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Public Policy Issues Custom Edition
Compiled by Marc Weiner Rutgers Public Policy

SPRING 2012
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Public Policy Issues Custom Edition
A Custom Book Compiled by
Marc Weiner
Rutgers Public Policy Spring 2012
CQ Press Custom Books 2300 N Street, NW, Suite 800 Washington, DC 20037 Phone: 202-729-1900; toll-free, 1-866-4CQ-PRESS (1-866-427-7737) Web: www.cqpress.com CQ Press content included in this publication is copyrighted. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher.
CONTENTS
1. STATES AND FEDERALISM

Kenneth Jost. From CQ Researcher.
2. DOMESTIC POVERTY
Thomas J. Billitteri. From CQ Researcher.
23
3. AGING POPULATION
Alan Greenblatt. From CQ Researcher.
49
4. MANAGING NUCLEAR WASTE

Jennifer Weeks. From CQ Researcher.
71
5. SCHOOL REFORM
Marcia Clemmitt. From CQ Researcher.
93
6. INCOME INEQUALITY
115
7. LABOR UNIONS' FUTURE

Pamela M. Prah. From CQ Researcher.
137
8. ENERGY POLICY
Jennifer Weeks. From CQ Researcher.
163
Page iii
9. MASS TRANSIT BOOM

Thomas J. Billitteri. From CQ Researcher.
185
10. OIL JITTERS

Peter Katel. From CQ Researcher.
207
11. FIXING URBAN SCHOOLS

233
12. FINANCIAL INDUSTRY OVERHAUL

259
13. CARING FOR VETERANS

Peter Katel. From CQ Researcher.
281
14. WIND POWER

David Hosansky. From CQ Researcher.
303
Page iv
CHAPTER
STATES AND FEDERALISM

BY KENNETH JOST
Excerpted from Kenneth Jost, CQ Researcher (October 15, 2010), pp. 845-868.
CQ Press Custom Books - Page1
States and Federalism

BY KENNETH JOST
and local immigration policies throughout the country, the suit says. 2 r i z o n a G o v. J a n The two issues are as curBrewer worked hard rent as the upcoming 2010 with the states legmidterm congressional elecislature to come up with tions. Republican candidates $1.1 billion in spending cuts and activists in the diffuse early this year to avoid a big Tea Party movement are debudget deficit in 2011. A big picting the health care overchunk of savings came from haul as a massive power grab eliminating health care coverby the federal government at age for 47,000 low-income the expense of state prerogachildren and 310,000 childless tives and individual rights. Along adults. with immigration-control adThis is the most signifivocacy groups, they are also cant streamlining of state govblaming Washington for the ernment ever undertaken, the failure to seal U.S. borders Republican chief executive from illegal immigrants and said as she signed a series of urging the feds to get out of budget bills on March 19. the way of state and local Only a few days later, howgovernments wanting to adopt ever, Arizonas budget-cutting tougher policies. 3 effort ran headlong into PresiThe conflicts over federdent Obamas plan to cover al and state powers, howmost of the estimated 50 milever, are also as old as the lion Americans without health Republic itself. The ConstiPresident Obama signs new health care reform insurance. Under the health tution, drafted in the sumlegislation on March 23, 2010, providing insurance for care overhaul that Congress mer of 1787, called for resome 30 million uninsured Americans. Twenty states have sued to invalidate the controversial legislation, passed and Obama signed into placing the weak national claiming the added costs it requires amounts to an law on March 23, states are government created by the unconstitutional intrusion on the states sovereignty. prohibited from reducing their Articles of Confederation with current health care funding. a federal system of divided The short version is that states are by the GOP-controlled legislature powers between the national and state locked into their existing programs at was necessary to solve a crisis we governments, known as federalism. the moment the president signs the bill, did not create and the federal gov- The new national government was to Monica Coury, spokeswoman for the ernment has refused to fix the cri- be stronger, but how much stronger Arizona Health Care Cost Containment sis caused by illegal immigration and was unclear. The issue was fiercely System, told the Arizona Republic on Arizonas porous border. debated in the state-by-state battles The very same day, Obama in Wash- that led up to ratification of the Conthe eve of Obamas signing. The agency operates the states Medicaid system, the ington called the law misguided and stitution nine months later. federal-state health care program for pledged an administration review of From the beginning there was amits implications. The Justice Depart- biguity in the Constitution, says Timlow-income persons. 1 Barely a month later, Brewer found ment followed through on July 6 by othy Conlan, a professor of political herself in another power struggle with filing a federal court suit in Phoenix science at George Mason University in Washington as she signed a contro- to invalidate the law as conflicting Fairfax, Va., and author of two books versial immigration law on April 23 with the federal governments plenary and numerous articles on federalism, making it a state crime to be in the power over immigration matters. The And the scope of ambiguity has grown country illegally and requiring local Constitution and the federal immi- over time as weve been forced to police to enforce federal immigration gration laws do not permit the de- adapt an 18th-century document to the law. Brewer said the law passed velopment of a patchwork of state realities of 20th-century government. 4
THE ISSUES
www.cqresearcher.com
AFP/Getty Images/Saul Loeb
Oct. 15, 2010
847

Condence in Government Lags
Fifty-nine percent of Americans have limited or no condence in either the federal or their state government (top graph). In ve economically stressed states Arizona, California, Florida, Illinois and New York a majority of voters say they can trust their state governments only some of the time (chart).
How much condence do you have in federal/state government?
Federal
1% 41% 59% 1%
State
41%
59%
A lot or some
Little or none
Not sure
How much of the time do you think you can trust your state government to do what is right?
Just about always 4% 3 4 2 3 Most of the time 29% 15 27 17 16 Only some of the time 60% 70 59 71 67
State Arizona California Florida Illinois New York
Never 6% 10 8 9 12
Dont know 1% 2 2 1 2
* Figures may not total 100 due to rounding. Sources: Voter Condence in Big Banks, Corporations & Wall Street Even Lower Than That of Government, Zogby, February 2010, www.zogby.com/news/Read News.cfm?ID=1817; Facing Facts: Public Attitudes and Fiscal Realities in Five Stressed States, Pew Center on the States, October 2010, www.pewcenteronthe states.org/uploadedFiles/PCS_PPIC.pdf?n=4566
Federal powers have grown over time, particularly since the 1930s, when President Franklin D. Roosevelt put Washington into the economicrecovery and regulation business. The Supreme Court initially struck down
some of FDRs legislative initiatives, but reversed course in 1937. The federal government clearly has grown in power since 1938, says Robert A. Schapiro, a professor of constitutional law at Emory University
School of Law in Atlanta. The scope of federal regulation has increased, Schapiro adds, but the scope of state regulation has also increased. Roosevelt set the pattern for Democratic presidents, including John F. Kennedy and Lyndon B. Johnson in the 1960s, of being associated with expanding the scope and size of the federal government. Two Republican successors, Richard M. Nixon and Ronald Reagan, countered with federalism reforms that purported to transfer power back to the states. Conlan notes, however, that both of the GOP chief executives also adopted some policies that centralized powers in Washington. Today, Obama and his fellow Democrats in Congress are under fierce criticism for supposedly expanding federal powers and spending to unprecedented levels. No governmentcontrolled health care, read one commonly seen placard at a Tea Party rally in Washington on Sept. 12. Another: The more the government takes, the le$$ we make. Cut taxes + spending now! Experts with differing political views say the attacks are overdrawn. Like most administrations, [Obamas] is somewhat conflicted, says Jonathan Adler, a conservative law professor at Case Western Reserve University in Cleveland. In some areas, the administration has sought to be responsive to the desire of the states to do their own thing. But in other areas, the administration has certainly been aggressive in maintaining federal supremacy to preempt state actions. Doug Kendall, president of the consumer-oriented Constitutional Accountability Center in Washington, agrees. The administrations record could be viewed as pointing in a couple of directions, Kendall says. He notes that the administration issued a policy statement early in 2009 generally pledging to minimize the use of the doctrine of federal preemption to supersede state laws. But he acknowledges that the
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administration has vigorously claimed called federalism revolution began to referred to by the acronym PPACA or, preemption to override some of the peter out, however, at the turn of the pejoratively, as Obamacare will flurry of state and local immigration century. After five years in office as cost states so much money that it inlaws passed in the past few years. (See Rehnquists successor, Chief Justice fringes on their power to control their At Issue, p. 861.) John G. Roberts Jr. has shown little own affairs. The administration, along Adler, Kendall and others also note interest in the area. with health reform advocates, conthat Obamas Republican predecessor, The court does have several federal- tends that any additional costs for George W. Bush, pursued several ism-related cases on its calendar for states will be minimal and will be offpower-centralizing policies despite the the current term, however, including set by other savings. GOPs general assoThe administrations ciation with favoring challenge to Arizonas states interests over newest immigration law Washingtons. There is also advancing in the wa s a d r a m a t i c courts. U.S. District growth of federal Judge Susan Bolton ismandates under sued an injunction on Bush, Conlan says. July 28 blocking the law Whether overfrom going into effect as drawn or not, disscheduled at 12:01 a.m. content with Obama the next day. The federadministration polial appeals court in San cies is fueling interFrancisco is scheduled est in ambitious but to hear the states appeal long-shot campaigns Nov. 1. (See box, p. 852.) to rewrite the U.S. As the court cases Constitution to limit proceed and the confederal power. Some gressional elections apconservatives are proach, here are some pressing a campaign of the major questions to get the required being debated: number of states Demonstrators block a street in downtown Phoenix on July 30 to protest 34 to call on ConIs the federal govArizonas tough new immigration law requiring local police to enforce gress to convene a ernment taking on federal immigration law. Gov. Jan Brewer said the law was necessary constitutional contoo much power to solve a crisis we did not create and the federal government has refused to fix the crisis caused by illegal immigration and vention, a procedure from the states? Arizonas porous border. never before used to Four weeks after an amend the nations upset win in Alaskas foundational document. Meanwhile, a a closely watched challenge to Ari- Republican primary, U.S. Senate candilibertarian-minded Georgetown Univer- zonas controversial law tightening pro- date Joe Miller used a nationwide telesity law professor is drawing attention hibitions against employers hiring il- vision appearance on Sept. 19 to call for a proposed constitutional amend- legal aliens. The federal appeals court for cutting back the size of the federal ment to allow two-thirds of the states in San Francisco upheld the law. The government. The first thing that needs to repeal a federal law unless Congress U.S. Chamber of Commerce, along with to be done, the Tea Party-backed canreenacts it in the face of the states op- immigrant-rights groups and the U.S. didate told host Chris Wallace on Fox position. (See story, p. 850.) government, is asking the justices to News Sunday, is, again, restricting the Federalism issues routinely end up strike the law down. The case will be growth and actually reversing the growth in the courts, often at the Supreme argued on Dec. 8. of government and, in the process, transCourt. In the 1990s under Chief JusMeanwhile, federal judges in two ferring power back to the states. tice William H. Rehnquist, the court states are considering suits by states Anxiety about the size of the federbreathed new life into federalism challenging the new health care law. al government had been growing since principles with several decisions that The states say the Patient Protection Obamas early months in office when Continued on p. 851 trimmed federal powers. The so- and Affordable Care Act sometimes
AFP/Getty Images/Mark Ralston
Oct. 15, 2010
849
States Look to Article V to Limit Federal Power

Conservative advocates push for a state-led convention to amend Constitution.
onservative scholars and activists, frustrated with mounting federal debt and expansion of federal powers, are looking to an unused provision in the Constitution for a remedy. They want to convene a convention under Article V, which permits applications from two-thirds of the states (now 34) to force Congress to call a convention where state delegates would debate constitutional amendments. To ratify the proposed amendments, three-fourths of the state legislatures (38) would then have to approve them. This current debt is unconscionable, says Bill Fruth, an economist and founder of 10 Amendments for Freedom, a Florida-based advocacy group working to create a convention to propose a balanced budget amendment. An amendment is necessary to force Congress to stop borrowing. They wont do it themselves, so we have to force them, Fruth says. Randy Barnett, a law professor at Georgetown Law Center, agrees. People are looking for levers to pressure Congress, says Barnett. We cant rely on Congress to police themselves or for the courts to police Congress, so Article V provides an alternate way of reining in federal power. Barnett, a prominent advocate of limiting federal power, is also pushing his own proposed constitutional amendment to allow two-thirds of the states to repeal a law passed by Congress. The repeal would take effect unless Congress decided to reenact the measure, with only a simple majority required. As Barnett explained in an op-ed in The Wall Street Journal, the amendment would effectively force Congress to take a second look at a new law if a solid majority of states opposed it. The op-ed was co-authored by William J. Howell, speaker of the Virginia House of Delegates, who said he would introduce the measure in a coming session. 1 Paradoxically, efforts to block the proposed convention are being led by conservative groups that also want to limit federal power but worry about the risk of potentially damaging changes to the Constitution. Lobbying by the Eagle Forum and the far-right John Birch Society have prompted at least 13 states to withdraw their applications for conventions in the last decade. There is no provision in the Constitution for how a convention would run, says Republican New Hampshire state Rep. Tim Comerford, who sponsored a successful effort in the 2010 legislative session to rescind a pending convention application. Comerford began his efforts after learning about the dangers of a constitutional convention from a John Birch Society video, Beware of Article V. The only constitutional convention we ever had was the original one, and that was a runaway convention because
they set out to amend the Articles of Confederation and wound up creating a whole new document, says Comerford. A new convention could put the First and Second Amendments any of the Constitution under fire. Virginia Sloan, director of The Constitution Project, a nonpartisan group that fosters discussion of constitutional issues, is also critical of the convention process. In the construction of the Constitution, the framers were trying to avoid people using the Constitution as a political tool, says Sloan. Most people are reluctant to support an amendments convention because we could destroy what we have. Calling for an amendments convention is nothing new. In the 1960s and again in the 80s, 32 of the 34 states needed sought to establish a convention, proposing, respectively, amendments on legislative reapportionment and balanced budgets. In both cases, the fear of a runaway, free-for-all convention motivated Congress to address the issues. This time, experts are not convinced that the threat of a convention will compel Congress to act. My prediction is no, says Robert G. Natelson, a senior fellow in constitutional jurisprudence at the Denver-based Independence Institute, which describes itself as a free-market, pro-freedom think tank. I hear some people say, Maybe Congress will just cave, but I think people who want to apply for a convention should be prepared for a convention. Organizing a convention comes with many obstacles. When you call a convention, you have to do a lot of organization beforehand, and you need a way of sharpening the issues, says Jack Balkin, a law professor at Yale University. Its a very tall order. Also, Balkin says, if a convention is held and actually sends proposed amendments to the states, they are very difficult to pass, as proven by the struggle and eventual failure to add the Equal Rights Amendment to the Constitution. As of Sept. 1, 20 state legislatures have voted to force Congress to hold an amendments convention. Fruths 10 Amendments for Freedom plans to have sponsors in all 50 state legislatures in January 2011 introduce the groups petition for a convention. The ramifications of calling a convention could be huge. The mere fact of having a convention would set all eyes on constitutional issues, says Balkin. Even if the convention failed, those issues would be setting the political agenda. It would suck all the air out of the political room. Maggie Clark
1 Randy Barnett and William J. Howell, The Case for a Repeal Amendment, The Wall Street Journal, Sept. 16, 2010, p. A23.
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Continued from p. 849
he proposed a $900 billion stimulus plan to try to lift the country out of the recession that began while Bush was president. Obama agreed to trim the request to gain Republican votes needed to pass the bill in the Senate. As enacted, the American Recovery and Reinvestment Act of 2009 provided $787 billion in stimulus divided between tax breaks for individuals and businesses; funds for education, health care and entitlement programs, including unemployment benefits; and funds for federal contracts, grants and loans. Meanwhile, the administration was also continuing the financial industry bailout the Troubled Asset Relief Program or TARP that had been enacted in the final months of the Bush administration. And with General Motors, the nations largest automaker, on the verge of financial collapse, Obama decided in June 2009 effectively to force the company into a federal bankruptcy court for reorganization, with the government acquiring a 60 percent ownership stake. The government had no shortage of interest from states for funds from the economic stimulus. Officials in the states most directly affected also generally backed the governments financial rescue plans for Wall Street (New York) and GM (Michigan). Emory law professor Schapiro finds the states support for the expanded federal roles unsurprising. Often what the federal government is trying to do is the same thing the state governments are trying to do, he says. Its just that the federal government can do it more effectively. On regulatory issues, Obama reversed the Bush administrations stance of invoking federal preemption to supersede state laws or state court rulings. The Bush administration was completely hostile to regulation at the state level, says Kendall of the Constitutional Accountability Center. The administration signaled the shift toward what is sometimes called pro-
gressive federalism with a decision in January 2009 to allow California and other states to set their own standards on greenhouse gases from cars and trucks. Later, Obama cautioned agency and department heads against issuing regulations that preempted state laws without clear federal statutory authority. Obamas memo, issued in May 2009, favorably quoted Supreme Court Justice Louis Brandeis observation that states can serve as a laboratory for novel social and economic experiments. 5 Obama also revised another Bush policy initiative that intruded on state prerogatives: the No Child Left Behind Act, with its combination of curriculum and testing mandates and financial penalties for non-performing schools. The act was challenged in court on states rights grounds but upheld. Federalism expert Conlan calls the law unquestionably the most intrusive federal policy on elementary and secondary education since the Great Society, and perhaps ever. Instead of using mandates and penalties, the Obama administration is promoting education reform in the states through a $4.35 billion competitive grant program known as Race to the Top. Eleven states and the District of Columbia have been selected to receive grants two in March, the others in late August based on detailed proposals that generally hewed to the administrations support for charter schools and performance-based pay for teachers. In all, 40 states and the District of Columbia submitted applications for the funds. 6 Despite some states-minded shifts, the administrations reputation on federalism among Republicans and conservatives today appears to be uniformly negative, largely because of the state mandates in the health care law and the immigration policy stance. Writing in The American Spectator in July, Andrew Cline, editorial page editor of the conservative New Hampshire Union Leader, de-
nounced what he calls the administrations crazy quilt federalism. 7 In similar vein, Gene Healy, a vice president at the libertarian Cato Institute and columnist for the Washington Examiner, accuses the administration of fair-weather federalism. The administration allows states license when theyre pursuing policies that the Obama administration and its supporters favor and brings the hammer down when theyre doing policies that [the administration opposes]. Healy says the Obama administration is not unique in adopting an inconsistent attitude toward state-federal relations. Its quite common for politicians to wave the 10th Amendment flag, he says. The Bush administration, Healy says, was quite abysmal on federalism. As examples, he notes the Bush policies of challenging state initiatives in California on medical marijuana and in Oregon on assisted suicide. Emory law professor Schapiro says the policy shifts from one administration to another indicate that federalism provides no fixed answer on the respective powers of the federal and state governments. Federalism debates have often been policy debates in constitutional language, he says. To the extent that some states dont like what the federal government is doing, thats the issue. Does the federal health care law infringe on the powers of the states? On the day before President Obama was to sign the federal health care law, Florida Attorney General Bill McCollum promised to file a suit challenging the act as an infringement of states rights immediately afterward. The legislation would cost the states billions of dollars and go far beyond any unfunded mandate weve ever seen, McCollum said on March 22. Anything that really manipulates the states like this, he continued, is unconstitutional under the 10th
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Arizona Law Blocked by Federal Judge

U.S. law preempts parts of tough anti-immigration law, judge says.
ajor provisions of Arizonas Support Our Law Enforcement and Safe Neighborhoods Act have been blocked from going into effect by a federal judges ruling on July 28. U.S. District Judge Susan Bolton in Phoenix ruled that federal law preempts provisions in four sections of the controversial act that: Require law enforcement officers to make a reasonable attempt to determine the immigration status of a person stopped, detained or arrested if there is a reasonable suspicion that the person is unlawfully present in the United States; and require verification of the immigration status of any arrested person before release. The provision, Bolton said, is likely to burden legally present aliens and to impermissibly burden federal resources and redirect federal agencies away from the priorities they have established. Create a crime for the failure to apply for or carry alien registration papers. The provision, Bolton ruled, alters the penalties established by Congress under the federal registration scheme. Create a crime for an unauthorized alien to solicit, apply for or perform work. The provision, the judge said, conflicts with a comprehensive federal scheme. . . . Authorize the warrantless arrest of a person if there is prob-
able cause to believe the person has committed a public offense that makes the person removable from the United States. Bolton found a substantial likelihood that officers will wrongfully arrest legal resident aliens under the provision. The judge found two challenged provisions were not preempted and could be enforced. Those provisions: Create a separate crime to transport or harbor an unlawfully present alien or encourage or induce an unlawfully present alien to come to or live in Arizona. Permit impoundment of vehicles used in the transporting or harboring of unlawfully present aliens. Many other provisions of the law remain enforceable because the government did not seek to enjoin them. They include a provision creating a new crime of stopping a motor vehicle to pick up day laborers if the action impedes normal traffic. The states appeal of the issuance of the preliminary injunction is to be heard by a panel of the Ninth U.S. Circuit Court of Appeals in San Francisco on Nov. 1. Kenneth Jost
Source: United States v. Arizona, CV10-1413-PHX-SRB, July 28, 2010, http://docs. justia.com/cases/federal/district-courts/arizona/azdce/2:2010cv01413/535000/87/.
Amendment, under the sovereignty of the states. The Obama administration is vigorously defending against Floridas federal court suit, now joined by 19 other states, and a similar suit filed separately by Virginia. Supporters of the health care law and many legal experts voice doubts about the statesrights challenge, though some experts see a stronger basis for attacking the laws individual-insurance mandate. In any event, the two federal judges hearing the cases one in Pensacola, the other in Alexandria have both signaled they are unlikely to dismiss the suits at an early stage. 8 Supporters of the law sharply dispute the opponents claims, including the claimed fiscal impact on the states. The law expands health insurance coverage by requiring participating states and all do participate to extend Medicaid eligibility beginning
in 2014 to a new, nationwide standard: all adults with incomes up to 133 percent of the federal poverty level. The new requirement is projected to add 16 million to 22 million people to Medicaid rolls nationwide. The federal government will pay 100 percent of the cost of new enrollees for the first three years, with the percentage declining gradually to 90 percent in 2020 and future years. The change amounts to a massive expansion of the states Medicaid programs, according to Robert Alt, a senior legal fellow and deputy director of the Center for Legal Studies at the conservative Heritage Foundation. Representatives of states are genuinely concerned about how much more this is going to cost, Alt says, and whether or not its simply going to bankrupt them. John Holahan, director of the Health Policy Research Center at the
liberal-oriented Urban Institute, calls the argument by the objecting states grotesquely flawed. The new law, he says, would mean a small increase in state Medicaid spending but would also allow states to reduce current spending in several areas notably, unreimbursed medical care for the uninsured. The savings, Holahan says, will be more than enough to offset the new spending under the law. In their lawsuits, the states contend that the new law fundamentally changes the Medicaid program from a voluntary federal-state partnership into a compulsory top-down federal program. In its reply, the government says the new law imposes valid conditions on the states acceptance of federal aid comparable to changes in Medicaid rules enacted periodically since the program was created in 1965. Health policy experts on both sides agree with the states argument that
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participation in Medicaid is, in practical terms, obligatory. Thats been true for a long time, says Holahan. No state has ever seriously considered walking away from [the program]. Two legal experts on federalism, however, say they doubt that the states coercion argument will carry the day. The legislation is a dramatic assertion and exercise of federal authority, says Adler, the conservative law professor at Case Western Reserve. Even so, Adler says, the states spending arguments are difficult to make. Conlan, a more centrist-minded federalism expert, is also dubious. Theres no question that the law does entail new opportunities and responsibilities for the states, he says. But he calls the states arguments overdrawn. In its brief, the government says that the Supreme Court has never struck down a federal state-aid program on the grounds that a condition for receiving the assistance was coercive. The states are also challenging provisions of the new law for the states to establish health-insurance exchanges to offer moderately priced insurance coverage for small businesses and individuals. The states depict the provisions as mandatory and, on that basis, as an impermissible command to operate a federal regulatory program. The government counters that the states in fact are free to decide whether or not to create the insurance exchanges. The states are also attacking the most politically contentious aspect of the new law: the individual health insurance mandate. In their suit, the states call the provision an unprecedented encroachment on the sovereignty of the Plaintiff States and the rights of their citizens. The government calls the claim premature and denies the states legal standing to bring the claim. But on the laws merits the government says the mandate is a valid exercise of Congress authority to regulate the market in health care.
The Heritage Foundations Alt says the argument contradicts federalism principles. If the Commerce Clause were read this broadly, then the federal government could do anything, he says. Emory law professor Schapiro calls it surprising for the states to raise a sovereignty-based argument against a regulation affecting individuals, not the states themselves. But he adds, Its a little late in the day for states to say that health is a local matter. Do state and local immigration laws infringe on federal powers? When two illegal aliens were involved in a fatal shooting in the small town of Hazleton in northeastern Pennsylvania in 2006, Mayor Lou Barletta responded by proposing a local ordinance aimed at making his city the toughest place in the United States for illegal immigrants. As approved by the town council, the Illegal Immigration Relief Act provided for lifting the business license of any company that employed or the rental license for any landlord that rented housing to an illegal alien. The ordinance was promptly challenged by Hispanic residents and immigrant-rights groups, blocked from going into effect and now has been struck down by a federal appeals court as conflicting with federal law. In a massive, 188-page decision on Sept. 9, a three-judge panel of the Third U.S. Circuit Court of Appeals said that it was required to intervene when states and localities directly undermine the federal objectives embodied in statutes enacted by Congress. 9 The appeals court ruling conforms to the general view, dating to the 19th century, that federal law is preeminent on immigration matters. But critics of the federal governments inability in recent years to stem the influx of undocumented aliens insist that states and localities are on sound ground in passing laws that they say will strengthen the enforcement of federal laws.
The primary responsibility for immigration policy and immigration enforcement rests with the federal government, says Ira Mehlman, national media director for the Federation for American Immigration Reform (FAIR). But Congress has made it clear over the years that they welcome state and local cooperation in enforcing immigration laws. As one example, Cory Andrews, a senior litigation counsel with the conservative Washington Legal Foundation (WLF), points to an immigration law passed in 1995 and known as section 287(g) that authorizes state and local law enforcement officers to perform immigration law enforcement functions. WLF filed a friend-of-thecourt brief supporting the Hazleton ordinance as well as the Arizona employersanctions law pending before the Supreme Court. Immigrant-rights advocates say the states have far less power to deal with immigration-related matters. The federal government has supreme power over anything that touches on who can enter the country and the conditions under which they may remain, says Karen Tumlin, managing attorney with the Los Angeles-based National Immigration Law Center. State attempts to legislate in that area are strictly prohibited. Tumlin acknowledges section 287(g) but notes that the provision permits agreements between the federal government and local law enforcement only if local officers receive specialized training from federal agents. As with the health care issue, experts Conlan and Adler both doubt the states arguments despite the differences in their political perspectives. Both scholars acknowledge the states concerns about the impact of illegal immigration but question the states authority to take on enforcement responsibilities themselves. The federal government is failing perhaps to adequately perform one of its constitutional responsibilities; says
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Conlan. The corollary of that is not that [the states] get to address immigration. That does not follow constitutionally. States may have legitimate policy complaints about federal enforcement, Adler says, but that does not mean that the states can enact their own policies. If the federal government believes that the immigration laws are to be enforced in a particular way, he says, the federal government has the ability to make that a national rule. Despite the legal doubts, state and local governments have enacted well over 1,000 immigration-related laws in the past six years. Many but not all of the laws have been struck down or blocked from going into effect. The Supreme Court will have its first chance to rule on the recent spate of laws during the current 2010-2011 term when the justices hear a challenge to Arizonas tough 2007 employersanctions law on Dec. 8. The case, Chamber of Commerce v. Whiting, pits business and civil rights groups challenging the law against Arizona and groups favoring a tougher stance against illegal immigration. The federal appeals court in San Francisco upheld the law. Schapiro, the Emory law professor, acknowledges the federal governments argument for preempting state and local laws aimed at more stringent enforcement of federal laws may seem paradoxical. Its a hard argument to make, he says. In briefs in the Hazleton case and the two cases challenging Arizona laws, the government argues that overenforcement by state and local governments risks burdening aliens legally in the United States, deterring employers or landlords from hiring or renting to legal aliens and overwhelming federal resources to enforce immigration laws. The appeals court in the Hazleton case credited those arguments. The laws employment provisions created an obstacle to federal policy, the court said, by emphasizing enforcement but not the anti-discrimination protections included in the federal employer sanctions law. As for the housing provisions, the court said that regulation of the residency of immigrants was clearly within the exclusive domain of the federal government. In Hazleton, Mayor Barletta is vowing to appeal the decision. I have said repeatedly over the years that the main line of defense against illegal immigration is to eliminate the availability of jobs to illegal aliens, Barletta said on the day of the decision. If illegal aliens have no place to work, they will self-deport. prohibition on any tax or duty on exports from other states. In urging ratification of the Constitution, James Madison and Alexander Hamilton stressed in The Federalist Papers the continued importance of the states. In Federalist 45, Madison said the federal governments powers were few and defined, while the states were numerous and indefinite. In Federalist 51, Hamilton argued that the federal structure would help preserve liberty. The different governments will control each other, he wrote. 11 Under Chief Justice John Marshall (1801-1835), the Supreme Court generally upheld federal powers, including an 1819 decision that gave a broad but not unlimited reading to Congress authority to enact all laws . . . necessary and proper for . . . the execution of its enumerated powers and limited the states ability to interfere with those powers. Under Chief Justice Roger Taney (1835-1864), the court tilted slightly toward the states. Taneys dual federalism is illustrated in a pair of immigration-related cases, a decade apart. One upheld as a proper exercise of a states police powers a law requiring ship masters to provide the names and other information about disembarking passengers. The other struck down a state law imposing a tax on those beginning a voyage. 12 The Civil War and the post-Civil War amendments established a national policy on an issue that the Constitution had left to the states: slavery. The 14th Amendment also laid the basis for expansion of federal powers by prohibiting the states from denying to any person equal protection or due process. The late-19th century Industrial Revolution also encouraged Congress to exercise its Commerce Clause powers, sometimes to protect nationwide enterprises such as the railroads and sometimes to safeguard workers or consumers from exploitative practices by business. The Supreme Court,
Continued on p. 856
BACKGROUND
Dual Sovereigns
he Constitution established a national government with some powers defined specifically and others more generally, but it also preserved state governments with most but not all of their residual powers retained. Over the course of two centuries, the federal government has grown in size and scope, but so too state governments. Congress and presidents have naturally gravitated toward federal solutions to perceived national problems but with the ever-present constraint of political and public support for states prerogatives. The Supreme Court at times limited federal powers somewhat, but since the 1930s has generally upheld the growing federal role exemplified in direct regulation and in conditions attached to federal aid to states. 10 The Constitution sets forth in Article I Congress so-called enumerated powers, including most significantly the power to tax and spend and to regulate interstate and foreign commerce. Article I also includes some limitations on the states, including a
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Chronology
1970s-1980s 2000-Present Federalism reform is persisPresidents George W. Bush and
tent theme in Washington, state capitals. 1972 Congress passes and President Richard M. Nixon signs general revenue sharing for state, local governments. 1981 Budget Reconciliation Act signed by President Ronald Reagan consolidates federal grant programs, cuts overall state aid. 1987 Supreme Court says Congress can require states to set minimum drinking age at 21 as condition to receive highway construction funds.
Barack Obama push centralizing policies in Washington despite nods to state prerogatives; federalism revolution stalls at Supreme Court. 2001 President Bush wins congressional approval of No Child Left Behind Act; measure establishes national standards on curriculum, testing, school performance; Bush signs into law Jan. 8, 2002; act is challenged in court but upheld. 2002 Help America Vote Act establishes nationwide minimum election standards, provides funds to replace punch-card, lever-based voting systems (Oct. 22). 2005 Real ID Act, requiring states to adopt uniform procedures for drivers licenses as individual identification (May 11). . . . Supreme Court rules federal drug laws preempt state measures to legalize medical marijuana; ruling seen as retreat from Rehnquists federalism revolution (June 6). 2006 Hazelton, Pa., enacts ordinance to punish employers for hiring or landlords for renting to illegal aliens; measure is one of hundreds enacted by state or local governments over several years to counter illegal immigration. 2007 Arizonas Legal Arizona Worker Act makes it a crime for illegal alien to seek employment in state and puts employer out of business for second offense of hiring illegal
alien; act is challenged by business, civil rights groups but upheld by federal appeals court in September 2008. 2008 Democrat Barack Obama elected after presidential campaign with minimal attention to state-federalism issues. 2009 Obama makes health care overhaul a major domestic policy goal; works with Congress to craft bill to expand Medicaid eligibility with federal financing, use states to create health insurance exchanges to provide affordable coverage for individuals, small businesses. 2010 Obama signs Patient Protection and Affordable Care Act into law (March 23); Virginia files suit same day challenging law as violating state law barring individual health insurance mandate; Florida files suit next day, challenging act as unconstitutional because of fiscal impact on state. . . . Arizonas Support Our Law Enforcement and Safe Neighborhoods Act (SB 1070) requires police to determine immigration status of any person arrested or stopped (April 23); federal judge, ruling in suit by U.S. government, enjoins major provisions as preempted by federal immigration law (July 28). . . . Hazelton ordinance struck down on preemption grounds by federal appeals court (Sept. 9). . . . Federal judge in Detroit upholds health care law (Oct. 7); suits by states still pending. . . . Federal appeals court to hear appeal in SB 1070 case (Nov. 1). . . . Supreme Court to hear challenge to Arizonas employer sanctions law (Dec. 8).
1990s
Federalism revolution at Supreme Court limits federal power. 1995 Congress passes and President Bill Clinton signs Unfunded Mandates Act, limiting new federal mandates on states without federal funding (March 22). 1995-2000 Chief Justice William H. Rehnquist leads Supreme Court in limiting Congress ability to force state governments to administer regulatory programs, protecting state governments from damage suits for violating federal law and limiting Congress use of Commerce Clause power to regulate noneconomic matters.
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Will Staggering New Medicaid Costs Hit the States?

Dueling studies examine impact of new health care reform law.
ebraska spends about $742 million a year in its Medicaid program to provide health care to low-income persons. In August, Gov. Dave Heineman released an actuarial study claiming that the states costs could increase by somewhere between $526 million and $766 million over the next 10 years under the new federal health care reform law enacted in March. Heineman, a Republican, called the price tag from the state-commissioned study staggering and shocking and urged Congress to repeal or substantially modify the law. Heineman also supports Nebraskas participation with other states in a federal court suit in Florida challenging the constitutionality of the law. A study by researchers at the liberal-oriented Urban Institute, however, estimates Nebraskas added costs much lower: $106 million to $155 million. And the report notes that Nebraska will receive more than $2 billion in new federal matching funds during the period under the law. 1 The dueling cost studies are highly dependent on differing assumptions about new Medicaid enrollment and health care cost trends. The price tags figure not only in political debate but also in the federal court case. Florida, the lead plain-
tiff in the case, is claiming that it faces $4 billion in additional Medicaid costs from 2014 when the law is to take effect through 2019. Floridas suit says the added cost a price the state simply cannot afford to pay represents an unconstitutional intrusion on the states sovereignty. The Urban Institute researchers, however, estimate a substantially lower price tag: $1.2 billion to $2.5 billion. Overall, they estimate the states will pay about $21 billion for Medicaid expansion through 2019 with the federal government picking up the lions share: $444 billion. With different but somewhat comparable projections, the nonpartisan Congressional Budget Office says the federal price tag for expanding Medicaid and the Childrens Health Insurance Program (CHIP) put at $434 billion represents just under half of the estimated $938 billion increase in total healthcare spending under the law. The other costs include $464 billion in subsidies for individuals and small businesses and $40 billion in small-employer tax credits. 2 The Medicaid expansion costs represent the price for setting a national household income standard of Medicaid eligibility at 133 percent of the poverty level: $29,300 for a family of four or $14,400 for a single person. Currently, eligibility varies
however, often set itself against economic regulation by either the federal or state governments in a laissezfaire period that extended into the 1930s. The court struck down or limited some federal laws by narrowly defining commerce as trade, not manufacturing. But it also struck down some state laws notably, limits on working hours as infringing on constitutionally protected property rights. Federal powers were lastingly expanded in the 1930s as President Franklin D. Roosevelt pushed through Congress and later won Supreme Court approval of the now-familiar laws regulating the economy and creating some elements of a social safety net. In three critical decisions in 1937 that overturned prior rulings, the court upheld the National Labor Relations Act, a federal unemployment compensation law and the Social Security Act for old-age benefits.
The court also upheld state wage-andhour laws and, in 1941, similarly upheld the federal Fair Labor Standards Act. 13 A year later, the court gave its most expansive construction to Congress commerce power by enforcing a production quota on a farmers cultivation of wheat solely for his own use with no intention of selling it. Congress power, the court wrote in Wickard v. Filburn, extended to any activity that exerts a substantial effect on interstate commerce. 14 The New Deal and post-New Deal laws and programs did not, however, reduce the states to nonentities. Indeed, the unemployment compensation system upheld in 1937 was to be administered by the states. Instead, the federal government worked through the states in what has been called cooperative federalism. The federal governments revenueraising powers allowed it to expand
its role from providing technical assistance to state governments to bestowing financial grants aimed at furthering federal goals, typically with significant conditions attached. These programs grew in FDRs so-called Second New Deal (mid-1935 to 1939); under his Democratic successor, Harry S. Truman (1945-1953); and, despite his supposed conservatism, under the Republican president, Dwight D. Eisenhower (1953-1961). By 1960, historian David B. Walker counts some 132 grant-in-aid programs with total outlays to the states of $6.8 billion nearly triple the amount at the start of Eisenhowers presidency. 15
New Federalisms
ederalism reform became a persistent theme in Washington and state capitals in the second half of the
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greatly between states. Many Southern states provide Medicaid only for persons well below the poverty level, while a few Northeastern states extend Medicaid to families with incomes as high as 150 percent of the poverty level. The federal government currently pays about half the costs of Medicaid in the wealthiest states and a larger fraction in less-wealthy states. Under the new law, the federal government will pick up 100 percent of the cost of newly eligible Medicaid participants for the first three years 2014 to 2016 with the percentage declining gradually to 90 percent in 2020 and subsequent years. In a critical report, two health care experts at the conservative Heritage Foundation say the reimbursement provision amounts to an attempt to appease state lawmakers. They put the total cost of Medicaid expansion for the states at $33 billion, including $12 billion in administrative costs. And while they acknowledge that state lawmakers may view the provision as a relatively good fiscal deal, they also warn that state taxpayers will face higher tax bills . . . not just for the state costs but for the federal costs as well. 3 John Holahan, director of the Urban Institutes Health Policy Research Center, says, however, that states will save money by
spending less on uncompensated care for uninsured individuals. State spending on health care for low-income children will also be reduced, he says, because many will gain coverage under the insurance exchanges to be established under the law. I dont agree that states will be worse off financially, Holahan concludes. Kenneth Jost
The eight-page report by Milliman, Inc., dated Aug. 16, 2010, is available at www.governor.nebraska.gov/news/2010/08/pdf/Nebraska%20Medicaid% 20PPACA%20Fiscal%20Impact.pdf. The report by Urban Institute researchers John Holahan and Irene Headen, Medicaid Coverage and Spending in Health Reform, Henry J. Kaiser Family Foundation, May 2010, www.kff.org/ healthreform/upload/Medicaid-Coverage-and-Spending-in-Health-ReformNational-and-State-By-State-Results-for-Adults-at-or-Below-133-FPL.pdf. For coverage, see these stories by Nancy Hicks in the Lincoln (Neb.) Journal Star: Medicaid expert says states report flawed, Sept. 16, 2010, p. B1; Nebraska Medicaid costs likely to soar, Aug. 19, 2010, p. A1. 2 Congressional Budget Office figures cited in Landmark: The Inside Story of Americas New Health-Care Law and What It Means for Us All, by The Staff of The Washington Post (2010), p. 173. Other background drawn from the chapter, Medicaids Expansion: The Impact on the States, pp. 163-168. 3 Edmond F. Haismaier and Brian C. Blaise, Obamacare: Impact on the States, Heritage Foundation, July 1, 2010, p. 3, http://thf_media.s3.amazonaws.com/ 2010/pdf/bg2433.pdf.
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20th century. Officials at both levels endeavored to find the right balance between federal and state responsibilities and to manage federal-state programs more efficiently and more effectively. Two Republican presidents in particular, Nixon (1969-1974) and Reagan (19811989), adopted policies aimed at returning powers to the states. State governments became more influential with increased revenue and administrative modernization, but they remained subject to mandates from Washington established by Congress or the executive branch and generally upheld by the Supreme Court. 16 The number and dollar amounts of federal aid programs grew, and their management became more complex, under the two Democratic presidents of the 1960s, Kennedy and. Johnson. The increased complexity of federal aid prompted proposals for intergovernmental reform under Johnson and that
Nixon developed and adopted as a signature domestic policy goal. Initially, Nixon pushed to consolidate federal aid in block grants. He broadened the effort with a proposal for general revenue sharing with state and local governments that Congress cleared for his signature in October 1972. The fiveyear, $30 billion program gave broad discretion to state and local officials. As George Mason professor Conlan notes, however, the Nixon presidency also saw a dramatic increase in federal regulations aimed at state and local governments notably, in the areas of environmental protection, health planning and highway construction. 17 Reagan opened his presidency by proposing a major federalism reform: a consolidation of scores of federal grant-in-aid programs into nine block grants. States were to get more discretion but also to suffer a significant cut in overall federal aid. After a con-
tentious congressional debate, Reagan got most of what he asked for in the Omnibus Budget Reconciliation Act of 1981. But he failed in subsequent efforts to consolidate more categorical programs into block grants. Reagan also failed with a bold plan announced in December 1981 for the federal government to take over Medicaid funding while giving the states responsibility for 43 other programs, including welfare and many other social services. The proposal fell under criticism from social service advocates and from many state officials who viewed it as requiring state tax increases. The administration also promised to ease regulatory restrictions on state governments. Nevertheless, the administration supported spending mandates that effectively required states to raise limits on trucking weights and to adopt a uniform minimum drinking age of 21. By the end of the 1980s, Conlan says, the
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Supreme Court to Consider Order to Reduce Prison Crowding

Hearing set on inmate-release order in California.
an a federal court order the state to reduce its prison population? California prisons have been filled to nearly double their capacity over the past decade. Now the state is now facing a federal court order to reduce inmate population by around 40,000 within a two-year period. California officials, however, are urging the Supreme Court to set aside the order as a misapplication of a law Congress passed specifically to make it difficult for federal judges to issue inmate-release decisions. Seventeen other states are backing Californias appeal. The order, issued by a special three-judge federal district court in August 2009, would require California to reduce its inmate population to 137.5 percent of the prisons combined designed capacity of 84,000. The court found that the population cap to be met through a combination of early releases and diversions of low-risk offenders at sentencing was needed to ensure constitutionally adequate medical and mental health care for state prisoners. 1 In appealing the decision, California contends that the threejudge court failed to follow the restrictions of the Prison Litigation Reform Act, which Congress passed in 1996 establishing new procedural and substantive restrictions on inmate-release orders by federal courts. Specifically, the law requires any inmate-release
order to be issued by a three-judge court, not an individual judge, and only after any remedial order by a single judge has been given reasonable time to remedy any constitutional violations. The law also requires that overcrowding be found to be the primary cause of a constitutional violation and that no other relief will remedy the violation. 2 Congress passed the law in response to lobbying by state attorneys general and district attorneys in the wake of a controversial federal court order requiring release of thousands of inmates from Philadelphia jails over a period of years. What we were asking, explains Sarah Vandenbraak Hart, a deputy Philadelphia district attorney who helped draft the law, was that they make a prison release order an absolute last resort remedy and only if absolutely necessary to remedy an ongoing constitutional violation. Lawyers for the California inmates contend the three-judge court followed the laws requirements. Congress succeeded in making it harder . . . but not impossible for courts to issue release orders, says Donald Specter, director of the Prison Law Office, a Berkeley-based inmate rights organization. They set the threshold, and our position is that weve met the threshold. Federal court orders in so-called institutional litigation have long been a bane of the states. State governments can find
number of new intergovernmental regulatory provisions enacted at the federal level surpassed the number for any previous decade. 18 The regulatory spike underlay the Clinton eras most important federalism reform: the Unfunded Mandates Reform Act of 1995. With some exceptions notably, civil rights statutes the act requires Congress to specify the cost of any new mandate on state and local governments and permits a point of order against any mandate unless fully funded in the bill. The act began with bipartisan cosponsorship when Democrats controlled the House and Senate in 1993; it won enactment in 1995 after Republicans had gained control of both chambers, but only after the GOP majorities had beaten back a string of weakening, Democratic-backed amendments. In signing the bill, President Bill Clinton called it historic, but
Conlan says that as in the Reagan era Congress and the White House continued to establish new regulatory mandates despite the professed reform. In the meantime, the Supreme Court had dealt two major blows to state prerogatives in federalism cases. In 1985, the court ruled that Congress could require state governments to follow minimum-wage and overtime requirements of federal labor law. The decision overturned a ruling favoring state governments on the issue a decade earlier. Then in 1987, the court upheld the federal law to withhold highway construction aid to any state that did not set the minimum drinking age at 21. In a 7-2 decision written by Chief Justice William H. Rehnquist, the court ruled the law a proper exercise of Congress spending power even though Congress had no authority to regulate the drinking age directly. 19
In the 1990s, however, Rehnquist led a revival of federalism principles to benefit states. In one line of decisions, the court prohibited Congress from requiring state or local governments to administer federal regulatory systems notably, the background check for gun purchasers. In another, the court held state governments immune from money-damage suits for violating federal law, including the federal wage and hours act. And in a pair of decisions written by Rehnquist, the court limited Congress power to use the Commerce Clause to regulate non-economic activity. One ruling struck down the federal Gun Free School Zones Act, which made it a crime to possess a gun within a minimum distance of a school. Another struck down a provision of the Violence Against Women Act that allowed victims of gender-motivated violence to sue their assailants in federal
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themselves on the losing end of decisions that not only require wide-ranging and sometimes expensive changes in operation of programs and facilities but also expose them to sixor seven-figure attorney fee awards to lawyers on the other side. In a significant decision in April, the Supreme Court ordered a lower court to reconsider a $10.5 million fee award to public-interest lawyers for a case that forced broad changes in the states foster care system. 3 The court order in the California case came after more than a decade of litigation over medical care for state inmates in separate cases filed before single-judge courts in Sacramento and San Francisco. The two district courts decided in 2007 to convene a three-judge court as provided in the 1996 law after finding medical care still constitutionally deficient. The threejudge court presided over a trial from November 2008 to February 2009 before issuing its 185-page decision on Aug. 4, 2009. The state says the order, which has been stayed pending the Supreme Court appeal, would require release of between 38,000 and 46,000 inmates. In its appeal, the state contends the requirements for a three-judge court were not met and the cases should be sent back to the separate district courts. In accepting the appeal on June 14, the Supreme Court said it would consider the jurisdictional issue at the same time as
the merits of the case. Oral arguments, now set for Nov. 30, will feature two highly regarded Supreme Court advocates: Carter Phillips for the state and Paul Clement, U.S. solicitor general under President George W. Bush, for the inmates. In his brief for the inmates, Specter discounts the potential impact of the case on other states, describing Californias prison crisis as unique. But he also discounts the states concerns about improper federal court intrusion into prison systems. Federalism is not a one-way street, Specter says. It doesnt mean only that states have rights. It also means that federal courts have obligations to enforce constitutional rights against the states. Kenneth Jost
The decision came in two consolidated cases: Coleman v. Schwarzenegger (medical care), Plata v. Schwarzenegger (mental health care), CIV S-90-0520 LKK JFM P, U.S. Dist. Ct., N.D./E.D. Calif., Aug. 4, 2009, www.caed.uscourts. gov/caed/Documents/90cv520o10804.pdf. For coverage, see Carol J. Williams, State gets two years to cut 43,000 from prisons, Los Angeles Times, Sept. 5, 2009, p. A1. The appeal at the Supreme Court is Schwarzenegger v. Plata, 091233; background and briefs on SCOTUSBlog: www.scotusblog.com/casefiles/cases/schwarzenegger-v-plata/?wpmp_switcher=desktop. 2 The act is codified at 18 U.S.C. 3626. Background at http://en.wikipedia. org/wiki/Prison_Litigation_Reform_Act. 3 The decision is Perdue v. Kenny A., 559 U.S. (April 21, 2010), www. supremecourt.gov/opinions/09pdf/08-970.pdf.
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court. In both cases, Rehnquist said Congress had infringed on the states traditional police powers. 20
Federal Powers
ederalism concerns have been given a low priority in Washington in the 21st century under two presidents of different parties: Republican George W. Bush and Democrat Barack Obama. Bush pursued centralizing policies on a range of issues despite his background as a former governor and the GOPs professed support for state prerogatives. The Supreme Court also appeared to step back from its resistance to expanding federal powers even after two appointments by Bush. Obama took office with some nods to the states, but he stirred strong opposition from many states to his health care reform and then
set the administration against state and local laws aimed at strengthening immigration enforcement. 21 Bush trampled on federalism concerns with his signature domestic policy initiative: education reform. The No Child Left Behind Act mandated student testing, imposed curriculum and teacher standards and threatened non-performing schools with penalties up to takeover by independent operators. Some states called the law unconstitutional, but court challenges failed to invalidate it. States also complained about the strictures in two other major laws: the Help America Vote Act, which set federal standards for voting and voter registration, and the Real ID Act, which established new requirements for state drivers licenses. All three laws provided some funds for the mandated changes, but education authorities in particular said federal aid fell short of the promised amounts.
The Bush administration overrode state interests in several other areas. Siding with business interests, the administration repeatedly interpreted federal laws or regulations to preempt state laws or court suits. On social issues, the administration won enactment of a nationwide ban on so-called partial birth abortions and pushed unsuccessfully for a constitutional amendment to ban same-sex marriages. The administration also attempted to use federal drug law to nullify Oregons assistedsuicide initiative, but the Supreme Court in 2006 rejected the attempt. 22 A year earlier, the high court had stepped back from its federalism stance of the 1990s with a decision upholding federal power to override a California initiative permitting medical use of marijuana. With Rehnquist and Justice Sandra Day OConnor among three dissenters, the court in June 2005 held that the
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government can ban private, noncommercial use of marijuana because of its potential impact on the admittedly illegal market in the drug. 23 OConnor retired and Rehnquist died later that year. As their successors, Bush chose John G. Roberts Jr. as chief justice and Samuel A. Alito Jr. as OConnors replacement, two Eastern conservatives less identified with federalism issues than the two Westerners they followed. Neither Obama nor his Republican opponent, Sen. John McCain of Arizona, made federalism a major issue as such in the 2008 presidential campaign. But both men professed support for states interests in the area, according to an assessment by federalism experts John Dinan and Shama Gamkhar. McCain selfidentified as a federalist to explain, for example, his opposition to a constitutional amendment to ban same-sex marriage. Obama identified himself with some of the states criticisms of No Child Left Behind. And both men buttressed their health care proposals by citing state initiatives: Obama pointed to Massachusetts Gov. Mitt Romneys universal coverage plan, McCain to Indiana Gov. Mitch Daniels market-oriented approach. 24 Early in his presidency, Obama made gestures and took some concrete actions favorable to states interests. In a meeting in February 2009, he promised the states governors to try to make their lives easier, not harder. As part of his economic-stimulus plan, Obama proposed and eventually won congressional approval of substantial aid to financially beleaguered states with few strings attached. Obama also reversed some Bush decisions to give states more discretion significantly, to pursue liberal policies in such areas as childrens health and air pollution control. And Attorney General Eric H. Holder Jr. announced in February 2009 that the Justice Department would discontinue raids on medical marijuana dispensaries in the 13 states that had legalized the practice. The administration worked to accommodate the states interests during the yearlong struggle that ended in March 2010 with enactment of the health care law. Broadening eligibility for Medicaid was always seen as the principal vehicle for expanding health insurance coverage, but from the outset the federal government was to bear most of the cost. Obamas proposal included a variety of mandates for health insurers, but states continued to have principal responsibility for insurance regulation. Republicans and conservatives opposed to the bill cited the fiscal impact on the states in their arguments, but the issue was overshadowed by the individual insurance mandate and, at the end, by arguments over the potential for government-subsidized abortions under the law. 25 Meanwhile, the administration was weighing a request made by the Supreme Court in November 2009 to state the governments view on the challenge to Arizonas employer-sanctions law. The governments brief, filed on May 28, marked the first time the government had weighed in against any of the flurry of state and local immigration laws enacted in the last few years. The brief pointed to the number of similar laws in urging the justices to hear the case. It went on to argue that Arizonas law disrupt[s] a careful balance that Congress struck between preventing employment of illegal aliens and preventing discrimination against racial or ethnic minorities. A month later, the court agreed to hear the case, setting the stage for arguments by years end. 26 insurance mandate even as it awaits pivotal developments in two similar suits by states that federal judges refused to dismiss at the earliest stage. In a ruling on Oct. 7, U.S. District Judge George Caram Steeh in Detroit accepted the administrations basic legal argument that Congress could require individuals to purchase health insurance as part of its power to regulate interstate commerce. When viewed in the aggregate, Steeh said, individual decisions to buy health insurance or go without have clear and direct impacts on health care providers, taxpayers, and the insured population who ultimately pay for the care provided to those who go without insurance. 27 Steehs ruling came in a case filed by the conservative Thomas More Law Center and several Michigan residents, one of 15-20 cases challenging the health care law, according to a compilation by the Justice Department. The ruling came as two higher-profile challenges by state governments were proceeding in federal courts in Virginia and Florida. U.S. District Judge Henry Hudson is scheduled to hear legal arguments in Richmond, Va., on Oct. 18 in competing motions for summary judgment by the state of Virginia and the federal government. Hudson had rejected the governments motion to dismiss the case in a 32-page opinion on Aug. 2 that called the applicable legal precedents informative but inconclusive. Meanwhile, U.S. District Judge Roger Vinson in Pensacola, Fla., was due to rule by his self-announced deadline of Oct. 14 on the governments similar motion to dismiss the suit by Florida and 19 other states challenging the health care law. In a hearing on Sept. 14, Vinson appeared sympathetic to the states claim about their costs once the law takes full effect in 2014. Doesnt this really put all 50 states on the short end of the stick? Vinson asked the governments attorney at one point.
Continued on p. 862
CURRENT SITUATION
Health Suits Advancing
he Obama administration is applauding a federal judges ruling upholding the new individual health
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At Issue:
Is the Obama administration taking on too much power from the states?
yes
ROBERT ALT
SENIOR LEGAL FELLOW AND DEPUTY DIRECTOR, CENTER FOR LEGAL & JUDICIAL STUDIES, THE HERITAGE FOUNDATION
WRITTEN FOR CQ RESEARCHER, OCTOBER 2010
DOUG KENDALL
PRESIDENT, CONSTITUTIONAL ACCOUNTABILITY CENTER
WRITTEN FOR CQ RESEARCHER, OCTOBER 2010
he Obama administration has used federal authority in a schizophrenic fashion: making illegitimate claims of authority to achieve desired ends, while disavowing legitimate authority where doing so proved beneficial to favored special interests. From a constitutional and policy perspective, this is the worst of both worlds. The most audacious claim of federal authority comes in the health care mandate, which requires all individuals to purchase health insurance or pay a penalty enforced through the tax code. Despite Speaker Nancy Pelosis incredulity to a press question asking where Congress found the constitutional authority for the mandate she responded, Are you kidding? Congress is still subject to the requirements of the Constitution, which grants to Congress limited and enumerated legislative powers. Where, then, does the Obama administration point to as its constitutional justification for this sweeping new authority? It claims that Congress has the authority to regulate individual acts of not purchasing a product (i.e., not entering into commerce) pursuant to Congress authority to regulate wait for it interstate commerce. The term unprecedented is thrown around lightly, but here I use the literal meaning this assertion of authority has no precedent. There is simply no example in federal law which supports this usurpation. Indeed, the first federal court to hear a challenge noted that [n]o reported case from any federal appellate court has extended the Commerce Clause or Tax Clause to include the regulation of a persons decision not to purchase a product. While in health care the Obama administration suffers from delusions of grandeur, in the area of federal regulatory preemption that is, the authority to set uniform regulations for products that actually are in interstate commerce to avoid a patchwork of 50 different regulations the administration has an inferiority complex. The administration has asserted a narrow view of preemption in a memorandum to the heads of all executive agencies and has disclaimed federal authority in court filings. This decision might seem difficult to understand in light of the previously bold assertions of federal authority until one realizes that this position is advantageous to the trial lawyers (major donors to the Obama administration), who find it easier to win cases if courts and juries are not bound by blanket federal product-liability requirements. As these examples suggest, the administrations assertions of federal authority are not circumscribed by the Constitution, but by political expediency.
no
yes no
Oct. 15, 2010 CQ Press Custom Books - Page17
he charge that the Obama administration has concentrated too much power in the federal government is not only unsupportable, it is in important respects counter-factual. Early in his presidency, President Obama issued a sweeping policy memorandum that reaffirmed the critical role that state and local governments play in protecting the health and safety of their citizens and directed executive branch officials to review every regulation adopted in the past 10 years to scrub them of language that inappropriately displaced states. Obamas shift in policy has led to reversal of several Bush administration policies and has empowered states to take a lead in a whole host of areas where state-level innovation is most needed, from environmental regulation to drug laws to financial reform. In one prominent example, the Obama administration granted California its long-sought waiver of federal preemption, restoring this state to its historic role as a pathbreaker in the regulation of auto emissions. Even President Obamas health care reform law is an example of balancing the need for a national solution with the benefits that accompany state innovation. Learning from state experiences, such as the Massachusetts plan signed into law by then-Gov. Mitt Romney, the new health care law preserves the states regulatory flexibility by (1) allowing states to form their own insurance exchange or join with a regional exchange; (2) giving states significant discretion over plan specifics like whether to cover abortion; and (3) permitting states to set up their own programs with or without an individual mandate so long as certain requirements are met. Only when the Constitution explicitly places sole power with the national government such as the provision that gives the federal government the power to make uniform rules for immigration and naturalization has the Obama administration jealously guarded federal power and challenged the ability of states like Arizona to create their own system of immigration enforcement. Reviewing these actions collectively, President Obama has appropriately balanced state-level innovation with national interests, viewing federalism as a structure for allocating government power in ways that improve how the government serves its citizens rather than as a zero-sum struggle between the national government and the states. Even when confronting issues of clear national concern, such as health care reform, the Obama administration has recognized the critical role states play in our federal system. The result is federalism at its best and a government that works better for everyone.
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In his opinion, Hudson, who was appointed to the federal bench by President George W. Bush in 2002, preliminarily upheld the states standing to bring the case in order to give effect to its law, the Virginia Health Care Freedom Act, prohibiting any individual health insurance mandate. On the merits, Hudson said the government had failed at this stage to overcome the states constitutional arguments against the law. No reported case from any federal appellate court, the judge wrote, has extended the Commerce Clause or the Tax Clause to include the regulation of a persons decision not to purchase a product, notwithstanding its effect on interstate commerce. 28 The case, Virginia ex rel. Cuccinelli v. Sebelius, is being brought in the name of Virginias conservative Republican attorney general, Ken Cuccinelli. He depicted Hudsons ruling as a significant setback for the Obama administration. In her comments, Health and Human Services (HHS) Secretary Kathleen Sebelius emphasized the preliminary nature of the ruling. The two sides recapitulated their arguments in parallel, competing motions for summary judgment filed with the court on Sept. 3 in advance of the Oct. 18 hearing. The health care mandate issue also figured prominently in the Sept. 14 arguments in the Florida case before Judge Vinson, a Reagan appointee to the federal bench in 1983. 29 For the states, Washington attorney David Rivkin argued that Congress has no authority to regulate citizens decisions not to buy health insurance. Congress can regulate commerce, he said. But Congress cannot create it. For the government, Ian Gershengorn, a deputy assistant United States attorney general, countered that uninsured individuals nevertheless use medical services. This is not telling people you have to buy a product, he said. Its saying this is how you have to pay for your health care.
On the fiscal issue, Blaine Winship, representing Florida, said the new law transformed Medicaid beyond its original purpose. Its quite a budget buster for us, he said. Gershengorn countered that any state can opt out of Medicaid. The states position, he added, would prevent Congress from making any changes in the program. Vinson, however, appeared sympathetic to the states. The states are in a catch-22 situation, the judge said, because the government dominates the ability to raise income. Expectations that Vinson would reject the governments effort to dismiss the case were fed by his decision to schedule further arguments on Dec. 16. Vinson rejected an effort by four states to join the suit on the federal governments side but said he would reconsider the issue later. The Florida and Virginia suits had been the most closely watched of the various challenges to the new health care law, including two previously dismissed on procedural grounds. In his ruling in the Michigan case, Judge Steeh rejected the administrations procedural arguments that the challengers lacked legal standing to bring the suit and that the suit was premature. He went on in a 20-page ruling, however, to say that Congress had a rational basis to conclude that, in the aggregate, decisions to forego [sic] insurance coverage in preference to pay for health care out of pocket drive up the cost of insurance. A Justice Department spokeswoman voiced satisfaction with the ruling. We welcome the courts decision upholding the health care reform statute as constitutional, said spokeswoman Tracy Schmaler. Robert J. Muise, senior trial counsel for the Thomas More Law Center, told The New York Times the case was set up nicely for appeal. 30
Immigration Cases Set
losely watched challenges to two Arizona statutes aimed at tougher
enforcement of federal immigration laws are being readied for oral arguments soon before federal appellate courts. The Ninth U.S. Circuit Court of Appeals, with jurisdiction over nine Western states, is set to hear arguments during the week of Nov. 1 in Arizonas effort to reinstate its law enacted in April making it a state crime to be in the country in violation of federal immigration laws. Meanwhile, the Supreme Court is due to hear arguments on Dec. 8 from business and immigrants rights groups seeking to invalidate the 2007 law stiffening the penalties for employers who hire illegal aliens. Both laws are being challenged under the doctrine known as preemption as intruding on the federal governments primacy over states on immigrationrelated matters. The justices are also hearing three other preemption cases this fall testing the relationship of state and federal laws in arbitration, auto safety and vaccine safety. The Ninth Circuit will be reviewing the July 28 ruling by federal judge Bolton in Phoenix that blocked major provisions of the act from going into effect. In her ruling, Bolton, appointed to the bench by President Clinton in 2000, acknowledged the states interest in controlling illegal immigration and addressing the concurrent problems with crime. But, she continued, it is not in the public interest for Arizona to enforce preempted laws. 31 Boltons ruling blocked the most controversial parts of the law, including a requirement that state and local law enforcement officers determine the immigration status of anyone arrested, detained or stopped that they reasonably suspect is unlawfully present in the country. The ruling also blocked the new state crime of failing to carry alien registration papers. And it enjoined the provision making it a crime for illegal immigrants to apply for a job. Immigration rights advocates hailed the ruling. Its a victory for the community, Lydia Guzman, president of
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Somos America (We Are America), said. Gov. Brewer voiced disappointment but called the ruling a bump in the road and vowed a quick appeal. The Ninth Circuit set an expedited briefing schedule in the case with arguments to be heard by a three-judge panel on Nov. 1. Earlier, a three-judge Ninth Circuit panel upheld Arizonas employer-sanctions law in a unanimous, 23-page opinion in September 2008. 32 The business and immigrant rights groups challenging the law argued that it created the risk of conflict preemption because state courts could rule differently on an aliens status than federal immigration authorities would. They also said that an express preemption clause precluded the state from revoking an employers business license because the federal law prohibited any penalties other than those provided there. Writing for the court, Judge Mary Schroeder, a Clinton appointee, rejected the challengers arguments. She said the speculative, hypothetical possibility of a conflict with federal law was insufficient to invalidate the law in its entirety. As for the license-revocation provision, she said it fell within an exception in the federal law for licensing provisions. She also found no conflict with federal law in the state acts requirement that employers use the voluntary federal E-verify system to verify a job applicants status. The Supreme Court agreed to hear the case on June 28. The Chamber filed its opening brief on Sept. 1, followed a week later by friend-of-thecourt briefs from the U.S. government, business groups, immigrant rights groups and a major labor union: the Service Employees International Union. The states brief and any supporting briefs were to be filed in October. In the other preemption cases, the high court will decide these issues being closely watched by business and consumer groups as well as state governments:
Can the victim of a vaccine-related injury sue the manufacturer in state court for a design defect despite the no-fault, administrative system established by the National Vaccine Injury Compensation Act? (Bruesewitz v. Wyeth; argument: Oct. 12.) Does the Federal Arbitration Act prevent a state from requiring that any consumer arbitration agreement permit the use of classwide arbitration allowing the consolidation of claims by all similarly situated persons? (AT&T Mobility v. Concepcion; argument: Nov. 9.) Do federal auto safety laws block an accident victim from suing a manufacturer in state court for failing to install a lap/shoulder belt in the middle back seat when not required to do so by federal regulations? (Williamson v. Mazda Motor of America; argument: Nov. 3.)
OUTLOOK
Federalisms Meanings
he Framers of the Constitution created a government unlike any other before. Federalism was our Nations own discovery, Supreme Court Justice Anthony M. Kennedy has written. The Constitution, Kennedy said, split the atom of sovereignty between the national and state governments, with each protected against incursion by the other. 33 In their deliberations, the Framers strove to divide powers between a strong and stable federal government and states whose prerogatives were to be protected from incursion by the new national government. Writing in Federalist No. 37, James Madison described the process of partitioning the respective powers of the federal and state governments as arduous. Now more than two centuries later, federalism issues remain contentious, but the context is much changed. The
dual federalism concept of the 19th century has been displaced by usages such as cooperative or collaborative federalism that describe powers and responsibilities intertwined among rather than partitioned between Washington and state capitals. In his book, Polyphonic Federalism, Emory law professor Schapiro sees this overlapping of power as promoting the traditional federalism values of responsiveness, selfgovernance and liberty. 34 Legislative debates and court challenges in todays major federalism controversies, however, still tend to be waged under the old zero-sum game concept of dividing rather than sharing power. State officials challenging the new health care law attack the fiscal impact of Medicaid expansion with little acknowledgment in their public comments of the joint federal-state structure of the program since its inception. From the opposite perspective, the business groups that press for federal preemption to supersede state law give no recognition to the states role in the 20th century in promoting stronger protections for workers, consumers and the general public ultimately to the benefit, not the detriment, of business itself. Meanwhile, Americans are evincing middling confidence at best in government at all levels. For several years, polls have been detecting declining public confidence in the federal government generally. But a recent Zogby International poll found public trust in state governments no higher with only a minority of respondents placing much trust in either Washington or their own state government. (See graph, p. 848.) Health care and immigration illustrate reasons for the publics angst. The inability to stem the rising cost of health care or the continuing flow of illegal immigration test the publics belief in the power of government to deal with contemporary problems. Ironically, the loudest voices in the debates are complaining that the federal government is taking on too much power to try to confront them.
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This is a classic example of what seems to be a growing pace of volatility in our system, says George Mason professor Conlan. This is like a case of whiplash. It was not that long ago when people were talking about this era of devolution, or returning power to the states. The court cases on the health care law are proceeding against the backdrop of strong political criticism by Republican lawmakers, many of whom are campaigning for Congress by promising to repeal and replace it. Neither the GOP lawmakers nor the states in their lawsuits provide details on how they would replace the law if successful in their goal of knocking it out. If the law stays on the books, a definitive Supreme Court decision is likely to be at least two years away. Meanwhile, immigrant rights groups that challenge tough-minded state and local laws acknowledge the problem of illegal immigration but look for a solution to the unlikely prospect of Congress and the president agreeing on some form of legalization as part of a broad overhaul of immigration law. For their part, the groups that support the states initiatives take no note of the Obama administrations sharp increase in deportations a record 392,000 during the year that ended Sept. 30, an increase of 81,000 over the number in President Bushs final year in office. 35 In Schapiros metaphor, however, these conflicts should be seen not as discordant, but euphonious the arguments and power struggles apt to lead to better policies with broader support in the long run. The state of federalism today, Schapiro says, is good. Its good when the question of allocation of power in the United States is debated.
John Schwartz, Obama Seems to Be Open to a Broader Role for States, The New York Times, Jan. 30, 2009, p. A16. 6 For background, see Kenneth Jost, Revising No Child Left Behind, CQ Researcher, April 16, 2010, pp. 337-360. 7 Andrew Cline, Obamas Crazy-Quilt Federalism, The American Spectator, July 13, 2010, http://spectator.org/archives/2010/07/13/obamascrazy-quilt-federalism/print. 8 The cases are Florida v. U.S. Dept of Health and Human Services, No. 3:10-cv-91-RV/EMT, Virginia ex rel. Cuccinelli v. Sebelius, U.S. Dist. Ct., E.D. Va., 3:2010cv00188. McCollum was interviewed for White House Brief, allpoli ticsradio.com, March 22, available on You Tube: www.youtube.com/watch?v=TzRqc8MrGtc. 9 The case is Lozano v. City of Hazleton, 073531, 3d Circuit, Sept. 9, 2010, www.ca3.us courts.gov/opinarch/073531p.pdf. Documents and updates can be found on the American Civil Liberties Unions website: www.aclu. org/immigrants-rights/anti-immigrant-ordinanceshazleton-pa. For coverage, see Julia Preston, Court Rejects a Citys Effort to Restrict Immigrants, The New York Times, Sept. 10, 2010, p. A12. 10 Background drawn in part from David B. Walker, The Rebirth of Federalism: Slouching toward Washington (2d ed., 2000). See also Michael Greve, Real Federalism: Why It Matters, How It Could Happen (1999). For a succinct overview, see Federalism in Kenneth Jost, Supreme Court from A to Z (4th ed., 2007), pp. 189-190. 11 The Federalist Papers are online at the Library of Congress Thomas website: http://thomas. loc.gov/home/histdox/fedpapers.html. 12 The cases are McCulloch v. Maryland, 17 U.S. 316 (1819); New York v. Miln, 36 U.S. 102 (1837); and Passenger Cases (Smith v. Turner, Norris v. Boston), 48 U.S. 283 (1849). 13 The cases are National Labor Relations Board v. Jones & Laughlin Steel Corp, 301 U.S. 1 (1937); Steward Machine Co. v. Davis, 301 U.S. 548 (1937) (unemployment compensation); Helvering v. Davis, 301 U.S. 619 (1937) (Social Security); West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937) (state minimum wage); United States v. Darby Lumber Co., 312 U.S. 100 (1941) (Fair Labor Standards Act). See individual entries in Melvin I. Urofsky and Paul Finkelman, Landmark Decisions of the U.S. Supreme Court (2d ed.), 2007. 14 The case is Wickard v. Filburn, 317 U.S. 111 (1942). 15 See Walker, op. cit., p. 99.
Notes
Quoted in Casey Newton, End of Kids Care could cost state billions from feds, The Arizona Republic (Phoenix), March 23, 2010, p. A1; see also Casey Newton, Budget for 2011 signed by Brewer, ibid., March 19, 2010, p. B1. 2 The case is United States v. Arizona, U.S. Dist. Ct., Ariz., 2:2010cv01413, http://dockets. justia.com/docket/arizona/azdce/2:2010cv0141 3/535000/. See Jerry Markon and Michael D. Shear, Justice Dept. sues Arizona over law, The Washington Post, July 7, 2010, p. A1. For coverage of the laws enactment, see Craig Harris, Alia Beard Rau and Glen Creno, Center of the storm, The Arizona Republic (Phoenix), April 24, 2010, p. A1. 3 For background on the Tea Party, see Peter Katel, Tea Party Movement, CQ Researcher, March 19, 2010, pp. 241-264. 4 Conlans books are listed in Bibliography. For previous coverage, see Kenneth Jost, States and Federalism, CQ Researcher, Sept. 13, 1996, pp. 793-816. 5 Memorandum for the Heads of Executive Departments and Agencies, May 20, 2009, www.whitehouse.gov/the_press_office/Presi dential-Memorandum-Regarding-Preemption/. For coverage, see Philip Rucker, Obama curtails Bushs policy of preemption, The Washington Post, May 22, 2009, p. A3. See also
1
About the Author

Associate Editor Kenneth Jost graduated from Harvard College and Georgetown University Law Center. He is the author of the Supreme Court Yearbook and editor of The Supreme Court from A to Z (both CQ Press). He was a member of the CQ Researcher team that won the American Bar Associations 2002 Silver Gavel Award. His previous reports include Abortion Debates and Revising No Child Left Behind. He is also author of the blog Jost on Justice (http:// jostonjustice.blogspot.com).
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Background drawn from Walker, op. cit.; Timothy Conlan, From New Federalism to Devolution: Twenty-Five Years of Intergovernmental Reform (1998). 17 Ibid., pp. 85-91. 18 Ibid., pp. 259-260. 19 The cases are Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985), overruling National League of Cities v. Usery, 426 U.S. 833 (1976); and South Dakota v. Dole, 483 U.S. 203 (1987). 20 The decisions include Printz v. United States, 527 U.S. 598 (1999) (gun background checks); Alden v. Maine, 527 U.S. 706 (1999) (Fair Labor Standards Act); United States v. Lopez, 514 U.S. 549 (1995) (Gun-Free School Zones Act); United States v. Morrison, 529 U.S. 598 (2000) (Violence Against Women Act). 21 Background drawn in part from Tim Conlan and John Dinan, Federalism, the Bush Administration, and the Transformation of American Conservatism, Publius: The Journal of Federalism, Vol. 37, No. 3 (winter 2007), pp. 279-303, http://publiusoxfordjournals.org; and Tim Conlan and Paul Posner, Inflection Point? Federalism and the Obama Administration, paper presented to American Political Science Association, September 2010, http://papers.ssrn. com/sol3/papers.cfm?abstract_id=1642264. 22 The decision is Gonzales v. Oregon, 546 U.S. 243 (2006). 23 The decision is Gonzales v. Raich, 545 U.S. 1 (2005). 24 John Dinan and Shama Gamkhar, The State of American Federalism 2008-2009: the Presidential Election, the Economic Downturn, and the Consequences for Federalism, Publius: The Journal of Federalism, Vol. 39, No. 3 (winter 2009), pp. 369-407, http://publius. oxfordjournals.org. Dinan teaches at Wake Forest University, Gamkhar at the University of Texas-Austin. 25 For a full account, see Landmark: The Inside Story of Americas New Health Care Law and What It Means for All of Us, by the staff of The Washington Post (2010). 26 The governments brief can be found on SCOTUSBlog: www.scotusblog.com/wp-content/ uploads/2010/05/09-115_cvsg-grant-limited.pdf. 27 The case is Thomas More Law Center v. Obama, 10-CV-11156, U.S. Dist. Ct. E.D. Mich., Oct. 7, 20910, www.mied.uscourts.gov/ News/Docs/09714485866.pdf. For coverage, see Lyle Denniston, Health insurance mandate upheld, SCOTUSBlog, Oct. 7, 2010, www.scotus blog.com/2010/10/health-insurance-mandateupheld/.
16
FOR MORE INFORMATION

10 Amendments for Freedom, 2740 S.W. Martin Downs Blvd., Suite 235, Palm City, FL 34990; (772) 781-6112; 10amendments.org. Nonprofit working to amend the Constitution by proposing initiatives that will restrain the power of Congress. Constitution Project, 1200 18th St., N.W., Suite 1000, Washington, DC 20036; (202) 580-6920; www.constitutionproject.org. Seeks consensus solutions to difficult legal and constitutional issues through dialogue across ideological and party lines. Federation for American Immigration Reform, 25 Massachusetts Ave., N.W., Suite 330, Washington, DC 20001; (202) 328-7004; www.fairus.org. Promotes immigration reform through increased border security and limits on the number of immigrants allowed per year. Heritage Foundation, 215 Massachusetts Ave., N.E., Washington, DC 20002; (202) 546-4400; www.heritage.org. Conservative think tank advocating for a smaller federal government role. National Conference of State Legislatures, 7700 E. First Place, Denver, CO 80230; (303) 364-7700; www.ncsl.org. Provides research and technical assistance for policy makers to exchange ideas on pressing state issues. National Immigration Law Center, 3435 Wilshire Blvd., Los Angeles, CA 90010; (213) 639-3900; www.nilc.org. Defends the rights and opportunities of low-income immigrants and their families. Urban Institute, 2100 M St., N.W., Washington, DC 20037; (202) 833-7200; www.urban.org. Research and education think tank working for sound public policy and effective government. We Are America Alliance, 1050 17th St., N.W., Washington, DC 20036; (202) 463-9222; www.weareamericanalliance.org. Advocacy group for immigrant civic engagement, formed after 2006 pro-immigration rallies.
The judges decision in Virginia ex rel. Sebelius is available at http://docs.justia.com/ cases/federal/district-courts/virginia/vaedce/3: 2010cv00188/252045/84/. All other case documents are also on the site. For coverage, see stories by Rosalind S. Helderman, U.S. judges allows Va. health care lawsuit to move ahead, The Washington Post, Aug. 3, 2010, p. A2; Va. begins courtroom assault on health care law, ibid., July 2, 2010, p. B1. 29 Quotes from these stories: N.C. Aizenman, A first step in health care suit, The Washington Post, Sept. 15, 2010, p. A4.; Kevin Sack, Suit on Health Care Bill Appears Likely to Advance, The New York Times, Sept. 15, 2010, p. A20; Kris Wernowsky, Health care suit lives to see another day, Pensacola News Journal, Sept. 15, 2010. 30 See Kevin Sack, Judge rules health law is constitutional, The New York Times, Oct. 8, 2010. 31 The decision in United States v. Arizona can be found at http://docs.justia.com/cases/ federal/district-courts/arizona/azdce/2:2010cv 01413/535000/87/. Reaction drawn from news coverage: Nicholas Riccardi and Anna
28
Gorman, Judge blocks key parts of Arizona immigration law, Los Angeles Times, July 29, 2010, p. A1. 32 The decision in what was then known as Chicanos por la Causa, Inc. v. Napolitano can be found at www.ca9.uscourts.gov/datastore/ opinions/2008/09/17/0717272.pdf. Janet Napolitano, then governor of Arizona, is now U.S. secretary of Homeland Security. For materials on the Supreme Court case, now known as Chamber of Commerce v. Whiting, see www. scotusblog.com/case-files/cases/chamber-ofcommerce-of-the-united-states-v-candelaria/? wpmp_switcher=desktop. 33 U.S. Term Limits v. Thornton, 514 U.S. 779 (1995) (Kennedy, J., concurring). 34 Robert A. Schapiro, Polyphonic Federalism: Toward the Protection of Fundamental Rights (2009), p. 177. 35 See Shankar Vedentam, U.S. deportations reach record high, The Washington Post, Oct. 8, 2010, p. A10; Julia Preston, Deportations From U.S. Reach a Record High, The New York Times, Oct. 8, 2010, p. A21.
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Bibliography
Selected Sources
Books
Conlan, Timothy J., From New Federalism to Devolution: Twenty-Five Years of Intergovernmental Reform, Brookings Institution Press, 1998. A professor at George Mason University traces and analyzes federalism reforms from the 1970s through the mid-1990s. Includes detailed notes. The book is a continuation of Conlans earlier title, New Federalism: Intergovernmental Reform from Nixon to Reagan (Brookings Institution Press, 1988). In acknowledgments, Conlan foreswore writing a third edition, but he has continued to write articles on the topic (see below). Greve, Michael S., Real Federalism: Why It Matters, How It Could Happen, AEI Press, 1999. The conservative activist-scholar, now at the American Enterprise Institute, argues that a revival of federalism possible but not inexorable is needed to counter centralizing tendencies and protect citizens liberty and welfare. Includes detailed notes. Holahan, John, Alan Weil, and Joshua M. Wiener (eds.), Federalism and Health Policy, Urban Institute Press, 2003. The book comprehensively details the respective roles of federal and state governments in setting and implementing health policy in the United States. Holahan is director of the institutes Health Policy Research Center; Weil was director of its New Federalism Project; Wiener a principal research associate. Notes and references with each chapter. Schapiro, Robert A., Polyphonic Federalism: Toward the Protection of Fundamental Rights, University of Chicago Press, 2009. The Emory law professors theory of polyphonic federalism views the organizational principle of multiple, overlapping decision-making authorities as the best means to promote responsiveness, self-government and liberty. Walker, David B., The Rebirth of Federalism: Slouching toward Washington (2d. ed.), Chatham House, 2000 (originally published 1995). The book traces the history of American federalism and analyzes its condition at the end of the Clinton presidency. Walker, now retired, was a professor at the University of Connecticut and Bowdoin College after having worked for many years with the Advisory Commission on Intergovernmental Relations. Includes detailed notes. servatism, Publius: The Journal of Federalism, Vol. 37, No. 3 (winter 2007), pp. 279-303, http://publiusoxford journals.org (subscription required). Conlan and coauthor Dinan, an associate professor of political science at Wake Forest University, write that President George W. Bush is the latest in a string of presidents to sacrifice federalism concerns for the pursuit of specific policy goals at the federal level. The issue included nine other articles assessing the Bush presidencys impact on federalism in such specific areas as education, environmental policy, preemption and federal assistance to states. Conlan, Tim, and Paul Posner, Inflection Point? Federalism and the Obama Administration, paper presented to American Political Science Association, Washington, D.C., Sept. 2-5, 2010, http://papers.ssrn.com/sol3/papers. cfm?abstract_id=1642264. Conlan and George Mason University colleague Posner write that President Obama is practicing nuanced federalism, with some areas of unprecedented federal reach alongside impressive examples of intergovernmental consultation and deference to state regulatory prerogatives. Greenblatt, Alan, Federalism in the Age of Obama, State Legislatures, July/August 2010, pp. 26-28, www. ncsl.org/?tabid=20714. The article, published in the magazine of the National Conference of State Legislatures, examines the Obama administrations exploitation of states fiscal woes to press them to implement initiatives in education, health care and other areas. Greenblatt, a former staff writer for Governing, is a CQ Researcher contributing writer. The online edition includes a Q&A with Paul Posner, a federalism expert at George Mason University.
Reports and Studies

2010 Immigration-Related Laws and Resolutions: JanuaryJune 2010, National Conference of State Legislatures, July 20, 2010, www.ncsl.org/default.aspx?TabId=20881. The report traces the growth in the number of immigrationrelated laws passed by the states since 2005 and categorizes the nearly 200 laws passed by state legislatures during the 2010 legislative season. Thomas, Kenneth R., Federalism, State Sovereignty, and the Constitution: Basis and Limits of Congressional Power, Congressional Research Service, Feb. 1, 2008, http://assets.opencrs.com/rpts/RL30315_20080201.pdf. The 24-page report by a CRS legislative attorney summarizes Supreme Court decisions governing the extent and the limits of federal power vis--vis the states from the early days of the Constitution to the present.
Articles
Conlan, Tim, and John Dinan, Federalism, the Bush Administration, and the Transformation of American Con-
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CHAPTER
DOMESTIC POVERTY
BY THOMAS J. BILLITTERI
Excerpted from Thomas J. Billitteri, CQ Researcher (September 7, 2007), pp. 721-744.
Domestic Poverty
THE ISSUES
Mexico in poverty at the turn of the 21st century. 3 An astonishing number of arilyn Bezear, a 52people are working as hard year-old single as they possibly can but are parent in Harlem still in poverty or have inwho lost her husband to cancomes that are not much above cer, was living in run-down the poverty line, said Peter public housing and working Edelman, a law professor at two jobs last winter, cleanGeorgetown University who ing offices and doing cleriwas co-chairman of a povercal work for a temp agency. ty task force this year for the Together, after taxes, I bring Center for American Progress, home up to $300 a week, a Washington think tank. 4 she told a congressional panel A number of indicators unin February. With this I pay derscore the depth and my rent, food, telephone and breadth of American poverty: payments for the loan that I Those in deep, or severe, took out for my daughter to poverty, with incomes of half go to college. When the temp or less of the official poverty agency has no work, Bezear threshold, number over 15 scrambles for ways to meet million more than the popexpenses, like working the ulations of New York City, Los late shift at a bowling alley Angeles and Chicago comHispanic day laborers negotiate with a potential and getting home at 4:30 in bined. Severe poverty hit a 32employer in Homestead, Fla. As low-skilled immigrants, the morning. year high in 2005, according many living below the poverty line, move to the South Bezear added: I am just to McClatchy Newspapers. 5 and Midwest to work in meatpacking and other industries, debate intensifies over immigrations impact one of many who live The gap between rich and on native-born Americans at the bottom of the income through these struggles. . . . poor is growing. In 2005, the scale. Newly released Census data for 2006 show that Wages, education, training and average income of the top 1 36.5 million Americans including nearly 13 million health care are a necessity. I percent of U.S. households children lived below the federal poverty line of hope my testimony did not rose $102,000 (adjusted for in$20,614 in income for a family of four. fall on deaf ears. 1 flation), but the bottom 90 Its a hope that many of Americas ber of presidential candidates are fopercent saw incomes rise $250, poorest citizens would no doubt cusing either squarely on poverty or according to economists Thomas echo. Despite a relatively stable econ- more generally on ideas to narrow the Piketty and Emmanuel Saez. 6 omy, an overhaul of the welfare sys- growing gap between the rich and poor. And the top 1 percent got the Newly released Census data for 2006 tem a decade ago and billions spent biggest share of national income on programs for the needy, poverty show that 36.5 million Americans since 1928. 7 remains pervasive and intractable about one in eight lived below the The chance an average American federal poverty line of $20,614 in inacross the nation. family will see its income plumConservatives say solutions must em- come for a family of four. More than a met at least 50 percent is roughphasize personal responsibility, higher third of them are children, and 3.4 milly two-and-a-half times that of the marriage rates and fewer out-of-wed- lion are 65 and older. And while the 1970s. 8 lock births, while liberals blame the nations poverty rate declined for the At some time, most Americans negative effects of budget cuts for anti- first time this decade, from 12.6 percent will live at least one year below poverty programs, tax cuts benefiting in 2005 to 12.3 percent last year, the the poverty line, according to sothe wealthy and the need for more number of children without health inciologists Mark R. Rank and early-childhood-development programs. surance rose to 11.7 percent in 2006. 2 Thomas A. Hirschl. 9 Indeed, among rich nations, the The Democratic Congress has made Such trends have helped push poverpoverty a priority issue. And a num- United States ranked second behind ty and broader issues of inequality and
AP Photo/Lynne Sladky
Available online: www.cqresearcher.com CQ Press Custom Books - Page25
Sept. 7, 2007
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DOMESTIC POVERTY
South Is Most Impoverished Region
Almost all the Southern states have poverty levels exceeding the national average of 12.3 percent of residents living in poverty. Mississippi leads the nation with a poverty rate of 20.6 percent. New Hampshire has the lowest rate, 5.4 percent. Percentage of People in Poverty by State, 2006
Wash. Mont. N.D. Minn. S.D. Wyo. Neb. Nev. Calif. Okla. Ariz. N.M. Ark.
Miss.
Vt. Wis. Mich. N.Y. Pa.
N.H. Maine Mass. Conn. R.I.
Ore.
Idaho
Iowa Ill. Ind. Ohio W.Va. Ky. Tenn. Ala. Va. N.C. S.C. Ga. Md. D.C.
Utah
Colo.
Kan.
Mo.
N.J. Del.
La. Texas
Less than 10%

Alaska Fla.
10.0-12.2% 12.3-14.9% 15.0% and over
Hawaii
Source: Historical Poverty Tables, U.S. Census Bureau, 2007
U.S. Total: 12.3%
economic insecurity onto the national stage in ways not seen for decades. Two years ago, televised images of squalor in post-Katrina New Orleans refocused the nations attention at least temporarily on poverty. More recently, the subprime mortgage debacle, higher gas prices and spiraling medical costs have edged millions of middle-class Americans closer to economic ruin. Meanwhile, Main Street angst is growing over globalization, which has contributed to the elimination of one-sixth of U.S. factory jobs in the past six years. 10 Jacob S. Hacker, a political scientist at Yale University and author of the 2006 book The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement And How You Can Fight Back, says poverty is on the nations radar for reasons that go beyond high-profile events like Katrina. Poverty is something the middle class
cares about when it looks down and sees itself poised on the financial precipice, he says. The middle class is looking up, too, at those in the top income strata, and theres a lot more discussion about [income] inequality. And finally, many middle-class Americans have a deep concern about the fact that were such a rich nation, and yet children and hardworking adults who moved into the labor market after welfare reform are struggling to get by. While politicians in both major parties have spoken to concerns about middle-class vulnerability, Democrats have been focusing squarely on poverty and inequality, blending appeals for middle-class protections with rhetoric reminiscent of the 1960s War on Poverty. Since assuming control of Congress in January, Democrats have held several hearings on poverty, hunger and economic threats to the needy. Rep.
Charles B. Rangel, D-N.Y., chairman of the powerful House Ways and Means Committee, declared this spring that with the exception of getting the hell out of the Middle East, I cant think of anything more patriotic that we can do than eliminate poverty. 11 In the 2008 presidential race, Sen. Hillary Clinton, D-N.Y., has accused the Bush administration of making the middle class and working families into invisible Americans, 12 while Sen. Barack Obama, D-Ill., alluding to his work as a community organizer in Chicago, has said poverty is the cause that led me to a life of public service. 13 Former Sen. John Edwards, D-N.C., has staked his campaign on the poverty issue, calling it the great moral issue of our time. 14 Among other contenders, Mayor Michael Bloomberg of New York who dropped his affiliation with the Republican Party in June has been among the most outspoken on poverty. On Aug. 28, the billionaire founder of Bloomberg News, who is thought to be considering a third-party presidential bid, proposed a sharp expansion in the Earned Income Tax Credit (EITC), which provides tax relief to the working poor, and called on politicians of both parties to move beyond ideology to overcome poverty. Bloomberg proposed roughly doubling the number of Americans eligible to benefit from the EITC to 19.7 million people. 15 We are beginning to hear a chorus of voices urging action on poverty, Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Subcommittee on Income Security and Family Support, said in April. 16 Edelman, at the Center for American Progress, echoed the point. Theres a rising concern in the country about inequality, he said. Theres concern about giveaways to the really wealthy, and theres concern about economic insecurity. The poverty issue is embedded in that. 17
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Gap Between Rich and Poor Widened

The top 1 percent of income households earned about 20 percent of the nation's total income in 2005, its highest share since 1929. From 2004 to 2005, the average income of such earners increased by $102,000, after adjusting for inflation. By contrast, the average income of the bottom 90 percent rose by $250. Share of Total Pre-tax Income Held by Top 1 Percent of Earners
20%
15
10
1913 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Source: Thomas Picketty and Emmanuel Saez, based on IRS data; in Aviva Aron-Dine, New Data Show Income Concentration Jumped Again in 2005: Income Share of Top 1% Returned to Its 2000 Level, the Highest Since 1929, Center on Budget and Policy Priorities, March 29, 2007
Nevertheless, it remains unclear how far voters will go in supporting new programs for the poor. A mere 1 percent of respondents to a Gallup Poll in June ranked the gap between rich and poor as the most important economic problem, and only 5 percent named poverty, hunger and homelessness as the most important non-economic problem. 18 Likewise, Edwards has trailed his rivals for the Democratic nomination and even failed to capture much support from voters who are struggling financially. In a survey of independent voters, 40 percent of respondents in households earning less than $20,000 said they would not vote for Edwards if he were the Democratic nominee. 19 The publics fickle interest in the poor has been evident in the two years following Hurricane Katrina, which produced some of the starkest and most widely disseminated images of urban poverty in American history. After Katrina, with its vivid images, a lot of people who have been working in the area of poverty reduction
were excited. They said, now we have some visible images, now people will get excited, and we can push this anti-poverty platform, says Elsie L. Scott, president of the Congressional Black Caucus Foundation. That lasted a month maybe, that excitement. Now that people in New Orleans have been dispersed around the country, people want to forget about it. They dont want to admit we have this kind of poverty in the United States. Policy experts say it would be unfortunate if Middle America fails to recognize how much poverty undermines the nations overall well-being. Childhood poverty alone saps the United States of $500 billion per year in crime and health costs and reduced productivity, according to Harry J. Holzer, a professor of public policy at Georgetown University. 20 Rising poverty should be a concern even among those who dont see a moral obligation to aid the poor, experts warn. The global competitiveness of the U.S. economy suffers if
workers are too poor to obtain an education and modern job skills, the government loses tax revenue and spends more on public assistance because of poverty, and communities fall victim to urban decay, crime, and unrest, notes a recent study on severe poverty in the American Journal of Preventive Medicine. 21 Yet, the American public has always had a tendency to blame the poor for their ills, some poverty experts lament. There is a common perception that the problem with the poor folks in the United States is a problem with values, said Dalton Conley, chairman of the Department of Sociology at New York University. Its not a values deficit at all; its really a resource deficit. 22 And that deficit can be steep. Most Americans would be shocked to know that full-time male workers, at the median, earned no more in 2005 than they did in 1973 after taking inflation into account, says Sheldon H Danziger, a professor of public policy at the University of Michigan. And that wage
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Democratic Candidates Stands on Poverty
Joseph Biden voted for the Fair Minimum Wage Act of 2007, which raised the minimum wage from $5.15 an hour to $7.25 an hour. Biden broke with his party to vote in favor of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which makes it harder for people to erase debt by declaring bankruptcy. Hillary Clinton accuses the Bush administration of turning the middle class into invisible Americans, and says if she is elected president, they will no longer be invisible. In 2002, Clinton was criticized by liberal groups for supporting an increase in the work requirement for welfare; she said that she supported the measure because it was tied to $8 billion in funding of day care for welfare recipients. She advocated for welfare reform under her husbands administration. As a senator, Clinton voted for an increase in the federal minimum wage. Christopher Dodd says that one of his policy priorities influenced by Catholic social teachings and the emphasis on the common good is creating safety nets for the disadvantaged. As a senator, one of Dodds priorities has been helping children, and he has authored numerous child care bills. Dodd has favored increases in the federal minimum wage. John Edwards has made reducing poverty the signature issue of his campaign, calling it the great moral issue of our time. He has set a goal of ending poverty in 30 years by lifting one-third of the 37 million currently impoverished Americans above the poverty line each decade through a higher minimum wage, tax cuts for low-income workers, universal health care and housing vouchers for poor families. Mike Gravel says Americas war on drugs must end because it does nothing but savage our inner cities and put our children at risk. Gravel proposes to help end poverty by creating a progressive tax system in which consumers of new products would be taxed at a flat rate. This would encourage Americans to save, Gravel says. This proposed system would replace the income tax and Internal Revenue Service. Dennis Kucinich advocates ending the war in Iraq and using the money saved to fight domestic poverty, calling homelessness, joblessness and poverty weapons of mass destruction. In July 2007, Kucinich said that he was in favor of reparations for slavery, saying, The Bible says we shall and must be repairers of the breach. And a breach has occurred. . . . Its a breach that has resulted in inequality in opportunities for education, for health care, for housing, for employment. Barack Obama In the Illinois Senate, Obama helped author the states earned income tax credit, which provided tax cuts for low-income families. Obama has supported bills to increase the minimum wage. In The Audacity of Hope, Obama describes what he calls Americas empathy deficit, writing that a stronger sense of empathy would tilt the balance of our current politics in favor of those people who are struggling in this society. Bill Richardson As governor of New Mexico, Richardson took steps to combat poverty in the state, one of the nations poorest. He eliminated the tax on food and offered tax breaks to companies paying above the prevailing wage. Richardson has backed a living wage in the state and created tax credits for the creation of new jobs. Source: This information first appeared on www.pewforum.org. Reprinted with permission from the Pew Forum on Religion & Public Life and Pew Research Center.
that enlists Savannahs business community in helping the poor. Savannah is hardly unique. At least one neighborhood of concentrated poverty often defined as a place where at least 40 percent of residents live below the poverty line exists in 46 of the nations 50 biggest cities, according to Alan Berube, a fellow in the Metropolitan Policy Program of the Brookings Institution, a think tank in Washington. 23 McClatchy Newspapers concluded this year that 43 percent of the nations 37 million poor people live in severe poverty sometimes called extreme or deep poverty. Severe poverty reflects those with incomes of less than half the federal poverty threshold in other words, under $9,903 for a family of four and $5,080 for an individual in 2005. The number of severely poor Americans grew by 26 percent from 2000 to 2005, McClatchy reported. Thats 56 percent faster than the overall poverty population grew in the same period. The rise in severe poverty extends beyond large urban counties to suburban and rural areas. Severe poverty is worst near the Mexican border and in some areas of the South, where
* Many people who study domestic poverty criticize the way the government measures poverty, arguing the standard federal poverty index does not accurately count the poor. Presidential candidate John Edwards is among those who call for reform of the poverty measure. His Web site states that it excludes necessities like taxes, health care, child care and transportation and fails to count some forms of aid including tax credits, food stamps, Medicaid and subsidized housing. The National Academy of Sciences has recommended improvements that would increase the count of people in poverty by more than 1 million. See also, for example, Reid Cramer, The Misleading Way We Count the Poor: Alternatives to Our Antiquated Poverty Measure Should Consider Assets, New America Foundation, September 2003, and Douglas J. Besharov, senior scholar, American Enterprise Institute, testimony before House Subcommittee on Income Security and Family Support, Measuring Poverty in America, Aug. 1, 2007.
stagnation came amid a boom in productivity in the 1990s, he adds. Theres a tendency for people to blame the poor for their own circumstances, Danziger says. And I dont think anybody would blame fulltime male workers. As Congress, policy experts and presidential candidates consider what to do about poverty, here are some of the questions they are asking:
Is extreme poverty growing? In Savannah, Ga., not far from the lush parks and antebellum mansions of the citys fabled historic district, poverty runs wide and deep. More than one-fifth of Savannahs residents live below the federal poverty line, and thats not the worst of it. * We have six census tracts with over a 50-percent poverty rate, says Daniel Dodd, who directs a project
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6.5 million severely poor residents are struggling to find work as manufacturing jobs in the textile, apparel and furniture-making industries disappear, McClatchy noted. The Midwestern Rust Belt and areas of the Northeast also have been hard hit as economic restructuring and foreign competition have forced numerous plant closings. At the same time, low-skilled immigrants with impoverished family members are increasingly drawn to the South and Midwest to work in meatpacking, food processing and agricultural industries. 24 In Illinois, the rate of extreme poverty is the highest in the hard-hit Midwest, with more than 700,000 people in such straits, according to the Heartland Alliance for Human Needs & Human Rights, an advocacy group in Chicago. A family of four living in extreme poverty in Bellevue, Ill., would have monthly expenses of $2,394 but monthly income of only $833, the group says. 25 But some researchers see little or no evidence that severe poverty is on the rise. Robert Rector, a senior policy analyst at the conservative Heritage Foundation, said hes seen no data that suggest increasing deprivation among the very poor, according to the McClatchy report. Rector questioned the growth of severe poverty, saying that census data become less accurate farther down the income ladder. He said many poor people, particularly single mothers with boyfriends, underreport their income by not including cash gifts and loans. 26 Such skeptical views extend beyond the severely poor. While real material hardship certainly does occur, it is limited in scope and severity, Rector told a congressional panel this year. Most of Americas poor live in material conditions that would be judged as comfortable or well-off just a few generations ago. Today, the expenditures per person of the lowest-income one-fifth . . . of households equal those of the median American household in the early 1970s, after adjusting for inflation. 27
Republican Candidates Stands on Poverty

Sam Brownback voted for the 1996 welfare reform bill that required more work for recipients and placed limits on the amount of time they could receive benefits. He says poverty can best be addressed by encouraging people to get married, get a job and not have children out of wedlock. He has promoted a marriage development account program to help married couples get training, buy a car, get an education or purchase a house. Brownback has voted against increasing the minimum wage. Rudolph Giuliani advocates requiring welfare recipients to work or engage in job training to receive benefits. New York Citys welfare rolls were cut by more than half while Giuliani was mayor, and he touts his overhaul of the citys welfare system as one of his major successes. During his 2000 senate campaign, Giuliani indicated that he would support an increase in the minimum wage if studies showed it would not reduce the number of available jobs. Mike Huckabee says one of his priorities is to address poverty because its consistent with me being pro-life. He calls his desire to fight poverty a faith position rather than a political position. He says it is impossible to address poverty without prioritizing stable homes and families. Duncan Hunter says tax cuts are the best tool for reducing poverty because they enable the poor to save and support their families. He advocates what he calls a Fair Tax, which would replace the national income tax with a national retail sales tax. As part of his anti-poverty agenda, he supports tariffs on Chinese imports to help preserve American manufacturing jobs. John McCain voted for a 1996 welfare reform bill that required more work for recipients and placed limits on the amount of time they could receive benefits. Although McCain voted for a bill to increase the federal minimum wage in February 2007, he has historically voted against minimum wage increases, arguing that they can hurt small businesses. Ron Paul In May 2007, Paul asserted that subsidies and welfare only provide poor people with crumbs, while the military-industrial complex and the big banks receive the real big welfare, further impoverishing the middle class and the poor. Paul opposes foreign aid, writing that the redistribution of wealth from rich to poor nations has done little or nothing to alleviate suffering abroad. W. Mitt Romney As Massachusetts governor, Romney proposed a plan requiring more people to work in order to receive state welfare benefits, bringing Massachusetts policy in line with federal welfare reforms. He supports increasing the minimum wage to match inflation but vetoed a bill to raise it in Massachusetts, saying it called for increases that were too extreme and too abrupt. Tom Tancredo The Colorado Congressman advocates moving from an incomebased tax to a consumption-based tax, which he says would create an explosion of job opportunities and economic growth that would benefit all sectors of society, particularly the poor. He also supports repealing the 16th Amendment and establishing a flat, national sales tax to alleviate the burden on American companies and put billions back into the economy. Fred Thompson In May the actor and former U.S. senator criticized programs that would redistribute the income among our citizens as defeatist. A policy of lowering taxes, he said, would stimulate economic growth and make the pie bigger. In 1999 he voted against an increase in the minimum wage. He also voted to reduce taxes on married couples in 2000. He has yet to officially declare his candidacy. Source: This information first appeared on www.pewforum.org. Reprinted with permission from the Pew Forum on Religion & Public Life and Pew Research Center.
In fact, many more consumer items are within reach of a wider segment of the population even the poor than they were 30 or 40 years ago, thanks in part to globalization and the spread of discount retailers. But the cost of neces-
sities such as health care and shelter have exploded, taking a much higher proportion of income than they once did. Indeed, while the poor may have more material goods than in the past, many analysts say poverty is much
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TANF Assistance on the Decline
The number of households receiving financial support through the Temporary Assistance for Needy Families (TANF) program has declined every fiscal year since 1996. A monthly average of just over 4 million households received TANF assistance in 2006, less than a third of the number of recipients 10 years earlier. Average Number of Monthly TANF Recipients, Fiscal 1996-2006 (in millions)
12.6 10.9 8.8 7.2 5.9 5.4
15 12 9 6 3 0
5.1
5.0
4.8
4.6
4.1
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: 2008 Budget in Brief, Department of Health and Human Services, 2007
more complicated than comparisons with earlier eras might suggest. On the one hand, the poor have vastly more consumer goods than a generation ago TVs, cars, washing machines, dishwashers in many cases, says Hacker of Yale University. But at the same time, if you think about where they are relative to middle-class Americans, to say nothing of those at the top, theyre much further behind. A major portion of the spending done by poor people is for basics, especially housing, transportation, child care and health care, and the poor have had a tough time keeping up with those costs, Hacker says. Whats more, the consumption of the poor is supported by higher levels of debt that can leave them extremely vulnerable. And those most vulnerable are people who live in severe poverty. From 2000 to 2004, its prevalence rose sharply. The risk of extreme poverty is significantly higher for children than adults, and it is higher for African-
Americans and Hispanics than for whites or Asian-Americans, according to the study in the American Journal of Preventive Medicine. Millions of Americans, overrepresented by children and minorities, have entered conditions of extreme poverty, the study said. After 2000, Americans subsisting under these conditions grew as a class more than any other segment of the population. 28 Reducing severe poverty is a daunting challenge that has spurred an outpouring of policy proposals from all sides of the political spectrum. In Savannah, Dodds project called Step Up, Savannahs Poverty Reduction Initiative represents one of the nations most ambitious local anti-poverty efforts. Formed in 2004, it is a collaboration of more than 80 organizations representing business, local government, nonprofit organizations, neighborhood groups and others. It receives donations from several major foundations as well as other sources, including businesses.
Step Ups methods include asking employers and business executives to role play for a few hours what impoverished residents experience every day. These things are quite eye-opening for a lot of people, Dodd says. The poverty simulation exercise reveals how frustrating the system is to navigate if youre making minimum wage, if you dont have the skills, and how hard it is to keep a job with what youre getting paid. Theres transportation obstacles, crime, and other impediments. 29 The exercise provides a common frame of reference for the community and demystifies myths about poverty, adds Dodd, who points out that welfare reform has led to a 70 percent reduction in government subsidies for the citys poor in the past seven years. 30 Step Ups goals include expanding poor peoples access to good jobs and quality health care, training them for career-level positions and expanding access to the EITC. The effort grew from a realization that we hadnt had a decline in poverty in 30 years, Dodd says. People realized wed thrown millions of dollars at this but hadnt had the impact we needed to have. For all the projects earnestness, though, it remains unclear whether Step Up will succeed. What I always tell people, says Dodd, is we dont have it all figured out yet. Has welfare reform reduced entrenched poverty? In August 1996, President Bill Clintons signature ended a six-decade practice of guaranteeing cash assistance to the poor. A new system required most people who get aid to work within two years of receiving it. The revised law also limited most aid to a total of five years. And it turned over to states and localities much of the control over how federal poverty money is dispensed. 31 More then a decade later, experts are still debating whether the poor are better off.
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Ron Haskins, a forMany anti-poverty mer Ways and Means advocates say even Committee staff memthough welfare reform ber who played a key put more people to role in the welfare work, further steps are overhaul, has written needed to ensure that that above all, welfamilies can climb out of fare reform showed poverty and stay there, that work even and that poor children low-wage work are protected. provides a more Timothy M. Smeeddurable foundation ing, director of the Cenfor social policy than ter for Policy Research handouts. 32 at Syracuse University, Before welfare resays welfare reform form, Haskins, now turned the welfare poor a senior fellow at the into the working poor. Brookings Institution, Youve got more selfStep Up Savannah, one of the nations most ambitious local antisaid last year, the respect, youre earning poverty efforts, is a collaboration of organizations from business, government, education and the nonprofit sector that helps main goal of state it, but the effect on kids residents of high-poverty neighborhoods become self-sufficient. welfare programs was is mixed. He calls for simply to give out a system that will make money. But now the message families mains a mixed bag. It is not clear, for work pay, where you go out and receive when they apply for welfare is example, to what degree welfare re- you work, you show the effort, you that they need a job, that the welfare form itself, along with its time limits put in 1,000 hours, and well find a program is there to help them find one on benefits, caused poverty rates to way to make sure youve got $15,000 and that they can receive cash benefits fall and work rates to rise. or $20,000 and youre not poor. Welfare reform, and in particular for a maximum of five years. As a reIn Wisconsin where some of sult, welfare rolls plunged by over 60 the onset of time limits, arrived in the the earliest efforts at welfare reform percent, as many as 2 million mothers midst of an extremely tight labor mar- took place the rate of growth in entered the labor force, earnings for fe- ket and a flourishing economy, says the number of people living in males heading families increased while Katherine Newman, a professor of so- poverty was higher in 2003-2004 than their income from welfare payments fell, ciology and public affairs at Princeton in any other state. 35 Richard Schlimm, and child poverty declined every year University. executive director of the Wisconsin So how much the shift toward Community Action Program Associabetween 1993 and 2000. By the late 1990s, both black child poverty and work was attributable to the pull of tion, a statewide association of compoverty among children in female-head- a growing economy and [demand munity-action and anti-poverty ed families had reached their lowest lev- for] labor is very hard to sort out, groups, says welfare reform simply she continues. My sense is that wel- has not worked, in reducing poverels ever. Even after four years of increased child fare reform had something to do with ty in his state. poverty following the 2001 recession, it, but its hardly the whole story. A Certainly it was the right thing to Haskins said, the rate of child poverty lot had to do with favorable market do, to get people working, Schlimm was still 20 percent lower than in 1993. conditions. says. But Ive always believed poor The Center on Budget and Policy people want to work, and they preHaskins went on to say that the success of welfare reform was creat- Priorities, a Washington think tank, last fer work over welfare. . . . We suced both by welfare reforms itself and year noted, among other negative cessfully achieved the elimination of by the work-support programs that trends, that while child poverty de- welfare, but I maintain that we had provided tax credits, health insurance, clined in the 1990s, as Haskins point- the wrong goal. The goal was to renutrition supplements and child care ed out, it nonetheless rose sharply duce poverty, and if we kept that in after 2000, as did the number of chil- our sights we would have focused a to low-income working families. 33 Yet, despite what many see as its dren living in severe poverty. 34 (See whole lot [more] funding on that than positive effects, welfare reform re- sidebar, see p. 735.) we did.
Courtesy Step Up Savannah
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Would more government spending on poverty help? While welfare reform encouraged work and reduced government caseloads, many experts say the fight against poverty has only begun. Some argue that reducing poverty depends in large measure on the poor exercising greater personal responsibility. While it is often argued that the U.S. devotes far fewer resources to social welfare spending than other rich nations, the facts show otherwise, Rector of the Heritage Foundation said. The good news is that remaining poverty can readily be reduced further, particularly among children. There are two main reasons that American children are poor: Their parents dont work much, and fathers are absent from the home. 36 Others say more government spending on anti-poverty programs is the key, Schlimm, at the Wisconsin Community Action Program Association, says that to reduce poverty, the nation needs political leadership coupled with a massive investment in affordable housing, accessible health care, education and job creation for the poor. Lets face it, we have committed massive investments in Iraq, he says, and [with] half of that even a fourth of that focused on poverty in the United States, we could make remarkable strides. Smeeding, the Syracuse University policy researcher, says U.S. poverty could be cut by a third to a half with an outlay of $45 billion to $60 billion a year, focused on three things: child care for working mothers; guaranteed child support for mothers who have established paternity with fathers who cant or wont pay because of disability or prison, and an expansion of the EITC. Lawrence Mead, a professor of politics at New York University, advocates a stick-and-carrot approach with lowincome men. In 2005, there were more than 7 million poor men ages 16 to 50 in the United States, and only half of them worked at all, Mead wrote. Among black men in poverty, nearly two-thirds were idle, and their employment has fallen steadily in recent decades. Mead proposes using the childsupport and criminal-justice systems to promote work among poor males. Right now, these institutions depress male work levels by locking men up and by garnishing their wages if they do work, he wrote. But they could be used to promote work. For example, men in arrears on their child support could be assigned to government-run work programs, as could parolees with employment problems. These men about 1.5 million each year would have to show up and work regularly on penalty of going to jail. Both groups might also receive wage subsidies. The combination might instill more regular work habits. Mandatory work for 1.5 million men would run $2 billion to $5 billion annually, according to Mead. In return, governments could collect more in child support and spend less on incarceration. 37 Everyone recognizes that men are the frontier, Mead says. The ultimate goal, he says, should be to both reward and enforce work in ways the current system doesnt do now. While spending on new programs is one approach to fighting poverty, some argue the solution isnt more outlays for anti-poverty programs but rather a mix of free-market capitalism and charity. Despite nearly $9 trillion in total welfare spending since Lyndon B. Johnson declared [the] War on Poverty in 1964, the poverty rate is perilously close to where it was when we began, more than 40 years ago, wrote Michael D. Tanner, director of health and welfare studies for the conservative Cato Institute think tank. Clearly we are doing something wrong. Throwing money at the problem has neither reduced poverty nor made the poor self-sufficient. . . . [I]f we have learned anything by now, it is that there are limits to what government programs even reformed ones can do to address the root causes of poverty. Observers have known for a long time that the surest ways to stay out of poverty are to finish school; not get pregnant outside marriage; and get a job, any job, and stick with it. That means that if we wish to fight poverty, we must end those government policies high taxes and regulatory excess that inhibit growth and job creation. We must protect capital investment and give people the opportunity to start new businesses. We must reform our failed government school system to encourage competition and choice. We must encourage the poor to save and invest. More importantly, the real work of fighting poverty must come not from the government, but from the engines of civil society. . . . [P]rivate charities are far more effective than government welfare programs. 38
BACKGROUND
Warring on Poverty
oncerns about work, hardship and who deserves help go back to the roots of the Republic. The Virginia Assembly of 1619 decreed that a person found guilty of idleness would be forced to work under a master til he shewe apparant signes of amendment. 39 In the 19th century, poorhouses sprang up to accommodate a growing tide of desperate people flooding the cities from the countryside. Poverty flourished along with widespread indifference to the plight of the needy. After the Civil War the journalist and political economist Henry George called
Continued on p. 732
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Chronology
1950s-1960s 1980s
Many Americans enjoy a postwar economic boom, but poverty persists. Poverty rate is 22.4 percent in 1959. 1962 Michael Harringtons book The Other America helps spur President Lyndon B. Johnsons War on Poverty. . . . Welfare program is renamed Aid to Families with Dependent Children (AFDC). 1964 Congress establishes permanent food stamp program. . . . Federal government develops income thresholds to define poverty in American society. 1965 Congress enacts Medicaid to provide health care to low-income people. 1967 Congress establishes the Work Incentive Program, requiring states to establish job-training programs for adults receiving welfare. 1969 President Richard M. Nixon calls hunger in America an embarrassing and intolerable national shame.
Poverty programs of the 1960s and 70s come under scrutiny from the Reagan administration. 1981 Congress cuts cash benefits for the working poor and lets states require welfare recipients to work. 1988 President Ronald Reagan signs Family Support Act, requiring states to implement education, job training and placement programs for welfare recipients.
by 2020, spurring calls for a similar effort in the United States.
2000s
Hurricane Katrina devastates Gulf Coast, putting spotlight on poverty. 2000 Federal poverty rate falls to 11.3 percent, lowest since 1974. 2004 Federal appeals court upholds the living wage law in Berkeley, Calif., rejecting the first major challenge to civic ordinances requiring contractors to pay above-poverty wages. . . . Poverty rate climbs to 12.7 percent Aug. 29, 2005 Hurricane Katrina hits New Orleans. 2006 Congress reauthorizes Temporary Assistance for Needy Families (TANF) as part of Deficit Reduction Act. 2007 McClatchy Newspapers analysis finds that percentage of poor Americans living in severe poverty reached a 32-year high in 2005. . . . Congress spars with the Bush administration over expansion of SCHIP. . . . House Ways and Means Committee hearings focus on poverty and inequality. . . . Democratic presidential candidate John Edwards takes a three-day, 1,800-mile Road to One America poverty tour. . . . Federal minimum wage rises for the first time in a decade to $5.85 an hour; it goes to $6.55 in summer 2008 and $7.25 in summer 2009. . . . Poverty rate falls to 12.3 percent.
1990s
Clinton administration pushes Congress to pass massive welfare reforms. 1992 Democratic presidential candidate Bill Clinton pledges to end welfare as we know it. 1993 Clinton expands EITC. 1996 Congress ends 60-year welfare entitlement program, passing a reform law that imposes work requirements and puts time limits on cash benefits. 1997 Federal minimum wage rises to $5.15 an hour. 1997 State Childrens Health Insurance Program (SCHIP) is created. 1999 The government of British Prime Minister Tony Blair introduces a plan to end child poverty in Britain
1970s
The energy crisis, recessions and industrial restructuring put new strains on the poor. 1975 Congress approves Earned Income Tax Credit (EITC), partly to offset the burden of Social Security taxes on low-income families and to provide an incentive to work.
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Military Families Face Financial Strain

This spring our caseload doubled.
eredith Leyvas work with military families recently as ing officer of the National Military Family Association, a poliled her to a troubling conclusion: Poverty is growing cy advocacy group in Alexandria, Va. Still, she says some military families may be on the finanamong the ranks of deployed service members, especially those who have been seriously injured in Iraq or Afghanistan. cial edge, often because theyre young and financially inexThis spring our caseload of both military families and wound- perienced and perhaps prey for financial predators. Others may be strained by relocation demands that ed warriors doubled, says Leyva, who is the put them in temporary financial straits, she says founder of Operation Homefront, a Santa My sense is that you dont have folks livAna, Calif., charity that helps military families ing in poverty so that day in and day out through 31 chapters nationwide. And, adds things are inadequate, says Raezer. But it can Leyva, whose husband is a Navy physician, be episodic, where theyre strapped for cash We saw a significant change in the types of because of the military lifestyle, financial incases. Were now seeing many more comexperience and predators. plicated and high-dollar crises that are comMost military families are ineligible for food pounded by deployment after deployment. stamps because the military housing allowance puts Operation Homefront served approxithem over the eligibility threshold, Raezer notes. mately 1,700 families of wounded service Even so, in fiscal 2006 food-stamp remembers in 2006, Leyva says, and over half demptions at military commissaries rose about and possibly more were living in poverty. $2.3 million over the previous year, to $26.2 As for the 1.5-million-member military million. While it was not clear what caused as a whole, however, little if any hard data Meredith Leyva, founder of the increase, three military stores affected by exists on the extent of poverty in military Operation Homefront. Hurricane Katrina and other storms accounted families during the current conflict. Much for more than 80 percent of the increase. 1 of the government information on issues In May, U.S. Reps. James McGovern, D-Mass., and Jo Ann like food stamp use among military families predates the war. Indeed, the financial health of military families can be a Emerson, R-Mo., introduced a bill that would expand spending highly complicated and nuanced issue to analyze, even leav- for federal nutrition programs, including a provision that would ing aside the struggles of those dealing with catastrophic in- exclude combat-related military pay from income calculations for jury. By any traditional measure of poverty . . . , military fam- food-stamp eligibility. 2 National Guard and active-duty families can feel financial strain ilies are a lot better off than their civilian peers based on such things as age and education, says Joyce Raezer, chief operat- differently. Lt. Col. Joseph Schweikert, state family program direcCinCHouse.com/Operation Homefront
the United States a place where amid the greatest accumulations of wealth, men die of starvation, and puny infants suckle dry breasts. 40 Later came the first rudimentary efforts to measure poverty. In 1904 the social worker Robert Hunter set what might have been the first national poverty line $460 per year for a five-member family in the Northern industrial states and $300 for a family in the South. 41 In the post-World War I boom years, some Americans enjoyed unprecedented comfort and wealth, but poverty wracked much of the nation.
Between 1918 and 1929, some 10 million families were poor. By 1933, in the depths of the Great Depression, a fourth of the labor force was without jobs, and an estimated 15 million families half the American population lived in poverty. 42 World War II jump-started the U.S. economy, and in the 1950s and early 60s many Americans enjoyed middleclass prosperity. But not all saw their living standards rise. Poverty persisted and grew, much of it concentrated in the rural South, Appalachia and the gritty urban cores of the industrial North. Many Americans blamed the poor for their plight, dismissing racism,
educational inequality and other entrenched societal ills as major factors in perpetuating poverty. In 1962 Michael Harrington wrote in his groundbreaking book The Other America: Poverty in the United States: There are sociological and political reasons why poverty is not seen; and there are misconceptions and prejudices that literally blind the eyes. . . . Here is the most familiar version of social blindness: The poor are that way because they are afraid of work. And anyway they all have big cars. If they were like me (or my father or my grandfather), they could pay their own way. But they prefer to live on
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tor for the Illinois National Guard, says there are definitely fami- in cases of serious injury suffered in war. When a soldier is deployed, a spouse may have to pay othlies that go through financial hardships, sometimes due to deployments. But it varies from soldier to soldier, family to family. Some ers to do jobs the soldier performed at home, such as mowing the lawn and maintaining the car, Leyva says. And if a solmake more while deployed. Nonetheless, at least 30 percent of Guard soldiers suffer a dier is wounded, she says, his pay immediately drops while the expenses skyrocket. Often, financial loss when deployed, a spouse takes leave from a job he says. or quits altogether to be at the Because the Guard offers wounded soldiers bedside or to a college-scholarship program, help the soldier through rehamany young soldiers enlist, bilitation, spending long days or get a degree and then enter weeks away from home. a well-paying career field. Service members were never When they are mobilized, their paid well, Leyva says, but these pay may drop sharply. It causextraordinary crises certainly es the family to go through overwhelm. a lot of hardships, SchweikLeyva fears that poverty ert says, especially if the solamong veterans will skyrocket dier doesnt have savings or in the wake of the current war, a spouses income to rely on. Wounded soldiers and their families attend a get-together as it did after the Vietnam conStill, he suggests, many sponsored by the Texas chapter of Operation Homefront flict. I think were going to see Guard members can be more at Brooke Army Medical Center at Fort Sam Houston. a whole new generation of disstable financially than activeabled veterans that are sort of duty troops. Guard soldiers tend to be older and to have established civilian careers. More- the mirror images of the Vietnam veterans, she says. Its as over, a working spouse will not have had to uproot periodical- much about mental as physical wounds, she says, and it could lead to a new generation of poverty. ly from a job, as often happens within the active-duty forces. In active duty, a lot of time you have to transfer from base to base, and its hard to establish a long-term career, Schweikert says. 1 Karen Jowers, Storms May Have Spurred Jump in Food-Stamp Use, Air Nonetheless, military families in both the Guard and regu- Force Times, July 5, 2007, www.navytimes.com. 2 The Feeding Americas Family Act, HR 2129. lar forces may find it hard to avoid financial ruin, especially
CinCHouse.com/Operation Homefront
the dole and cheat the taxpayers. This theory, Harrington went on, usually thought of as a virtuous and moral statement, is one of the means of making it impossible for the poor ever to pay their way. . . . [T]he real explanation of why the poor are where they are is that they made the mistake of being born to the wrong parents, in the wrong section of the country, in the wrong industry or in the wrong racial or ethnic group. Once that mistake has been made, they could have been paragons of will and morality, but most of them would never even have had a chance to get out of the other America. 43
By 1962, more than a fifth of Americans were living in poverty. Harringtons book helped spur Washington to act. 44 A few months before his assassination, President John F. Kennedy directed his Council of Economic Advisers to study domestic poverty and recommend ways to fight it. 45 Kennedys successor, President Lyndon B. Johnson, followed through, declaring in his first State of the Union address, on Jan. 8, 1964, unconditional war on poverty in America. Later that year Congress established the Office of Economic Opportunity, which attacked poverty through a phalanx of new programs, from Head Start a
school-readiness effort to Job Corps, a training program for teens and young adults. 46 Johnsons fight against poverty also included a wide range of Great Society programs, from the 1964 Food Stamp Act to Medicare and Medicaid. The War on Poverty persisted under the Nixon administration, which broadened the Food Stamp program and saw the passage of the Supplemental Security Income program for disabled people, among others. Even so, President Richard M. Nixon sought to dismantle the Office of Economic Opportunity, disbursing many of its programs among various federal agencies. The office was finally closed by President Gerald R. Ford in 1975.
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Under Attack
sequent economic growth did not trickle down. Although the economy expanded for many years in the 1980s, the wage rates of low- and mediumskilled male workers did not. On the other hand, the earnings of those in the upper part of the income distribution grew rapidly. 47 Tax Credit expanded so much in the early 90s, states put so much into childcare subsidies, and the State Childrens Health Insurance Program (SCHIP) came in. But the poverty rate among single mothers remains very high, and theres nothing new on the horizon. Danziger noted in a 2006 paper that as many as 30 percent of single mothers who left welfare and took jobs are out of work in any given month. 50 Advocates point out that it is possible to make real gains against poverty and not just gains in cutting welfare caseloads. They point to big strides against child poverty in Britain, where in 1999 Prime Minister Tony Blair pledged to end child poverty by 2020.
y the 1980s and the start of the Reagan administration, poverty programs were under full-scale attack. The poverty rate, which dipped to just over 11 percent in the early 1970s, hit 15.2 percent in 1983. Conservatives, impatient with the Johnson-era philosophy of federally funded social aid for the poor, charged that the governments expensive programs were making poverty and dependence worse rather than better. [S]ome years ago, the federal government declared War on Poverty, and poverty won, Reagan famously said in his 1988 State of the Union address. Today the federal government has 59 major welfare programs and spends more than $100 billion a year on them. What has all this money done? Well, too often it has only made poverty harder to escape. Federal welfare programs have created a massive social problem. With the best of intentions, government created a poverty trap that wreaks havoc on the very support system the poor need most to lift themselves out of poverty: the family. The Reagan administration argued that the social policies enacted in the 1960s and 70s had undermined the functioning of the nations basic institutions and, by encouraging permissiveness, non-work and welfare dependence, had led to marital breakup, non-marital childbearing and the erosion of individual initiative, according to the University of Michigans Danziger and Robert H. Haveman, a professor of economics and public affairs at the University of Wisconsin. The Reagan philosophy was that tax cuts and spending cuts would increase the rate of economic growth, and that the poor would ultimately benefit through the increased employment and earnings that would follow such growth, they wrote. However, a deep recession in the early 1980s increased poverty, and the sub-
Welfare Reform
he 1980s laid the groundwork for the radical shift in anti-poverty policy that was to come during the Clinton era. In 1993 Clinton pushed through a record expansion of the Earned Income Tax Credit. Then, Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 otherwise known as the Welfare Reform Act. The move to overhaul welfare outraged some. Georgetown Universitys Edelman resigned from the Clinton administration in protest. In a blistering critique, Edelman wrote that the measure would lead to more malnutrition and more crime, increased infant mortality and increased drug and alcohol abuse and increased family violence and abuse against children and women. 48 But others have praised the reform measure. What the Clinton bill did, a Boston Globe columnist opined on the acts 10th anniversary, was end the condescending attitude that the poor were incapable of improving their situation, and that compassion consisted of supplying money indefinitely to women who had children, but no husbands or jobs. The bill replaced deadly condescension with respect. 49 Still, while welfare caseloads plummeted, poverty persisted, even among those who joined the labor force. Basically, things are better than most people thought, Danziger says today. On average, welfare recipients did much better moving from welfare to work, in part because the minimum wage was increased in 1997, the Earned Income
Elusive Dream
ut in cities and towns across America, President Johnsons 1964 pledge not only to relieve the symptom of poverty but to cure it and, above all, to prevent it remains an elusive dream. 51 The loss of manufacturing jobs and the stability and safety net they once provided is a big reason the dream remains out of reach. In Wisconsin, a state of 5.6 million people, the poverty rate shot from 8.2 percent to 11 percent over five years, says the Wisconsin Community Action Program Associations Schlimm. Im 58 and have lived in Wisconsin all my life, and its very unusual to see those kinds of numbers, he says. It is the loss of good jobs, manufacturing jobs that is to blame. A lot of Wisconsins good jobs support the auto industry, he continues. And were a paper-making state. Many of the papermakers moved. . . . When I got out of college, you could go to a paper mill, and if it didnt work out, you could drive a couple of blocks down the street and find work with another company. In 1968 they paid $6 to $7 an hour. Now they pay $25. Theyre very coveted jobs. But there arent as many
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Did Recent Reforms Help Needy Families?

Bush administration tightened TANF work requirements.
ention welfare reform to a political observer, and it is Bill Clinton who typically comes to mind. It was candidate Clinton who pledged to end welfare as we know it and President Clinton who signed the landmark welfare reform act into law in 1996. But the Bush era also has engineered significant reforms in the welfare system, changes that could have far-reaching effects on the nations poor. The most important came with last years congressional reauthorization of Temporary Assistance for Needy Families (TANF), the federal block-grant program that replaced the old welfare system. The reauthorization strengthened work requirements and closed a loophole so that separate state-funded TANF programs have to be included in work-participation calculations. In effect, the Bush administration and Congress put teeth back into TANF work requirements but set difficult benchmarks for state programs that are working with adult populations experiencing many barriers to employment, Scott W. Allard, an assistant professor of political science and public policy at Brown University, noted recently. 1 Others looking back on more than a decade of welfare reform worry the recent changes in the welfare rules could make poverty trends worse. Two analysts at the Center on Budget and Policy Priorities, Sharon Parrott, director of the centers Welfare Reform and Income Support Division, and senior researcher Arloc Sherman, argue that even though changes in TANF a decade ago played a role in reducing poverty and raising employment rates during the 1990s, our safety net for the poorest families with children has weakened dramatically. 2 Among the trends they pointed to: child poverty fell in the 1990s, but began rising after 2000, and the number of children in deep poverty rose; the number of jobless single mothers receiving no government cash assistance has risen significantly, and TANF now helps a far smaller share of families that qualify for the program than it used to help. Last years reauthorization could weaken the safety net even more, the two analysts suggested. Welfare reauthorization requires states to place a much bigger portion of their TANF caseloads in work activities and restricts the kind of activities that can count toward state work-participation requirements, Parrott and Sherman noted. In many cases, state programs designed to address two of the biggest problems that have emerged over TANFs first decade that parents who leave welfare for work often earn low wages and have unstable employment, and that
many families with the greatest barriers to employment are being left behind will no longer count toward states work requirements, they wrote. In fact, the cheapest and easiest way for a state to meet the new work rules would simply be to assist fewer poor families, especially the families with barriers to employment who need the most help. On top of that, the amount of basic federal block-grant funds for states has not been adjusted since 1996 and has lost 22 percent of its value to inflation, Parrott and Sherman wrote. Some observers are more sanguine about the course of welfare reform. Writing in a point-counterpoint format with Parrott and Sherman, Lawrence Mead, a professor of politics at New York University and an architect of welfare reform, describes it as an incomplete triumph. He says reform achieved its two main goals: Work levels rose sharply among poor mothers, the main beneficiaries of welfare. And caseloads plummeted. Still, Mead says that the reform effort has had limitations. For one thing, he says, it did not create a system that promotes work on an ongoing basis through a combination of government incentives and emphasis on personal responsibility. He notes that 40 percent of those who have left welfare have not gone to work, and many welfare recipients have moved in and out of jobs. Nor did welfare reform ensure that people leaving welfare for jobs will have enough income to live on, Mead says. The situation has improved, but not enough. And welfare reform did not adequately address the employment challenges among poor men, many of whom are fathers in welfare families, Mead says. Nonetheless, Mead is hopeful the limitations of welfare reform can be addressed at least partly through engagement by the poor in the political process. Because more of the poor are working or moving toward work, they are in a stronger position to demand changes, such as payment of living wages, than they were under the old entitlement system of welfare, Mead says. First, though, the poor must assert themselves both on the job and in the political sphere, he says. Finally, he writes, what reform enforced was not work, but citizenship. 3
1 Scott W. Allard, The Changing Face of Welfare During the Bush Administration, Publius, June 22, 2007. 2 Sharon Parrott and Arloc Sherman, Point-Counterpoint, in Richard P. Nathan, editor, Welfare Reform After Ten Years: Strengths and Weaknesses, Journal of Policy Analysis and Management, Vol. 26, No. 2, 2007. 3 Lawrence Mead, Point-Counterpoint, in ibid.
of them. The economy hasnt been able to replace those very good jobs. What matters most in the fight against poverty, many advocates contend, is
leadership and political will. The No. 1 problem is leadership, says David Bradley, executive director of the National Community Action Foundation.
Were not talking billions of dollars. Were talking receptivity to looking at ideas. Bradley notes that the Johnson-era Office of Economic Opportunity was
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a laboratory for anti-poverty innovations. For many years weve not had the federal government willing to fund and be experimental in partnering in new ideas on poverty. A lot of ideas start at the grass roots. I see incredible projects out there but no mechanism to duplicate them nationwide. At the same time, Bradley laments that some in both political parties believe none of the ideas from the 1960s are worth keeping. I find it frustrating that some candidates who are talking about poverty view anything thats gone on previously as not successful or not innovative or creative enough, he says. If youre a program that started in 1964 or 1965, that doesnt mean by definition that youre still not innovative in your community. Bradley is cautiously optimistic that a renewed commitment to fighting poverty is afoot in the nation. Political leaders in both parties are talking about the issue and the governments role in bringing about solutions, he points out. But that will happen, Bradley says, only if solutions are not overpromised, the effort is bipartisan, innovation and creativity are part of the approach, sufficient government money is available and, most important, if there is a general acceptance that the federal government wants to be a positive partner. It can be a partner that requires accountability, he says, but a partner nevertheless. in the 2008 presidential race. But as the campaign began moving into high gear this summer, poverty and what to do about it has been high on the list of priorities among several leading Democratic candidates, most notably Edwards and Obama. Edwards has set the ambitious goal of cutting poverty by a third within a decade and ending it within 30 years. Echoing President Johnsons Great Society program, Edwards proposes a Working Society where everyone who is able to work hard will be expected to work and, in turn, be rewarded for it. To attack poverty, Edwards is pushing more than a dozen ideas, from raising the minimum wage, fighting predatory lending and reducing teen pregnancy to creating a million temporary stepping stone jobs for those having difficulty finding other work. Obama has his own long list of proposals. He also backs a transitional jobs program and a minimum-wage increase, for example, along with such steps as improving transportation access for the working poor and helping ex-prisoners find jobs. But deeper differences exist in the two candidates approaches. Edwards has focused on the malignant effects of the concentration of poverty in inner cities, The Washington Post noted. He has argued for dispersing low-income families by replacing public housing with a greatly expanded rental voucher program to allow families to move where there are more jobs and better schools. Obama, on the other hand, has presented a sharply different overall objective: fixing innercity areas so they become places where families have a shot at prospering, without having to move. 52 Part of what is noteworthy about the Edwards and Obama proposals is that they exist at all. Many Democratic candidates, including Sen. Clinton, have focused on the plight of the middle class rather than the poor. Since the late 1980s, the columnist E. J. Dionne Jr. noted, Democrats have been obsessed with the middle class for reasons of simple math: no middle-class votes, no electoral victories. 53 With the exception of recent comments by former Republican Bloomberg of New York, GOP rhetoric on poverty has not been nearly as prevalent as the Democrats. In January, President Bush acknowledged that income inequality is real, suggesting his administration might be poised to do more on poverty and perhaps get ahead of Democrats on the issue. 54 But more recently the administration has resisted congressional efforts to expand the SCHIP program, which benefits poor children. Meanwhile, Republican presidential hopeful Mitt Romney echoed the longstanding conservative criticism of Democrat-backed social policies, declaring that Democrats are thinking about big government, big welfare, big taxes, Big Brother. 55
Anti-Poverty Proposals
CURRENT SITUATION
Presidential Race
t remains unclear how much traction the poverty theme will have
n recent months several think tanks and advocacy groups have turned out policy proposals for reducing poverty. In April the liberal Center for American Progress advanced a dozen key steps to cut poverty in half in the next decade, including raising the minimum wage to half the average hourly wage, expanding the EITC and Child Tax Credit, promoting unionization, guaranteeing child-care assistance to low-income families and creating 2 million new housing vouchers designed to help people live in opportunity-rich areas. The centers main recommendations would cost roughly $90 billion annually a significant cost, it conceded, but one that is necessary and could be readily funded through
Continued on p. 738
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At Issue:
Should immigration be reduced to protect the jobs of nativeborn poor?
Yes
STEVEN A. CAMAROTA
DIRECTOR OF RESEARCH, CENTER FOR IMMIGRATION STUDIES
FROM TESTIMONY PREPARED FOR HOUSE JUDICIARY COMMITTEE, MAY 9, 2007
GERALD D. JAYNES
PROFESSOR OF ECONOMICS AND AFRICANAMERICAN STUDIES, YALE UNIVERSITY
FROM TESTIMONY BEFORE HOUSE SUBCOMMITTEE ON IMMIGRATION, CITIZENSHIP, REFUGEES, BORDER SECURITY, AND INTERNATIONAL LAW, MAY 3, 2007
here is no evidence of a labor shortage, especially at the bottom end of the labor market where immigrants are most concentrated. . . . There is a good deal of research showing that immigration has contributed to the decline in employment and wages for less-educated natives. . . . All research indicates that less-educated immigrants consume much more in government services than they pay in taxes. Thus, not only does such immigration harm Americas poor, it also burdens taxpayers. . . . While the number of immigrants is very large . . . the impact on the overall economy or on the share of the population that is of working age is actually very small. And these effects are even smaller when one focuses only on illegal aliens, who comprise one-fourth to one-third of all immigrants. While the impact on the economy . . . may be tiny, the effect on some Americans, particular workers at the bottom of the labor market may be quite large. These workers are especially vulnerable to immigrant competition because wages for these jobs are already low, and immigrants are heavily concentrated in less-skilled and lower-paying jobs. . . . It probably makes more sense for policymakers to focus on the winners and losers from immigration. The big losers are natives working in low-skilled, low-wage jobs. Of course, technological change and increased trade also have reduced the labor market opportunities for low-wage workers in the Untied States. But immigration is different because it is a discretionary policy that can be altered. On the other hand, immigrants are the big winners, as are owners of capital and skilled workers, but their gains are tiny relative to their income. In the end, arguments for or against immigration are as much political and moral as they are economic. The latest research indicates that we can reduce immigration secure in the knowledge that it will not harm the economy. Doing so makes sense if we are very concerned about low-wage and less-skilled workers in the United States. On the other hand, if one places a high priority on helping unskilled workers in other countries, then allowing in a large number of such workers should continue. Of course, only an infinitesimal proportion of the worlds poor could ever come to this country even under the most open immigration policy one might imagine. Those who support the current high level of unskilled legal and illegal immigration should at least do so with an understanding that those American workers harmed by the policies they favor are already the poorest and most vulnerable.
No
yes no
Sept. 7, 2007 CQ Press Custom Books - Page39
e can acknowledge that immigration probably hurts the employment and wages of some less-educated citizens and still conclude immigration is a net benefit for the United States. The most methodologically sound estimates of the net effects of immigration on the nation conclude that the United States, as a whole, benefits from contemporary immigration. Properly measured, this conclusion means that during a period of time reasonably long enough to allow immigrants to adjust to their new situations, they produce more national income than they consume in government services. Confusion about this issue is caused by some analysts failure to make appropriate distinctions between immigrations impact on specific local governments and groups and its impact on the whole nation. Although benefits of immigration such as lower prices for consumer and producer goods and services, greater profits and tax revenues accrue to the nation as a whole, nearly all of the costs for public services consumed by immigrants are borne by localities and specific demographic groups. . . . Even so, inappropriate methods of analysis have led some analysts to overstate the costs of immigration even at the local level. . . . On average, Americans receive positive economic benefits from immigration, but, at least in the short run, residents of particular localities and members of certain groups may lose. . . . Democratic concepts of justice suggest the losses of a few should not override the gains of the many. Democratic concepts of justice also demand that societys least-advantaged members should not be paying for the immigration benefits enjoyed by the entire nation. A democratic society benefiting from immigration and debating how to reshape its immigration policies should also be discussing social policies to compensate less-skilled workers through combinations of better training, relocation and educational opportunities. . . . [T]he evidence supports the conclusion that from an economic standpoint immigrations broader benefits to the nation outweigh its costs. An assessment of the effects of immigration on the employment prospects of less-educated native-born workers is that the effect is negative but modest, and probably is significant in some specific industries and geographic locations. . . . However, it is just as likely that the relative importance of lesseducated young native [workers] job losses due to the competition of immigrants is swamped by a constellation of other factors diminishing their economic status.
Available online: www.cqresearcher.com
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a fairer tax system. Spending $90 billion a year would represent about 0.8 percent of the nations gross domestic product, which is a fraction of the money spent on tax changes that benefited primarily the wealthy in recent years. The Urban Institute estimated that four of the centers recommendations on the minimum wage, EITC, child tax credit and child care would cut poverty by about a fourth. Moreover, it said, both child poverty and extreme poverty would fall. 56 A Brookings Institution proposal to reinvigorate the fight for greater opportunity includes seven recommendations for the next U.S. president, from strengthening work requirements in government-assistance programs, promoting marriage and funding teen pregnancy-prevention efforts to subsidizing child care for low-wage workers, increasing the minimum wage and expanding the EITC. We need a new generation of anti-poverty policies that focus on requiring and rewarding work, reversing the breakdown of the family and improving educational outcomes, the proposal states. The $38.6 billion per year cost should not be incurred, the authors say, unless it can be fully covered by eliminating spending or tax preferences in other areas. 57 Many advocates emphasize the need to help poor people build their assets, such as savings accounts and home equity, as a way of propelling them out of poverty. Also key, they say, is the need to spend more on earlychildhood programs to help keep youngsters from falling into poverty in the first place. Universal high-quality early childhood education is the single most powerful investment we could make in insuring poverty doesnt strike the next generation, says Newman of Princeton University.
Tax Policy
roposals to adjust federal tax policy to help lift the poor into the economic mainstream are among those getting the most attention. Much of the discussion has focused on expansion of the child and earned income tax credits. A letter sent to members of Congress last spring by hundreds of advocacy groups urged expansion of the child credit, which can reduce the tax liability of families with children. The current income threshold in 2007, it is $11,750 excludes 10 million children whose families are too poor to claim the credit, the letter stated. The threshold keeps rising with inflation, increasing the tax burden on the poor and dropping many families from the benefit altogether. The letter added that according to the Tax Policy Center, operated by the Urban Institute and Brookings Institution, half of all African-American children, 46 percent of Hispanic children and 18 percent of white children received either no Child Tax Credit or a reduced amount in 2005 because their families earnings were too low. 58 Along with the child credit, the EITC is widely cited as ripe for expansion. Created in 1975 to protect lowwage workers from rising payroll taxes, the credit has been expanded several times, under both Republican and Democratic administrations. More than 20 million families benefit from more than $40 billion in credits today, according to Brookings Berube. Most of those eligible for the credit have children under age 18 living at home and earn less than $35,000, according to Berube. In 2004 the average claimant received a credit of about $1,800. 59 While claims of abuse have been leveled at the tax credit, it has generally been popular across the political spectrum because it encourages work, helps the needy and does not levy a cost on wealthier taxpayers. 60
But anti-poverty advocates say the tax credit could be even more effective by making it easier for families with two earners to get the credit and extending it to single workers in their late teens and early 20s. 61 Childless adults are the only group of working tax filers who begin to owe federal income taxes before their incomes reach the poverty line, says the letter to members of Congress. Workers in that category got an average credit of only $230 last year, the letter said. Increasing the amount of the credit for low-income workers not living with children would increase work incentives and economic security for millions of Americans working in low-wage jobs. Making poor people aware of the tax credit is also an obstacle that must be overcome, advocates say. Many people who are eligible for the credit dont claim it, sometimes because of language or educational barriers. Dodd, at Step Up in Savannah, says the Internal Revenue Service said $10 million to $12 million in credits go unclaimed in his city alone.
States and Localities

s federal policymakers wrestle with the poverty issue, states and localities are making inroads of their own. Mayor Bloomberg has been promoting a plan to pay poor families in New York up to $5,000 a year to meet such goals as attending parent-teacher meetings, getting medical checkups and holding full-time jobs. Patterned after a Mexican initiative, the plan aims to help poor families make better long-range decisions and break cycles of poverty and dependence that can last generations. 62 Other efforts are afoot in the states. A proposed bill in the California Assembly, for example, would establish an advisory Childhood Poverty Council to
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develop a plan to reduce child poverty in the state by half by 2017 and eliminate it by 2027. 63 Not all such steps pan out, though. In 2004, Connecticut passed legislation committing the state to a 50 percent reduction in child poverty by 2014, but child poverty has risen since then, an official of the Connecticut Association for Community Action complained this summer, blaming the failure to enact a state-funded EITC. 64 As states seek ways to reduce the number of poor within their borders, they also are trying to adjust to the stiffer work requirements that Congress enacted last year when it reauthorized welfare reform. 65 The new rules are forcing some states to adapt in creative ways. In California, for example, where less than a fourth of welfare recipients work enough hours to meet federal requirements, officials are moving some teenage parents, older parents and disabled people into separate programs paid entirely by state funds so they arent counted in federal work-participation calculations. Arkansas, on the other hand, has been sending monthly checks to the working poor. Arkansas eventually aims to artificially swell its welfare population from 8,000 families to as many as 11,000 and raise the work-participation rate by at least 11 percent, according to a press report. Officials hope the extra cash will also keep the workers employed. 66 The tougher work rules have upset poverty advocates, who argue they damage efforts to help those most vulnerable or lacking in skills to prepare for the job market. Some of the changes made it almost impossible in some ways for people to use the system to get out of poverty, said Rep. McDermott, the Washington Democrat. 67 But others defend the approach. The bottom line is that the only real way to get out of poverty is to find a job, said Rep. Wally Herger, a California Republican who chaired the House subcommittee that worked on last years
reauthorization. Theres always the line, Well, some people cant do it. What thats really doing is selling those people short. 68
OUTLOOK
Ominous Signs
he outlook for real progress against domestic poverty is mixed, especially in the near term. On one hand, concerns about poverty, income inequality and declining mobility are playing a bigger role on the national scene than they have in years. The kind of political momentum that spurred the War on Poverty in the 1960s may be emerging again albeit in a more muted fashion and with a different set of policy proposals. But big obstacles remain, especially funding. Congress would face difficult fiscal choices if it sought to enact any major anti-poverty program, many analysts point out. Even the Democratic majority, which has long pushed for more spending for social programs, would face major barriers. The Democrats have committed to pay-as-you-go budgeting, so I dont think well have a major push on anti-poverty [programs] or on programs designed to help the poor and middle class over the next four to eight years, says Yales Hacker. Thats part of the reason for the publics frustration were hamstrung by the budgetary situation. At the same time, a number of ominous developments have been occurring that suggest the poor will have an even rougher time financially than they have in recent years. The explosion in mortgage foreclosures, rising prices for basics like gasoline and milk and the ever-present threat of recession and layoffs all conspire most
heavily against those with the fewest resources. Recently, job growth and expansion in the service sector have both been weaker than expected, indicating tougher times ahead for those on the economic margins. Coupled with the uncertain economic outlook is the unresolved issue of immigration. Some analysts are less concerned about illegal immigrants taking low-paying jobs from native-born Americans as they are about the chance that immigrant groups will become mired in permanent poverty because of out-of-wedlock births and other social problems. In the long term, says Mead of New York University, overcoming poverty probably does depend on restricting immigration to 1970 levels. Curbing immigration, he says, not only would make more entry-level jobs available to native-born men the group that Mead sees as a priority for antipoverty action but also help keep a new underclass from developing even as the nation struggles to reduce poverty in the established population. As scholars and activists look ahead, some express optimism, as Lyndon Johnson once did, that poverty not only can be substantially reduced but actually eliminated. Others note that Johnsons vow to eliminate poverty raised expectations that were never satisfied. I think the poor are always going to be with us, says Bradley of the National Community Action Foundation. Can we substantially reduce poverty? Yes. But the [idea] that somehow certain programs are going to eradicate poverty in America is just unrealistic.
Notes
1
Testimony before House Ways and Means Subcommittee on Income Security and Family Support, Hearing on Economic Opportunity and Poverty in America, Feb. 13, 2007.
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DOMESTIC POVERTY
2 Figures reflect U.S. Census Bureau data for 2006. For background, see Kathy Koch, Child Poverty, CQ Researcher, April 7, 2000, pp. 281-304. 3 Timothy M. Smeeding, testimony before House Ways and Means Subcommittee on Income Security and Family Support, Hearing on Economic Opportunity and Poverty in America, Feb. 13, 2007. The study is based on Smeedings calculations from the Luxembourg Income Study. 4 Quoted in Bob Herbert, The Millions Left Out, The New York Times, May 12, 2007, p. A25. 5 Tony Pugh, U.S. Economy Leaving Record Numbers in Severe Poverty, McClatchy Newspapers, Feb. 22, 2007, updated May 25, 2007. 6 Aviva Aron-Dine, New Data Show Income Concentration Jumped Again in 2005, Center on Budget and Policy Priorities, March 29, 2007, www.cbpp.org/3-29-07inc.htm. 7 David Cay Johnston, Income Gap Is Widening, Data Shows, The New York Times, March 29, 2007, p. C1. 8 Panel Study of Income Dynamics; CrossNational Equivalent File, Cornell University. Cited in John Edwards, Marion Crain and Arne L. Kalleberg, eds., Ending Poverty in America: How to Restore the American Dream (2007), The New Press, published in conjunction with the Center on Poverty, Work and Opportunity, University of North Carolina at Chapel Hill. Data are from Jacob S. Hacker, The Risky Outlook for Middle-Class America, Chapter 5, p. 72. 9 Mark R. Rank, Toward a New Understanding of American Poverty, Journal of Law & Policy, Vol. 20:17, p. 33, http://law.wustl.edu/Journal/20/p17Rankbookpage.pdf. 10 Steven Greenhouse, A Unified Voice Argues the Case for U.S. Manufacturing, The New York Times, April 26, 2007, p. C2. 11 Katrina vanden Heuvel, Twelve Steps to Cutting Poverty in Half, Blog: Editors
Cut, The Nation, April 30, 2007, www.thenation.com/blogs/edcut?pid=190867. 12 Patrick Healy, Clinton Vows Middle Class Will Not Be Invisible to Her, The New York Times, March 11, 2007, www.nyt.com. 13 Quoted in Alec MacGillis, Obama Says He, Too, Is a Poverty Fighter, The Washington Post, July 19, 2007, p. 4A. 14 Jackie Calmes, Edwardss Theme: U.S. Poverty, The Wall Street Journal Online, Dec. 28, 2006. 15 Edward Luce, Bloomberg urges US to extend anti-poverty scheme, FT.com (Financial Times), Aug. 29, 2007. 16 McDermott Announces Hearing on Proposals for Reducing Poverty, press release, House Ways and Means Subcommittee on Income Security and Family Support, April 26, 2007. 17 Mike Dorning, Will Poverty Make Political Comeback? Chicago Tribune, June 3, 2007, p. 4. 18 Gallup Poll, June 11-14, 2007. 19 Jon Cohen, Despite Focus on Poverty, Edwards Trails Among the Poor, The Washington Post, July 11, 2007, p. 7A. 20 Testimony before House Committee on Ways and Means, Hearing on the Economic and Societal Costs of Poverty, Jan. 24, 2007. 21 Steven H. Woolf, Robert E. Johnson and H. Jack Geiger, The Rising Prevalence of Severe Poverty in America: A Growing Threat to Public Health, American Journal of Preventive Medicine, Vol. 31, Issue 4, October 2006, p. 332. 22 Quoted in Statement of Child Welfare League of America, House Ways and Means Subcommittee on Income Security and Family Support, Hearing on Economic Opportunity and Poverty in America, Feb. 13, 2007. According to the statement, Conleys comment came in an ABC television profile of poverty in Camden, N.J., broadcast in January 2007. 23 Testimony before House Ways and Means Subcommittee on Income Security and Fam-
About the Author

Thomas J. Billitteri is a freelance journalist in Fairfield, Pa., who has more than 30 years experience covering business, nonprofit institutions and public policy for newspapers and other publications. He has written previously for CQ Researcher on teacher education, parental rights and corporate social responsibility. He holds a BA in English and an MA in journalism from Indiana University.
ily Support, Feb. 13, 2007. Berube said concentrated poverty is defined by Paul Jargowsky of the University of Texas-Dallas as neighborhoods where at least 40 percent of individuals live below the poverty line. 24 Pugh, op. cit. 25 Nell McNamara and Doug Schenkelberg, Extreme Poverty & Human Rights: A Primer (2007), Mid-America Institute on Poverty of Heartland Alliance for Human Needs & Human Rights. For the Bellevue data, the report cites Pennsylvania State University, Poverty in America (n.d.) Living Wage Calculator, retrieved Nov. 15, 2006, from www.livingwage.geog.psu.edu/. 26 Pugh, op. cit. 27 Testimony before House Ways and Means Subcommittee on Income Security and Family Support, Feb. 13, 2007. 28 Woolf, et al., op. cit. 29 Peter Katel, Minimum Wage, CQ Researcher, Dec. 16, 2005, pp. 1053-1076. 30 Sarah Glazer, Welfare Reform, CQ Researcher, Aug. 3, 2001, pp. 601-632. 31 Dan Froomkin, Welfares Changing Face, www.Washingtonpost.com/wp-srv/politics/special/welfare/welfare.htm, updated July 23, 1998. 32 Ron Haskins, Welfare Check, The Wall Street Journal, July 27, 2006, accessed at www.brookings.edu. 33 Interview: Welfare Reform, 10 Years Later, The Examiner, Aug. 24, 2006, accessed at www.brookings.edu. 34 Sharon Parrott and Arloc Sherman, TANF at 10: Program Results are More Mixed Than Often Understood, Center on Budget and Policy Priorities, Aug. 17, 2006. 35 Wisconsin Council on Children & Families, Wisconsin Ranks First in Growth in Poverty: Census Bureau Reports, press release, Aug. 30, 2005. See also testimony of Richard Schlimm, House Ways and Means Committee, Hearing on the Economic and Societal Costs of Poverty, Jan. 24, 2007. 36 Testimony before House Subcommittee on Income Security and Family Support, Feb. 13, 2007. 37 Lawrence Mead, And Now, Welfare Reform for Men, The Washington Post, March 20, 2007, p. 19A. 38 Michael D. Tanner, More Welfare, More Poverty, The Monitor (McAllen, Texas), Sept. 8, 2006. 39 Proceedings of the Virginia Assembly, 1619. 40 Henry George, Progress and Poverty, first printed in 1879. Quoted in H. B. Shaffer, Persistence of Poverty, Editorial Research Reports, Feb. 5, 1964, available at CQ Researcher Plus Archive, www.cqpress.com.
740
Gordon M. Fisher, From Hunter to Orshansky: An Overview of (Unofficial) Poverty Lines in the United States from 1904 to 1965Summary, March 1994, retrieved at http://aspe.hhs.gov/poverty/papers/htrssmiv.htm. 42 CQ Researcher, op. cit. 43 Michael Harrington, The Other America: Poverty in the United States (1962), pp. 14-15. 44 U.S. Census data show the poverty rate for individuals was 22.2 percent in 1960; 21.9 percent in 1961; 21 percent in 1962; 19.5 percent in 1963; and 19 percent in 1964. For families the rate ranged from 20.7 percent to 17.4 percent in that period. 45 See H. B. Shaffer, Status of War on Poverty, in Editorial Research Reports, Jan. 25, 1967, available at CQ Researcher Plus Archive, www.cqpress.com. 46 Marcia Clemmitt, Evaluating Head Start, CQ Researcher, Aug. 26, 2005, pp. 685-708. 47 Sheldon H. Danziger and Robert H. Haveman, eds., Understanding Poverty (2001), Russell Sage Foundation and Harvard University Press, pp. 4 and 5. 48 Peter Edelman, The Worst Thing Bill Clinton Has Done, The Atlantic Monthly, March 1997. 49 Jeff Jacoby, Wefare Reform Success, The Boston Globe, Sept. 13, 2006, p. 9A. 50 Sheldon H. Danziger, Fighting Poverty Revisited: What did researchers know 40 years ago? What do we know today?, Focus, University of Wisconsin-Madison, Institute for Research on Poverty, Spring-Summer 2007, p. 3. 51 Lyndon B. Johnson, Annual Message to Congress on the State of the Union, Jan. 8, 1964. 52 MacGillis, op. cit. 53 E.J. Dionne Jr., Making the Poor Visible, The Washington Post, July 20, 2007, p. A19. 54 Mary H. Cooper, Income Inequality, CQ Researcher, April 17, 1998, pp. 337-360. 55 www.mittromney.com. 56 Mark Greenberg, Indivar Dutta-Gupta and Elisa Minoff, From Poverty to Prosperity: A National Strategy to Cut Poverty in Half, Center for American Progress, April 2007, www.americanprogress.org/issues/2007/04/po verty_report.html. 57 Ron Haskins and Isabel V. Sawhill, Attacking Poverty and Inequality, Brookings Institution, Opportunity 08, in partnership with ABC News, February 2007, www.opportunity08.org/Issues/OurSociety/31/r1/Default.aspx. 58 Coalition on Human Needs, Nearly 900 Organizations Sign Letter to Congress in Support of Expanding Tax Credits for the Poor, May 25, 2007, www.chn.org. The let-
41

Center for American Progress, 1333 H St., N.W., 10th Floor, Washington, DC 20005; (202) 682-1611; www.americanprogress.org. A liberal think tank that issued a report and recommendations on poverty this year. Coalition on Human Needs, 1120 Connecticut Ave., N.W., Suite 910, Washington, DC 20036; (202) 223-2532; www.chn.org. An alliance of organizations that promote policies to help low-income people and others in need. Economic Policy Institute, 1333 H St., N.W., Suite 300, East Tower, Washington, DC 20005-4707; (202) 775-8810; www.epi.org. A think tank that studies policies related to the economy, work and the interests of low- and middle-income people. Heritage Foundation, 214 Massachusetts Ave., N.E., Washington, DC 20002-4999; (202) 546-4400; www.heritage.org. A conservative think tank that studies poverty and other public-policy issues. Institute for Research on Poverty, University of Wisconsin-Madison, 1180 Observatory Dr., 3412 Social Science Building, Madison, WI 53706-1393; (608) 262-6358; www.irp.wisc.edu. Studies the causes and consequences of poverty. Mid-America Institute on Poverty, 4411 North Ravenswood Ave., Chicago, Ill. 60640; (773) 336-6084; www.hearatlandalliance.org. A research arm of Heartland Alliance, which provides services for low-income individuals. National Community Action Foundation, 810 First St., N.E., Suite 530, Washington, DC 20002; (202) 842-2092; www.ncaf.org. Advocates for the nations communityaction agencies. Step Up, Savannahs Poverty Reduction Initiative, 101 East Bay St., Savannah, GA 31401; (912) 644-6420; www.stepupsavannah.org. A coalition of more than 80 local business, government and nonprofit organizations seeking to reduce poverty. U.S. Census Bureau, 4600 Silver Hill Road, Suitland, MD 20746; www.census.gov. Maintains extensive recent and historical data on poverty and demographics. University of North Carolina Center on Poverty, Work and Opportunity, UNC School of Law, Van Heck-Wettach Hall, 100 Ridge Road, CB#3380, Chapel Hill, N.C. 27599-3380; (919) 962-5106; www.law.unc.edu/centers/poverty/default.aspx. A national forum for scholars, policymakers and others interested in poverty, established by presidential candidate John Edwards. Urban Institute, 2100 M St., N.W., Washington, DC 20037; (202) 833-7200; www.urban.org. Studies welfare and low-income families among a range of issues.
ter, dated May 24, 2007, was accessed at www.chn.org/pdf/2007/ctceitcletter.pdf. 59 Alan Berube, Using the Earned Income Tax Credit to Stimulate Local Economies, Brookings Institution, www.brookings.org. 60 Adriel Bettelheim, The Social Side of Tax Breaks, CQ Weekly, Feb. 5, 2007. 61 Ibid. 62 Diane Cardwell, City to Reward Poor for Doing Right Thing, The New York Times, March 30, 2007, p. 1B. The bill is AB 1118. David MacDonald, communications director, Connecticut Association for Community Action, letter to the editor of the Hartford Courant, June 27, 2007, p. 8A. 65 Clea Benson, States Scramble to Adapt To New Welfare Rules, CQ Weekly, June 25, 2007, p. 1907. 66 Ibid. 67 Ibid. 68 Ibid.
64 63
Sept. 7, 2007
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Bibliography
Selected Sources
Books
Danziger, Sheldon H., and Robert H. Haveman, eds., Understanding Poverty, Russell Sage Foundation and Harvard University Press, 2001. Writings on domestic poverty range from the evolution of anti-poverty programs to health policy for the poor. Danziger is a professor of social work and public policy at the University of Michigan, Haveman, a professor of economics and public affairs at the University of Wisconsin, Madison. DeParle, Jason, American Dream: Three Women, Ten Kids, and a Nations Drive to End Welfare, Viking Adult, 2004. A reporter looks at the effort to overhaul the American welfare system through the lives of three former welfare mothers. Edwards, John, Marion Crain and Arne L. Kalleberg, eds., Ending Poverty in America, New Press, 2007. Co-edited and with a conclusion by Democratic presidential candidate Edwards, this collection of articles reflects a progressive economic agenda. Haskins, Ron, Work Over Welfare: The Inside Story of the 1996 Welfare Reform Law, Brookings Institution Press, 2006. A former Republican committee staffer and a chief architect of welfare reform, Haskins tells the story of the political debates leading up to the historic welfare overhaul. Marian Wright Edelman, founder and president of the Childrens Defense Fund, writes, Far less wealthy industrialized countries have committed to end child poverty, while the United States is sliding backwards. Greenberg, Mark, Indivar Dutta-Gupta and Elisa Minoff, From Poverty to Prosperity: A National Strategy to Cut Poverty in Half, Center for American Progress, April 2007. The think tanks Task Force on Poverty says the United States should set a goal of halving poverty over the next decade. Harrison, David, and Bob Watrus, On Getting Out-and Staying Out-of Poverty: The Complex Causes of and Responses to Poverty in the Northwest, Northwest Area Foundation, 2004. An estimated 2 million people live in poverty in the Northwest, more than 900,000 of them in severe poverty. McNamara, Nell, and Doug Schenkelberg, Extreme Poverty & Human Rights: A Primer, Heartland Alliance for Human Needs & Human Rights, 2007. A guidebook explains how human rights advocacy can combat both global and domestic poverty. Meyer, Bruce D., and James X. Sullivan, Three Decades of Consumption and Income Poverty, National Poverty Center Working Paper Series, September 2006. The study examines poverty measurement in the United States from 1972 through 2004 and how poverty rates have changed over the years. Rector, Robert, How Poor Are Americas Poor? Examining the Plague of Poverty in America, Heritage Foundation, Aug. 27, 2007. A senior research fellow at the conservative think tank writes that the plague of American poverty might not be as terrible or incredible as candidate [John] Edwards contends. Toldson, Ivory A., and Elsie L. Scott, Poverty, Race and Policy, Congressional Black Caucus Foundation, 2006. The four-part report explores affordable-housing policy, wealthaccumulation needs and strategies for reducing poverty and unemployment. Woolf, Steven H., Robert E. Johnson and H. Jack Geiger, The Rising Prevalence of Severe Poverty in America: A Growing Threat to Public Health, American Journal of Preventive Medicine, October 2006. Woolf, a professor of family medicine, epidemiology and community health at Virginia Commonwealth University and lead author of this study, says the growth in severe poverty and other trends have disturbing implications for society and public health.
Articles
Bai, Matt, The Poverty Platform, New York Times Magazine, June 10, 2007. Taking a close look at presidential candidate John Edwards focus on the poor, Bai says the main economic debate in Democratic Washington focuses on the tools of economic policy taxes, trade, welfare and how to use them. Dorning, Mike, Will Poverty Make Political Comeback? Chicago Tribune, June 3, 2007. Since the 1960s, Dorning notes, leading presidential candidates generally have not focused on the plight of the poor as a central issue.
Reports and Studies

Congressional Budget Office, Changes in the Economic Resources of Low-Income Households with Children, May 2007. This study charts income changes among the poor from the early 1990s. Childrens Defense Fund, The State of Americas Children 2005.
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The Next Step:

Additional Articles from Current Periodicals
Extreme Poverty
Olkon, Sara, and Darnell Little, Poverty Moves From the City to the Suburbs, Los Angeles Times, Oct. 22, 2006, p. A16. The rise in extreme poverty is tied to the movement of immigrants and minorities, especially Latinos, from the city to the suburbs. Page, Clarence, Lets Finish Job in Conquering Poverty in U.S., Chicago Tribune, Sept. 3, 2006, p. A5. While overall poverty has steadied, there has been a sharp increase in families living in extreme poverty. Skiba, Katherine M., Housing Experts Work to Address City Poverty, Milwaukee Journal Sentinel, Oct. 13, 2005, p. A2. Some housing experts say creating mixed-income communities would help alleviate extreme poverty. Reddington, Dana, Welfare Cuts Have Counties Scrambling, The Philadelphia Inquirer, Feb. 10, 2006, p. B1. Cost cutting by the federal government in Pennsylvanias TANF program has led to state residents owing more taxes. Schuler, Kate, Senate Passes Medicare Aid, TANF Extension Combination, CQ Today, Sept. 29, 2005. The Senate has extended the TANF welfare block-grant program until 2006.
Welfare Reform
Courtney, Mark E., Welfare Reforms Shortcoming, The Washington Post, July 24, 2006, p. A19. Welfare, as we know it, ended after President Clinton signed the welfare-reform law. Foley, Ryan J., Court Deals Setback to Wis. Welfare Reform, Says State Must Help Those Who Cannot Find Jobs, The Associated Press, June 19, 2007. A Wisconsin appeals court ruled that the state must continue giving assistance to welfare participants who are ready to enter the work force but currently cannot find jobs. Samuelson, Robert J., One Reform That Worked, Newsweek, Aug. 7, 2006, p. 45. The Responsibility and Work Opportunity Reconciliation Act of 1996 has modestly improved the lives of millions. Young, Cathy, In Defense of Welfare Reform, The Boston Globe, Aug. 28, 2006, p. A11. The biggest weakness of welfare reform is that it has focused almost exclusively on women, neglecting issues involving their partners and the fathers of their children.
Government Spending
Fletcher, Michael A., Bushs Poverty Talk Is Now All But Silent, The Washington Post, July 20, 2006, p. A4. Poverty forced its way to the top of Presidents Bush agenda in the wake of Hurricane Katrina, but its time in the limelight was brief. Ohlemacher, Stephen, Politics of Poverty Leaves U.S. With Poverty Rate That Few Think Is Accurate, The Associated Press, Feb. 21, 2006. The reporting of poverty rates increasingly depends on how much politicians are willing to spend on helping the poor. Zuckerman, Mortimer B., A Debt to Ourselves, U.S. News & World Report, Oct. 3, 2005, p. 60. Hurricane Katrina has raised many questions on the extent to which government should spend on poverty.
CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.
TANF
Cole, Wendy, Rich Ohio But Poor Ohioans, Time, Jan. 30, 2006, p. 14. Ohio has $900 million in unused TANF funds a surplus twice as big as the surplus in New York, the state with the second-largest surplus. Eckholm, Erik, For the Neediest of the Needy, Welfare Reforms Still Fall Short, Study Says, The New York Times, May 17, 2006, p. A18. A new study suggests that the TANF program has not significantly helped individuals living in poverty.
MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.
APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.
CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.
Sept. 7, 2007
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Updated April 27, 2011
Domestic Poverty
Here are key events, legislation and court rulings since publication of the CQ Researcher report by Thomas J. Billitteri, Domestic Poverty, Sept. 7, 2007.
etween 2008 and 2009, the deep recession that began around December 2007 increased the U.S. poverty rate from 13.2 percent to 14.3 percent, its highest level since 1994, according to the Census Bureau. 69 Nevertheless, say some analysts, poverty might have increased even more had public programs not propped up many families. In the recessions wake, though, many such programs are threatened with severe cutbacks, even as the unemployment that plunged many people into poverty remains high. The number of Americans living in poverty rose from just under 40 million in 2008 to about 43.6 million in 2009 the largest number in the 51 years the government has reported poverty statistics. The poverty-rate increase related to the recession was smaller than the one that accompanied the twin recessions that ran from January 1980 through late 1982 but larger than that during the 1973-1975 recession, the Census Bureau says. 70 Steeply rising unemployment connected to the recession helped drive the increase in poverty rates since 2007. In the nations 100 largest metropolitan areas, city and suburban unAFP/Getty Images/Mark Ralston Mother and daughter rest in the skid row district of Los Angeles after receiving free groceries at a shelter. The economic crisis has caused high youth poverty and unemployment and increased reliance on government and private aid.
employment both nearly doubled between December 2007 and December 2009, rising to 10.3 percent in the 100 largest cities and to 9.3 percent in their suburbs, according to analysts Elizabeth Kneebone and Emily Garr at the centrist Brookings Institution. 71 Furthermore, by December 2010, or 12 months after economists say that economic recovery had begun, unemployment in major metropolitan areas had dropped only slightly to 9.8 percent in cities and 8.9 percent in suburbs. 72 Along with rising and persistent unemployment came a telling rise in the use of government anti-poverty assistance, notably the Supplemental Nutrition Assistance Program (SNAP) previously called food stamps. SNAP enrolled a record 43.5 million Americans one in seven as of November 2010. 73 Especially in the deepest part of the recession, between January 2008 and July 2009, SNAP use increased steeply and steadily, wrote Kneebone and Garr. 74 The poorest Americans those with incomes 50 percent or less of the federal poverty level, about $11,000 for a family of four made up 6.3 percent
of the entire population, some 19 million people, in 2009. That was up from 5.7 percent of the population, or 17.1 million people, in 2008, the Census Bureau says. 75 Poverty among children the age group most likely to live in a poor household increased because of the recession as well. Before the recession hit, 13 states and the District of Columbia had child-poverty rates of at least 20 percent or higher. But by 2009, eight more states had joined the list of those where at least one child in five lived in poverty, according to Brookings analyst Julia B. Isaacs. The
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DOMESTIC POVERTY
largest recession-related increases in child poverty occurred in Michigan, Indiana and Ohio. 76 Once mainly a phenomenon of cities and rural areas, poverty has increased in American suburbs over the past decade, and the trend seems to be continuing. Between 1999 and 2009, the number of people nationwide livnied it would have increased poverty much more, had not government programs supported Americans in the downturn, according to the Center on Budget and Policy Priorities (CBPP), a liberal think tank. According to the Census Bureaus traditional poverty measures, the poverty rate increased by 1.1 percent beministrations 2009 stimulus legislation, said Sherman. Programs in the 2009 Recovery Act kept more than 4.5 million people out of poverty in that year, according to CBPP. Expansions of unemployment benefits enacted in the stimulus plan kept 1.3 million people above the poverty line; improvements in the Child Tax Credit and the Earned Income Tax Credit (EITC), 1.5 million; the Making Work Pay tax credit, 1 million; and increased benefit levels for SNAP, 700,000, Sherman estimated. 79 In 2011, however, as Recovery Act assistance ends and states and cities struggle to trim budgets strained by recession-fueled tax-revenue losses, programs that help stave off poverty likely face substantial cuts. Michigan, Missouri, Arkansas and Florida, for example, are among states where new limits on unemployment benefits have been proposed. In April, Republican Gov. Rick Snyder made Michigan the first state to cut the number of weeks the state will pay unemployment benefits, signing legislation to cut the benefit period from 26 weeks to 20. 80 Michigan is one of at least 23 states where lawmakers are mulling an end to EITCs that go to the working poor; the credits are refundable, meaning that, in some cases, recipients may get more money than they paid in income taxes. Snyder and conservative lawmakers view ending the EITC as a potentially important step to trim a $1.8 billion state budget deficit. The credit returns an average of $432 annually to recipients, who are mostly families with children. 81 The $400 . . . could mean the difference between paying my . . . energy bill or not, commented Rohnalda Hollon, an Iraq War veteran and single mother of three in Beaverton, Mich. 82 But we cannot afford these sacred cows, said Republican state Sen. Roger Kahn, who sponsored a bill to end the credit. Do we need it? Can we afford it? Whats it worth? For the EITC the answers are no, no and not enough, Kahn said. 83
A social worker displays a federal food-assistance card. The Supplemental Nutrition Assistance Program (SNAP) enrolled a record 43.5 million Americans one in seven as of November 2010.
ing below the federal poverty line $21,954 in household income for a family of four in 2009 grew by 25.6 percent. Suburbs of the nations 100 largest metropolitan areas, however, saw their poverty rate swell by a whopping 37.4 percent. By 2009, 1.6 million more poor people lived in suburbs than in cities, a dramatic departure from 2000 when city poor outnumbered their suburban counterparts by almost 400,000, writes Brookings analyst Kneebone. 77 Anti-poverty Programs The severity of the so-called Great Recession and the steep, long-term rise in unemployment that accompa-
tween 2008 and 2009, a modest uptick given that unemployment rates had doubled in many regions and many Americans lost their homes to foreclosure. But using a new alternative measure that takes into account the poverty-ameliorating effects of tax credits and non-cash government benefits such as SNAP, the Census Bureau finds that the national poverty rate did not increase at all between 2008 and 2009, a remarkable achievement given the recessions severity, wrote CBPP analyst Arloc Sherman. 78 Poverty usually burgeons in major recessions but did not in the most recent because of existing poverty programs and, especially, the Obama ad-
Getty Images/Joe Raedle
Chronology
2007
In 13 states and the District of Columbia, at least one child in five is poor. . . . Suburban poverty is growing at a faster rate than urban poverty for the first time in history.
2008
As recession begins, about 40 million Americans live in poverty, defined as annual earnings of just under $22,000 for a family of four.
number of poor Americans rises to 43.6 million. . . . In the 100 largest metropolitan areas, unemployment rates have doubled since 2007, to an average 10.3 percent in cities and 9.3 percent in suburbs. . . . In 21 states and the District of Columbia, at least one child in five is poor. . . . Suburban poor outnumber urban poor by 1.6 million nationwide. . . . Federal stimulus and assistance funds in the 2009 Recovery Act, such as increased unemployment benefits, help keep recession-related poverty from rising higher.
covery beginning, unemployment in major metropolitan areas drops slightly, to 9.8 percent in cities and 8.9 percent in suburbs. . . . The federal Supplemental Nutrition Assistant Program (SNAP), formerly called food stamps, enrolls one in seven Americans.
2011
2009
2010
States face budget crunches as Recovery Act assistance ends. . . . Some states consider ending or limiting poverty-assistance programs such as unemployment benefits and Earned Income Tax Credits.
In the depths of the recession, the

Conservative analysts increasingly argue that government aid such as unemployment benefits and the EITC are a costly burden on taxpayers and an alarming sign that too many Americans have grown dependent on government rather than relying on their own enterprise to get through hard times. The Heritage Foundation, a conservative think tank, for example, has repeatedly raised concerns about the challenges that rapidly growing dependence poses to this countrys republican form of government and for the broader civil society, wrote Heritage analysts William W. Beach and Patrick D. Tyrrell. Growing dependence on government erodes the spirit of self-reliance and self-improvement, they argue. 84 Programs such as the EITC, which provide benefits even to people who are too poor to pay income tax under current laws, are a special problem,
By years end, with economic rewrote Beach and Tyrrell. Dependencecreating programs quickly morph into political assets that policymakers readily embrace, and voters tend to support politicians or political parties that give them higher incomes or subsidies for the essentials of life, they note. Can this republican form of government withstand the political weight of a massively growing population of Americans who believe themselves entitled to government benefits, and who contribute little or nothing for them? the Heritage analysts ask. 85
Marcia Clemmitt
gov/prod/2010pubs/p60-238.pdf, p. 14. Ibid. 71 Elizabeth Kneebone and Emily Garr, The Landscape of Recession: Unemployment and Safety Net Services Across Urban and Suburban America, Brookings Metropolitan Policy Program, March 2010, www.brookings.edu/ papers/2010/0330_recession_kneebone.aspx, p. 1. 72 Emily Garr, The Landscape of Recession: Unemployment and Safety Net Services Across Urban and Suburban America, Brookings Metropolitan Policy Program, March 2011, www. brookings.edu/papers/2011/0331_recession_ garr.aspx, p. 1. 73 Ibid., p. 7. 74 Kneebone and Garr, op. cit., p. 9. 75 Income, Poverty and Health Insurance in the United States, op. cit., p. 19. 76 Julia B. Isaacs, Child Poverty During the Great Recession: Predicting State Child Poverty Rates for 2010, Brookings/First Focus, January 2011, www.brookings.edu/~/media/Files/ rc/papers/2010/1209_child_poverty_isaacs/1209_ child_poverty_isaacs.pdf.
70
Notes
69
Income, Poverty and Health Insurance Coverage in the United States: 2009, U.S. Census Bureau, September 2010, www.census.
CHAPTER
AGING POPULATION
BY ALAN GREENBLATT
Excerpted from Alan Greenblatt, CQ Researcher (July 15, 2011), pp. 577-600.
Aging Population
BY ALAN GREENBLATT
niors which will be much higher than population growth among young and workingames Kempthorne is runage Americans will lead to ning out of money. He changes across society, insaved, or thought he was cluding pressures on the worksaving, for retirement, force and federal budget. 4 says his son, Dirk, a former Thats despite the fact that Republican governor of the United States is aging less Idaho. He thought he rapidly than other developed would be okay, even if he nations, such as Germany, lived to be 90. Italy, Spain and Japan. By But on the 4th of July, the 2015, the population of senior Kempthorne turned 96. working-age people typiHis savings are gone, and cally defined as those behis only source of income is tween ages 15 and 64 will Social Security Social Sebegin to decline throughout curity and a couple of sons, the developed world, with the Dirk Kempthorne says. United States as the sole major As the proud patriarch of a exception. successful family, James The demographics are Kempthorne isnt happy about obviously more favorable having to rely on his children than just about anywhere else for help. But hes not alone. in the rich world, says Nearly 10 million adult children Richard Jackson, who directs over age 50 in the United States the Global Aging Initiative at provide care or financial help the Center for Strategic and to their aging parents. 1 International Studies, a think Such numbers are only tank in Washington. We have going to grow. The oldest an aging population, but at members of the baby boom the end of the day, when Activists on Capitol Hill urge lawmakers on April 15 not generation 78 million the last of the boomers have to cut Medicare, the federal governments health Americans born between passed on to that great Woodinsurance program for the elderly and disabled. The same 1946 and 1964 are turnstock in the sky, well be day, however, the majority-Republican House approved a ing 65 this year. The sheer about as old as Japan and budget plan that would rein in Medicare costs. Democrats oppose the plan and intend to use it as a campaign issue number of them means that Italy are today. And well in 2012. Economists say entitlement programs must be one will turn 65 every 8 sechave a growing population scaled back to control the countrys deficit. onds until 2030. 2 and not a stagnant or a deBut the population of the clining one. I assume that most people would old old those over age 85 is But the United States has a major growing, proportionately, faster. Ameri- like to live a long, full life, and thats problem those other countries dont ca has the largest number of centenar- increasingly possible, says John Rother, have. Spending on health care is far ians in the world, at 72,000 a total policy director at AARP, the major ad- greater here than in other developed that has doubled over the past 20 years vocacy group for seniors, formerly countries and will only rise with the and will at least double again by 2020, known as the American Association of aging of the population. 5 Retired Persons. Advances in health care according to the Census Bureau. 3 We look as though our problem Thats the result of good news: in- make that more likely for people. is very affordable, relative to other Still, Rother acknowledges that a good countries, says Neil Howe, president creased life expectancy that stems deal of concern exists about the chal- of LifeCourse Associates, a demofrom improved medicine and nutrition and a drastic decline over recent lenges posed by the aging population. graphics consulting firm in Great Falls, The rapid growth in the number of se- Va., and author of several books about decades in infant mortality.
THE ISSUES
Getty Images/Alex Wong
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AGING POPULATION
More Americans Expect to Delay Retirement
One-fth of American workers say they expect to retire later than planned a lower percentage than in 2009 and 2010, but higher than when the economy was stronger in 2002. Workers Expecting to Retire Later Than Planned, 2002-2011
(percentage)
25% 20 15 10 2002 2005 2008 2009 2010 2011 Source: Ruth Helman, et al., The 2011 Retirement Condence Survey: Condence Drops to Record Lows, Reecting the New Normal, Employee Benet Research Institute, March 2011, www.ebri.org/pdf/surveys/rcs/2011/ebri_03-2011_no355_ rcs-11.pdf.
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demographics. The big factor that pushes hugely in the other direction is health care. We are anomalous in that we have a system in which health care costs are growing uncontrollably even before the age wave. Total enrollment in Medicare, the federal governments health insurance program for the elderly, is expected to rise from 47 million today to just over 80 million by 2030. 6 Richard Foster, Medicares chief actuary, predicts the programs trust fund could be depleted by 2024. 7 The growing number of aging Americans also will put enormous strains on Social Security and Medicaid, the state-federal health insurance program for the poor and disabled, which pays for more than 40 percent of nursing home care in the United States. What were long-term problems are now at our doorstep, says Maya MacGuineas, director of the Fiscal Policy Program at the New America Foundation and president of the nonpartisan Committee for a Responsible Federal Budget, which advocates greater fiscal discipline.
On April 15, the U.S. House of Representatives approved a budget plan that would attempt to rein in Medicare costs by converting it from an insurance program to a limited subsidy for seniors buying private insurance. The plan is unpopular with the public, according to polls, and Democrats not only oppose it but plan to use it as a campaign issue in 2012. 8 We will never allow any effort to dismantle the program and force benefit cuts upon seniors under the guise of deficit reduction, five Democratic senators wrote June 6 to Vice President Joseph Biden, who had been leading negotiations with members of Congress on debt reduction. Our nations seniors are not responsible for the fiscal challenges we face, and they should not be responsible for shouldering the burden of reducing our deficits. But many policy analysts insist some changes to entitlements benefiting seniors, particularly Medicare, will be necessary to bring down the federal deficit. On average, says Richard W. Johnson, director of the retirement policy program at the Urban Institute, a cen-
trist think tank in Washington, Americans are healthier than 30 years ago. But theres been an increase since the late 1990s in the number of Americans in their late 40s or 50s who are disabled or suffer ailments that make it harder for them to work. Were seeing increases in the number of handicapped people in late middle age, mostly because of obesity and sedentary lifestyles, says demographer Phillip Longman of the New America Foundation, a liberal think tank in Washington. Here we have this generation thats physically unfit and has no savings and whose health care we cant afford at current prices. Such health challenges are going to make it difficult for many Americans to work longer, which economists argue will be necessary to shore up not only Social Security but also personal retirement savings. Rother, the AARP policy director, stirred up a great deal of controversy with remarks quoted in The Wall Street Journal that suggested the seniors lobbying group, which had helped torpedo a plan to partially privatize Social Security in 2005, might be willing to accept benefit cuts in the program. 9 The group immediately sought to downplay Rothers comments. Still, the open debate about cutting entitlement programs, combined with losses in the stock market and the collapse of the housing bubble, have left elder Americans nervous about their financial futures. 10 A retirement confidence survey by the Employee Benefit Research Institute found that the percentage of workers not at all confident they will be able to afford a comfortable retirement rose from 22 percent last year to 27 percent this year, the highest level in the 21 years the group has conducted the survey. (See graph, p. 581.) 11 And its going to be harder for younger Americans to support the swelling population of seniors. Dowell Myers, a demographer at the University of
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Southern California, says the ratio of those over 65 to those between 25 and 64 has been constant for 40 years, with 24 seniors for every 100 working-age Americans. But that dependency ratio will spike by two-thirds over the next 20 years, to 38 seniors per 100 workingage adults, he says. When we come out of this recession, were going to have fewer new workers and more boomers retiring, Myers says. Thats when well feel the changes. As Americans contemplate the consequences of an aging population, here are some of the questions theyre debating: Should Americans work longer? In March, the Centers for Disease Control and Prevention announced that the U.S. death rate had hit a new low while life expectancy had once again ticked up. A male born in 2009 could expect to live 75.7 years, while a female could expect to live to 80.6. 12 Those numbers are a vast improvement over life expectancy in 1935, when Social Security was created. Life expectancy at birth then was just 58 for men and 62 for women. 13 Those averages were held down by much higher rates of infant mortality. Most people who lived to adulthood could expect to live past 65, even then. Still, people are living longer and spending more years in retirement. Those two facts are putting additional strain on both Social Security and Medicare finances. The typical beneficiary is expecting to receive benefits for almost nine years longer than when the Social Security program started, says Charles Blahous, a trustee of the Social Security program and research fellow at the conservative Hoover Institution at Stanford University. Not only are people living longer, but they are retiring earlier. Most men worked, on average, just past 65 during the 1950s. Now, the average retirement age is 62, says Blahous, who
Workers Gloomy About Retirement Prospects

More than one-fourth of American workers are not at all condent that they will have enough money to last through retirement. Thats nearly a three-fold increase from nine years earlier. Fewer than one in eight workers is very condent about a comfortable retirement.
50% 40 30 20 10 0
Worker Condence in Having Enough Money to Live Comfortably Throughout Retirement, 2002-2011
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Very confident Somewhat confident Not too confident Not at all confident Dont know/ refused to answer
Source: Ruth Helman, et al., The 2011 Retirement Condence Survey: Condence Drops to Record Lows, Reecting the New Normal, Employee Benet Research Institute, March 2011, www.ebri.org/pdf/ surveys/rcs/2011/ebri_03-2011_no355_rcs-11.pdf.
was an economic aide to former President George W. Bush. The age for retiring with full Social Security benefits is slowly rising to 67. Some politicians and economists believe it needs to be raised further. That was the recommendation of President Barack Obamas debt commission last year and is a policy direction lately followed in several European countries. What we really need to do is raise the early-entitlement age, which has always been 62 since it was introduced, in 1956 for women and in 1962 for men, says the Urban Institutes Johnson. The problem with having the early retirement age relatively young is that it does send a signal that 62 is an appropriate time to retire. Its not good for society as a whole, and its also not good for individuals. Many people may not be able to retire early, regardless of the official retirement ages set by Social Security. Americans do a bad job of saving in
general, and retirement accounts, in particular, are not as full as they should be. Many people have yet to make up recent stock market losses, and a weak housing market has largely dashed hopes of turning homes into assets that can offer support in retirement. Fewer private employers are offering guaranteed pension benefits, and pensions and other retirement benefits for government workers are under political pressure as well. 14 The result is that about half of U.S. households are at risk of not being able to maintain their living standards in retirement, according to the Center for Retirement Research at Boston College. 15 More Americans might need to keep working, and market demand for them to do so may also rise, suggests MacGuineas, of the New America Foundation. Were actually going to be having labor-market shortages as baby boomers move out of the workforce, she says. A number of social scientists have speculated about whether boomers will
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Cities Struggle to Meet Growing Needs of Elderly

We have a country thats aging everywhere.
ockfords not doing well. The Illinois city, about 90 miles northwest of Chicago, was once a leading furniture-making center, but those jobs are mostly gone. As a result, Rockfords unemployment rate was among the highest among U.S. cities during the recent recession. Most jobs that remain are snatched up by workers 55 and older about all thats left of Rockfords working-age population. Rockford Mayor Larry Morrissey, who is in his 40s, was elected on a platform of promising economic revitalization that would help bring young people including natives whove left back to town. Without strong cultural amenities or a major university, its been a tough sell. Lack of jobs presents the biggest obstacle. Even entry-level jobs paying just above minimum wage that once would have gone to teenagers or people in their 20s are now largely held by workers in their 50s. We have an aging population, and its getting poorer, said James Ryan, Rockfords city administrator. 1 Rockford may be an extreme case, but its not unique. Many former industrial cities in the Northeast and Midwest are growing both older and less affluent. Among the nations 100 largest metropolitan areas, the ones that have had the highest percentage growth of seniors are struggling places such as Scranton, Pa., Buffalo, N.Y., and Youngstown, Ohio. 2 They have higher concentrations of seniors, says William Frey, a demographer at the Brookings Institution think tank who has analyzed 2010 census data on the location of seniors. The younger people have left. There are metropolitan areas in Florida that have a high density of people over age 65. But the number of seniors and aging baby boomers who pick up and move to warmer climes
in Florida and Arizona is relatively small. Most people retire in their own homes, or at least their own counties. You can certainly find lots of upper-middle-class baby boomers who are coping quite well, moving into college towns where there are good social services available and good medical services, says demographer Phillip Longman, a senior research fellow at the New America Foundation. The vast majority of baby boomers, however, are often stuck underwater in postwar tract housing and more recent exurban construction. They cant get out if they wanted to. Frey says its important for communities, particularly in the suburbs that were planned with younger populations in mind, to learn to adapt to aging ones. Every metropolitan area, he says, is seeing marked growth in its senior population and will see more as boomers age. The baby boom python keeps rolling along, he says. In recent years, many local governments and nonprofit groups have tried to come up with programs, such as increased transit, that will help address the needs of populations that are aging in place. About 40 localities, including Atlanta, Iowa City, Iowa, and Pima County, Ariz., have passed ordinances mapping out voluntary or mandatory design requirements for new-home construction that would accommodate the needs of seniors and the disabled, sparing more of them from moving to nursing homes. We could save a lot of money if individuals could continue to live in their own homes and receive in-home nursing if they need it, says Rep. Jan Schakowsky, D-Ill., who has introduced inclusive home design legislation at the federal level. Helping seniors cope with chronic disease is another way to keep them out of nursing homes. Thats why Elder Ser-
keep working longer for that reason or perhaps out of a desire to keep mentally and socially active. Many have speculated that the next generation of older Americans will want to volunteer or work part time, if not stay in their same job past the normal retirement age. Theres not going to be a shrinking entry-level workforce, but its not going to be growing either, says Jackson of the Center for Strategic and International Studies. There may be demand for older workers. But not everyone is convinced that many more people will be able to keep working well into their 60s or
even 70s. Robert H. Binstock, a professor of aging and public policy at Case Western Reserve University, notes that although people are living longer, theyre also afflicted with chronic diseases for longer periods of time. A lot of them cant do their jobs anymore, he says. The whole notion that everybody is going to be able to keep doing their job until 70, its silly. Blahous, the former Bush administration official, dismisses such arguments. Social Security already makes provisions for disabilities, and people worked, on average, longer a half-
century ago, he says. People take early retirement more often, Blahous says, not because more people are physically breaking down. Its because its financially beneficial. But putting aside arguments about whether people are physically capable of working longer, theres also the question of whether they can find work. Alicia Munnell, director of the Boston College Center for Retirement Research, says employers will never say they wouldnt hire older people thats against the law but they are very ho hum about the prospect. Her center has conducted surveys that show
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Its not just the lack of provices of Merrimack Valley gramming help offered by govin Lawrence, Mass., has ernments that is a problem for been working with seniors aging communities, but also a and physicians to help codecline in basic services and ordinate management of amenities, Binstock says. prescription drug regimens Youve got lots of places that and other treatments. Were are aging, and the young people not a medical facility, but are moving out, particularly in what we have is the abilirural areas, he says. Youre going ty to draw elders in and to have communities that arent educate them on their even going to have grocery stores. health care, says Rosanne Eighty-year-old Ada Noda, of St. Augustine, Fla., developed Some states have a youth DiStefano, the facilitys exhealth problems and couldnt work, forcing her to declare bankruptcy. Aging trends are seen by many experts as a population that is growing more ecutive director. significant reason for the climb in health care costs. But rapidly than the older populaDiStefanos program has health economists say medical costs are rising largely because tion, notably in the Southwest, been widely imitated in of the increasing availability of expensive treatments. says Frey. But aging populaMassachusetts, as have a tions are growing in many number of other innovations designed to help residents adjust to old age. But such parts of the country not accustomed to accommodating them. The localities where older residents are starting to predomprograms are having trouble attracting funding in the present inate, such as Rockford, are the ones that are going to be budget environment. Many local governments are providing exercise classes and most severely hit, says Frey. We have a country thats aging nutrition assistance for seniors, but a survey by the National everywhere, but its only young in certain spots. Association of Area Agencies on Aging found that finance and Alan Greenblatt funding problems are the biggest challenge localities face in adjusting to an aging population. Thirty percent of local gov1 Ted C. Fishman, Shock of Gray (2010), p. 235. ernments say that their overall revenues are in decline. 3 If you go community by community, sure, some have de- 2 For background, see Thomas J. Billitteri, Blighted Cities, CQ Researcher, veloped programs that are better than others, says Robert H. Nov. 12, 2010, pp. 941-964. 3 The Maturing of America: Communities Moving Forward for an Aging Binstock, a professor of aging and public policy at Case West- Population, National Association of Area Agencies on Aging, June 2011, ern Reserve University. Overall, its a tremendous problem. www.n4a.org/files/MOA_FINAL_Rpt.pdf, p. iii.
AP Photo/Jake Roth
employers are worried about issues such as older workers stamina, ability to learn new skills and adaptability to changing technology. Thus, although the economics of both entitlement programs and household finances would seem to dictate that more Americans will have to work longer, their chances of doing so might not be as good as they would wish. We see employers willing to keep older workers, but they are reluctant to hire [older] people who are new to the payroll, says the Urban Institutes Johnson. We know that when older people lose their jobs, getting a new
job is harder, and the periods of unemployment are longer. Will spending on health care for the elderly bankrupt the United States? Health care costs already consume more than double the share of the economy that they did 30 years ago. They are expected to consume $2.8 trillion this year, or 17.9 percent of gross domestic product (GDP), according to the federal Centers on Medicare and Medicaid Services (CMS). Thats up from 8.1 percent of the economy in 1975. 16
Medicare and Medicaid spending have grown at a similar pace. The two programs, which provide coverage for seniors and the poor and disabled, respectively, are on course to grow from about 4 percent of GDP in 2008 to nearly 7 percent by 2035. 17 The 2010 federal health-care law, known as the Affordable Care Act, was designed to cut Medicare costs by nearly $120 billion over the next five years. 18 But Medicares actuaries worry that savings from the 2010 law cant all be relied upon. Thats because Congress has frequently canceled plans to lower Medicare fees
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AGING POPULATION
U.S. Population Growing Grayer
A record 40 million Americans are age 65 or older, nearly double the total four decades ago. The number of seniors has risen every decade since 1880.
(in millions)
50 40 30 20 10 0
Number of Americans Age 65 or Older, 1880-2010
1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Sources: Life Expectancy for Social Security, Social Security Administration, www.ssa.gov/history/lifeexpect.html; Prole of General Population and Housing Characteristics: 2010, U.S. Census Bureau, 2010, factnder2.census.gov/faces/ tableservices/jsf/pages/productview.xhtml?pid=DEC_10_DP_DPDP1&prodType=table.
for hospitals and physicians. 19 As a result, the Medicare trust fund is on course to run out of money in 2024 five years earlier than previously predicted according to Richard Foster, the chief actuary at CMS. Rising health care costs are a burden not just for the government but for individuals as well. Were spending about $8,000 more annually for insurance for a family of four than we did in 2000, says Paul Hewitt, vice president of research at the Coalition for Affordable Health Coverage, an advocacy group in Washington. Experts say aging trends are a significant reason for the climb in health care costs and an important source of pressure on the federal budget. Its worth keeping in mind that a significant share of health care growth is demographically based, says Jackson of the Center for Strategic and International Studies. Youre looking at a steep rise in cost just because of the rise in the average age of the beneficiaries the aging of the aged. But health economists say aging trends are far from the whole story. Medical costs are rising largely because of the ever-increasing availabil-
ity of expensive treatments in the health care system a system that treats young and old alike. The real problem is not the aging of the population, but the rise of health care costs, says Case Westerns Binstock, a former president of the Gerontological Society of America. We dont look at the elephant in the room here, which is the enormous profits of the medicalindustrial complex. Most experts agree that major alterations are in order. Some are discouraged that the two major parties seem worlds apart on health care issues. Both parties have to recognize the need to compromise, says the Urban Institutes Johnson. That does not appear imminent. Republicans have pledged to repeal the 2010 health care law, considered one of Obamas signature achievements, while Democrats intend to use the GOPs controversial plan to turn Medicare into something resembling a voucher program against them in the 2012 elections. Even as congressional Republicans seek to slash Medicare and other entitlements, they oppose the Independent Payment Advisory Board, estab-
lished by the 2010 health care law, which is meant to make recommendations for Medicare spending cuts when its growth exceeds GDP growth by more than 1 percent. Cutting providers eventually cuts benefits because they are less available, said Sen. Jon Kyl, R-Ariz., the minority whip. You dont have as many physicians, for example, to take care of Medicare patients, so either people have to wait a lot longer or they never get to see the physician theyd like to. 20 But if a political deal is not reached, the consequences could be dire, experts warn. The Congressional Budget Office (CBO) says health care costs, on their current course, could swallow all of GDP by 2082. 21 The risk of bankruptcy from health costs in particular, says Hewitt, are exactly what bond rating agencies have warned about when they have threatened recently to downgrade U.S. debt meaning the federal government may not be able to borrow money as cheaply because theres more risk that it wont be able to cover its interest payments. Three-quarters of the projected deficits over the next 10 years are new health care spending, according to CBO, Hewitt says. If you could hold health costs at 2011 levels, you wouldnt have any deficit of note in 2021. Theres no question that were on course for health care costs to bankrupt the country, says the New America Foundations MacGuineas. You cant have anything growing faster than GDP forever, because it consumes more and more of the economy. That may be the greatest danger. MacGuineas, like other budget experts, predicts that some sort of change will be made in health care spending, because present trends are not sustainable. But the changes wont come without pain and political difficulty. In the meantime, rising health costs may continue to squeeze spending on other programs.
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Will the young and old fight over resources? When he unveiled his budget in February, New York City Mayor Michael Bloomberg warned that the city faced tough choices because of a budget shortfall of nearly $5 billion. Everybody expects you to do everything, the mayor said. Thats not the world we live in. 22 Bloomberg felt he had no choice but to threaten layoffs of more than 4,000 school teachers. At the same time, however, his budget contained a new initiative: the construction of 10 megacenters for senior citizens. Both ideas were ultimately rejected by the city council. Still, says the Urban Institutes Johnson, That was striking. It seems to be the essence of the potential for intergenerational combat. The idea that aging boomers will drain the nations resources through entitlements such as Social Security and Medicare and that younger generations are not just going to resent but protest it has seeped into popular culture. It forms the premise, for example, of satirical novels such as Christopher Buckleys Boomsday and Albert Brooks 2030. While older voters demand full funding for Social Security and Medicare, younger voters may worry that the growth of those expensive programs is crowding out spending on areas that benefit them more directly, such as education and transportation. Or the young might want to see entitlements cut in order to chop deficits that theyll eventually have to repay. I think its amazing weve gotten this far without younger generations getting more agitated about constantly investing in seniors, with no similar promises made for productive investments for young people, says MacGuineas. Voting schisms along generational lines have become apparent in some recent elections. You had this overwhelming tilt of millennials to the
Elderly a Growing Share of Electorate

The proportion of the American electorate age 65 and older has risen modestly over the past 20 years, from 17 percent in 1990 to 19 percent in 2010. But it is expected to grow sharply over the next 40 years, topping 30 percent by 2050.
(percentage)
35% 30 25 20 15 1990 * projected
Voting-age Population Age 65 and Older, 1990-2050
2000
2010
2020*
2030*
2040*
2050*
Sources: United States 1990 Census of Population, U.S. Census Bureau, www.census.gov/prod/cen1990/cp1/cp-1-1.pdf; United States 2000 Census of Population and Housing, U.S. Census Bureau, November 2010, www.census. gov/prod/cen2000/phc-1-1-pt1.pdf; Projections of the Population by Selected Age Groups and Sex for the United States: 2010 to 2050, U.S. Census Bureau, 2008, www.census.gov/population/www/projections/les/nation/summary/np2008-t2.xls.
Democrats and Obama in 2008, says Howe, co-author of Millennials Rising, about the generation born between 1982 and 2002. Obama and McCain Sen. John McCain, Obamas GOP opponent were dead even among those 30 and over. Older Americans voted disproportionately for GOP candidates in 2010. But Democrats won a special election in May in a traditionally Republican congressional district in upstate New York. The election was widely interpreted as a referendum on the House GOPs plan to turn Medicare into a form of voucher program, with seniors turning out in force to reject the idea and the Republican candidate. Over the years, until very recently, theres been very little evidence that older people vote on the basis of old-age benefits as a bloc, says Binstock at Case Western Reserve. Its only in 2010 and the 26th District in New York that you begin to see some signs of this, particularly in relation to Medicare.
Howe and others say boomers, throughout their adult lives, have not voted as a predictable bloc. If they start to in old age, however, they would be formidable. As the population ages, the electorate the group of people actually voting is growing older at a disproportionate rate. The percentage of the voting-age population that is over 65 is expected to climb by more than 10 percent over the next 25 years. 23 (See graph, above.) And, because older voters tend to go to the polls more regularly, their share of the electorate will climb even more, Binstock predicts. Some political scientists are skeptical that there will be a young persons revolt, or even noticeable friction between the generations. I dont buy the generational-conflict theory, says Alan Abramowitz, a political scientist at Emory University. Programs that benefit the elderly, such as Social Security and Medicare, also benefit their children and grandchildren. If you cut benefits for the elderly, one conse-
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Getty Images/Joe Raedle
AGING POPULATION
quence will be to largely synonymous shift costs onto their with death. Older peochildren and reduce ple were both rarer and income available to more vulnerable to sudpay for, among other den death due to such things, education for things as infectious distheir children. eases and poor sanitaOthers echo this tion. But even as modpoint, noting that oldern medicine has age entitlements keep conquered diseases that seniors from being a afflict the old, it has done financial burden on even more to address their children, while infant mortality. older voters will want With fewer people to see young people dying young, life exsucceed through edpectancy has increased. ucation in part, to And healthier babies help pay the taxes have coincided with Walter Breuning celebrates his 113th birthday at a retirement home in that fund their entiother societal and ecoGreat Falls, Mont., on Sept. 21, 2009. At his death in April 2011 at age tlements. nomic factors to bring 114, he was the last American man born in the 19th century and one of the worlds oldest people. The oldest of the 78 million Americans born Older people birthrates down. As during the post-World War II baby boom are turning 65 this year, while really do care about prosperity grows, death the share of the population over 85 is growing even faster. their grandchildren rates fall. And the adand obviously have vent of pensions and a financial stake in having a proother social-insurance programs has ductive workforce, says Rother, the meant that parents no longer have as AARP vice president. Younger peogreat a need for large families to supple need to look forward to a seport them as they age. cure retirement, and they obviously Meanwhile, womens roles have cant vote to limit Medicare without changed. Many now balance reproduchaving repercussions for them later. tion with concerns and responsibilities Still, some observers say resentment or most of human history, jour- outside the home. Contraceptives are among the young is only likely to nalist Ted C. Fishman points out more widely available, while abortion grow as entitlements take up an inin his book about global aging, Shock has become legal and available. creasingly large share of a strained fed- of Gray, people who lived past 45 had Finally, as American society has eral budget. And some worry that the beaten the odds. Life expectancy bare- urbanized, fewer families need to intergenerational compact may be ly budged from 25 years during the have multiple children to help work frayed by the fact that the older Amer- Roman Empire to 30 years at the dawn in the fields. icans who receive entitlements are of the 20th century. 24 predominantly white, while the school Until the Industrial Revolution, peoand working-age populations will be ple 65 or older never comprised more increasingly made up of minorities, in- than 3 or 4 percent of the population. n the 1930s, demographers predictcluding Hispanics and Asians. (See side- Today, they average 16 percent in the ed that after a long period of debar, p. 588.) developed world and their share Despite the rumblings, I think the is expected to rise to nearly 25 per- cline in birthrates dating back to the population may come to appreciate that cent by 2030. 25 (The share of Amer- Industrial Revolution, the U.S. populaold-age benefits are actually things that icans over 65 will be nearly 20 per- tion would stagnate and was unlikely benefit all generations, Binstock says. cent by then.) Demographers call such to rise above 150 million by centurys However, I do think that the growing shifts from historic norms the demo- end. But birthrates shot up immediately after World War II, quickly rising to Latino population may very well come graphic transition. to resent paying taxes to support an A confluence of factors has led to more than 4 million births per year. Continued on p. 588 older white generation. the current transition. Aging was once
BACKGROUND
Living Longer
Fertility Splurge
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Getty Images/John Moore
Chronology
1940s-1960s High postwar birth rates fuel
suburban growth. 1946 First of the 78 million American baby boomers are born. 1956 Women are allowed to collect early benefits under Social Security at age 62. The same deal is offered to men in 1962. 1959 More than 50 million Americans are under age 14, representing 30 percent of the population. 1960 Sun City opens in Arizona, pioneering the retirement community idea. 1960 Seventy percent of women ages 20-24 are married. 1965 Forty-one percent of Americans are under age 20. . . . Medicare and Medicaid, the main government health programs for the elderly, poor and disabled, are created.
1990 Proportion of married women ages 20-24 drops to 32 percent. 1992 Bill Clinton elected as the first boomer president.
the retirement age for pilots from 60 to 65. . . . The nations earliestborn boomer, Kathleen CaseyKirschling, applies for Social Security benefits.
2000s
2010s
Oldest boomers, enter their 60s, raising concerns about the cost of their retirements. 2000 For every American 65 or older, there are 3.4 workers contributing payroll taxes to Social Security a ratio that will shrink to 2.0 by 2030. 2003 Congress passes an expansion of Medicare that offers a prescription drug benefit to seniors. . . . Pima County, Ariz., becomes the first local government to require all new homes to be designed to accommodate seniors and the disabled. 2005 The pregnancy rate of 103.2 per 1,000 women aged 15 to 44 years old is 11 percent below the 1990 peak of 115.8. 2006 President George W. Bush, one of the oldest boomers, turns 60. . . . The Pension Protection Act allows workers to dip into their pensions while working past 62. 2007 Federal Reserve Chairman Ben S. Bernanke predicts Social Security and Medicare will swallow 15 percent of annual economic output by 2030. . . . The Federal Aviation Administration proposes increasing
The number of older Americans continues to rise, but the U.S. enjoys more growth among school and working-age populations than other rich nations. 2010 The number of workers 55 and over hits 26 million, which is a 46 percent increase since 2000. Congress enacts the Affordable Care Act, designed to expand health coverage, including a doubling of the eligible population under Medicaid. 2011 March 16: The Centers for Disease Control and Prevention announces that life expectancy for Americans at birth increased in 2009 to 78.2 years. . . . April 15: The House passes a budget that would convert Medicare into a voucher program for those now under 55. . . . May 24: Democrats win a special election in a traditionally Republican district in upstate New York; the race is seen as a referendum on the House GOP Medicare proposal. 2015 Working-age populations are projected to start declining in the developed world, with the United States as the major exception. 2025 Population growth is expected to stall in every developed country except the United States, which is also expected to be the only developed nation with more children under age 20 than elderly over age 65.
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1980s-1990s Boomers set aside youthful re-
bellion to take a leading role in wealth creation and politics. 1983 Congress approves a gradual increase in the age at which Americans can collect full Social Security benefits, from 65 to 67. 1986 The Age Discrimination Employment Act is amended to eliminate mandatory retirement ages.
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Minority Youths Are Rising Demographic Force

Trend has major implications for aging whites.
hite America is aging, while its young people are increasingly dominated by members of ethnic and racial minorities. As a result, the days when the United States will no longer be a white-majority nation are coming sooner than demographers had long expected. That could lead to a political struggle over resources, some social scientists contend. There could be a generational battle over governmental priorities one with racial or ethnic overtones. Younger members of minority groups may not want to fund entitlement programs that chiefly benefit a mostly white cohort of older Americans. Conversely, the elderly who hold disproportionate political power thanks to higher rates of voter turnout may seek to protect such programs at the expense of investments in government programs that chiefly benefit the young. Over time, the major focus in this struggle is likely to be between an aging white population that appears increasingly resistant to taxes and dubious of public spending, and a minority population that overwhelmingly views government education, health and social-welfare programs as the best ladder of opportunity for its children, political journalist Ronald Brownstein wrote in the National Journal last year. 1 In a number of places, minorities already outnumber whites at least among schoolchildren. The population of white children declined by 4.3 million from 2000 to 2010, while that of Hispanic children rose by 5.5 million, according to the 2010 decennial census. Indeed, the number of white children decreased in 46 states between 2000 and 2010. Whites now make up a minority among
those younger than 18 in 10 states and 35 large metropolitan areas, including Atlanta, Dallas and Orlando. In Texas, 95 percent of the growth of the youth population occurred among Hispanics. What a lot of older people dont understand is that, to the extent we have a growing youth population, its entirely due to minorities, says William Frey, a demographer at the Brookings Institution who has analyzed the 2010 census data on children. Twenty-three states have seen a decline in the total number of children. In the baby boom generation, about 20 percent never had children, which is about double the rate of the previous generation of elders, says Phillip Longman, a policy researcher at the New America Foundation think tank in Washington. Now, youre talking about this aging population that doesnt have any family support and doesnt have any biological relations, he says. Its not so much that theyre white as they forgot to have children. This opens one of the big questions regarding the differences between an older, white population and a younger population made up more from minorities. In his 2007 book Immigrants and Boomers, demographer Dowell Myers worried that there is little kinship or sense of shared identification between the groups. But Longman says such concerns may be overstated. Thirty years ago, I predicted that would be a big thing, the conflict between generations made even worse by the fact that it has an ethnic and racial component to it as well, he says. Longman argues now, however, that racial lines are getting blurrier. Just as the definition of who was white expanded in
All told, about 76 million children were born in the United States between 1946 and 1964, generally considered the period of the baby boom. (Several million have died, but immigrants have more than made up for those numbers, bringing the baby boom total to 78 million.) Simply put, the baby boom was a disturbance which emanated from a decade-and-a-half-long fertility splurge on the part of American couples, concluded the Population Reference Bureau in 1980. 26 Childbearing long delayed first by the Great Depression of the 1930s and then by war was put off no longer.
Women married younger and had their first babies at an earlier age than at any time in modern history. 27 The fertility rate, which refers to the average number of children born to women of childbearing years, had averaged 2.1 children per woman during the 1930s but peaked at 3.7 in the late 1950s. 28 The number of babies being born certainly surprised the General Electric Co. in January 1953. It promised five shares of stock to any employee who had a baby on Oct. 15, the companys 75th anniversary. GE expected maybe eight employees would qualify. Instead they had to hand over stock to 189 workers. 29
The time was ripe, economically, for many more people to have children than had done so during the Depression. GDP expanded rapidly, from $227 billion in 1940 to $488 billion in 1960. Median family income and wages climbed steadily because of tight labor markets, while inflation remained low. The Servicemembers Readjustment Act of 1944, commonly known as the GI Bill of Rights, helped more people in the middle class buy their first homes and get college educations, significantly increasing their lifetime earnings. Never had so many people, anywhere, been so well off, observed U.S. News & World Report in 1957. 30
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White parents with chilthe first half of the 20th cendren may be more likely to lotury to include groups such cate in select neighborhoods as the Irish and Italians, Hisand communities, perhaps those panics will increasingly be with better schools, or superiseen as white, Longman or public amenities related to says. I just think the meltchildrearing, he writes. 3 ing pot continues, he says. Polls indicate that younger It will be in the interest Americans are readier to emof the aging white populabrace racial diversity than tion to see that young peotheir elders, while more deple, including Hispanics and Minorities are fueling the nations growing youth scribe themselves as mulother minorities, fulfill their population. Above, black and Hispanic students at the Harlem Success Academy, a New York charter school. tiracial. Still, racial animosieducational potential, says ties and differences persist, Myers. Otherwise, they will and they may become exacerbated as the white population ages be caught short as the working-age population, which pays and the minority population grows larger. the bulk of the taxes that support programs that benefit The public-school system is one place where tensions could seniors, is made up largely of minorities. The person you rise. Gaps on average reading and math test scores posted by educated 20 years ago, thats who is going to buy your Hispanics and non-Hispanic whites have been narrowing, but house, he says. remain wide. Despite the closing white-Hispanic gaps on civics Alan Greenblatt performance, the fact is were still seeing gaps in the double digits, said Leticia Van de Putte, a Texas state senator who sits on the board that oversees National Assessment of Edu- 1 Ronald Brownstein, The Gray and The Brown: The Generational Mismatch, National Journal, July 24, 2010, www.nationaljournal.com/magazine/ cational Progress testing. 2 the-gray-and-the-brown-the-generational-mismatch-20100724. Because school funding relies partly on property tax as- 2 State Senators React to Hispanic Achievement Gains, Hispanic Tips, May 5, sessments in most places, such disparities may be perpetuated 2011, www.hispanictips.com/2011/05/05/state-senators-react-to-hispanicby racial segregation. Although the 2010 census showed a de- achievement-gains-on-latest-naep-civics-report-card-that-showed-substantialgains-in-the-performance-of-hispanic-students-at-grades-four-eight-and-12/ cline in residential segregation, black and Hispanic children are 3 William Frey, Americas Diverse Future, The Brookings Institution, April 2011, more likely to live in a segregated neighborhood than black p. 10, www.brookings.edu/~/media/Files/rc/papers/2011/0406_census_diversity_ frey/0406_census_diversity_frey.pdf. and Hispanic adults, according to Frey.
Getty Images/Chris Hondros
The Baby Bust

erhaps because of the advent of the birth control pill in 1960 and the fact that more women had careers, boomers were slower to become parents than their parents had been. Between 1965 and 1976 the era of the so-called baby bust fertility among whites dropped below replacement levels. 31 After just two decades of a fertility splurge, Americans went back to marrying later and producing fewer children. In 1990, only 32 percent of women 20-24 were married, com-
pared to 70 percent in 1960. Social scientists began to posit that it was the baby boom that was exceptional in American history, not the subsequent bust. 32 But the baby bust was followed by the uptick known as the echo boom, when many boomers became parents, racking up 64 million live births between 1977 and 1993. 33 Meanwhile, boomers continued to dominate many aspects of American life and culture. Some criticized them as frivolous, blaming their personal habits and quests for self-fulfillment for every social ill from divorce rates to teen drug use. Others defended
them for fighting for greater rights for women and gays, among others. The debate about boomers values became a recurring motif in politics especially after Bill Clinton, who would become the first boomer president, emerged on the national stage in 1992. Political scientists have noted that boomers failed to coalesce behind a single political party, with many growing more fiscally conservative during the 1980s but remaining socially liberal, with views on race, AIDS, drugs and womens rights distinctly different from their parents generation. But the mere fact of their massive numbers made them hard to ig-
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AGING POPULATION
nore and created policy challenges buy private insurance is an example. A The percentage of adults who are as they aged. This year, the first of survey conducted in May by the Pew providing personal or financial care about 78 million baby boomers turn Research Center for the People & the to a parent has tripled since 1994, 60, including two of my dads fa- Press found opposition to the plan was according to the MetLife Mature Marvorite people, me and President especially high among people who say ket Institute. Nearly 10 million adult Clinton, President George W. Bush they have heard a lot about this pro- children over the age of 50 care for said during his 2006 State of the posal fully 56 percent are opposed, their aging parents, said Sandra Union address. This milestone is while 33 percent are in favor. 36 Timmermann, the institutes director. more than a personal crisis. It is a The politics of this is, the baby Assessing the long-term financial imnational challenge. The retirement of boom is a generation thats always pact of caregiving for aging parents the baby boom on caregivers themgeneration will selves, especially those put unprecedented who must curtail their strains on the fedworking careers to do eral government. 34 so, is especially important, since it can Combined spendjeopardize their future ing for Social Secufinancial security. 37 rity, Medicare and Boomers are quite Medicaid will condifferent from earlier sume 60 percent of generations as theyre the federal budget approaching this age, by 2030, Bush said, says William H. Frey, presenting future a demographer at the Congresses with Brookings Institution, a impossible choices centrist think tank in staggering tax Washington. For exincreases, immense ample, boomer women deficits or deep cuts are much more likein every category of A nurse examines stroke victim Elvira Tesarek at her home in Warren, ly to have lived indespending. R.I., in May 2011. Nearly 1,300 elderly and disabled adults in the state have been able to return home under a pilot program pendent lives, been Bush had spent designed to cut spending on Medicare. head of households a good chunk of and worked. 2005 touting a plan But theres a great to revamp Social Security, meant to be the signature been pretty willing to vote themselves deal of economic inequality within the domestic achievement of his second good fiscal deals, says MacGuineas of baby boom generation, he notes, which means many retirees will have a hard term. But the plan which would the New America Foundation. time making ends meet. 38 In addihave allowed workers born after 1950 tion, Frey says, boomers didnt have to put part of their payroll taxes into as many children as their parents genprivate investment accounts in exeration, so they cant rely on them change for cuts in traditional benefits oomers will add to the rising num- for support. went nowhere. A Washington ber of seniors but their parents, Not everyone views the aging of Post/ABC News Poll found that 58 percent of those surveyed said the more in many cases, will still be around. America as bad news. An aging popthey heard about Bushs plan, the less Those 85 and over now make up the ulation, says Eric Kingson, a professor fastest-growing segment of the U.S. popof social work at Syracuse University, they liked it. 35 More recent attempts to overhaul the ulation, according to the National Insti- is a sign that society has successfully major entitlement plans benefiting se- tute on Aging. That means that even as fostered an economy that helps peoniors have proved no more popular. A boomers enter what has traditionally ple lead long, prosperous lives. PopHouse Republican plan to convert been considered old age, they are sand- ulation aging is not just about the old, Medicare from an insurance program wiched between still-living parents and he says. Its about how all of our ininto a credit that would help seniors their own children and grandchildren. stitutions are going to change.
Sandwich Generation
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McClatchy-Tribune via Getty Images/Jay Reiter
CURRENT SITUATION
Financial Insecurity
ven as federal officials debate the affordability of Social Security and Medicare as the population ages, individual Americans are increasingly concerned about their own ability to support themselves during retirement. Even before the financial crisis of 2008, income and wealth inequality was growing among seniors. Back in 2004, the top 5 percent of the baby boomers controlled more than half of the assets, says Diane Oakley, executive director of the National Institute on Retirement Security in Washington. The bottom half had less than 3 percent of the assets. She hopes lower-income Americans have been able to save more for retirement since then, but stock market losses and the collapse of the housing bubble make that unlikely. In a recent poll, 78 percent say they cant save enough on their own to be secure in retirement, says Brian Perlman, president and CEO of Mathew Greenwald & Associates, a market research firm in Washington. Peoples beliefs are that its harder and harder to do that. The risk for retirement has shifted more onto individuals, Oakley says. From 1980 to 2008, she says, the percentage of private-sector workers covered by defined-benefit pension plans which offer a guaranteed income throughout retirement dropped from 38 percent to 20 percent. Meanwhile, defined-contribution plans, such as 401(k) plans, have grown. These plans, which shift the burden for retirement savings onto individuals, have certain tax advantages, but
like any personal savings account, they can be drained dry. Unlike definedbenefit plans, the money is gone once 401(k) assets are depleted. Americans are not contributing enough to 401(k)s to build up sufficient retirement nest eggs. According to Towers Watson, a human-resources consulting firm, only 57.3 percent of Americans have enough in their retirement accounts to replace one years worth of working salary. Only 10.9 percent had more than four times their current salary saved up. 39 Because most people are going to be retired more than a few years, that presents a problem. For most, Social Security will represent the bulk of their retirement income, but benefits average only about $14,000 per year. Only about half of workers are in any kind of retirement plan through their employers, says the Urban Institutes Johnson. People dont make the most of their 401(k) plans they dont contribute the maximum, or at all.
Automatic Enrollment
ost workers have to sign up for 401(k) plans, but Johnson favors automatic enrollment. Automatic enrollment plans would allow employers to deduct part of each paycheck and put the money toward employees retirement, unless a worker made the express decision to opt out. Weve run some simulations, Johnson says. If most people behave as we expect they would, based on past experience, automatic enrollment would increase retirement incomes for low- and moderate-income people by about 20 percent. The Obama administration supports the idea of automatic enrollment. The administration would like employers, even if they dont offer 401(k) accounts of their own, to enroll their workers in some kind of retirement account.
The basic idea is that an employer would simply do payroll deduction, says J. Mark Iwry, senior adviser to Treasury Secretary Timothy Geithner. When we do automatic enrollment in 401(k)s, the [participation] rate goes up from two-thirds or threequarters to more than 90 percent. But the idea of enrolling workers automatically into retirement savings accounts may run into opposition in Congress because of budget concerns. Obamas deficit commission last year recommended lowering the cap on annual contributions allowed to such retirement savings accounts. 40 Aside from putting more money aside for retirement, individuals will also come to rely more on income earned later in life whether by staying in their old job longer or finding a new one after retiring, many economists believe. If people want to have a secure retirement, they really should work longer, says Alicia Munnell, director of the Center for Retirement Research at Boston College. Theres an enormous benefit in terms of what your Social Security benefits and 401(k) accounts will be. And then, you have [fewer] years over which to spread your savings. All were talking about, basically, is three to four more years. Were not talking about into your 90s.
Government Cutbacks
ost government workers can count on a relatively comfortable retirement. In contrast to privatesector employees, about 90 percent of state and local government workers are enrolled in defined-benefit programs. But the disparity between the plans offered to government workers and those at private companies, along with severe budget problems confronting state and local government workers,
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AGING POPULATION
is increasing pressure on retirement benefits in the public sector, too. The gap between what states had promised to pay out in pensions and retirement health benefits and the assets they have to pay them had grown to more than $1.26 trillion by the end of the 2009 budget year, according to the Pew Center on the States. 41 Some economists say the gap is even larger. State and local retirement accounts might be more than $1 trillion in the red, but union leaders say its unfair to blame government workers because legislatures failed to make scheduled payments to pension funds over the years. Better to blame Wall Street, they say, for racking up record profits even as large-scale investment losses have blown a hole through pension accounts. Theyve blamed public empowers that would allow him to change retirement-benefit formulas. 42 Reed warns that he will have to lay off two-thirds of the citys work force if he cant achieve significant savings in retirement-benefit costs. What consumed $65 million of the citys budget a decade ago already accounts for $250 million and half the citys current budget shortfall. Retirement costs could rise to as much as $650 million annually over the next few years, Reed says. In Reeds mind, its simply a math problem. We are draining money out of services and pouring them into retirement benefits, Reed says. However you define unsustainable, its unsustainable. Public-employee unions concede that Reeds complaints are borne out of real problems with San Joses finances. They dont agree that his approach is the best way to address those problems, however. And union leaders in San Jose, like their colleagues elsewhere, think stripping public employees of promised benefits will undermine one of the few pockets of retirement security. Its perfectly understandable that workers in the private sector are worried about their retirement security, says John Liu, New York Citys comptroller. But to scapegoat public employees will fuel a race to the bottom in our country. Yet, further cutbacks appear inevitable, even for government workers who have long counted on benefits that would allow them to retire free of financial anxiety. State officials appear to have lost some of their initial enthusiasm for moving to 401(k)style plans, however, because of the enormous upfront costs in switching from traditional pensions. In Kentucky, increased costs are estimated at $8 billion over 15 years. Nevada would run through $1.2 billion in just two years. 43
Continued on p. 594
We are draining money out of services and pouring them into retirement benefits. However you define unsustainable, its unsustainable.
Mayor Chuck Reed San Jose, Calif.
About a dozen states have altered their pension systems over the past couple of years, according to the National Conference of State Legislatures. Most have made moves such as putting new employees into 401(k)style accounts, rather than enrolling them in defined-benefit plans.
Math and Politics

ut some governors and lawmakers have sought changes in retirement coverage for current workers as well. The battle over retirement benefits has turned political, most notably in Wisconsin, where legislation to strip most public employees of collective bargaining rights led to weeks of large-scale protests at the capital.
ployees for problems theyve never caused in the first place, says Randi Weingarten, president of the American Federation of Teachers. Patrick OConnor, an alderman in Chicago, agrees that unions have a point when they accuse government officials of not properly funding promised benefits. Still, he argues, cities and states have no choice but to cut back on benefits that are no longer affordable. Government cant blame the unions in total, OConnor says. Government is what put the benefits in place. But I dont think anybody who looks at pension plans thinks they can be funded at the levels theyre at. In San Jose, Calif., Mayor Chuck Reed declared a state of fiscal emergency in May, hoping he can persuade voters to give him additional
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At Issue:
Should the retirement age be raised?
yes
RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE
ANDREW G. BIGGS
ocial Securitys retirement age should not be increased for anyone on the verge of retirement, but theres a good case for doing so over coming decades, as the Baby Boomers retire and the population ages. In 1950, the average retiree claimed Social Security benefits at age 68.5 and lived to around 76. Today, a typical retiree claims benefits at 63 and will live an additional two decades. Americans today live almost one-third of their adult lives in retirement, supported by an increasing tax burden on their kids and grandkids. This isnt simply unfair to future generations. It is also a waste of human talent. Are there some people who cant work longer? Of course. And for them, early retirement or disability benefits remain an option. But it would be strange in todays service economy if Americans, who work mostly in offices, could not work as long as prior generations who toiled in mines, mills and farms. Indeed, our longer lives are also healthier lives. According to the National Center for Health Statistics, among individuals ages 65-74 the share describing themselves as in fair or poor health dropped from 25.1 percent in 1983 to 18.5 percent in 2007. Overall, 75 percent of individuals over 65 report being in good, very good or excellent health. Its easy to scare people for instance, President Obamas Commission on Fiscal Responsibility and Reform would increase the retirement age to 69. But this would apply only to people who havent even been born yet and at retirement would live on average to age 88 almost 10 years longer than they did when Social Security started in the 1930s. It is true that life expectancies have risen faster for highearners than for low-income Americans. This is why almost every reform plan that raises the retirement age also makes Social Security more progressive, by boosting benefits for lowearners while trimming them for the rich. One option is to let the retirement age rise to 67 as scheduled, then increase it in future years as life spans rise. If life expectancies increase quickly, then the retirement age will follow; if life spans stay constant, the retirement age wont need to increase further. By itself, this would fix nearly one-quarter of Social Securitys deficit. Mathematically, we cant fix the entire entitlement deficit by raising taxes. And Medicare is far more likely to require tax increases than Social Security. So it only makes sense to reduce costs where we can. Increasing the retirement age is a reasonable response to longer lives.
no
yes no
WRITTEN FOR CQ RESEARCHER, JULY 2011
CO-CHAIRS, STRENGTHEN SOCIAL SECURITY CAMPAIGN

WRITTEN FOR CQ RESEARCHER, JULY 2011
NANCY ALTMAN AND ERIC KINGSON
o reduce unemployment during the 1961 recession, and in recognition that many Americans were unable to work until age 65, Congress allowed men to claim reduced Social Security benefits at age 62, just as it had for women in 1956. Speaking in support, Democratic Ohio Rep. Charles Vanik said that if 2 million male workers eventually retire under this program, 2 million job opportunities will be created. Ironically, with unemployment topping 9 percent, many in Congress today favor increasing Social Securitys full retirement age. This is the wrong policy today, would have been wrong in 1961 and will be wrong in the future. A retirement age increase is mathematically indistinguishable from a benefit cut, and ill-advised because benefits are too low. Congress has already increased the retirement age from 65 to 67, a 13 percent cut for people born after 1960. A further increase, from 67 to 69, would be another 13 percent cut for retired workers, no matter whether they claim benefits at age 62, age 70, or any age in between, and translates into lower benefits for many spouses and widow(er)s. Benefits are modest, averaging about $14,000, and the retirement prospects for persons in their 40s and early 50s are already dimmed by diminishing pension protections, shrinking 401(k) and IRA retirement savings, unemployment and declining home values. Retirement-age increases especially burden lower-wage and minority workers, who often have no choice but to retire early. It is well-known that many workers must stop work because of serious health and physical challenges; still others face age discrimination and job loss. Sixty-two percent of Latino males and 53 percent of older black male workers are in physically demanding or difficult jobs, compared with 42 percent of their white male counterparts. By retiring early, they claim permanently reduced benefits. A hardship exemption for these categories of workers has never been found to be politically feasible or workable. Lower-wage workers, on average, have seen little or no increase in life expectancy. Over the past quarter-century, the life expectancy of upper-income men increased by five years while life expectancy among lower-income men increased by only one year and that of lower-income women actually declined. For all these reasons, Congress should follow the will of the American people, who reject increasing the retirement age. Congress should consider eliminating Social Securitys projected shortfall by scrapping the cap on earnings subject to Social Securitys FICA contributions, as the American people strongly favor.
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Even the well-funded Pentagon is worried about whether it can afford to fund retirement benefits, including health care, at the levels soldiers and sailors have come to expect. Retiree pay will cost the Department of Defense about $50 billion next year, according to the Obama administrations proposed fiscal 2012 budget. Military health costs, which have doubled over the past decade, will run even more, with a fair share going to coverage of military retirees. We in the Department of Defense are on the same path that General Motors found itself on, retired Marine Maj. Gen. Arnold Punaro, who advises the Pentagon on financial operations, told NPR. General Motors did not start out to be a health care company that occasionally built an automobile. Today, were on the path in the Department of Defense to turn it into a benefits company that may occasionally kill a terrorist. 44 Robert Gates, who stepped down as Defense Secretary June 30, said the military may have to consider moving to a 401(k)-style plan. Financial problems make some sort of change to the Pentagons pension and retirement health formulas inevitable, he told Defense News. We are way behind the private sector in this. 45
OUTLOOK
Political Prospects
iven the costs associated with aging particularly those involving medical care some economists are growing pessimistic about the countrys long-term budget health. By the time the last of the boomers have turned 65, in 2029, there will be nearly twice as many people enrolled
in Medicare as there are today, according to AARP. Social Security has pretty much anticipated the aging population and built up a very large trust fund, says Rother, AARPs policy director. Medicare is the place where the stress shows. Health care costs are bound to be driven higher by an older population. Some worry Congress wont be able to agree on ways to significantly reduce growth in entitlement programs and thereby reduce the federal deficit. I just think the two parties are kind of locked in cement on this stuff, says Hewitt of the Coalition for Affordable Health Care. The question of whether Congress will change entitlements really depends on the attitudes of the voting public, he says. I frankly dont think that fiscal conservatives are going to be able to hold the line, because baby boomers in the end are going to decide they dont want to defund their retirement, Hewitt says. Myers, the USC demographer, says politicians will need to appeal to older voters to make big policy changes. Older Americans may love their entitlements, but theyll have to be convinced that younger, workingage people need money left over for productive investments in areas such as education and infrastructure and shouldnt be saddled with crippling debt, Myers says. The only winning political strategy is not to fight [older voters] but persuade them its in their interest, Myers says. I believe they control the electorate for the next 20 years, and we dont have 20 years to wait. Budget realities will force changes to entitlement programs in the next decade, says MacGuineas of the New American Foundation. And, she says, waiting until financial markets force fiscal changes, as has been happening in European countries such as Greece, wont be pleasant.
Theres no question that by 2020, changes will have been made, she says. What Im worried about is that changes may have been forced upon us changes made because of markets will be much more painful. Not everyone thinks some kind of fiscal crisis is inevitable. Blahous, the Hoover Institution fellow and Social Security trustee, says hes pessimistic, but not because he worries the country will face economic Armageddon. Instead, Blahous worries that continuing unbridled growth in major entitlement programs will mean well have more expensive government than weve ever had before, he says. Peoples after-tax income will not have the growth weve seen in the past. There are some positive predictions. The Urban Institutes Johnson says widowhood is becoming less common. Men are living longer, and the differences between men and womens mortality is lessening. Widowhood is still associated with poverty. Still, Johnson expects income inequality among the aged to continue to grow and more older Americans will need to work longer. Others say policy changes to health coverage are inevitable, despite the political opposition engendered both by President Obamas 2010 health care-expansion law and the House GOPs current effort to limit Medicare growth. Were going to be moving more and more toward managed care, says Binstock, the Case Western Reserve health policy professor, in the sense that therell be a fixed budget in terms of care for older people. Older people will be hurt as a result, Binstock contends. But the New America Foundations Longman isnt convinced. A move toward some form of managed care will lead to better health outcomes than the current U.S. health system, which
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is prone to ill-informed treatment and mistakes, he says. I would hope in 10 years, we have turned the corner on the health care thing, Longman says. The idea that were going to let people go get any care they want from anybody they want, thats not going to work. Longman says the outlook is gloomy but that it wont be impossible to turn things around. As long as health care is restructured and as long as todays young people dont forget to have children, the U.S. should be able to care for its growing senior population, he says. But fewer people are having children and certainly fewer are having multiple children, notes Fishman, the author of Shock of Gray. Were about a generation away from children having no brothers and sisters, no aunts and uncles, no cousins, he says. People may be looking continuously for more family supports, but the family just wont be there. The prospect of fewer children and longer life expectancy means the median age will continue to rise. No matter the difficulties posed by the aging of the baby boom generation, they wont be solved by that generations passing. The boomers may seem like a large cohort of older people, Fishman says, but the median age is increasing and that wont turn around.
For background, see Marcia Clemmitt, National Debt, CQ Researcher, March 18, 2011, pp. 241-264. 5 For background, see the following CQ Researcher reports: Marcia Clemmitt, HealthCare Reform, June 11, 2010, pp. 505-528, updated May 24, 2011; Beth Baker, Treating Alzheimers, March 4, 2011, pp. 193-216; Alan Greenblatt, Aging Baby Boomers, Oct. 19, 2007, pp. 865-888; and Marcia Clemmitt, Caring for the Elderly, Oct. 13, 2006, pp. 841-864. 6 Richard Wolf, Medicare to Swell With Boomer Onslaught, USA Today, Jan 1. 2011, http:// abcnews.go.com/Politics/medicare-swell-babyboomer-onslaught/story?id=12504388. 7 From remarks at The 2011 Medicare Trustees Report: The Baby Boomer Tsunami, American Enterprise Institute, May 16, 2011. 8 See, for instance, CNN Poll: Majority Gives Thumbs Down to Ryan Medicare Plan, CNN.org, June 1, 2011, http://politicalticker.blogs.cnn. com/2011/06/01/cnn-poll-majority-gives-thumbsdown-to-ryan-plan/. 9 Laura Meckler, Key Seniors Association Pivots on Benefit Cut, The Wall Street Journal, June 17, 2011, http://online.wsj.com/article/ SB10001424052702304186404576389760955403 414.html. 10 For background, see Thomas J. Billitteri, Middle-Class Squeeze, CQ Researcher, March 6, 2009, pp. 201-224. 11 Employee Benefit Research Institute, The 2011 Retirement Confidence Survey: Confidence Drops to Record Lows, Reflecting the New Normal, March 2011, www.ebri.org/pdf/ surveys/rcs/2011/EBRI_03-2011_No355_RCS11.pdf. 12 U.S. Death Rate Falls for 10th Straight Year, Centers for Disease Control, March 16, 2011, www.cdc.gov/media/releases/2011/p03 16_deathrate.html.
13 Life Expectancy for Social Security, Social Security Administration, www.ssa.gov/history/ lifeexpect.html. 14 For background, see Kenneth Jost, PublicEmployee Unions, CQ Researcher, April 8, 2011, pp. 313-336; and Alan Greenblatt, Pension Crisis, CQ Researcher, Feb. 17, 2006, pp. 145-168. 15 For background, see the centers Web page on its National Retirement Risk Index publications at http://crr.bc.edu/special_projects/ national_retirement_risk_index.html. 16 See Annual Report of the Medicare Trustees, Center for Medicare and Medicaid Services, May 13, 2011, www.cms.gov/ReportsTrustFunds/ downloads/tr2011.pdf. 17 Choosing The Nations Fiscal Future, National Academies Press (2010), p. 79, available at www.ourfiscalfuture.org/wp-content/uploads/ fiscalfuture_full_report.pdf. 18 Strengthening Medicare: Better Health, Better Care, Lower Costs, Centers for Medicare and Medicaid Services, www.cms.gov/apps/ files/medicare-savings-report.pdf. 19 Matthew DoBias, Medicares Actuary Paints a Darker Picture Than Trustees, National Journal.com, May 23, 2011, www.nationaljournal.com/healthcare/medicare-s-actuarypaints-a-darker-picture-than-trustees-20110523. 20 Emily Ethridge, Republicans Decry Medicare Cost-Control Panel While Seeking Broad Cuts, CQ HealthBeat, June 8, 2011. 21 CBOS 2011 Long-Term Budget Outlook, Congressional Budget Office, www.cbo.gov/doc. cfm?index=12212. 22 Jonathan Lemire and Erin Einhorn, Mayor Bloomberg Unveils $65.6 Billion Budget, New York Daily News, Feb. 17, 2011, http:// articles.nydailynews.com/2011-02-17/local/286 28742_1_president-michael-mulgrew-mayorbloomberg-teacher-layoffs.
Notes
1 Double Jeopardy For Baby Boomers Proving Care For Their Parents, MetLife Mature Market Institute, June 2001, p. 2, www.metlife. com/assets/cao/mmi/publications/studies/2011/ mmi-caregiving-costs-working-caregivers.pdf. 2 For background, see Thomas J. Billitteri, Rethinking Retirement, CQ Researcher, June 19, 2009, pp. 549-572. 3 Matt Sedensky, Number of 100-Year-Olds is Booming in U.S., The Associated Press, April 26, 2011, http://news.yahoo.com/s/ap/ 20110426/ap_on_re_us/us_centenarian_boom.
About the Author

Alan Greenblatt covers foreign affairs for National Public Radio. He was previously a staff writer at Governing magazine and CQ Weekly, where he won the National Press Clubs Sandy Hume Award for political journalism. He graduated from San Francisco State University in 1986 and received a masters degree in English literature from the University of Virginia in 1988. For the CQ Researcher, he wrote Confronting Warming, Future of the GOP and Immigration Debate. His most recent CQ Global Researcher reports were Attacking Piracy and Rewriting History.
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AGING POPULATION
23 As Boomers Wrinkle, The Economist, Dec. 29, 2010, www.economist.com/node/17800237? story_id=17800237. 24 Ted C. Fishman, Shock of Gray (2011), p. 13. 25 Richard Jackson and Neil Howe, The Graying of the Great Powers (2008), p. 7. 26 Paul C. Light, Baby Boomers (1988), p. 10. 27 Herbert S. Klein, The U.S. Baby Bust in Historical Perspective, in Fred R. Harris., ed., The Baby Bust: Who Will Do the Work? Who Will Pay the Taxes? (2006), p. 115. 28 Light, op. cit., p. 23. 29 Steve Gillon, Boomer Nation: The Largest and Richest Generation Ever and How It Changed America (2004), p. 1. 30 Ibid., p. 6. 31 Klein., op. cit., p. 173. 32 Jeremy Greenwood, Ananth Seshadri and Guillaume Vandenbroucke, The Baby Boom and Baby Bust. American Economic Review, 2005, p. 183. 33 William Sterling and Stephen Waite, Boomernomics: The Future of Money in the Upcoming Generational Warfare (1998), p. 3. 34 President George W. Bush, State of the Union address, Jan. 31, 2006, www.washing tonpost.com/wp-dyn/content/article/2006/01/ 31/AR2006013101468.html. 35 Jonathan Weisman, Skepticism of Bushs Social Security Plan Is Growing, The Washington Post, March 15, 2005, p. A1, www.wash ingtonpost.com/wp-dyn/articles/A35231-2005 Mar14.html. 36 Opposition to Ryan Plan Among Older, Attentive Americans, Pew Research Center, June 6, 2011, http://people-press.org/2011/ 06/06/opposition-to-ryan-medicare-plan-fromolder-attentive-americans/. 37 Sheryl Nance-Nash, Caring for Aging Parents Will Cost Boomers $3 Trillion, AOL Daily Finance, June 15, 2011, www.dailyfinance.com/ 2011/06/15/caring-for-aging-parents-will-costboomers-3-trillion/. 38 For background, see Marcia Clemmitt, Income Inequality, CQ Researcher, Dec. 3, 2010, pp. 989-1012. 39 See, Retirement Attitudes, Towers Watson, September 2010, www.towerswatson.com/assets/ pdf/2717/TowersWatson-Retirement-Attitudes_ NA-2010-17683.pdf. 40 Will Congress Slash Your 401(k) Tax Break, Reuters Wealth, June 16, 2011, http://blogs. reuters.com/reuters-wealth/2011/06/16/willcongress-slash-your-401k-tax-break/. 41 William Selway, U.S. States Pension Fund Deficits Widen by 26%, Pew Center

AARP, 601 E St., N.W., Washington, DC 20049; (888) 687-2277; www.aarp.org. The largest advocacy organization for older Americans. American Society on Aging, 71 Stevenson St., Suite 1450, San Francisco, CA 94105; (415) 974-9600; www.asaging.org. Founded as the Western Gerontological Society; offers programs and online learning for professionals in health care, social services, government and other fields who seek to improve the quality of life for older adults. Boston College, Center for Retirement Research, Hovey House, 140 Commonwealth Ave., Chestnut Hill, MA 02467; (617) 552-1762; crr.bc.edu. Conducts research on issues related to retirement, particularly finance and health. Center for Strategic and International Studies, Global Aging Initiative, 1800 K St., N.W., Washington, DC 20006; (202) 887-0200; csis.org/program/global-aging-initiative. Conducts research and education programs on long-term economic, social and geopolitical implications of demographic change in the United States and abroad. Employee Benefit Research Institute, 1100 13th St., N.W., Suite 878, Washington, DC 20005; (202) 659-0670; www.ebri.org. Conducts research on employee benefits, including pensions and defined-contribution plans such as 401(k)s. National Association of Area Agencies on Aging, 1730 Rhode Island Ave., N.W., 4th Floor, Washington, DC 20036; (202) 872-0888; www.n4a.org. Umbrella organization for local area aging agencies. National Institute on Aging, Building 31, Room 5C27, 31 Center Dr., MSC 2292, Bethesda, MD 20892; (301) 496-1752; www.nia.nih.gov. Leads the federal governments scientific effort to study the nature of aging. National Institute on Retirement Security, 1730 Rhode Island Ave., N.W., Suite 207, Washington, DC 20036; (202) 457-8190; www.nirsonline.org. Studies retirement-income issues such as pensions. Urban Institute, Program on Retirement Policy, 2100 M St., N.W., Washington, DC 20037; (202) 833-7200; www.retirementpolicy.org. Conducts research on issues relevant to retirement, such as Social Security, long-term care and unemployment rates among older Americans. UCLA, Center for Policy Research on Aging, 3250 Public Policy Building, Box 951656, Los Angeles, CA 90095; (310) 794-5908; www.spa.ucla.edu. Studies major policy and political issues surrounding aging; devotes particular attention to issues relating to ethnic populations.
Study Says, Bloomberg, April 25, 2011, www.bloomberg.com/news/2011-04-26/u-sstates-pension-fund-deficits-widen-by-26-pewcenter-study-says.html. 42 Elizabeth Lesly Stevens, San Jose Mayor Declares State of Fiscal Emergency, The Bay Citizen, May 21, 2011, www.nytimes.com/2011/ 05/22/us/22bcstevens.html. 43 Stephen C. Fehn, States Overhaul Pensions But Pass On 401(k)-Style Plans, Stateline, June 21, 2011, www.stateline.org/live/details/story? contentId=582585. 44 Tamara Keith, Health Care Costs New Threat to U.S. Military, NPR, June 7, 2011, www. npr.org/2011/06/07/137009416/u-s-military-hasnew-threat-health-care-costs. 45 Vago Muradian, Q&A: Robert Gates, U.S. Defense Secretary, Defense News, June 13, 2011, p. 32, www.defensenews.com/story.php? i=6792060&c=FEA&s=INT.
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Bibliography
Selected Sources
Books
Fishman, Ted C., Shock of Gray, Scribner, 2010. The author, a former financial trader, uses statistics and sketches of representative individuals to portray how aging is presenting fiscal, health and economic challenges to countries including Japan, China and the United States. Gillon, Steve, Boomer Nation: The Largest and Richest Generation Ever and How It Changed America, Free Press, 2004. The History Channels Gillon writes a sympathetic history of the boomers, whose birth, he says, is the single greatest demographic event in American history. Pearce, Fred, The Coming Population Crash and Our Planets Surprising Future, Beacon Press, 2010. A former New Scientist news editor traces the history of population changes, looking at past state-sponsored efforts at population control and the implications for possible population decline in decades to come. Is there such a thing as a Medicare voting bloc? Some political scientists suggest there increasingly could be pitched political battles between generations over government resources. Ludden, Jennifer, Boomers Take the Retire Out of Retirement, NPR.org, Jan. 1, 2011, www.npr.org/2011/01/01/13 2490242/boomers-take-the-retire-out-of-retirement. As baby boomers reach age 65, many are optimistic, but a bit more than half may not be able to maintain current living standards in retirement. Rucker, Philip, NY Race Is Referendum on GOP Medicare Plan, The Washington Post, May 15, 2011, www.washing tonpost.com/politics/ny-special-election-becomes-refer endum-on-gop-medicare-plan/2011/05/15/AFnoVR4G_ story.html?hpid=z3. Democrats successfully test a strategy they intend to use in 2012, castigating Republicans for looking to overhaul Medicare.
Studies and Reports

Arno, Peter S., and Deborah Viola, Double Jeopardy for Baby Boomers Caring for Their Parents, MetLife Mature Market Institute, June 2011, www.metlife.com/assets/cao/mmi/pub lications/studies/2011/mmi-caregiving-costs-working-care givers.pdf. Nearly 10 million adult children over age 50 care for their aging parents. Cohn, DVera, and Paul Taylor, Baby Boomers Approach 65 Glumly,Pew Research Center, December 2010, http:// pewsocialtrends.org/files/2010/12/Boomer-Summary-Re port-FINAL.pdf. As they approach 65, boomers continue to be accepting of changes in social trends and arent ready to concede they have reached old age. Frey, William, Americas Diverse Future, Brookings Institution, April 2011, p. 10, www.brookings.edu/~/media/ Files/rc/papers/2011/0406_census_diversity_frey/0406_ census_diversity_frey.pdf. The 2010 census showed that the number of white and black children shrank, while there was significant growth among Hispanics and Asians younger than 18. Jackson, Richard, and Neil Howe with Rebecca Strauss and Keisuke Nakashima, The Graying of the Great Powers: Demography and Geopolitics in the 21st Century, Center for Strategic and International Studies, 2008, www.aging society.org/agingsociety/publications/public_policy/CSIS major_findings.pdf. The report offers a comprehensive survey of aging trends in the developed and developing world.
Articles
As Boomers Wrinkle, The Economist, Dec. 29, 2010, www.economist.com/node/17800237?story_id=17800237. Aging baby boomers will resist any cuts to their entitlements. Brownstein, Ronald, The Gray and the Brown: The Generational Mismatch, National Journal, July 24, 2010; www. nationaljournal.com/magazine/the-gray-and-the-brownthe-generational-mismatch-20100724. The United States is seeing a divergence in attitudes and priorities between a heavily nonwhite population of younger people and an overwhelmingly white cohort of older people. Fehr, Stephen C., States Overhaul Pensions But Pass on 401(k)-Style Plans, Stateline, June 21, 2011, www.state line.org/live/details/story?contentId=582585. Pensions for state government workers are badly underfunded, but officials are still wary of switching employees to retirement savings accounts. Hare, Kristin, Older Americans Are Working Longer, St. Louis Beacon, April 24, 2011, www.stlbeacon.org/issuespolitics/172-Economy/109733-retiring-retirement-americansare-working-longer-. Ten years ago, 4 million people age 65 and older were working or looking for jobs. By March, that number had increased to 7 million. Johnson, Kirk, Between Young and Old, A Political Collision, The New York Times, June 3, 2011, www.nytimes. com/2011/06/04/us/politics/04elders.html.
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The Next Step:

Community
Carreras, Jessica, Golden Gays, Between the Lines (New York), July 8, 2010. As America ages, gays and lesbians have started to concentrate more and more on aging issues affecting their community. Meyers, Jessica, Aging Boomers Heading to the Burbs, Dallas Morning News, July 25, 2010, p. A1, www.dallas news.com/news/community-news/prosper/headlines/2010 0725-as-aging-baby-boomers-head-to-suburbs-collin-countyto-feel-impact.ece. Many retirees are moving to the suburbs only to find that their new communities are as unaccommodating for aging seniors as the cities they left. Pyros, Andrea, As Seniors Age, Families Face Myriad Challenges, Poughkeepsie (N.Y.) Journal, Nov. 25, 2010. Americans are taking in their aging parents in greater numbers, spurring a rise in multigenerational homes. Wolfe, Warren, et al., Where Will Seniors Live? Star-Tribune (Minneapolis), Dec. 2, 2010, p.A1, www.startribune.com/life style/111163024.html. Communities built for the elderly are sprouting up all over the nation, but seniors are reluctant to inhabit them. totally disabled, while the reality is often somewhere in between.
Employment
Collins, Margaret, Survey Suggests Benefits Keep Older Workers from Leaving,Sun-Sentinel (Fort Lauderdale, Fla.), June 19, 2011, p. D1, www.sun-sentinel.com/business/flretaining-older-workers-20110617,0,6111086.story. As fewer seniors maintain the savings they need to retire, employers are offering incentives to prolong aging workers time in the labor force. Gibson, Caitlin, Agings Evolving Puzzle: How Washingtons Communities, and Their Seniors, Must Adapt to a Changing Game, The Washington Post, June 16, 2011, p. T19, www.washingtonpost.com/local/agings-evolvingpuzzle-how-communities-and-their-seniors-must-adapt-to-achanging-game/2011/05/23/AGJ9FmWH_story.html. Unemployment and large elderly populations are driving Washington, D.C., residents to develop programs aimed at keeping seniors active and healthy as they age in their own homes. Johnson, Kirk, Between Young and Old, a Political Collision, The New York Times, June 4, 2011, p. A10, www. nytimes.com/2011/06/04/us/politics/04elders.html. Unemployment and bankruptcy are growing among Americans age 65 and over, contributing to a growing generational divide.
Culture
El Nasser, Haya,Boomer Divide: Generation Spans 19 Years, USA Today, Dec. 3, 2010, p. A1, www.usatoday.com/news/ nation/2010-12-03-1Atwoboomers03_CV_N.htm. Boomers are generally viewed as a massive, homogenous portion of the population, but not every member of the generation feels connected. Horovitz, Bruce, Big-Spending Boomers Bend Rules of Marketing, USA Today, Nov. 16, 2010, p. A1, www.usa today.com/printedition/news/20101116/1aboomerbuyers 16_cv.art.htm. Marketing firms are increasingly switching their focus from the young to the old as seniors wield more influence. Jayson, Sharon, Tired of the Baby Boomers; Other Generations are Weary of Their Place in the Culture, USA Today, Nov. 18, 2010, p. D1, www.usatoday.com/yourlife/ parenting-family/2010-11-18-boomerloathing18_CV_N.htm. The boomer generations time in the spotlight may be exhausting the rest of Americas patience. Tugend, Alina, Fears, and Opportunities, on the Road to Retirement, The New York Times, June 4, 2011, p. B5, www. nytimes.com/2011/06/04/your-money/04shortcuts.html. Stereotypes of seniors range from adventure-seeking to
Health Care
Fitzgerald, Jay, Retiring Boomers, Rising Health Costs Are a Frightening Combination, The Boston Globe, June 12, 2011, p. 1, articles.boston.com/2011-06-12/business/29650 598_1_medicare-spending-medicare-today-medicare-modern ization-act. No consensus has emerged on how to reform a Medicare system that most experts agree is unsustainable in its current form. Rivkin, Jacqueline, Not There to Care; With Ailing Parents, Children Living Elsewhere Struggle to Balance Competing Needs, Newsday (New York), June 4, 2011, p. B4. Many working adults are struggling financially and emotionally to care for aging parents while maintaining a career. Sullivan, Julie, Baby Boomers Set to Become Generation Alzheimers With 1 in 8 Predicted to Get the Disease, Oregonian (Portland), Jan. 28, 2011, www.oregonlive.com/ health/index.ssf/2011/01/baby_boomers_set_to_become_ gen.html. According to the Alzheimers Association, the diseases is on track to become the defining disease of aging baby boomers, yet research and treatment options are limited compared to other serious ailments, such as cancer.
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CHAPTER
MANAGING NUCLEAR WASTE

BY JENNIFER WEEKS
Excerpted from Jennifer Weeks, CQ Researcher (January 28, 2011), pp. 73-96.
Managing Nuclear Waste

BY JENNIFER WEEKS
for safe, long-term solutions based on sound science. 4 Obama has asked Congress to t Dominion Powers terminate funding for Yucca nuclear power station Mountain and suspended Nuin Waterford, Conn., clear Regulatory Commission 14 massive steel canisters lie (NRC) review of a license apentombed in concrete bunkers plication for the repository in a high-security area. that President George W. Bush The protection is needed submitted in 2008. And last because the so-called dry March Obama created a Blue casks hold nuclear waste that Ribbon Commission, which inemits dangerous levels of heat cludes scientists, energy inand radiation. The used or dustry executives and former spent nuclear fuel was elected officials and regulafirst cooled in special pools for tors, to recommend new wasteseveral years, but it will restorage options. main a health hazard for hunNuclear power generates dreds of thousands of years. about 20 percent of the naStoring spent fuel on-site tions electricity, and supportwasnt the original plan for ers promote it as a clean enthe Waterford plant or dozens ergy source that does not of others across the nation. generate pollutants or contribute A 1982 law made disposing to climate change. But no new of spent fuel the federal govreactor has entered operation ernments responsibility. in the United States since 1996. Waste was supposed to be Orders for new plants fell sent to an underground sharply after the partial meltA blue glow bathes nuclear waste submerged in water complex that the Departdown of the reactor core at for cooling at one of the 100-plus waste storage sites ment of Energy (DOE) was the Three Mile Island nuclear throughout the United States. After submersion for developing under Yucca plant in Harrisburg, Pa., in 1979. several years, the waste still remains dangerously Mountain in the southern Most of the 104 reactors opradioactive for thousands of years and must be isolated to protect the environment. The Obama administration Nevada desert. erating today in the United recently sought to block longstanding plans to bury the Starting in the late 1980s, States were built in the 1970s nations nuclear waste at a single repository under DOE planned to ship spent and 80s, and a few date back Yucca Mountain, in Nevada. fuel from local power plants to the 1960s. 5 Utilities are to the site, which was scheduled to tense scientific and political contro- planning a handful of new plants today, open in 1998. The repository plan versy that the Center for Public In- mainly in Southern states at sites where called for drilling a 40-mile network tegrity, a nonpartisan research group reactors already operate. 6 of tunnels about 1,000 feet below the in Washington, calls it an example of In the near term, experts across the surface. Burying spent fuel and other broken government. 2 Many critics political spectrum say, economics is radioactive waste in the mountains believe that design flaws and earth- the biggest obstacle to a nucleartuff (hardened volcanic ash) would quake activity at the site could cause power renaissance because reactors isolate it from the environment for up radioactive waste to leak and conta- cost more to build than plants powminate groundwater. 3 to 1 million years, DOE said. 1 ered by coal, natural gas or wind. But President Barack Obama supports they also agree that the nation needs But technical challenges, funding shortfalls and opposition from Neva- expanding nuclear power but says Yucca a consistent policy for handling nuda officials, including Senate Majority Mountain is not the right place to store clear waste. 7 Leader Harry Reid, put work on Yucca nuclear waste. During the 2008 presiSustainability of nuclear power in Mountain years behind schedule. The dential campaign he argued that it is the U.S. depends on reducing the costs project has been dogged by such in- time to start exploring new alternatives of nuclear plants, says Tom Cochran,
THE ISSUES
U.S. Department of Energy
Jan. 28, 2011
75

Illinois Tops Nation in Spent-Fuel Storage
With nearly 8,000 metric tons, Illinois leads the nation in the storage of used commercial nuclear fuel. Only four other states exceed 3,000 tons. Twelve states store no nuclear fuel. Used Nuclear Fuel in Storage by State, 2009 (in metric tons)
Wash. Ore. Mont. N.D. S.D. Idaho Wyo. Neb. Nev. Calif. Okla. Ariz. N.M. Texas Ark.
Miss.
Minn. Wis.
Mich.
N.H. Vt.
Maine
N.Y. Pa.
Mass. R.I. Conn. N.J.
Iowa
Ill.
Ind. Ohio Ky.

Tenn. W.Va.
Utah
Colo.
Kan.
Mo.
Va. N.C. S.C.
Del. Md. D.C.
La.
Ala.
Ga.
Tons of Used Nuclear Fuel 0
Alaska
Fla.
0.1-1,000 1,001-2,000 2,001-3,000
Hawaii
3,000+
* A metric ton equals 2,200 pounds. Source: Nuclear Energy Institute
a senior scientist at the Natural Resources Defense Council (NRDC), an environmental advocacy group. In Cochrans view, spent nuclear fuel stored at commercial reactors does not pose major public safety risks today. But if you look hundreds or thousands of years ahead, we have a responsibility to set up institutions for managing it. Were 60 years into the nuclear era, and its time to get going, he says. Since the first commercial reactor started up in 1957, nuclear plants have produced about 65,000 metric tons of spent fuel, which is now stored at reactors across the nation. When fuel is unloaded from a reactor, it is extremely hot and highly radioactive. It goes into specially designed cooling pools, where it remains under at least 20 feet of water for a minimum of several years. But there are safety limits on how densely spent fuel can be
packed into cooling pools without starting a chain reaction that could cause an accident. As a result, NRC has given 38 nuclear plants permission to build dry cask storage on-site for older, cooler fuel because their spent-fuel pools are full or nearly full. 8 Spent fuel also is stored at a dozen sites where reactors have shut down. At some of these sites the entire plant has been demolished and removed, leaving only fences and guards protecting fuel canisters. The federal government is also responsible for disposing of up to 20,000 metric tons of spent fuel and high-level radioactive waste most of it left over from manufacturing nuclear weapons at federally owned sites. 9 Transporting nuclear waste poses special challenges because of the risk of contamination along the route, accidents involving trucks or rail cars
carrying waste and the potential threat of attacks by terrorists. Many critics say that a private or government-owned corporation could solve the nuclear waste problem more effectively than DOE. Federal agencies arent well-structured to run programs like this, says Rodney McCullum, director of used-fuel programs for the Nuclear Energy Institute, the industrys policy organization. Managers change every two to four years; agencies are politically driven and they are subject to annual congressional budget cycles. Congress is part of the problem, utilities argue, because instead of using mandatory fees that utilities pay into the federal Nuclear Waste Fund to work on radioactive waste disposal, it has spent much of that money on other government activities. Since 1983 nuclear utilities have paid more than $25 billion into the fund money that they recover in fees charged to their electricity customers but have not received any waste disposal services in return. Instead, many are paying extra for dry cask storage. Money appropriated from ratepayers for a specific purpose should be spent for that purpose, says David Boyd, chair of the Minnesota Public Utilities Commission and head of the National Association of Regulatory Utility Commissioners (NARUC) Subcommittee on Nuclear Issues and Waste Disposal. Wed like to handle it more like a dedicated trust fund. Today the waste funds balance is more than $24 billion. But Boyd says that because Congress has effectively borrowed much of that money, the fund is little more than a pile of IOUs from previous Congresses. Obamas Blue Ribbon Commission, which is scheduled to issue a final report next year, is charged with reviewing all alternatives for the storage, processing and disposal of civilian and defense used nuclear fuel, highlevel waste and materials derived from nuclear activities. 10 The commission
76
is not authorized to choose a new repository site but could recommend new guidelines for designing and locating a facility that would be more acceptable to local communities and other stakeholders than Yucca Mountain. The commission may endorse current U.S. policy, known as the oncethrough cycle, in which nuclear fuel is irradiated once in the reactor, then permanently stored underground. Or it could propose new policies, such as reprocessing (chemically treating) spent fuel to recover residual uranium and plutonium that can be reused to generate more electricity. (See graphic, p. 80.) This approach, known as a closed fuel cycle, was the original blueprint for U.S. nuclear power in the 1950s and 60s. But it was abandoned in the 1970s after concern arose that plutonium from commercial reactor fuel could be used in nuclear weapons. Critics point out that reprocessing is expensive, and that in addition to producing weapon-usable plutonium it also generates new types of highlevel radioactive waste, which can be liquids, solids or sludges and are extremely hazardous. 11 Nuclear engineers say they can develop safer, cleaner reprocessing methods that will not create weaponusable plutonium. But the United States has worked for years to limit the spread of reprocessing abroad in order to slow the spread of nuclear weapons. Instituting domestic reprocessing would make it harder to justify denying nuclear technology to other countries even nations such as Iran that are trying to produce their own nuclear arsenals. As part of either disposal approach, the Blue Ribbon Commission may also recommend building one or more centralized interim storage sites where fuel could be shipped to relieve crowding at operating reactors, free up closed reactor sites for other uses or speed cleanup at military sites. But interim
Spent Fuel Stored in Casks

The need for alternative storage of spent nuclear fuel developed in the late 1970s and early 80s when pools at many nuclear reactors began to ll with stored spent fuel. Dry casks, which typically are steel containers that are welded or bolted shut, keep spent fuel isolated from the environment. Cask storage is considered safe and environmentally sound and is resistant to oods, tornadoes, extreme temperatures and other unusual conditions. The Nuclear Regulatory Commission requires spent fuel to be cooled in pools for at least ve years before being transferred to casks.
Dry Storage of Spent Fuel
Source: Fact Sheet on Dry Cask Storage of Spent Nuclear Fuel, U.S. Nuclear Regulatory Commission, December 2008
storage can be as hard to place as a permanent repository, because many communities fear that once they accept nuclear waste, they may never be free of it. As lawmakers, utilities and communities debate options for managing nuclear waste, here are some issues they are considering: Is transporting radioactive waste dangerous? Because spent nuclear fuel and highlevel waste are extremely radioactive, some observers worry that transport-
ing them poses a health risk for people who handle fuel casks or live along transport routes. Although the United States has more than 40 years of experience with shipping radioactive waste, opening a repository or reprocessing spent fuel would involve moving much larger quantities over thousands of miles. Utilities routinely ship spent nuclear fuel among storage facilities at different plants. They have made more than 3,000 shipments of commercial spent nuclear fuel by road and rail since the mid-1960s. And DOE has moved many
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tons of defense nuA significant radiaclear waste as it tion release would only cleans up nuclear happen in a very lowweapons production probability accident sites. About a dozen scenario, says the minor accidents have Natural Resources Deoccurred during fense Councils Cochran. these shipments, Id worry more about none of which rebeing in a small car leased radioactivity to in front of the truck the environment. 12 carrying spent fuel than A 2006 study by the about exposure from an National Research accident. Council concluded While the potential that there were no for major accidents confundamental technicerns some industry critics, so too does the cal barriers to the safe possibility of routine transport of spent nuCleanup workers using breathing tanks and wearing protective suits radiation exposure. clear fuel and [highprepare a cooling basin for demolition at the Hanford nuclear site in Washington state. Radioactive fuel rods that were stored underwater for Some cite a 2008 envilevel waste] in the decades in the plants basins leaked contaminated water ronmental impact study United States. 13 into the surrounding soil. But some groups by George W. Bushs worry that largeadministration supportscale transport of radioactive waste must withstand a range of forces in ing a proposal for large-scale domeswill increase risks of accidents or low- testing, including a 30-foot drop onto tic reprocessing and plutonium recylevel exposures. In November 2010 reinforced concrete, a 40-inch drop onto cling starting around 2025. 19 The report the American Public Health Associa- a steel spike, a 30-minute fully en- estimated that shipping spent fuel and tion (APHA) called spent-fuel trans- gulfing fire and submersion under water high-level waste cross-country would 15 portation a national public health for eight hours. cause from a handful to hundreds of In its 2006 study the National Re- additional cancer deaths over 50 years threat that is largely preventable. The group advocates long-term fuel search Council recommended steps to from public exposure to low-level rastorage at reactors until a permanent improve transportation security, in- diation, depending on the number of cluding analyzing risks of long-lasting shipments and whether they went by repository is ready. 14 The potential hazards and risks are fires that might breach a fuel cask. Re- road or rail. 20 huge, so minimizing transport makes searchers were worried about scenarYou cant move spent fuel withsense. It just takes one accident, and ios like a 2001 disaster in which a out irradiating people along the truck then everyone will be pointing fingers freight train carrying flammable and routes, argues Gerald Pollet, execuand asking how we got to this point, toxic chemicals derailed in a tunnel tive director of Heart of America says Amy Hagopian, a professor of under downtown Baltimore, igniting a Northwest (HOANW), a nonprofit group 16 global health at the University of fire that burned for five days. in Washington state. HOANW advoIn response the Nuclear Regulatory cates for cleanup of the Hanford nuWashington in Seattle who reviewed Commission sought a study that con- clear reservation, a site on the Cothe statement for APHA. Spent fuel is transported in massive cluded the likelihood of such accidents lumbia River covering nearly 600 square steel casks that measure four to eight was extremely low and that rail-ship- miles where workers produced plutofeet in diameter, have walls five to 15 ment casks for spent fuel would not nium for nuclear weapons from 1943 inches thick and contain materials that release dangerous levels of radiation through the late 1980s. Hanford re17 The agency shield the environment from radioac- even in a similar fire. mains the most contaminated site in tivity. One cask used for shipment by also negotiated with the railroad in- the U.S. nuclear weapons production truck holds up to nine bundles of fuel dustry to revise freight policies so that complex. But Pollet asserts that DOE rods and weighs up to 25 tons; a rail trains carrying flammable materials should find ways to manage Hanfords shipment cask holds several dozen would not enter tunnels at the same nuclear waste without increasing risk 18 bundles and can weigh 150 tons. Casks time as trains carrying spent fuel. to the public. If you move it twice
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A Glossary of Nuclear Terminology

uclear science has its own language. Heres a guide to key terms used by scientists and nuclear-energy experts. Dry cask: A large steel canister that can be used to store spent nuclear fuel after it has cooled underwater. Fast reactor: A reactor that uses fast-moving, high-energy neutrons to sustain a chain reaction. Unlike thermal reactors, fast reactors cannot be cooled with water. Instead they typically use liquid sodium or other liquid metals. Fission: Splitting an atom of a heavy element to release energy, usually in the form of heat. The main isotopes that can be split by fission using slow neutrons are uranium-233, uranium235, and plutonium-239. These materials can also be used to power nuclear weapons. Fission products: Chemical elements formed when atoms of a fuel such as uranium are split into smaller fragments. Roughly 3 to 4 percent of spent fuel is made up of fission products, including iodine, cesium, and strontium. Many of these substances decay within a century (although some are longerlived), and generate much of the short- and medium-term heat from spent nuclear fuel. Fuel rod: A long metal tube that contains uranium pellets whose atoms can be split. A commercial nuclear power reactor may hold dozens of fuel assemblies, each of which is a bundle of up to several hundred fuel rods. High-level radioactive waste: Extremely radioactive nuclear byproducts, including spent fuel rods and liquids and solids from reprocessing. Isotopes: Different forms of a chemical element, distinguished by the number of neutrons in each atoms nucleus, with distinct nuclear properties. Examples are uranium-235 and uranium-238.
Once-through fuel cycle: A process in which fuel is irradiated once in a nuclear reactor, then permanently disposed of without reusing any of its components. Plutonium: A heavy metallic element formed when uranium238 absorbs a neutron in a reactor. Radioactive waste: Radioactive materials that are at the end of their useful lives or cannot be used productively. Such waste includes spent nuclear fuel, radioactive liquids and solids from reprocessing and equipment, protective clothing or other materials that have been contaminated by radioactivity. Spent fuel: Nuclear fuel that has been bombarded with neutrons in a reactor until it can no longer sustain a nuclear reaction. The irradiation typically lasts 18 to 24 months. Thermal (slow) reactor: A nuclear reactor that uses slowmoving neutrons to sustain a chain reaction. U.S. commercial nuclear power reactors are thermal reactors. Often, the neutrons are slowed down by collisions with water, used for this purpose and to cool the reactor core. Transuranics/actinides: Transuranics are elements heavier than uranium, including plutonium, neptunium and americium. Together with uranium, these elements are also referred to as actinides. About 1 percent of spent reactor fuel consists of plutonium and other actinides, which decay very slowly over thousands of years and produce much of the long-term heat and radioactivity from spent fuel. Uranium: A radioactive element used to make nuclear reactor fuel. Fresh nuclear fuel contains about 96 percent uranium-238, an isotope that cannot be split using slow neutrons, and 4 percent uranium-235, which can. Jennifer Weeks
first to reprocess spent fuel and then to send the leftover high-level waste to a repository we will see many more cancers, he says. The National Research Council study also called sabotage of nuclear waste shipments a major technical and societal concern, especially in the wake of the September 11, 2001, terrorist attacks. 21 Companies transporting nuclear waste are required to use routes approved by the Nuclear Regulatory Commission and monitor shipments in transit. But the federal agencys regulations have changed little since they were enacted in 1980. The agency is proposing new requirements,
including joint planning with states along transit routes and use of global positioning systems or radiofrequency identification to track shipments in real time. 22 The agencys proposed standards are a vast improvement over the current rule, says Edwin Lyman, a senior scientist with the Union of Concerned Scientists, a nonprofit group that lobbies on environmental issues and oversight of nuclear power. But they would be stronger if they spelled out the size and type of attacking force that security measures must withstand, he argues. This rule still doesnt provide the same level of security for spent
fuel in transit as for spent fuel at reactor pools, Lyman says. The number of escorts protecting spent fuel shipments is essentially ad hoc and isnt clearly related to a specific and evolving threat. Should Congress revive the Yucca Mountain repository? The Obama administration says the Yucca Mountain repository is officially canceled. But many stakeholders contend the administration cannot unilaterally kill the project. DOEs fiscal 2011 budget request ended support for the departments Office of Civilian Radioactive Waste
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The Nuclear Fuel Cycle
In a once-through fuel cycle, spent fuel is disposed of after one pass through a reactor (or, if necessary, stored for a period before disposal). In a closed fuel cycle, spent fuel is reprocessed to recover usable plutonium and uranium, which are recycled into fresh fuel. Reprocessing also generates high-level radioactive wastes that require disposal.
South Carolinas newly elected Republican governor, Nikki Haley, put it more bluntly in her gubernatorial campaign. She contended that Obama was terminating Yucca Mountain as a favor to Democratic Majority Leader Reid, who adamantly opposes the repository and narrowly survived a reelection challenge in 2010. (See At Issue, p. 89.) President Obama and Harry Reid are willing to shut down Yucca and make South Carolina a permanent dumping ground to save Harry Reids Senate seat, Haley charged. If the feds want to renege on the promise to keep Yucca open, they must refund the $1.2 billion [in ratepayer fees] our state has spent on the facility. We want our money back. 24 In June the Nuclear Regulatory Commissions Atomic Safety and Licensing Board ruled that DOE could not unilaterally withdraw the license application. And on December 10, the U.S. Court of Appeals for the District of Columbia Circuit fast-tracked the lawsuit filed by the states and NARUC, requiring briefs to be filed early in 2011. By the fall of 2010, however, DOE had already disbanded the staff of the Office of Civilian Radioactive Waste Management. 25 And NRC chairman Gregory Jaczko had ordered his agency to end work on the Yucca Mountain license application. Jaczko justified this step by observing that DOEs budget proposal sought to terminate work on Yucca Mountain. Many members of Congress are outraged by these actions. We are deeply disappointed that DOE has overstepped its bounds and has ignored congressional intent . . . in its actions regarding Yucca Mountain, 91 House and Senate members (14 Democrats and 77 Republicans) wrote to Energy Secretary Steven Chu in July. 26 And in October, four senior House Republicans called Jaczkos actions alarming and unilateral, charging that NRC and DOE were
Fuel Fabrication
Nuclear Reactor
Back End of Cycle
Enrichment
plu ton ium ura niu m
Interim Storage
Conversion
Spent Fuel Reprocessing*
Milling
Final Disposition
Front End of Cycle
Mining
* Spent fuel reprocessing is omitted from the cycle in most countries, including the United States. Source: Energy Information Administration
Management, which oversaw work on the repository. And last March DOE asked the Nuclear Regulatory Commission to withdraw the license application for the repository that President Bush had submitted, and rule out resubmission. [T]he Secretary of Energy has decided that a geologic repository at Yucca Mountain is not a workable option for long-term disposition of these materials, DOEs petition stated. 23 But South Carolina, Washington state and the National Association of Regulatory Utility Commissioners (NARUC) are suing DOE, arguing that only Con-
gress has authority to stop work on the project. Washington and South Carolina both have large quantities of military nuclear waste at DOE sites, some of which was destined for Yucca Mountain. (Idaho, Colorado, Tennessee and New York also have nuclear waste at DOE sites.) NARUC acted on behalf of consumers nationwide who had paid fees into the Nuclear Waste Fund for work on a repository. NARUC applauds the president for supporting science-based decisions that arent trumped by politics, but in this case hes been inconsistent, says Boyd, chair of the groups nuclear waste committee.
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working together to flout Congress authority. 27 Because Congress has not yet passed any detailed spending bills for fiscal 2011, many members assert that they have not formally ruled on DOEs request to terminate work on Yucca Mountain. 28 The nuclear industry supports finishing the license review. We think it should continue for two reasons, says the Nuclear Energy Institutes McCullum. First, the law requires it. Second, whether or not the administration or Congress wants to fund Yucca Mountain, weve invested $10 million in the licensing process and addressed a lot of issues. Seeing them resolved in a final determination will be very valuable. Even if NRC doesnt approve Yucca Mountain, the review might help us select an alternative site. Officials in states where DOE is storing spent fuel and other radioactive waste worry that if Yucca Mountain is canceled, they could be stuck with those materials for decades or centuries. Ending work on Yucca Mountain significantly sets back cleanup at Hanford and puts our people and our environment at risk, Rob McKenna, attorney general for Washington state, said when his state sued to keep the project going. (See At Issue, p. 89.) Others argue, however, that pushing through what they call a flawed repository would not only be irresponsible but could even backfire on states that want to get rid of radioactive waste. Pollet of Heart of America Northwest points out that less than 10 percent of Hanfords spent fuel and radioactive waste is destined for Yucca Mountain under binding legal cleanup agreements. The remainder will be managed at Hanford well into the future, until a second repository or some other solution is available. 29 The state of Nevada has very credibly shown that Yucca Mountain cant meet legal standards for keeping radioactivity out of groundwater,
Pollet argues. If Washington state fights to open Yucca Mountain by relaxing those regulations, Congress is likely to turn around and apply them to Washington for the rest of our radioactive waste. We should be setting standards that protect human health everywhere. Should the U.S. recycle plutonium from spent fuel? Reprocessing spent fuel and recycling its plutonium content is one of the most controversial aspects of nuclear power. Inarguably, spent fuel contains unused energy value. According to DOE, about 90 percent of nuclear fuels energy content is discarded in a once-through fuel cycle. But plutonium can also be used in nuclear weapons, and dissolving fuel rods to extract it generates substantial quantities of highlevel waste. For these reasons, environmentalists and many national-security experts have opposed reprocessing spent fuel since the 1970s. Moreover, when fresh uranium is abundant and affordable, as it is today, reprocessing is considerably more expensive than a once-through fuel cycle. Thats because building, operating and safeguarding reprocessing plants is very expensive. During their presidencies, Ronald Reagan and George W. Bush each reversed policies set by their predecessors and encouraged the nuclear industry to reprocess and recycle plutonium. But no utilities were interested in investing their capital to do that. If Im a nuclear executive, I can buy uranium and make it into fuel, or I can take my spent fuel and make it into new fuel. Right now buying uranium is much cheaper. If reprocessing was economic to do, private money would be there to do it, says Charles Forsberg, a research scientist at the Massachusetts Institute of Technology (MIT) and director of a 2010 study on the future of the nuclear fuel cycle. The MIT study concluded that a
once-through cycle was economically preferable for at least the next several decades and would probably dominate the nuclear industry for most of the 21st century. It also recommended research into different nuclear fuel cycles while cautioning that the United States needs to develop new technologies and think broadly about safety, waste management, economics and nonproliferation before making new fuel cycle choices. 30 There are a lot of barriers to reprocessing in the U.S., says Forsberg. The regulatory structure isnt in place, and nonproliferation experts have a lot of worries about plutonium recycling. We might need to do it in 30 or 40 years, but theres no strong driver. Energy Secretary Chu has suggested that reprocessing and recycling could become options for breaking down certain components of spent fuel, such as actinides. (See glossary, p. 79.) Were looking at, instead of the way we do it today, where youre using 10 percent or less of the energy content of fuel, can you actually reduce the amount of waste and the lifetime of the waste, Chu said in a 2009 interview. 31 Contrary to the Bush administrations proposal to commercialize reprocessing starting in about 2025, Chu speculated that the United States might store spent fuel for a century or more before reprocessing it to recover plutonium and other components. The Obama administration has stretched out federal research on nuclear fuel cycles with a goal of identifying options that could be ready to deploy by 2050. Nothing has been weeded out. We could take a lot of different pathways, and we need to explore what they look like, says Kathryn McCarthy, deputy associate director at DOEs Idaho National Laboratory. McCarthy says various reprocessing and recycling methods could address different aspects of the nuclear waste management burden. For example,
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some approaches could reduce the volume of waste (important if repository space is limited); others could limit how much heat or radioactivity the waste generates at different points in its life cycle by breaking down shorter- or longer-lived components of spent fuel. We can come up with elegant schemes on paper, but when you look at it from a practical point of view, you need to think about where we can site a repository and what kind of geology it has, and work from there, McCarthy says. Although environmentalists are strongly concerned about safe and secure management of spent fuel and radioactive waste, they oppose reprocessing as a waste-management strategy. For example, the Natural Resources Defense Councils Cochran points out that recycling to burn up actinides from spent fuel would require constructing dozens of fast reactors, which are designed differently from commercial power, or thermal, reactors operating today. Fast reactors generate fast-moving neutrons that can split actinides to produce energy, but they also are hard to operate and more prone to accidents. History has not been kind to fast reactors. They have cost considerably more than thermal reactors, and seem likely to stay that way, and have proven to be much less reliable than thermal reactors, Cochran told the Blue Ribbon Commission last May. In the view of Admiral Hyman G. Rickover [who led the U.S. Navys move to nuclear-powered ships in the 1950s and 60], fast reactors were expensive to build, complex to operate, susceptible to prolonged shutdown . . . and difficult and time-consuming to repair. Admiral Rickover got it right, Cochran asserted. 32 Experts agree on one key point: the United States will need a repository even if it reprocesses nuclear waste, because reprocessing creates high-level waste that cannot be used in a reactor. Reprocessing doesnt solve the waste problem, because you still have to treat waste that is as difficult to handle as spent fuel, says former NRC commissioner Peter Bradford. It also adds to the cost of nuclear power. That harms our ability to deal with climate change, because we could get the same amount of greenhouse gas reduction much sooner from other [energy] sources. nuclear power plants. Officials assumed that utilities would store spent fuel onsite in cooling ponds for several years, then reprocess it and recycle its plutonium and uranium content into new fuel for breeder reactors, which are designed to generate more fissile material than they consume. However, the Atomic Energy Commission (AEC), which was responsible for both promoting and regulating nuclear power, paid much more attention to building up this new industry than to its environmental impacts. A 1957 report from the National Research Council, commissioned by the AEC, stated that radioactive waste could be safely disposed of underground. The authors, who were prominent scientists, suggested that salt deposits were especially promising because the presence of salt showed that water (which could transport leaking radioactive waste) was not flowing through the zones. Moreover, they suggested, because salt tended to flow slowly into mined areas and fill them in, it would encase the waste and seal it off. However, the report cautioned, The research to ascertain feasibility of disposal has for the most part not yet been done. 34 Over the next five years the AEC studied options for underground radioactive waste disposal. From 1965 through 1968 it conducted tests at an abandoned salt mine in Lyons, Kan., and in 1970 the commission announced a tentative decision to make Lyons the first U.S. nuclear waste repository. But local officials opposed hosting a repository, and technical problems developed at the site, forcing the commission to abandon its plan. 35 The AEC then tried to develop a surface interim storage facility to give it time to look for a permanent site, but this policy was also unpopular. The effort ended in 1974 when Congress split the commission into separate
Continued on p. 84
BACKGROUND
Launching a New Industry
he first U.S. radioactive waste was generated in the 1940s at the Hanford military site in eastern Washington. Uranium fuel rods were irradiated in Hanfords nuclear reactors, turning a fraction of their uranium into plutonium. Then chemists dissolved the spent fuel rods in acid and used solvents to separate out the plutonium, which was shipped to other sites for use in nuclear bombs. Over time the process generated millions of gallons of highly radioactive waste, which was stored in massive underground tanks near the Columbia River. In the early 1950s, as the United States worked to expand its nuclear arsenal, other military sites at Oak Ridge, Tenn., Savannah River, S.C., and Idaho Falls, Idaho, also started reprocessing spent fuel to recover plutonium and uranium for bombs. These sites operated largely in secret, so radioactive waste often was handled expediently for example, by dumping it into local rivers and streams or burying it. 33 U.S. leaders wanted to develop a commercial nuclear power industry, so in the mid-1950s Congress authorized private companies to build and run
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Chronology
1950-1960s
U.S. government launches the nuclear power industry. 1954 Congress passes the Atomic Energy Act, directing the federal government to develop nuclear power for peaceful use. Military sites already have thousands of gallons of high-level radioactive waste left from plutonium production for nuclear weapons. 1966 The first commercial reprocessing plant opens at West Valley, N.Y., generating more liquid high-level waste.
1982 Nuclear Waste Policy Act directs the Department of Energy (DOE) to locate and build two underground repositories for spent fuel and high-level waste. Utilities are required to pay fees into the Nuclear Waste Fund and to contract with DOE for disposal. 1984 Nuclear Regulatory Commission (NRC) issues its first Waste Confidence Decision, holding that nuclear waste can be stored safely and that a repository will eventually be available. 1985 DOE identifies three possible repository sites in Texas, Washington and Nevada, and seven options for a second site in Eastern states, all of which refuse to accept a facility. 1986 DOE suspends its search for an Eastern nuclear waste site. . . . NRC starts licensing dry cask storage of spent fuel at nuclear plants. 1987 Congress directs DOE to focus research on a repository at a single site at Yucca Mountain in Nevada. The state sues to block the program, losing in federal court in 2004.
1998 DOE misses its legal deadline for taking ownership of commercial spent fuel and high-level waste. . . . India and Pakistan test nuclear weapons made with materials originally obtained for peaceful purposes.
2000s
Controversy grows over waste disposal. 2001 President George W. Bush calls for reprocessing spent fuel and using its plutonium content in advanced reactors. 2002 DOE begins work on Yucca Mountain license application. 2005 Energy Policy Act of 2005 provides loan guarantees and energyproduction tax credits for new advanced nuclear reactors. . . . DOE revises the projected Yucca Mountain repository opening date from 2012 to 2014. 2008 DOE submits license application for Yucca Mountain to the NRC and projects an opening date of 2020. 2009 President Barack Obama cancels near-term plans for commercial reprocessing of nuclear fuel. 2010 Obama administration calls for halting Yucca Mountains funding and asks NRC to withdraw its license application, but NRC licensing board refuses. . . . State utility regulators sue to continue work on Yucca Mountain.
1970s
Federal government bars reprocessing of nuclear waste and commits to underground disposal. 1970 Atomic Energy Commission (AEC) identifies abandoned salt mine in Lyons, Kan., as a possible waste disposal site. 1974 AEC abandons Kansas site after discovering technical problems. . . . India detonates what it calls a peaceful nuclear weapon. 1977 President Jimmy Carter bars reprocessing of spent nuclear fuel to avoid stockpiling plutonium that can be used in weapons.
1990s
Nuclear industry pushes to expand, but plans for Yucca Mountain fall behind. 1991 Surface studies begin at Yucca Mountain. 1994 Tunneling at Yucca Mountain begins.
1980s
U.S. officials commit to underground disposal of nuclear waste at Yucca Mountain in Nevada.
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Nuclear Waste Buried for the Ages in New Mexico Desert

Our mission is to help shrink the footprint of the nuclear weapons complex.
proposal to build a nuclear waste repository at Yucca Mountain in Nevada has sparked debate for years, but an underground storage site in New Mexico has been operating since 1999 with much less controversy. The Waste Isolation Pilot Plant (WIPP), located in the remote town of Carlsbad, N.M., was excavated from a 2,000-footthick salt bed that dates back to the Permian era, 250 million years ago, when the area was covered by sea water. It was designed specifically to receive transuranic (TRU) waste from nuclear weapons production sites operated by the Department of Energy (DOE). (See glossary, p. 79.) TRU waste contains slowly decaying manmade radioactive elements such as plutonium and americium, which are not as intensely radioactive as spent fuel from a commercial power reactor. But they emit radiation over millions of years that can be harmful if radioactive particles are inhaled or contaminate groundwater, so the waste must be isolated from the environment. 1 Typical materials sent to WIPP include rags, tools, soil and protective clothing contaminated with plutonium. Most of these are so-called contact-handled TRU waste, which emits such low radiation that workers can handle the containers they are shipped in without special shielding. A small fraction, known as remote-handled waste, is more heavily contaminated, so workers transport it using equipment that shields them from radiation. 2 For decades TRU waste at weapons production sites was commonly buried in shallow trenches, sometimes mixed with other waste and packaged in nothing more substantial than cardboard boxes or plastic bags. Starting in 1970 the Atomic Energy Commission, which at that time regulated U.S. nuclear activities, required the waste to be stored separately in leak-
proof drums. When the Cold War ended with the dissolution of the Soviet Union in 1991, states began suing DOE to force it to remove TRU waste from both active and closed weapons sites and clean up contaminated soil and groundwater. As of early December 2010, WIPP had received 9,207 shipments (72,422 cubic meters) of TRU waste, including 445 shipments (229 cubic meters) of remote-handled waste. (A cubic meter equals 1.3 cubic yards.) The wastes were transported by rail and truck over a total of more than 11 million miles. The Environmental Protection Agency has certified that WIPP will safely contain TRU waste for 10,000 years. 3 Our mission is to help shrink the footprint of the nuclear weapons complex, says Casey Gadbury, Carlsbad field office Site Operations Director at DOE, which manages WIPP. We started with waste at more than 30 sites, and over half of those have been cleaned up, which lets DOE decommission storage buildings, shrink sites and save money. For example, shipping TRU waste to WIPP helped make it possible for DOE to close Rocky Flats, a large facility outside Denver that manufactured plutonium cores for nuclear bombs. Except for a protected landfill at the center of the site, Rocky Flats has been cleaned up and converted to a national wildlife refuge. 4 In contrast to Yucca Mountain, WIPP is generally accepted by the surrounding community. Before WIPP, the main industries in this area were potash mines and oil and gas production, which both had cyclical markets and were subject to boom-and-bust cycles, says Gadbury. When Carlsbad leaders heard that studies were being done that could bring a repository here, they started lobbying officials in Washington, D.C., and asking to be considered. The fact that this area had a lot of scientific and engineering expertise
agencies: the Nuclear Regulatory Commission and the Energy Research and Development Administration (later absorbed into DOE).
Rethinking Reprocessing
.S. leaders were forced to rethink national fuel cycle policy in 1974, when India carried out what it called a peaceful nuclear test, setting off a bomb it had made with plutonium from a civilian reactor. A year later the
CIA warned that Taiwan, South Korea, Pakistan, Argentina, Brazil, Libya, South Africa, Iran, Egypt and Spain all of which had or were considering nuclear power programs could develop nuclear weapons within a decade. 36 At the same time, early U.S. reprocessing plants were experiencing problems. A commercial plant that operated at West Valley, N.Y., from 1966 through 1972 shut down after operators decided they could not afford to meet new, stricter environmental standards. 37 General Electric had built a commercial plant in Morris, Ill., but
decided in 1972 not to open it because of numerous operating problems. 38 In 1976 President Gerald Ford announced a moratorium on reprocessing unless it could be done without promoting nuclear proliferation. Fords successor, Jimmy Carter, announced in 1977 that the United States would defer indefinitely the commercial reprocessing and recycling of plutonium. Carter also barred federal support for a third commercial reprocessing plant under construction in Barnwell, S.C. The plant was never completed. 39
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may have helped, since Moreover, New Mexico offiWIPP has provided a new cials are not looking for more application for those skills. nuclear waste. [I]t is crucial that DOE also has made subWIPP remain focused on its misstantial payments to New sion disposal of the nations Mexico in connection with defense-related transuranic waste WIPP, including more than and not expand to dispos$321 million in highway imal of other wastes for which it Radioactive military waste has been buried at a provements and $16 million was not contemplated or deDepartment of Energy site in remote for emergency-response casigned, Ron Curry, the states Carlsbad, N.M., for more than a decade. pabilities since 1997. former environment secretary, But New Mexico also negotiated hard with federal agencies, told a Blue Ribbon Commission created last year by President notes Charles Forsberg, an MIT research scientist who studies nu- Barack Obama to recommend new waste-storage options. 7 clear waste issues. The U.S. government had to find a solution Jennifer Weeks for TRU waste so that it could keep the nuclear weapons program going, Forsberg says. So it grudgingly gave New Mexico some authority to regulate health and environmental impacts at 1 U.S. Department of Energy, Waste Isolation Pilot Plant, Radiation, WIPP, plus lots of economic benefits. And, adds Forsburg, Los www.wipp.energy.gov/fctshts/radiation.pdf. 2 U.S. Department of Energy, WIPP RH-TRU Waste Alamos National Laboratory one of three U.S. laboratories that www.wipp.energy.gov/library/rhwaste/rhsummry.htm. Study Summary, design and maintain nuclear weapons is located in New Mex- 3 Information from U.S. Department of Energy, Carlsbad Field Office, Dec. 7, ico and has a lot of TRU waste. The laboratory gets first prior- 2010. 4 Jennifer Weeks, From Bombs to Birds, Defenders Magazine, Winter 2009, ity for shipping those materials to WIPP. 5 Some observers have suggested that DOE could send com- www.defenders.org/newsroom/defenders_magazine/winter_2009/from_bombs_ to_birds.php. mercial spent fuel or high-level waste from weapons plants to 5 See New Mexico Environment Department, Waste Isolation Pilot Plant WIPP instead of Yucca Mountain. However, that idea raises (WIPP) Information, www.nmenv.state.nm.us/wipp/. some difficult issues. WIPP is not big enough to handle the 6 Christopher M. Timm and Jerry V. Fox, Should WIPP Replace Yucca prepared for the Blue Ribbon Commission appointed by quantity and diversity of waste types that were slated for trans- Mountain?, paperObama to recommend new nuclear waste-storage options, President Barack port to Yucca Mountain, so a separate repository would have November 2010, http://brc.gov/e-mails/November10/Should%20WIPP%20 to be built in Carlsbad to receive them. And because salt for- Replace%20Yucca%20Mountain%20-%2011058%20-%20Final%20Draft.pdf. 7 Ron Curry, Cabinet Secretary, New Mexico Environment Department, summations will flow around waste and enclose it over time, spent mary of statement before the Blue Ribbon Commission, July 7, 2010, fuel stored there could not be retrieved if DOE opted to re- http://brc.gov/Disposal_SC/docs/SecretaryCurryBlue%20RibbonSummary.pdf. process it in the future. 6
Carter also canceled funding for the Clinch River Breeder Reactor, a medium-sized commercial plant in Tennessee. Although his successor, Ronald Reagan, sought to revive the breeder (over his budget directors objections), it came to be seen as a symbol of wasteful and unnecessary pork-barrel spending to benefit Tennessee legislators notably Republican Sen. Howard Baker, the projects strongest advocate. 40 Congress terminated the program in 1983 after its projected cost ballooned from $699 million to $1.6 billion. 41
The U.S. nuclear industry made two really bad assumptions: that the costs of power plants would come down and therefore that breeder reactors would become more affordable, and that uranium was scarce and therefore reprocessing would be necessary, says the Natural Resource Defense Councils Cochran. Everything turned on those theories that we would run out of low-cost uranium and would need to close the fuel cycle by reprocessing and reusing plutonium. As it became clear that those assumptions were wrong, reprocessing became less nec-
essary. But the need for a final disposal site for waste was, if anything, more urgent. Meanwhile, spent fuel was piling up at nuclear power stations. Carter announced that he would ask Congress to let the federal government take ownership of spent fuel, although he stressed that it was mainly utilities responsibility to store it until a repository was ready. In 1982 Congress passed the Nuclear Waste Policy Act, which set timetables for locating and licensing two underground repositories, one each in the East and West. The law
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also required DOE to take ownership of spent fuel by Jan. 31, 1998, when the first repository was expected to be ready, and directed the Nuclear Regulatory Commission to help utilities develop dry storage at reactors in the meantime. In addition, the act required utilities to pay a fee of one-tenth of 1 cent per kilowatt-hour of nuclear electricity generation into a federal Nuclear Waste Fund.
Sticking It to Nevada
s the law required, DOE named nine potential repository sites in 1983, including locations in Louisiana, Mississippi, Nevada, Texas, Utah and Washington. Then DOE chose three finalists for the first repository Yucca Mountain; Deaf Smith County, Texas; and Hanford, Washington and said it would keep looking for an Eastern site. But all of the communities that DOE considered objected and said the department was moving too fast. In 1986 DOE gave up the search for an Eastern site, further angering Western states. In 1987 Congress reentered the fray, amending the law to designate Yucca Mountain as the only site DOE could study for a repository, in what became known as the screw Nevada bill. Nevada officials were outraged that their state, which had no nuclear power plants and had already been contaminated by above-ground nuclear tests in the 1950s and 60s, was being forced to accept the nations nuclear waste. (Under the Nuclear Waste Policy Act a host state could veto accepting a repository, but Congress could override the veto.) Gov. Richard Bryan called the bill a legislative atrocity and predicted that it would be a nuclear nightmare for the Congress, an avoidable and costly mistake that the taxpayers will have to finance. 42 Over the next 15 years Nevada tried many tactics to block work on Yucca
Under Yucca Mountain

The unfinished nuclear waste repository under Nevadas Yucca Mountain has been canceled by President Obama. According to government plans for the controversial facility, the entrance (top) would lead to a 40-mile network of tunnels (bottom) about 1,000 feet below the surface. Begun in the 1980s, the repository in Nevadas southern desert was designed to safely store canisters holding thousands of tons of spent nuclear fuel from civilian nuclear power plants and Department of Defense weapons programs for up to 1 million years. Last March Obama created a Blue Ribbon Commission to recommend new waste storage options.
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AFP/Getty Images/Maxim Kniazkov (both)
How Other Nations Handle Waste

Few have selected repository sites.
any nations generate electricity from nuclear power, but only a few have successfully chosen a site for disposing of radioactive waste. Finland considered six potential repository sites from 1987 through 1998 and chose Olkiluoto, an island off the west coast where two nuclear reactors were operating. Posiva, a private company owned by Finlands utilities, is building a demonstration facility at the site. It expects to apply for a construction license next year and an operating license in 2018. Sweden studied eight potential sites, then narrowed the competition to two communities in 2002, both of which bid to host the repository. The winner, Osthammar, was selected in 2009 because its dry, crystalline bedrock was considered to be the safest option for isolating nuclear waste. As in Finland, Swedens utilities formed a private company to manage and dispose of their radioactive waste. The company, SKB, expects to begin site work in 2013 and be operating in 2023. Other nations are further behind in the repository process: Belgium shifted from reprocessing spent fuel to direct disposal in 1994. The country stores spent fuel at reactors and a central interim facility. It is studying sites for underground disposal, with construction expected to start around 2035.
Canada requires retrievable deep underground disposal. It is researching potential sites, and operation is expected around 2025. France reprocesses spent fuel and plans long-term underground disposal of high-level wastes left over from reprocessing. It is studying potential repository sites and expects to apply for a license in 2015 and begin operation in 2025. Germany reprocessed spent fuel until 1989, then shifted to direct disposal. It is studying potential repository sites and expects to build a facility by 2035. Japan reprocesses spent fuel and is studying potential sites for a high-level-waste repository. It expects to select a site between 2023 and 2027. Russia reprocesses spent fuel and stores high-level waste at interim sites. It is studying sites for a final repository. The United Kingdom reprocesses spent fuel and is planning for underground disposal, with a repository site to be chosen by community agreement. Jennifer Weeks
Source: Radioactive Waste Management, World Nuclear Association, June 2009, www.world-nuclear.org/info/inf04.html.
Mountain, including denying DOE permits to work at the site, passing a state law against storing nuclear waste in the state and denying DOE the water rights it needed to build a rail line to Yucca Mountain. The state also questioned whether the repository would actually keep radioactive waste isolated from the environment for millions of years. It presented data about seismic and volcanic activity near Yucca Mountain that it argued showed why the site was unsuitable for a repository. 43 At the same time, DOE started to clean up contaminated nuclear weapon production sites that were no longer needed after the end of the Cold War. These sites were now subject to federal and state environmental regulations, and DOE was forced to sign legally binding cleanup agreements with states and the U.S. Environmental Protection Agency that set targets for removing spent fuel and radioactive waste.
For example, the agency pledged to remove used fuel from Idaho by 2035 or pay penalties of $60,000 per day. Some of these materials were designated for Yucca Mountain.
Delays and Lawsuits
OE pressed ahead with work on Yucca Mountain through the 1990s, but design changes, funding shortfalls and quality control problems stretched work well beyond the original 1998 target for accepting spent fuel. By 2000 more than a dozen utilities were using dry casks to store spent fuel at reactors. They also were suing DOE for breach of contract. At first DOE claimed it was not responsible for damages because its lack of a repository was an unavoidable delay. After courts rejected that argument, the agency tried to
avoid liability by partially refunding utilities for their Nuclear Waste Fund contributions. But courts also struck down that approach. 44 By 2010 DOE had paid $725 million in legal settlements, and 50 cases were pending against it. DOE estimated that if it started accepting waste from reactors in 2021, its total liability to utilities (funded by taxpayers) would be about $13.1 billion. Whats more, it said, that amount would increase by about $500 million in each year beyond 2021 that DOE was not able to accept nuclear waste. 45 President George W. Bush submitted a license application for Yucca Mountain to the Nuclear Regulatory Commission (NRC) in 2008. The licensing process, which was scheduled to take three years, had two parts: a technical analysis of the repositorys design, and hearings at the same time before the NRCs Atomic
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Safety and Licensing Board to let state and local governments, American Indian tribes and other stakeholders voice their concerns. 46 But as the commission started work on the license application in the spring of 2009, President Obama submitted his fiscal 2010 budget proposal, which cut funding for the project by about one-fourth and called for scaling it back to costs necessary to answer inquiries from the Nuclear Regulatory Commission, while the Administration devises a new strategy toward nuclear waste disposal. 47 A year later, in early 2010, the Energy Department submitted a budget request that canceled all work on Yucca Mountain. ologic repositories were likely to be available by 2007-2009 and, if not, that spent fuel could be safely stored at reactors or off-site for at least 30 years after a reactors 40-year operating license expired. NRC affirmed the rule in 1990, revising its estimate of when a repository would be ready to the first quarter of the twenty-first century, and endorsed the rule again in 1999 without further change. 49 NRC revisited the issue again in 2010. This time it ruled that spent fuel could be safely stored at reactors or off-site for at least 60 years after the reactors license expired. Despite the Obama administrations proposal to cancel Yucca Mountain, the commission also concluded that repository space would be available to dispose of commercial high-level waste and spent reactor fuel. But it gave no specifics, saying only that underground disposal would be ready when necessary, without a projected date. 50 The nuclear energy industry applauded NRCs action as a sign that waste management should not be a roadblock to licensing new reactors. Theres a lot of confidence in our ability to store nuclear materials. Weve been storing them safely for a long time, and well continue to do so, says the Nuclear Energy Institutes McCullum. Others were negative. This is more an act of desperation than a finding of science, said Eric Epstein, manager of the Pennsylvania watchdog group Three Mile Island Alert. 51 News accounts pointed out that many operating reactors had already received 20-year extensions on their original 40-year operating licenses; thus, assuming that waste could remain on-site for 60 years after a plant closed, the waste might not be moved for 120 years. 52 Despite NRCs findings, 10 states have barred new nuclear plant construction until the federal government identifies a means of disposing of high-level waste and spent fuel. Californias limit, passed in 1976, was upheld by the U.S. Supreme Court, which ruled in 1983 that states could regulate nuclear power for economic reasons, including the potential cost of storing and disposing of spent fuel. 53 Connecticut, Illinois, Kentucky, Maine, Massachusetts, Oregon, West Virginia and Wisconsin have similar moratoriums in place, and Minnesota has barred any new nuclear plant construction. 54
Weak Renaissance
or a decade nuclear advocates have predicted that the United States was on the verge of a new growth period in nuclear power, driven by performance improvements at operating reactors and concerns about global climate change. 55 After Congress approved loan guarantees for a handful of new nuclear plants in the Energy Policy Act of 2005, utilities announced plans to build more than 20 new reactors. 56 But that expansion has stalled. In late 2007, as the nation entered a sharp economic recession, manufacturing output and demand for electricity slowed. That in turn lowered the price of natural gas, nuclear powers main competitor for generating electricity. The recession also made it harder for utilities to get financing for new reactors, which have high construction costs. Nuclear advocates expected Congress to set a price on carbon emissions as part of President Obamas energy program, thereby making emission-free nuclear generation more competitive with fossil fuels. But the Democrat-controlled House struggled in 2009 to pass a cap-and-trade bill designed to reduce emissions by allowing utilities to buy and sell emission permits. The House finally succeeded by a mere seven votes. But the Senate also controlled by Democrats couldnt pass a bill at all. 57
CURRENT SITUATION
Waste and Licenses
ven with nuclear waste policy in flux, the Nuclear Regulatory Commission is considering proposals for new nuclear plants. In September the commission affirmed and updated its longstanding finding that nuclear waste can be stored safely for decades at reactors or interim storage sites, and that a repository will eventually be available for disposal. This opinion, known as the Waste Confidence Decision, serves as a generic finding that disposing of spent fuel does not need to be factored into environmental impact studies associated with licensing decisions. NRC first stated this view in 1984, after a New England advocacy group and a Minnesota state agency challenged its approval of expanded spent-fuel storage at reactors in Vermont and Minnesota. 48 The commission concluded that one or more ge-
Continued on p. 90
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At Issue:
Should Congress revive the Yucca Mountain repository?
yes
ROB MCKENNA ATTORNEY GENERAL, WASHINGTON STATE

WRITTEN FOR CQ RESEARCHER, JANUARY 2011
SENATE MAJORITY LEADER

WRITTEN FOR CQ RESEARCHER, JANUARY 2011
SEN. HARRY REID, D-NEV.
he dispute over whether high-level nuclear waste should be safely stored at Nevadas Yucca Mountain comes down to a political promise between President Barack Obama and Sen. Harry Reid. Should politics trump science? Should we ignore the law to fulfill a campaign promise between two powerful politicians? The people of Washington state have worked too hard cleaning up our Hanford Nuclear Reservation where nearly two-thirds of the nations defense-related, high-level radioactive waste festers to let the federal government unilaterally abandon the process for evaluating the nations only scientifically studied and congressionally approved high-level nuclear waste repository. The facts are clear. Roughly 53 million gallons or 2,400 average-sized swimming pools of untreated nuclear waste are stored at Hanford in 177 large underground tanks. About one-third of these tanks are known or suspected to have leaked, releasing roughly 1 million gallons of waste. Congress has been seeking suitable storage for more than 30 years, approving the Nuclear Waste Policy Act in 1982 to end political games and provide a detailed process for siting and licensing nuclear waste storage facilities. The Department of Energy (DOE) invested 20 years in scientific research, which consumed millions of hours and more than $4 billion before Energy Secretary Spencer Abraham recommended Yucca Mountain as a repository in 2002. Congress then designated Yucca Mountain as the nations sole repository, triggering the licensing phase and putting DOEs application before the Nuclear Regulatory Commission. The licensing process is intended to answer any questions about whether a repository at Yucca Mountain is suitable and safe. Thanks to recent federal actions, this process has been corrupted. DOE has pulled the plug on the Nuclear Waste Policy Acts process without congressional approval and without providing any evidence Yucca Mountain is technically unsuitable. Instead, listen to the politics at play: [T]he Secretarys judgment . . . is not that Yucca Mountain is unsafe or that there are flaws . . . but rather that it is not a workable option. I am in court so Yucca Mountains fate is decided on its scientific merits, not by political paybacks. The federal governments shenanigans threaten to delay Hanfords entire clean-up mission, creating greater risks to the people and environment of my region. Sen. Reid has been in prime position to change the law, if that was in the nations best interests. Its time to put people ahead of politics and follow the law.
no
yes no
t
Jan. 28, 2011 CQ Press Custom Books - Page87
he Yucca Mountain repository project is dead, and as long as I am the majority leader of the U.S. Senate it will stay that way. Yucca Mountain was forced on Nevada nearly 25 years ago as part of what many refer to as the Screw Nevada bill. Without a comprehensive study of all potential sites, Congress designated Yucca Mountain the nations dumping ground for high-level radioactive waste despite having a grossly incomplete understanding of the science and no comprehension of the serious consequences it would pose to Nevadans. In addition to severe health and safety risks, a nuclear waste dump at Yucca would have a devastating impact on Nevadas tourism industry, dragging down the states entire economy. It is beyond reckless to ship the most toxic substance known to man across the country to be buried over volcanic fault lines only 90 miles from the worlds premier tourist destination. Nevada could not afford these risks in 1987, and we surely cannot afford them today. The Yucca Mountain project was also the epitome of wasteful government spending until the Obama administration declared an end to the project nearly two years ago. The price tag on Yucca rose to nearly $100 billion, when the proposed site remained riddled with technical, legal and safety problems. But most important, the dump at Yucca Mountain posed a grave risk to our health and safety as thousands of shipments of nuclear waste would have been carried across America through our neighborhoods, by our schools and right past the Las Vegas strip the economic engine of southern Nevada. I am proud that after two decades of fighting, the Yucca Mountain project is history thanks to budget cuts year after year, culminating with President Obama terminating the project and eliminating all funding for it in last years budget. I am grateful that Energy Secretary Steven Chu has taken the necessary step of taking Yucca off the table and creating a Blue Ribbon Commission to determine the best path for dealing with nuclear waste based on sound science, 21stcentury technologies and the input of all stakeholders. This panel includes the nations foremost experts on nuclear energy, environmental science and public policy. Our country has some of the best scientific minds in the world. I am confident they can find a solution to deal with the nations nuclear waste that ensures the safety and security of all Americans.
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Even before Republicans won control of the House in the 2010 midterm elections, observers widely assumed that legal limits on carbon emissions which opponents argued would cripple the economy were too unpopular to be enacted into law. 58 President Obama confirmed that view in a press conference following the midterms, although he insisted that cap and trade was just one way of skinning the cat. . . . It was a means, not an end. 59 Many Republicans in the new Congress support building more nuclear plants, but the economics of new reactors are still highly unfavorable. Nuclear power is almost unfinanceable in todays environment, New York Public Service Commissioner Robert Curry said in mid-November. I dont see how the election changes that for good or ill. 60 Even a sharp rise in oil prices would do little to boost nuclear power because very few utilities use oil to generate electricity. And new drilling techniques are making it possible to develop abundant natural gas deposits across the United States, from the Northeast to the Rockies. New reactor projects are moving forward in Georgia and South Carolina states where regulators allow utilities to recover the cost of new plants from their customers. But in many Northeastern and Midwestern states, nuclear utilities have to compete against other fuels based on price. You just cant build reactors in states that use competitive markets to sort out what kind of new generation [plant] gets built, says former NRC commissioner Bradford. When you rank issues for the nuclear industry, cost is pretty far ahead of waste.
Private Options
ow that President Obama has called for rethinking nuclear waste policy, many stakeholders want to see the task assigned to an entity other
N
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than DOE, such as a private contractor working for utilities or a governmentowned, single-mission corporation, often nicknamed Fedcorp. DOE is one of the most mistrusted agencies of the federal government, followed by the NRC, says Eugene Rosa, a professor of sociology at Washington State University who has studied public perceptions of risk related to nuclear power and other environmental and technical issues. The standard model for DOE and pro-nuclear scientists has been to think that if we only educate people about the technical details, they will accept nuclear power. That whole paradigm is bankrupt; it doesnt work that way. People get a lot of technical details wrong, and the pro-nuclear community would like to disenfranchise them because of that. But the publics concerns are still real and need to be taken seriously. Even if DOE was better at communicating with the public, the scientific studies the department carries out to show that a repository can isolate radioactive waste from the environment are extremely complicated, notes University of California, Berkeley, historian Cathryn Carson. DOE uses sophisticated computer models to predict how the repository will behave far into the future, what paths waste would follow if it escaped and what the consequences would be, over the course of millennia. Its so complex that its extremely hard for the public to understand, and mistrust of DOE makes many people think that the inputs must be cooked, Carson says. Part of the challenge of making a case for the repository is showing how scientists make projections, and conveying that process to audiences who dont necessarily trust the government or government contractors. In addition to communicating more effectively with the public, groups such as the National Association of Regulatory Utility Commissioners (NARUC) expect a government-owned corporation to operate more efficiently and man-
age nuclear waste fees more responsibly than DOE or Congress. A Fedcorp CEO may be better able to offer states and communities incentives to store nuclear waste than a federal negotiator who has to go back to Congress for money, says NARUCs Boyd. The corporation could be empowered to set nuclear waste fee levels and collect fees directly, without the federal government getting involved. And it could work more directly with utilities to take advantage of their expertise. The federal government has set up many corporations to provide public services, including Amtrak for rail passenger service, the Corporation for Public Broadcasting and the Federal Deposit Insurance Corporation for help in stabilizing the banking system. Former Sen. George Voinovich, R-Ohio, and Rep. Fred Upton, R-Mich., introduced legislation in 2010 to create a government corporation for managing nuclear waste; Voinovich retired at the end of 2010, but Upton chairs the House Energy and Commerce Committee and may reintroduce the bill this year. The design of a Fedcorp is less important than whether it has real authority, says MITs Forsberg. There are lots of different corporate structures, but the leaders have to have power to make agreements that everyone can live with. You cant have 535 overseers in Congress, he says. The system needs to include everyone who has a stake in solving the problem, including utilities and public utility commissions. You have to be in an ownership position to make these deals.
OUTLOOK
No Shortcuts
ost observers agree that the United States does not face an
immediate nuclear waste crisis. But given how long it will take to locate, build and license a nuclear waste repository, they also say that it is essential to agree on basic goals and get the process back on track. After the Blue Ribbon Commission delivers its final report next year, Congress will have to approve and fund new steps, which will likely include either directing the Nuclear Regulatory Commission to continue with licensing Yucca Mountain or laying out rules for a new repository. Assigning nuclear waste policy to an agency outside of DOE would require Congress to charter the new entity and decide how it should be funded. If a search is opened for a new repository site or interim storage sites, politicians and voters in potential host states will no doubt demand extensive input into any decisions. Each of those steps will require Congress and federal officials to focus on goals many election cycles into the future. Nuclear waste is so dreaded that we could see a tar-baby syndrome that generates mistrust of whoever has to deal with it, says Washington State Universitys Rosa. But something has to be done. We cant go on forever the way we are. Nuclear power is growing internationally, so the world needs to solve this issue. One key, scholars assert, is to view nuclear waste policy as a social issue, not just a technical problem. We have tried-and-true methods for ensuring that a process is representative, and we understand the factors that erode public trust and make people afraid of nuclear technology, says Rosa. Many experts commend Sweden and Finland for thinking hard about nuclear waste storage issues, such as how to offer communities incentives that dont seem like bribes, and how to have real dialogues with citizens about their concerns. (See sidebar, p. 87.) Forcing states to accept facilities they dont want as Congress did when it directed DOE to
study only Yucca Mountain for a repository is expedient but has proved to be self-defeating, observers say. Nevada fought Yucca Mountain instead of negotiating with DOE for better benefits because there were perceptions that the federal government was taking shortcuts and that the process was wired, says Boyd at the National Association of Regulatory Utility Commissioners.
Notes
1
The U.S. Environmental Protection Agency set standards for the Yucca Mountain repository that sought to limit how much radioactivity people might receive from spent fuel stored there for up to 1 million years. This target was based on an estimate by the National Academy of Sciences that peak exposure risk might occur hundreds of thousands
Nuclear waste is so dreaded that we could see a tar-baby syndrome that generates mistrust of whoever has to deal with it.
Eugene Rosa Professor of Sociology, Washington State University
MITs Forsberg points out another lesson that the federal government could learn from other countries: thinking about hazardous waste in broad categories, instead of distinguishing between nuclear waste and other long-lived substances, such as the heavy metals lead, arsenic and cadmium. U.S. policy says that if something is radioactive, it goes to a geologic repository, which is a good idea. But if its a heavy metal that remains toxic forever, we dump it and dont worry about it, which is crazy, he contends. Europeans have figured out that anything really long-lived and hazardous needs to go to a repository, and the question of whether its radioactive or a toxic heavy metal is a technical detail for engineers, Forsberg says. We need a waste management policy based on hazards to people that covers all wastes.
of years after radioactive waste was placed in the repository. See American Nuclear Society, The EPA Radiation Standard for Spent-Fuel Storage in a Geological Repository, November 2006, www.ans.org/pi/ps/docs/ps81-bi.pdf. 2 Center for Public Integrity, Nuclear Waste Problem Unsolved, www.publicintegrity.org/ investigations/broken_government/articles/entry/ 956/. 3 For an overview of technical concerns with Yucca Mountain, see Alison Macfarlane and Rodney Ewing, eds., Uncertainty Underground: Yucca Mountain and the Nations High-Level Nuclear Waste (2006). 4 Steve Tetreault, Waste Site Critics See Opening, Las Vegas Review-Journal, Nov. 10, 2008, www.lvrj.com/news/34191604.html. 5 U.S. Energy Information Administration, U.S. Nuclear Statistics/Reactor Status Table, www. eia.doe.gov/cneaf/nuclear/page/operation/statoperation.html. 6 Many proposed plants are currently on hold while utilities seek loan guarantees and other financial support, but site preparation is under way in Georgia and Tennessee. See
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U.S. Energy Information Administration, Status of Potential New Commercial Nuclear Reactors in the United States, July 1, 2010, www.eia. doe.gov/cneaf/nuclear/page/nuc_reactors/com _reactors.pdf; Matthew Wald, Nuclear Renaissance Is Short on Largess, The New York Times, Dec. 7, 2010, http://green.blogs.nytimes. com/2010/12/07/nuclear-renaissance-is-shorton-largess/?scp=2&sq=new%20reactors&st=cse. 7 For background see Jennifer Weeks, Nuclear Energy, CQ Researcher, March 10, 2006, pp. 217-240. 8 U.S. Nuclear Regulatory Commission, List of Power Reactor Units, updated Sept. 23, 2010, www.nrc.gov/reactors/operating/list-powerreactor-units.html, and Location of Independent Spent Fuel Storage Installations, www.nrc. gov/waste/spent-fuel-storage/locations.html. 9 Federal Commitments Regarding Used Fuel and High-Level Wastes, Van Ness Feldman, P.C., paper commissioned for the Blue Ribbon Commission, Aug. 31, 2010, http://brc.gov/ library/commissioned_papers/August%202010 %20BRC%20Federal%20Committments%20Paper %20REVISED%2011.12.10.pdf. 10 See Commission charter, online at www.brc. gov/pdfFiles/BRC_Charter.pdf. 11 For example, see Idaho Department of Environmental Quality, Waste at INL: High Level Waste, www.deq.idaho.gov/inl_oversight/ waste/high_level.cfm. 12 National Research Council, Going the Distance? The Safe Transport of Spent Nuclear Fuel and High-Level Radioactive Waste in the United States (2006), pp. 117-122. 13 Ibid., pp. 2-3. 14 Policy Statement B-7, summarized at www.apha.org/membergroups/newsletters/sec tionnewsletters/occupat/fall10/default.htm#{46 E77A7B-722B-4393-94A5-FD04BF5CE736}. 15 U.S. Nuclear Regulatory Commission, Safety of Spent Fuel Transportation (2003), pp. 4-5, www.nrc.gov/reading-rm/doc-collections/nuregs/ brochures/br0292/br0292.pdf, and Typical Spent Fuel Transportation Casks, www.nrc. gov/waste/spent-fuel-storage/diagram-typicaltrans-cask-system-2.pdf. 16 National Transportation Safety Board, Railroad Accident Brief, August 2004, www.ntsb. gov/publictn/2004/RAB0408.pdf. 17 U.S. Nuclear Regulatory Commission, Spent Fuel Transportation Package Response to the Baltimore Tunnel Fire Scenario, NUREG/CR-6886, www.nrc.gov/reading-rm/doc-collections/nuregs/ contract/cr6886/r2/cr6886r2.pdf. 18 U.S. Nuclear Regulatory Commission, Staff actions taken in response to the National Academy of Sciences study on transportation of high-level waste and spent nuclear fuel in the United States, SECY-07-0995 (June 6, 2007). 19 President Obama changed this plan to focus on basic research, with no reprocessing until mid-century at the earliest. 20 U.S. Department of Energy, Office of Nuclear Energy, Draft Global Nuclear Energy Partnership Programmatic Environmental Impact Statement Summary, DOE/EIS-0396 (October 2008), pp. S-52, S-53, www.brc.gov/ library/docs/GNEP%20Summary.pdf. Figures cited are for public latent cancer fatalities. 21 National Research Council, Going the Distance, op cit., p. 8. 22 Physical Protection of Irradiated Reactor Fuel in Transit, Federal Register, Oct. 13, 2010, pp. 62695-62716. 23 U.S. Department of Energys Motion to Withdraw, submitted to the Atomic Safety and Licensing board, U.S. Nuclear Regulatory Commission March 3, 2010, www.energy.gov/news/ documents/DOE_Motion_to_Withdraw.pdf. 24 Haley Slams Reids Rejection of Yucca Nuclear Waste Site, FoxNews.com, Sept. 19, 2010. 25 Emily Yehle, Little Hope, Help for DOEs Displaced Yucca Mountain Contract Workers, The New York Times, Aug. 24, 2010, www.ny times.com/gwire/2010/08/24/24greenwire-littlehope-help-for-does-displaced-yucca-moun-272 66.html. 26 Bipartisan Coalition to DOE: Halt Actions to Terminate Yucca Mountain, July 6, 2010, https://hastings.house.gov/News/Document Single.aspx?DocumentID=199019. 27 Members of Congress Urge NRC Chairman to Continue Yucca Mountain Review, Nuclear Power Industry News, Oct. 15, 2010. 28 For example, see Jack Spencer, Yucca Mountain and Nuclear Waste Policy: A New Beginning? Heritage Foundation, Dec. 16, 2010, www.heritage.org/research/reports/2010/12/yuccamountain-and-nuclear-waste-policy-a-new-be ginning. The 111th Congress passed a shortterm continuing resolution late in 2010 funding most government programs through March 4, 2011 at current levels. 2010 Legislative Summary: Appropriations (Overview), CQ Weekly, Dec. 27, 2010, p. 2907. 29 For details see Jeff Mapes, An Activist View: Closing Yucca Good for Hanford, The Oregonian, Feb. 26, 2009, http://blog.oregon live.com/mapesonpolitics/2009/02/an_activist_ view_closing_yucca.html. 30 The Future of the Nuclear Fuel Cycle: Summary Report (2010), pp. xi-xii. 31 Q&A: Steven Chu, TechnologyReview.com, May 14, 2009. 32 Thomas B. Cochran, statement before the Blue Ribbon Commission on Americas Nuclear Future, May 25, 2010, pp. 4-5, http:// docs.nrdc.org/nuclear/files/nuc_10062201a.pdf. 33 For background see Mary H. Cooper, Nuclear Arms Cleanup, CQ Researcher, June 24, 1994, and U.S. Department of Energy, Linking Legacies: Connecting the Cold War Nuclear Weapons Production Processes to Their Environmental Consequences (1997), www.em. doe.gov/Publications/linklegacy.aspx. 34 National Research Council, The Disposal of Radioactive Waste On Land (1957), p. 1, www. biodiversitylibrary.org/ia/disposalofradioa00nati# page/1/mode/1up. 35 James M. Hylko and Robert Peltier, The U.S. Spent Nuclear Fuel Policy: Road to Nowhere, Power Magazine, May 1, 2010. 36 Managing Nuclear Proliferation: The Politics of Limited Choice, Central Intelligence Agency, December 1975, declassified Aug. 21, 2001, www.gwu.edu/~nsarchiv/NSAEBB/NSAE BB155/prolif-15.pdf.
About the Author

Jennifer Weeks is a Massachusetts freelance writer who specializes in energy, the environment, science and technology. She has written for The Washington Post, Audubon, Popular Mechanics and more than 50 other magazines and websites and worked for 15 years as a public policy analyst, congressional staffer and lobbyist. She has an A.B. degree from Williams College and masters degrees from the University of North Carolina and Harvard.
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Record of Decision: Final Environmental Impact Statement for Decommissioning and/or Long-Term Stewardship at the West Valley Demonstration Project, U.S. Department of Energy, April 14, 2010, pp. 3-4, www.westvalley eis.com/ROD.pdf. 38 Robert Gillette, Nuclear Fuel Reprocessing: GEs Balky Plant Poses Shortages, Science, vol. 185 (Aug. 30, 1974), pp. 770-771. 39 Jan Collins Stucker, Nuclear White Elephant, The New Republic, Jan. 20, 1982. 40 Robert Reinhold, Controversial Clinch River Reactor Plan Is Poised to Proceed, The New York Times, March 10, 1981; Colin Norman, Clinch River Supporters Pin Hopes on Baker, Science, vol. 220 (June 10, 1983), p. 1132. 41 John Abbots, All the Kings Horses and All the Kings Men . . . Bulletin of the Atomic Scientists, January/February 1989, pp. 49-50; U.S. General Accounting Office, Department of Energy, Opportunity to Improve management of Major System Acquisitions, GAO/RCED-97-17 (November 1996), pp. 34, 50. 42 Larry B. Stammer, Nevada May Get Nuclear Waste Dump, Los Angeles Times, Dec. 18, 1987, http://articles.latimes.com/1987-12-18/news/mn20047_1. 43 For details see the website of the Nevada Agency for Nuclear Projects, www.state.nv.us/ nucwaste/. 44 Todd Garvey, The Yucca Mountain Litigation: Breach of Contract Under the Nuclear Waste Policy Act of 1982, Congressional Research Service, R40996 (Dec. 22, 2009). 45 Kim Cawley, Congressional Budget Office, statement for the record for the Committee on the Budget, U.S. House of Representatives, July 27, 2010. 46 Licensing Yucca Mountain, U.S. Nuclear Regulatory Commission, April 2009, www. nrc.gov/reading-rm/doc-collections/fact-sheets/ fs-yucca-license-review.pdf. 47 Keith Rogers, Obama Budget Plan Cuts Yucca Mountain Funding, Las Vegas ReviewJournal, Feb. 26, 2009, www.lvrj.com/news/ 40348957.html. 48 The rule was prompted by a court decision, Minnesota v. NRC (602 F. 2d 412, 1979) consolidating the two cases. In this case, a federal appeals court held that NRC could make generic judgments about whether nuclear waste could be safely handled and disposed of, rather than analyzing the issue every time a utility applied for a new or
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Heart of America Northwest, 1314 E. 56th St., Suite 100 Seattle, WA 98105; (206) 382-1014; www.hoanw.org. Advocates for cleanup of the Hanford nuclear weapons site in eastern Washington state. Idaho National Laboratory, 2525 Fremont Ave., Idaho Falls, ID 83415; (866) 495-7440; www.inl.gov. Department of Energy laboratory focusing on nuclear and energy research, science and national defense. National Association of Regulatory Utility Commissioners, 1101 Vermont Ave., N.W., Suite 200, Washington, DC 20005; (202) 898-2200; www.naruc.org. Represents state public service commissions that regulate energy, water and telecommunications utilities. Natural Resources Defense Council, 40 West 20th St., New York, NY 10011; (212) 727-2700; www.nrdc.org. Environmental advocacy group that conducts research and policy work on issues including nuclear energy, waste and weapons. Nuclear Energy Institute, 1776 I St., N.W., Suite 400, Washington, DC 20006; (202) 739-8000; www.nei.org. Represents the nuclear energy and nuclear technologies industry. U.S. Department of Energy, Office of Nuclear Energy, 1000 Independence Ave., S.W., Washington, DC 20585; (202) 586-4403; www.ne.doe.gov. Promotes nuclear power through research, development and demonstration projects. U.S. Nuclear Regulatory Commission, One White Flint North, 11555 Rockville Pike, Rockville, MD 20852; (301) 415-7000; www.nrc.gov. Regulates commercial nuclear power plants, transport of nuclear materials and operation of nuclear waste storage and disposal facilities.
amended reactor license. 49 For details, see NRC Waste Confidence Positions, http://brc.gov/library/docs/NRC%20 waste%20confidence%20FRNs%201984-2008.pdf. 50 U.S. Nuclear Regulatory Commission, Waste Confidence Decision Update, Federal Register, Dec. 23, 2010, www.federalregister. gov/articles/2010/12/23/2010-31637/waste-con fidence-decision-update. 51 Barbara Miller, NRC Extends Time That Radioactive Waste Can Be Stored at Nuclear Plants, The Patriot-News (Penn.), Jan. 10, 2011. 52 For example, see Josh Stilts, NRC Wants Waste Stored for Century, Brattleboro Reformer, Jan. 4, 2011. 53 The case is Pacific Gas and Electric Company v. State Energy Resources Conservation and Development Commission, 461 U.S. 190 (1983). 54 Scott Hendrick, State Restrictions on New Nuclear Power Facility Construction, National Conference of State Legislatures, December 2010,
www.ncsl.org/?TabId=21817. Weeks, op. cit. 56 Status of Potential New Commercial Nuclear Reactors in the United States, U.S. Energy Information Administration, July 1, 2010, www.eia.doe.gov/cneaf/nuclear/page/nuc_ reactors/reactorcom.html. 57 For background see Marcia Clemmitt, Energy and Climate, CQ Researcher, July 24, 2009, pp. 621-644. 58 For example, see Ezra Klein, Cap-and-Trade is Dead, The Washington Post, July 19, 2010. 59 Press conference by the President, Nov. 3, 2010, www.whitehouse.gov/the-press-office/ 2010/11/03/press-conference-president. 60 Matthew L. Wald, G.O.P. Gains on Capitol Hill May Not Advance Nuclear Power, The New York Times, Nov. 16, 2010, www.nytimes. com/2010/11/17/business/energy-environment/ 17NUCLEAR.html.
55
Jan. 28, 2011
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Bibliography
Selected Sources
Books
Bernstein, Jeremy, Plutonium: A History of the Worlds Most Dangerous Element, Joseph Henry Press, 2007. Bernstein, a physicist and former New Yorker staff writer, recounts the history of plutonium and shows why the buildup of global plutonium stockpiles is dangerous. Gerber, Michele Stenehjem, On the Home Front: The Cold War Legacy of the Hanford Nuclear Site, 3rd edition, Bison Books, 2007. A comprehensive history of the Hanford nuclear site, constructed as a secret Manhattan Project facility during World War II, covering its Cold War operations and the ongoing effort to clean it up. Walker, Samuel J., The Road to Yucca Mountain: The Development of Radioactive Waste Policy in the United States, University of California Press, 2009. The Nuclear Regulatory Commissions historian traces the history of U.S. policy debates over managing spent nuclear fuel and high-level radioactive waste. npr.org/templates/story/story.php?storyId=126799978. New Mexicans are divided over whether to expand an existing nuclear waste repository in Carlsbad so that it could store commercial spent fuel. Rosa, Eugene A., et al., Nuclear Waste: Knowledge Waste? Science, vol. 329, Aug. 13, 2010, pp. 762-763. To identify a workable U.S. nuclear waste policy, a Blue Ribbon Commission appointed by President Obama should focus on conditions that will make that policy socially and politically acceptable to the public. Upson, Sandra, Finlands Nuclear Waste Solution, IEEE Spectrum, December 2009, http://spectrum.ieee.org/energy/ nuclear/finlands-nuclear-waste-solution/0. Finland is building one of only two active nuclear waste repositories in the world, with the other next door in Sweden. Wald, Matthew L., Giant Holes in the Ground, Technology Review, November/December 2010. A predicted nuclear power renaissance has stalled, but the main reason is high construction costs, not controversy over waste disposal.
Articles
Biello, David, Spent Nuclear Fuel: A Trash Heap Deadly for 250,000 Years or a Renewable Energy Source? Scientific American, Jan. 28, 2009, www.scientificamerican.com/ article.cfm?id=nuclear-waste-lethal-trash-or-renewable-energysource. Some experts see spent nuclear fuel as waste, but others call it a valuable energy resource. Blumenthal, Les, Nuclear Sites Fear Theyre the Alternative to Yucca Mountain, McClatchy Newspapers, Aug. 30, 2009, www.mcclatchydc.com/2009/08/30/74567/nuclearsites-fear-theyre-the.html. Washington, South Carolina, Idaho and other states that house former nuclear weapons production sites fear that they will be permanently stuck with military radioactive waste if Yucca Mountain is not built. Cochran, Thomas B., et al., Its Time to Give Up on Breeder Reactors, Bulletin of the Atomic Scientists, May/ June 2010, pp. 50-56, www.princeton.edu/sgs/publications/ articles/Time-to-give-up-BAS-May_June-2010.pdf. Based on experience in six other countries, the authors argue that reactors designed to produce more plutonium than they use are expensive, unreliable, dangerous and unnecessary. Joyce, Christopher, For N.M., Nuclear Waste May Be Too Hot to Handle, National Public Radio, May 14, 2010, www.
Reports and Studies

The Future of the Nuclear Fuel Cycle, Massachusetts Institute of Technology, 2010, http://web.mit.edu/mitei/ docs/spotlights/nuclear-fuel-cycle.pdf. A panel of scientists and engineers argues that the United States should continue with a once-through fuel cycle for at least several decades, plan to store spent fuel for up to a century at centralized sites and create a new quasi-governmental organization to manage nuclear waste. Garvey, Todd, The Yucca Mountain Litigation: Breach of Contract under the Nuclear Waste Policy Act of 1982, Congressional Research Service, Dec. 22, 2009, http://ncse online.org/NLE/CRSreports/10Jan/R40996.pdf. Utilities have filed more than 70 claims against the Department of Energy for breaching legal agreements to take ownership of civilian spent nuclear fuel. The departments total liability could be up to $50 billion. Survey of National Programs for Managing High-Level Radioactive Waste and Spent Nuclear Fuel, U.S. Nuclear Waste Technical Review Board, October 2009, www.nwtrb. gov/reports/nwtrb%20sept%2009.pdf. Experts say that deep underground storage is the safest approach for long-term management of nuclear waste, but experience in 13 countries shows that designing and locating a repository raise many technical and political challenges.
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CHAPTER
SCHOOL REFORM
BY MARCIA CLEMMITT
Excerpted from Marcia Clemmitt, CQ Researcher (April 29, 2011), pp. 385-408.
School Reform
BY MARCIA CLEMMITT
ford University in California. While many people want to be reassured that things are aren Caruso, a thirdgoing just fine, ignoring the grade teacher in Los real message of these comAngeles, read the emparisons actually imperils our barrassing news last August economic future, he wrote. 3 in the Los Angeles Times: She Key to gaining elusive pubwas in the bottom 10 perlic support for large-scale educent of city elementary cational changes is persuading teachers, according to the families, who generally support papers analysis of seven years their local schools, that past of students performance on strategies have been costly failstandardized math and Engures. Reformers have not been lish tests. shy about making that case. Yet, that poor showing Over the past four decades, didnt fit Carusos profile. A the per-student cost of running 26-year classroom veteran, our K-12 schools has more she was among the districts than doubled, while our stufirst teachers certified by the dent achievement has remained prestigious National Board virtually flat, Gates wrote refor Professional Teaching cently. To build a dynamic Standards, and her principal 21st-century economy . . . we had named her one of the need to flip the curve. 4 best teachers at Hancock But teachers and many Park Elementary School, education scholars argue that Thousands of young college graduates teach in urban which serves a mainly upperreformers seek a simple fix schools through Teach for America, a nonprofit group middle-class neighborhood. for a complex problem. that receives support from venture philanthropy groups such as the Bill & Melinda Gates Foundation. Above, Caruso was taken aback Low-performing students are Erin Gavin conducts a discussion with her seventhby the Times findings but concentrated in the lowestgraders in Brooklyn Center, Minn., on Feb. 4. told the newspaper she income districts, where inwas determined to do betadequate funding, teacher ter. If my student test scores show they are joined by Democratic politi- turnover and the ravages of poverty Im an ineffective teacher, she said, cians, including President Barack make it difficult for students to excel, Id like to know what contributes Obama, and venture philanthropists, critics of market-based reforms say. to it. What do I need to do to bring led by Microsoft cofounder Bill Gates, Achievement differences between who are bringing the ideas they used students are overwhelmingly attributmy average up? 1 Its a question teachers nationwide to achieve business success to the do- able to factors outside of schools, wrote may soon be asking. With international main of public education. Gates, Los Matthew Di Carlo, a senior fellow at tests showing that the United States Angeles insurance magnate Eli Broad the Albert Shanker Institute, a research no longer leads in K-12 learning, an and other wealthy donors have poured and advocacy group affiliated with emerging coalition of reformers is aim- billions of dollars into market-oriented the American Federation of Teachers ing to use market-based ideas to im- reform efforts, arguing that failing schools (AFT), the nations second-largest prove the nations 99,000 public jeopardize the nations economic com- teachers union. Research shows that schools. 2 The ideas include paying petitiveness in the global market. about 60 percent of variation in students International data comparing K-12 school achievement is explained by teachers based on student performance and creating more publicly funded, student achievement across many na- student and family background characprivately run, charter schools to com- tions clearly show that U.S. schools are teristics, many related to income, Di failing, according to Eric Hanushek, a Carlo wrote. Only 10 or 15 percent of pete with public institutions. Conservative analysts have long rec- senior fellow at the Hoover Institution, achievement differences can be laid to ommended such measures. But now a conservative think tank based at Stan- teachers, he argued. 5
THE ISSUES
AP Photo/Andy King
April 29, 2011
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SCHOOL REFORM
U.S. Lags Behind Asia in Math Scores
U.S. eighth-graders rank ahead of those in several European countries but behind students in England, Japan, South Korea and Taiwan. Average Math Scores of 8th-Grade Students by Selected Countries, 2007*
Test score
600 500 400 300 200 100 0

Taiwan
598
597
570
513
508
504
496
491
480
464
South Korea
Japan England United Czech Aus- Sweden States Republic tralia
Italy
Bulgaria
* Scores are based on an 800-point scale. Top-scoring countries average about 600. Source: Patrick Gonzales, et al., Highlights From Trends in International Mathematics and Science Study 2007: Mathematics and Science Achievement of U.S. Fourth- and Eighth-Grade Students in an International Context, National Center for Education Statistics, September 2009, nces.ed.gov/pubs2009/2009001.pdf.
Reform critics also argue that the emphasis on rising educational costs is misplaced. For one thing, said Richard Rothstein, a research associate at the liberal Economic Policy Institute, a large chunk of the cost increase Gates mentions has been used to educate children with disabilities. That segment of K-12 school spending has swelled from 4 percent to 21 percent over the past four decades, he said. Previously, schools largely ignored the special needs of children with disabilities, he said. 6 Henry Levin, a professor of economics and education at Columbia University in New York, says, too, that no other country has to include [teachers] health-care costs and pensions in school-cost calculations. (Health insurance and retiree benefits add at least 20 percent in costs beyond salary for a public-sector worker, such as a teacher, according to the Bureau of Labor Statistics.) 7 Our per-pupil expenditures are the highest in the world, Levin acknowl-
edges. But he argues that it isnt fair to criticize schools for this because of the vast difference in employee costs between countries. None of these arguments, however, are persuasive to reform proponents, who say ample evidence exists to show that parental choice, school competition and data-based decision-making are needed to drive improvement. New York Federal Reserve Bank economist Rajashri Chakrabarti found unambiguous improvement in public school performance in Florida and Wisconsin as a result of offering parents a choice of schools, according to the Center for Education Reform, in Washington, D.C. The center also cites research by the Manhattan Institute, a conservative think tank in New York, concluding that all students in a Florida program that offered wide school choice to students with disabilities made greater academic improvements as their school options expanded and that included students who stuck with their neighborhood schools. 8 In recent school-reform battles, such as last winters hot dispute in Wis-
consin over newly elected Republican Gov. Scott Walkers plan to drastically limit teachers collective-bargaining rights, unions have been heavily criticized for running up costs while allowing poor teaching to flourish. 9 The unions have been pushing the case that there is a war against teachers, but I dont think thats true, says the Hoover Institutions Hanushek. There is a war against teachers unions that unions have brought on themselves by opposing reform proposals such as basing firing decisions on student achievement, he says. Linking teacher evaluations and student performance on standardized tests is indeed among the most contentious topics in public education. Earlier this month, the Los Angeles Unified School District announced that it will privately inform individual teachers of their ratings on a so-called valueadded success scale that it uses to link teacher performance and test scores. The approach is a favorite of many reform advocates, and it was the L.A. districts data that the Los Angeles Times plumbed to create its rankings of Caruso and other teachers in the city. The district is negotiating with the local teachers union, the United Teachers Los Angeles, which is affiliated with both the AFT and the nations largest teachers union, the National Education Association, to include the measurements in formal performance reviews, a move the union strongly opposes. 10 Times reporters argue that opposition is unwarranted because a valueadded analysis compares teachers by evaluating the progress of each individual student in their classrooms against that students own progress in earlier school years. By comparing a students achievement only to his or her own record, the value-added approach takes into account such factors as poverty and learning disabilities, over which an individual teacher has no control. Thus, it is a fair way to judge teachers success, the Times argued. 11
388
Opponents maintain, however, that inciting teachers to compete with one another for pay is the wrong way to go about improving education. Diane Ravitch, a research professor of education at New York University who recently disavowed her longtime support for market-based reforms, noted that legendary business-improvement consultant W. Edwards Deming believed that merit pay for workers was even bad for corporations. It gets everyone thinking about what is good for himself, Ravitch wrote, and leads to forgetting about the goals of the organization. 12 Columbias Levin argues that teaching requires collaboration more than competition. For example, he says, teachers who want their students to improve need to talk to the teachers at lower grades about whether theyre teaching skills on which higher grades lessons are based and seek their cooperation to do so, he says. Its hard to say that the future really is in competition. As policymakers, schools and families debate how to improve schools, here are some questions they are asking: Are the public schools failing? Behind the push to reform K-12 education lies the proposition that widescale failure of American schools bears significant responsibility for a lagging economy. But critics of that view argue that reform enthusiasts ignore data showing progress alongside problems. Whats more, they argue, it makes no sense to hold schools responsible for the nations economic woes. American education is in a state of crisis, according to the Heritage Foundation, a conservative think tank in Washington. Millions of children pass through Americas schools without receiving a quality education that prepares them . . . to compete in the increasingly competitive global economy. 13 Reform critics cite international PISA (Programme for International
Reading Prociency Highest in Northeast

Connecticut ranks rst in eighth-grade reading ability followed closely by other Northeastern states, including Massachusetts and New Jersey. The District of Columbia ranks below all 50 states. State Rankings by 8th-Grade Reading Level, 2009
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Connecticut Massachusetts New Jersey Vermont Pennsylvania New Hampshire Minnesota Montana Ohio South Dakota Maryland Washington Maine Nebraska Missouri North Dakota Wisconsin 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. Wyoming Idaho Illinois Kansas Kentucky New York Oregon Utah Colorado Florida Indiana Iowa Virginia Delaware Michigan North Carolina Rhode Island 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. Tennessee Alaska Arizona Arkansas Georgia Texas Oklahoma Alabama South Carolina California Hawaii Nevada New Mexico West Virginia Louisiana Mississippi District of Columbia
Source: 8th Grade Reading 2009 National Assessment of Education Progress, Federal Education Budget Project, New America Foundation, febp.newamerica. net/k12/rankings/naep8read09.
Student Assessment) tests, which compare student performance in dozens of countries, in arguing that U.S. teachers are, by and large, doing a good job. But the Hoover Institutions Hanushek dismisses that claim as largely wrong. Its true, Hanushek wrote, that recent PISA tests find U.S. 15-year-olds above the developed-country average in reading, at the average in science, and below average in math, results that make it seem that perhaps we are not doing so badly. But thats a faulty conclusion, he argued, because reading is very difficult to assess accurately in the international tests. And reading scores have proven less important than math and science for both individual and national success. 14
Furthermore, international performance on these tests is very closely related to . . . economic growth, so that small score differences among countries may add up to big differences in economic well-being over time, Hanushek wrote. 15 In an article co-authored with two other scholars, one of them German, Hanushek argued that economic productivity depends on developing a highly qualified cadre of scientists, engineers, entrepreneurs and other professionals. International tests show, for example, that the United States produces fewer top scorers in math than countries it competes with, the scholars said. (See graphs, pp. 388 and 392.) 16 Furthermore, school failure is not confined to low-income neighborhoods,
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SCHOOL REFORM
Putting Teachers to the Effectiveness Test

Whether someone is capable or not is way more complex than it may seem.
arlier this year, the Bill & Melinda Gates Foundation one of the nations biggest funders of school-reform projects announced it would use the Memphis and Pittsburgh school districts, among others, as laboratories for developing teacher effectiveness programs using data on student achievement and teachers classroom behaviors. The idea is to figure out the connection between student achievement and actions of individual teachers and use the linkage to make high-stakes educational decisions decisions, for example, on which teachers to fire, which to reward with merit pay or other recognition and which teaching practices to replicate. 1 Microsoft cofounder Bill Gates told The Wall Street Journal that he will deem the project a success if 10 years from now . . . we have a very different personnel system thats encouraging effectiveness [in teaching] and our spending has contributed to that. He went on to say that education-improvement efforts have suffered because data on teacher and school performance havent been available. Contrast that situation, he said, to professions like long-jump or tackling people on a football field or hitting a baseball, where the average ability is so much higher today because theres this great feedback system, measurement system. 2 Many education analysts agree that traditional teacher-evaluation practices havent been of much use. A principal sitting in the back of the room checking off things on a list of recommended teacher behaviors made almost no sense, partly because its bound to involve many very subjective judgments, says Aaron Pallas, a professor of sociology and education at Columbia University in New York. Almost everybody does well on such evaluations, proving that the approach isnt very accurate or useful, he says. Nevertheless, Pallas maintains, while old-style evaluations provide almost no guidance about what to do to improve ones teaching, new data-oriented evaluation systems dont either at least so far. Yet, rejecting the data approach means sticking our heads in the sand, says Valerie E. Lee, an education professor at the University of Michigan in Ann Arbor. These things can be good so long as theyre done right, she says. That means including other measures besides standardized-test scores and being careful not to jump at untested teacher-evaluation approaches, she says. If developed and used judiciously, Lee says, a good system could control for individual differences in students, such as
attendance and home life, over which a teacher has no influence. And that, she says, would make for fairer teacher-to-teacher comparisons than those that simply look at student test scores. Donald B. Gratz, an education professor at Curry College in Milton, Mass., cited a bit of history in arguing that programs linking teacher merit pay and student test scores are ill-conceived. In the mid-1800s, British schools and teachers were paid on the basis of the results of student examinations, for reasons much like those cited by todays reformers, Gratz wrote. After about 30 years, however, the testing bureaucracy had burgeoned, cheating and cramming flourished and, with public opposition swelling dramatically, the practice was abandoned as a failure. 3 Basing pay on test scores poses another problem, too, Gratz says: Fewer than half of teachers teach subjects whose material is contained in standardized tests. Furthermore, Gratz notes, at grades six and up, students typically have six or seven different teachers during a given year. Who gets the credit or the blame for a students success or failure? he asks. It looks like a field day for labor lawyers. Offering merit pay for good teaching hasnt been shown to improve instruction either, Gratz argues. Instituting merit-pay programs assumes that teachers know what to do and just arent doing it, but thats likely not the case, he says. We do know a lot about how to teach, but teaching is an extremely complex task, and its not as easy as it may seem for teachers to change their behavior to incorporate research findings about student learning, for example, he says. Complicating matters is the fact that educators and education administrators ability to succeed relates to the situation in which theyre working, says Jeffrey Henig, a professor of education at Columbia. We have superintendents and principals, for example, who succeed in one school, then go somewhere else and fail, he notes. So the question of whether someone is capable or not is way more complex than it may seem on the surface. Marcia Clemmitt
1 Stephanie Banchero, Bill Gates Seeks Formula for Better Teachers, The Wall Street Journal online, March 22, 2011, http://online.wsj.com/article/SB1000 1424052748703858404576214593545938506.html. 2 Quoted in ibid. 3 Donald B. Gratz, The Problem with Performance Pay, Educational Leadership, November 2009, pp. 76-79.
Hanushek says in an interview. Some suburban schools seem to be great, he says, but its because of things parents are providing for their children,
which may mask the fact that the schools themselves do a poor job. But many education scholars say that while some individual schools are
in trouble, claims of widespread failure in American education are false. The Economic Policy Institutes Rothstein wrote that the National Assessment
390
of Educational Progress (NAEP), which tracks math and reading skills by following groups of students from fourth through 12th grades, shows that American students have improved substantially, in some cases phenomenally, over the past two decades. 17 Both black and white fourth- and eighth-graders have improved in math, the Economic Policy Institutes Rothstein wrote. Whats more, he said, African-American students have, at the fourth-, eighth- and 12th-grade levels, improved their math and reading skills the most, achieving a rate of progress that would be considered extraordinary in any area of social policy. 18 The Organisation for Economic Cooperation and Development (OECD), an international intergovernmental group that manages the PISA tests, also cites U.S. educational improvement. Since 2006, the United States has seen significant performance gains on international science assessments, mainly because Americas lowest-scoring students have been closing the gap that separates them from the top scorers, the OECD said. 19 Overall, the American public school system is pretty decent, says Katrina Bulkley, an associate professor of education at New Jerseys Montclair State University. Its just that in pockets, its served badly. Those pockets are mainly in urban and rural districts with the greatest poverty. 20 In low-poverty schools where fewer than 10 percent of students qualify for free or reduced-price lunches 15-year-old American students score above the international average in reading on the PISA assessment, according to Stephen Krashen, a professor emeritus of education at the University of Southern California. By contrast, in schools where low-income students make up more than 75 percent of enrollment, 15-year-old students scored second to last among the 34 OECD nations. 21
The U.S. education system doesnt provide enough classroom resources to overcome the disadvantages wrought by poverty, analysts from the OECD argue. The United States is one of only three OECD countries in which class sizes in high-poverty schools are routinely much larger than in schools in higher-income districts, said a recent report. As a result, disadvantaged American students are at risk of receiving fewer educational resources, including teacher time, than richer students, the analysts said. 22 Poverty imposes often-overlooked handicaps. I can guarantee you right now that at least 20 percent of our kids need glasses, said Ramn Gonzlez, principal of a public middle school in New York Citys South Bronx who struggles to get private funding for vision tests and glasses. Theyre in their classrooms right now, staring at blackboards with no idea what theyre looking at, said Gonzlez. You can have the best teachers, the best curriculum and the greatest after-school programs in the world, but if your kids cant see, what does it matter? 23 Educational reformers such as former New York City school Chancellor Joel Klein have said that to fix poverty you have to fix education, says Aaron Pallas, a professor of sociology and education at Columbia University. Schools can partner with others to help do this, Pallas says. But the idea that schools are going to transform poverty on their own is just giving schools too much credit. Many school reformers argue that Americans are losing jobs to oversees competition because the United States isnt adequately educating its students, says Donald B. Gratz, an education professor at Curry College in Milton, Mass. But the real reason is that American workers are expensive, he says. American workers productivity has soared in the past 20 years, demonstrating that graduating good employees is not the problem, he says.
At the same time, universities not the public schools are the real culprits in failing to prepare students to compete in the emerging globalized economy, some critics contend. The quality of teaching in higher education is worse than at the lower levels, terrible, but thats going unnoticed, says Richard Ingersoll, a professor of education and sociology at the University of Pennsylvania. Professors lead the ranks of those who want to impose [standardized-testbased] evaluations on K-12 teachers, but nobodys asking for similar tests to be used on them. The double standard is striking. But the higher-education scene is changing. In a study of 2,300 students at 24 U.S. universities, Richard Arum, a New York University professor of sociology and education, found that more than a third showed no improvement in critical thinking and writing skills after four years of college. 24 Their professors may soon find themselves on the test-score hot seat, Arum said. Beginning in 2016, the OECD will use the same test he used to compare college achievement internationally. Said Arum, The U.S. higher-education system has been living off its . . . reputation, but professors will increasingly be held accountable. 25 Are teachers unions a major barrier to improving schools? Many reform advocates say teachers unions are blocking change by being obsessed with job protection. They point to sensational cases, such as the infamous rubber rooms in which hundreds of New York City teachers deemed unfit for the classroom by school administrators sat for months, or even years, drawing their salaries, while their cases awaited due-process hearings. 26 But teacher advocates argue that, despite their flaws, such due-process protections are needed to shield teachers from politically motivated firings or firings based on prejudice. They also
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SCHOOL REFORM
Lower Math Scores Tied to Poverty
Students who qualify for free or reduced-price lunches tend to score lower in mathematics than those whose family income is high enough to make them ineligible for subsidized lunches. The correlation suggests poverty contributes to lower achievement. Average Mathematics Scores of 8th-Grade Students Eligible for Free or Reduced-price Lunches, 2007*
(Score)
600 500 400 300 200 100 0
557
543
514
482
465
508
Less than 10% 10-24.9%
25-49.9%
50-74.9%
75% or more U.S. average
(Percentage of Students Eligible for Subsidized Lunches) * Scores are based on an 800-point scale. Top-scoring countries average about 600. Source: Patrick Gonzales, et al., Highlights From Trends in International Mathematics and Science Study 2007: Mathematics and Science Achievement of U.S. Fourth- and Eighth-Grade Students in an International Context, National Center for Education Statistics, September 2009, nces.ed.gov/pubs2009/2009001.pdf.
say that reform proposals are drastic enough to warrant caution. Whats more, they point out that unions are not uniformly opposed to reforms. Because of union contracts, it takes two years, $200,000 and 15 percent of the principals total time to get one bad teacher out of the classroom, said Terry M. Moe, a senior fellow at the Hoover Institution. If we figure that maybe 5 percent of the teachers . . . are bad teachers nationwide, that means that 2.5 million kids are stuck . . . with teachers who arent teaching them anything, said Moe. The unions are largely responsible. 27 School systems in cities such as Chicago that have tried to pioneer substantial reforms have not been able to produce evidence confirming their value because unions and others have nipped them in the bud, said Hanushek. 28 In districts with strong unions, policy change takes longer, according to
Katharine O. Strunk, an assistant professor of education and policy at the University of Southern California, and Jason A. Grissom, an assistant professor of public affairs at the University of Missouri. Stronger unions are better able . . . to negotiate contracts that constrain districts flexibility in policy setting, they wrote. 29 Yet, unions arent the only ones who make it hard to implement change in schools, some analysts argue. They point to resistance by school boards to expanding charter schools, which compete with regular public schools but are exempt from many regulations public schools must follow. (See sidebar, p. 396.) Local school boards have been as great a roadblock, and in some cases even fiercer opponents of reforms, than unions, wrote PBS education reporter John Merrow. They go to court to keep charter schools from opening or expanding. Why? Its about money and control. 30
Blasting unions as driven solely by self-interest ignores facts, union supporters say. For one thing, there is no research . . . that correlates student achievement to collective bargaining rights, despite many reformers claims that ending bargaining rights will improve schools, said Kate McLaughlin, executive vice president of the United Teachers of Lowell, the AFT local in Lowell, Mass. Massachusetts students, for example, perform higher than anybody else in this country academically. Yet we have the strongest collective bargaining rights, she said. 31 Massachusetts teachers bargained for and won the right of every teacher to have a qualified and trained mentor during the first three years on the job to help them improve, a clear instance of unions working for students, McLaughlin said. 32 Even many teachers agree that the most commonly used method of teacher evaluation classroom evaluation by a school administration usually doesnt work well, and some unions are trying to lead development of new methods, says Gratz of Curry College. The Massachusetts Teachers Association (MTA) proposes basing evaluations on multiple measures that can be validated against one another. Under the plan, the MTA says, no high-stakes decisions such as firing or raising pay would be based solely on test scores or any other single factor, such as expert evaluation of teachers classroom and planning practices. Instead, if apparently good practices arent matched by good scores or vice versa, evaluators would be required to find out why before acting. 33 Union-management partnerships have fostered reform in places such as Toledo, Ohio, and Norfolk, Va., according to researchers led by David Lewin, a management professor at the University of California, Los Angeles. In those cities, administrators and unions emphasize professional development, teacher evaluation and mentoring to
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improve teacher quality. As an apparent result, school districts experience very low levels of voluntary teacher turnover, the group wrote. Unions and administrators collaboratively make difficult decisions to not retain ineffective teachers, they reported. 34 Countries whose students regularly surpass U.S. students on international tests without exception have strong unions, observed Dennis Van Roekel, president of the National Education Association (NEA). Teachers must implement administrators policies, so a collaborative environment matters, he said. 35 Green Dot, a nonprofit organization founded in 1999, operates 17 charter high schools and one middle school in high-poverty areas of Los Angeles and one high school in New York City, all unionized. Ive seen what happens to working people when they dont have . . . somebody fighting for them, said founder Steve Barr, a Democratic political activist and fundraiser who in 1990 cofounded the nonprofit, nonpartisan Rock the Vote group that aims to increase young peoples political participation. When disagreements surface, Barr recommends that administrators and unions ask, Is there 75 percent of this issue we all agree on? 36 The University of Pennsylvanias Ingersoll says that while the current reform movement has a punitive cast toward teachers that unions understandably resent, he doesnt absolve unions altogether. Many unions arent helping much, he says. It would be good for them to get out in front on defining what a good, medium and bad teacher is, but unions have done little of that. Sometimes I think the unions are their own worst enemies. Whatever the case, school management plays a huge role negative or positive in improving schools, says David Menefee-Libey, a professor of politics at Pomona College, in Claremont, Calif. There is very strong research support for five specific factors that underlie school improvement,
How U.S. Teacher Salaries Compare

Compared with salaries of other college-educated workers, U.S. teacher salaries are further behind than teacher salaries in many other countries. Ranking of Selected Countries in Teacher Pay Compared with Other College-educated Workers
Safe, orderly environments, and Principals who prioritize learning. 37 Is business-style competition a good model for improving schools? Evidence shows that market-style competition and performance-measurement statistics can improve education, reform advocates say. But skeptics argue that reshaping education to operate like a business is, at best, an unproven strategy that may in fact be contrary to the goals of schooling. Using data to figure out who is best at vital tasks such as educating teachers is crucial, says Gregory McGinity, managing director for education policy at the Los Angeles-based Broad Foundation, one of a small group of philanthropies making grants aimed at spurring education reforms and measuring their results. Rather than propping up all teacher-training programs, he says, governors and school superintendents must be more aggressive in using data to determine which schools of education are doing a good job and then put the dollars into the schools that provide the best teachers. Critics focus too much on proposals for firing unsuccessful teachers while ignoring plans to use merit pay and public recognition to reward teachers whose students improve, McGinity says. Some researchers have found data that links improved education to marketoriented changes, such as providing families with a wider choice of schools. For example, a school-choice program in Chicago produced modest improvement in on-time high-school graduation rates for students who exercised the option to switch from their assigned neighborhood schools, reported Douglas Lee Lauen, an assistant professor of public policy at the University of North Carolina, Chapel Hill. Students who were high achievers and those from neighborhoods with low poverty rates benefited most, Lauen found. 38 In a school system overhauled along market lines, schools would be
Spain Germany Australia Finland Sweden France England South Korea United States Italy
Source: Building a High-Quality Teaching Profession: Lessons From Around the World, Organisation for Economic Co-operation and Development, 2011, www2.ed.gov/about/inits/ ed/internationaled/background.pdf.
and, surprise! Those five factors frequently arent present in schools where low-income students are, he says. The five factors which were validated in research by Anthony S. Bryk, president of the Carnegie Foundation for the Advancement of Teaching are, according to Menefee-Libey: Support systems to guide teachers in what and how to teach; Good working conditions; Strong ties between the school and community;
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closed and replaced rather than tinkered with in hopes of improvement, wrote Andy Smarick, a visiting fellow at the conservative Thomas B. Fordham Institute, an education-policy think tank. In other words, schools would be treated like businesses those that fail or consistently produce losses are shuttered, and competition fills the gap. Once persistently low performing, the majority of schools will remain low performing despite being acted upon in innumerable ways, Smarick said. In what he calls an alarming record, only 14 percent of California schools restructured under the 2002 No Child Left Behind Act (NCLB), a major educationreform measure signed into law by President George W. Bush, achieved adequate yearly progress in the first year after the changes. The proportions for schools in Maryland (12 percent) and Ohio (9 percent) were even worse, Smarick wrote. 39 (Under NCLB, restructuring means firing and replacing a schools principal and most of its teachers and/or reopening the school as a charter school or under the management of a private school-management company or the state government.) 40 Frederick M. Hess, director of education policy at the conservative American Enterprise Institute, argues that the public-school system is too stodgy, rule-burdened and old-fashioned to improve. Furthermore, efforts to scale up and apply small improvements to many schools routinely fail, he says. Thus, he argues, instead of taking this 19th-century box called school and making it better, we ought to scrap the traditional school system altogether and think about how to help people get what they need. The way to do that, Hess says, is by harnessing entrepreneurs energy to provide students and teachers with education products and services geared to their individual needs, such as instructional computer programs based on new brain research, and creating virtual schools that students can attend online. But New York Universitys Ravitch said she saw no reason to believe that closing a school and opening a new one would necessarily produce superior results. In fact, she wrote, half of New York Citys 10 worst-performing schools on 2009 state math tests were new schools that had been opened to replace failing schools. 41 Firing teachers is also a dicey strategy, says Columbias Pallas. We know that new teachers, no matter where they come from, often are foundering for at least a few years, he says. A more realistic approach would be to focus on improving how we prepare teachers, both in school and once they get on the job, he contends. Do reformers think theres a huge army of new teachers to jump in to replace those who are pushed out? asks Menefee-Libey, of Pomona College. We havent seen them. Kenneth J. Saltman an associate professor of education at DePaul University in Chicago, worries that in the race to require schools to produce measurable outcomes, the value of intellectual curiosity, among other things, will be lost. What happens to the country when the curriculum gets narrowed to exclude skills like deep reading and detailed debate of issues because these skills arent easily testable? he asks. All of these reforms have been advanced as accomplishing really big stuff bringing low-income kids fully into the mainstream, where theyll achieve on a par with higher-income students, says Columbias Levin. But even studies that show positive effects of market-oriented strategies show quite small effects, he says. In Washington, D.C., schools recorded gains in test scores under the direction of Chancellor Michelle Rhee, a hardnosed reformer best known for firing hundreds of low-performing teachers before resigning possibly under pressure from a newly elected mayor a mere three years into her tenure. But as Levin says, reading scores that apparently soared in the second year of Rhees tenure disappeared in the third year. He adds, If youre only looking for tiny gains, then youve evaded the original argument for market-based reform.
BACKGROUND
Engine of Opportunity
odays school-reform debates are the latest in a long line of disputes over public education dating back to the 19th century. For two centuries, many have hoped that the public schools could help the United States break the historical mold of nations stratified by class. Americas excellent universal education promises that the rail-splitter . . . at 20 years of age may become the chief magistrate of 50 millions of free people before he is 50, declared William A. Mowry (1829-1917), a school administrator in Rhode Island and Massachusetts. 42 Expectations for what schools should accomplish have continuously risen. In 1870, only 2 percent of Americans graduated from high school, and 30 years later the rate was only 6.4 percent. 43 By 1940, however, fully half of American students graduated from high school, and in 1969 the graduation rate peaked at 77 percent. 44 Despite the seemingly much greater progress made by American schools than in the past, however, the 20th century also saw virtually constant calls for improvement and reform, according New York Universitys Ravitch. Notwithstanding the remarkable gains in American students educational attainment, it is impossible to find a period in the
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Chronology
1990s
Interest in school-reform grows, with limited results. Republicans push for expanded school choice; Democrats support developing compatible curriculum and nationwide learning standards. 1990 Wisconsin legislature establishes nations first school-voucher pilot program, to help 1,100 low-income Milwaukee students attend nonreligious private schools. . . . Princeton graduate Wendy Kopp turns her 1989 senior-thesis idea on eliminating education inequities into Teach for America, which recruits elite-college graduates to teach for two years in low-income districts. 1991 Minnesota enacts first charterschool law. 1992 First charter school opens in St. Paul, Minn. . . . California enacts second charter law. 1993 Tennessee adopts value-added assessment system to measure how much individual teachers increase or decrease students test scores. 1994 President Bill Clinton signs Goals 2000: Educate America Act, creating the National Education Standards and Improvement Council with authority to approve states academic standards; short-lived effort effectively ends when Republicans win control of the House in November. . . . Microsoft cofounder Bill Gates and his wife establish Bill & Melinda Gates Foundation, soon to become a major funder of school-reform projects. 1995 Teach for America alumni Michael Feinberg and David Levin launch Knowledge Is Power Program (KIPP) charter schools. . . . Ohio state legislators pilot a voucher program for low-income Cleveland students to use at either religious or nonreligious schools. . . . Illinois legislature hands control of Chicago public schools to Democratic Mayor Richard Daley. 1999 Florida establishes first statewide school voucher program.
chancellor. . . . New York City school Chancellor Joel Klein says he will fire principals of schools with lagging test scores. . . . Teach for America, which placed 500 teachers its first year, receives 18,000 applications for 2,900 positions. 2009 Citing disappointing results, Gates Foundation ends small-school program after awarding $2 billion in grants. . . . President Barack Obama announces Race to the Top grants for states to develop student-achievement databases, expand charter schools and improve teacher retention and recruitment. 2010 Using previously confidential school data, Los Angeles Times names L.A. elementary-school teachers who score high and low on value-added teacher assessments. . . . Fenty loses re-election after many residents protest Chancellor Rhees teacher and principal firings; Rhee resigns. . . . Gates Foundation will fund development of databases to assess teachers achievement. 2011 Newly elected Republican governors and legislators in states including Wisconsin, Ohio, Indiana, Idaho, New Jersey and Florida propose bills to lower costs and improve education by ending tenure, limiting teachers union collective bargaining rights, instituting merit pay and firing teachers based on student-achievement assessments. . . . USA Today reports possible evidence of cheating on standardized tests at D.C. schools that former Chancellor Rhee praised as successful examples of school reform.
2000s
No Child Left Behind law focuses attention on failing schools. Reformers seek to weed out teachers who dont raise students achievement scores and reward those who do. 2002 U.S. Supreme Court rules in favor of Ohios voucher program. . . . Broad Foundations first annual Broad Prize of $1 million, for an urban district that reduces achievement gaps for low-income students, goes to Houston. 2003 Gates Foundation awards millions to Boston and other cities to break large high schools into smaller units, based on the theory that a more personal environment aids learning. 2007 Newly elected Democratic Mayor Adrian Fenty of Washington is the latest official to wrest control of schools from the local school board; he appoints high-profile reformer Michelle Rhee as school
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Charter Schools Draw Mixed Reviews

Education experts say only a few have merit.
he nations 5,000 charter schools taxpayer-funded institutions freed of some rules that public schools must follow figure big in school reformers plans to improve American education. But education experts say that while some individual charter schools have merit, the charter movement as a whole is not a panacea for what ails the nations public-school system. That assessment has not discouraged education-reform advocates from embracing charter schools. So-called venture philanthropies such as the Bill & Melinda Gates Foundation generously fund charter school-management organizations, such as San Francisco-based Knowledge Is Power Program (KIPP). Moreover, the Obama administrations school-reform funding program, Race to the Top, encourages states to make their school laws friendlier to charter development. But information on how well charter schools perform is only gradually emerging. So far, the results are mixed, with some charter schools producing impressive learning results compared with demographically similar public schools, some lagging at the bottom on many measures and most ensconced somewhere in the middle of the pack on student achievement. Valerie E. Lee, a professor of education at the University of Michigan in Ann Arbor, says that only a few charter schools are really good at improving student achievement, while a few are absolutely awful, and the rest are no different from traditional public schools. Is this research solid enough to use as a basis for a large expansion of many of these schools? she asks. Id probably say, No. Charter schools are not covered by laws in some states that require a unionized teaching staff. Whats more, they do not have to follow state and school-district requirements on curriculum and mode of instruction. While most charter schools
operate similarly to traditional public schools, others use longer school days or avant-garde teaching methods, such as curricula built around music education or experiential learning. While reformers interest in charter schools has grown sharply in recent years, the charter-school movement isnt new. Minnesotas charter-school law, the first in the nation, is 20 years old this year. And with charter-school laws in effect in 40 states and the District of Columbia, the number of students enrolled in such schools tripled to 1.3 million between 2000 and 2008. 1 Some of the newest research shows that while few charter schools seem to substantially improve students test scores, they do produce much higher graduation rates in other words, they instill students with motivation, says John Witte, a professor of public affairs and political science at the University of Wisconsin, Madison. This parallels the old research on Catholic schools, showing that their students also were more likely than comparable public-school students to persist through graduation, Witte says. In a 2010 analysis of 22 of the 99 schools managed by the San Francisco-based KIPP charter school-management organization, most of the schools had positive, statistically significant and educationally substantial effects on students scores on state mathematics and reading tests. Furthermore, while KIPP schools serve smaller numbers of students for whom English is a second language and fewer special-education students, they also enroll a disproportionate share of low-income students compared to other local schools, analysts wrote. 2 A 2009 Stanford University study, meanwhile, found that charter-school students outperformed their public-school counterparts in Arkansas, Louisiana, Missouri, Denver and Chicago. But charter students significantly lagged in achievement in Arizona,
20th century in which education reformers, parents and the citizenry were satisfied with the schools, although few agreed about what should be done to improve them, she wrote. 45 Beginning in the 1970s, oil shocks, recessions and a globalizing economy shook Americans confidence in what had seemed an endlessly bright economic future. The schools came under new criticism as the United States found its world-beating school-completion rates surpassed by other nations. By the late 1980s, high-school graduation rates declined to just under 70 percent
and leveled off. In 2007, the rate stood at 68.8 percent. 46 Current reform projects aimed at retooling schools as an engine of economic prosperity trace their history at least as far back as 1957, when the Soviet Union launched Sputnik, the first spacecraft to orbit the earth, says Curry Colleges Gratz. Sputnik, he says, sparked worries that the United States might be losing its global technological superiority, and schools came under sharp criticism for not doing enough to prepare students in math and science. But he says efforts to blame the schools for the nations large economic and tech-
nological challenges have an air of unreality because schools cant possibly be held responsible for globalization, growing income inequality and other such factors that shape the economy. Even as Americans have had high hopes for schools, theyve been skeptical about teachers. Over the 20th century, national magazines regularly fretted about teacher hygiene, perversion, patriotism and competence, wrote Hess of the American Enterprise Institute. 47 The first U.S. teachers union, the Chicago Teachers Foundation, was established in 1897. 48 At the time, many teachers
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Florida, Minnesota, New Mexico, Ohio and Texas and performed on a par with public-school students in California, Georgia, North Carolina and the District of Columbia. Nationwide, 17 percent of charter schools improved students math achievement significantly, compared with public schools, but 37 percent lagged behind public schools on math achievement, according to the analysis. 3 Furthermore, while reformers push to close low-achieving public schools, researchers have also found that, like public schools, low-achieving charter schools are extremely difficult to shut down. Are bad schools immortal? lamented researchers at the conservative Fordham Institute in a 2010 analysis. In follow-up research on both public and charter schools found to be low achievers in 2003-2004, a foundation analyst found that 72 percent of the low-achieving charters were still operating and still bad five years later. (Eighty percent of low-achieving public schools in the study also remained in operation.) 4 The bottom line, say many scholars: Dont count on charter schools to drastically improve education. Originally, many hoped that the freedom granted to charter schools would allow them to develop new modes of instruction that other schools could adopt. But so far, theres not much evidence of charters serving as incubators for innovation, says Aaron Pallas, a professor of sociology and education at Columbia University in New York. I cant say theres one reform thats come out that can be widely adopted, he says. Some charter-management organizations such as KIPP have significantly raised student achievement after lengthening the school day and school year, he says. But when it comes to the curriculum and ways of teaching, theyre not looking much, if any, different from the public schools.
The number of charter schools is always going to be limited because they require entrepreneurial people at the center, says Wisconsins Witte. That means that the existence of even the best charter schools in low-income districts does not let the community off the hook for making its public schools as good as they can be, says Lee. She says many families lack the time or knowledge to compete for the limited number of slots typically available in local charter schools. Parents usually must participate in a lottery for available seats. Concern also exists among civil rights groups about the very large numbers of minority children enrolled in charter schools, which often dont have the same ties to the community or public accountability as do public schools, says Janelle Scott, an assistant professor of education at the University of California, Berkeley. Civil rights organizations and charter-management organizations havent been terribly involved with each other, she says. So theres some concern about whos shaping education for people of color. Marcia Clemmitt
1 Fast Facts, National Center for Education Statistics, U.S. Department of Education, http://nces.ed.gov/fastfacts/display.asp?id=30. 2 Christina Clark Tuttle, et al., Student Characteristics an Achievement in 22 KIPP Middle Schools, Mathematica Policy Research, Inc., June 2010, www.mathe matica-mpr.com/publications/pdfs/education/kipp_fnlrpt.pdf. 3 Multiple Choice: Charter School Performance in 16 States, CREDO, Stanford University, 2009, http://credo.stanford.edu/reports/MULTIPLE_CHOICE_ CREDO.pdf. 4 David A. Stuit, Are Bad Schools Immortal? Fordham Institute, December 2010, www.edexcellence.net/publications-issues/publications/are-bad-schoolsimmortal.html.
faced unfair treatment, wrote Ravitch. The New York City Board of Education fired female teachers if they married and, after teachers successfully fought for the right to wed, it fired those who became pregnant. As late as the mid-20th century, in Texas, a right to work state where teachers unions have had little success in organizing and thus enjoy little clout, an ultraconservative group called the Minute Women . . . would drop in unannounced to observe classes . . . to find out whether teachers expressed any unacceptable political opinions, such as support for desegregation, Ravitch wrote. 49
Organized teachers won passage of the first tenure law in 1909, in New Jersey, to protect against firings based on race, gender or unpopular political opinions or to make way for cronies of school management. 50
Public and Private

s early as the mid-19th century, charities used private money to try to reshape the nations public schools. After the Civil War, abolitionist charity groups who feared that Southern states would not provide education to freed
slaves took on the job themselves, notes Janelle Scott, an assistant professor of education at the University of California, Berkeley. For example, the American Missionary Association, a nondenominational Protestant group, opened more than 500 schools for freed slaves. 51 Many private fortunes have helped shape U.S. education. The Carnegie Foundation for the Advancement of Teaching, established in 1905 by industrialist Andrew Carnegie, helped found the Educational Testing Service (ETS), for example. The ETS developed and to this day manages standardized tests that include the SAT. In addition,
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Teaching Is a Prestige Profession in Some Countries

There are few occupations with higher status in Finland.
odays U.S. school reformers, alarmed at what they see as widespread failure in the classroom, tend to focus on removing bad teachers, reducing the collective bargaining power of teacher unions and reducing the authority of teachers to stray from standardized curricula. But in some other countries where students outpace American pupils on international tests, the focus is on giving teachers greater autonomy and elevating them to a professional status often reserved for lawyers and doctors. Finland has raised the social status of its teachers to a level where there are few occupations with higher status, states a report prepared for an international education summit organized by U.S. Education Secretary Arne Duncan in March. 1 Test scores in Finland were below the international average 25 years ago but have recently risen to the top of the global rankings. Finland focuses on bringing the best students into teaching and ensuring that the job confers respect in society, according to the report, prepared by the Organisation for Economic Cooperation and Development (OECD). In contrast to the United States, where elementary-school teachers, especially, come from the lower half of college classes, top students in Finland battle for primary-school teaching spots. In 2010, for example, over 6,600 applicants competed for 660 available slots in primaryschool preparation programs . . ., making teaching one of the most sought-after professions, the OECD said. 2
Finnish teachers unions play a key role in shaping education policy, too. Its a totally different situation in Finland than in the United States when it comes to the relationship between unions and school administrators, said Henna Virkunnen, the countrys minister of education. Our teachers union has been one of the main partners We are working very much together with the union, she said. Nearly all of the teachers are members. I think we dont have big differences in our thinking. 3 Virkunnen acknowledged that comparing education policies is not easy. Schooling is very much tied to a countrys own history and society, so we cant take one system from another country and put it somewhere else, she said. Still, national differences aside, paying close attention to teachers pre-service and in-service training, developing teachers who are experts of their own work, respecting their professional autonomy and knowledge and providing good workplace conditions are key, Virkunnen said. 4 Singapore also assigns high status to the teaching profession. It carefully selects young people from the top onethird of the secondary-school graduating class whom the government is especially interested in attracting to teaching and offers them a monthly stipend, while still in school, the OECD said. The stipend, it said, is competitive with salaries for new graduates in other professional fields. In exchange, recipients must make a three-year commitment to teaching.
the Carnegie Foundation led the fight for federal Pell grants for low-income college students. 52 In 1955, Milton Friedman, a University of Chicago libertarian economist and 1976 Nobel Prize winner, introduced a new twist to the idea of linking the public and private sectors on schooling. As part of his overarching theory that all public-sector enterprises overspend and underperform because they are not disciplined by market supply and demand, Friedman proposed that public funds should be directed to private schools. The government should fund education but should not, in general, run schools, because government, by nature inefficient, should run as few institutions as possible, Friedman theorized. His plan would offer parents
vouchers equal to the estimated cost of . . . a government school to send children to private schools. Such a scheme would permit competition to develop and not least . . . , make the salaries of school teachers responsive to market forces, Friedman wrote. 53 Little noticed at first, the idea was promoted in the 1980s by a burgeoning network of conservative think tanks such as the American Enterprise Institute. 54
The New Reformers

wealth boom in the 1990s built fortunes for entrepreneurs in such fields as electronics and finance and gave rise to a new breed of school reformers, typified by Gates, the Microsoft
cofounder, and Broad, who made his first fortune in Detroit real estate development before turning to insurance. This group has been dubbed venture philanthropists for their efforts to fuse business methods with their social activism. Venture philanthropists critique of traditional philanthropy is that its been far too incremental in achieving goals, says the University of Californias Scott. As a result, while old-style foundations generally announced broad funding areas, then solicited grant applications from experts in those fields, venture philanthropists often dont ask you to apply. Instead, they seek you out, if youre doing specific work that they support, because they tend to believe they already know what works in a given field, Scott says. But the venture philanthropists ideas dont always pan out in practice.
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teacher unions that work in They get a choice of catandem with local and nationreer paths: becoming masal authorities to boost student ter instructors who train achievement, they said. These others, curriculum and rehigh-performing nations illussearch specialists or future trate how tough-minded coladministrators. 5 laboration more often leads to Some have noted an educational progress than irony in the fact that Edutough-minded confrontation. 6 cation Secretary Duncan not only organized the in Marcia Clemmitt ternational summit but coFinland focuses on bringing the best students into teaching. authored a newspaper col1 Building a High-Quality Teaching Above, a second-grade class in Vaasa. umn with the top official of Profession: Lessons from Around the the events host: Fred van World, Organisation for Economic Leeuwen, general secretary Co-operation and Development, 2011, of 30-million-member Education International, the largest inter- p. 11, www.oecd.org/document/53/0,3746,en_21571361_44315115_47386549_ 1_1_1_1,00.html. national teachers union. 2 Ibid. The Obama administration has vocally supported many of 3 Quoted in Justin Snider, An Interview With Henna Virkunnen, Finlands the principles of the U.S. school-reform movement, including Minister of Education, The Hechinger Report, March 16, 2011, http://hechingerthe championing of charter schools, most of which employ report.org/content/an-interview-with-henna-virkkunen-finlands-minister-ofeducation_5458. nonunionized teachers and are intended to compete with tra- 4 Quoted in ibid. ditional public schools. 5 Building a High-Quality Teaching Profession, op. cit., p. 9. Yet Duncan and his co-authors wrote that increasing 6 Arne Duncan, Angel Gurra and Fred van Leeuwen, Uncommon Wisdom teacher autonomy is vital for improving the schools. Con- on Teaching, Dept. of Education website, March 16, 2011, www.ed.gov/ trary to arguments of many current U.S. school reformers, blog/2011/03/uncommon-wisdom-on-teaching. many of the worlds top-performing nations have strong
For example, one of the Gates Foundations early initiatives running from 2001 to 2009 funded the breakup of large high schools into small ones of a few hundred pupils each, on the theory that better education occurred in a more personal environment, Scott says. At the time, research showed that medium-sized high schools of 500 to 1,200 students got the best results. But Gates poured money into tiny schools anyway. Then, after several years, when the small schools didnt produce improvement, the foundation quietly dropped the program, says Scott. One person involved with the initiative told Scott that researchers had told us that medium-sized, rather than very small, high schools showed the best results, but we didnt listen, she says.
On the positive side, the episode demonstrates that the Gates Foundation, at least, is willing to learn from poor results, says Scott. But it also illustrates the potential danger of privately funding a crucial public resource, she says. What happens to schools created with private dollars when that money is withdrawn? Should taxpayers support them? Scott asks. Still, venture philanthropists are gaining power as they support mainly market-oriented school reforms in concert with like-minded politicians, such as New York City Mayor Michael Bloomberg and Chicago Mayor Richard Daley. Also working with the philanthropists are education entrepreneurs such as Wendy Kopp, the Princeton graduate who founded Teach for America, a nonprofit group that has placed thousands of young
graduates of elite colleges into temporary teaching slots in urban schools. Scott says venture philanthropists have followed the lead of conservative funders who in the 1970s began to build a network of professors, academic research centers and think tanks that today buttresses the powerful conservative movement. By funding multiple groups and individuals and providing multiyear funding to cover operating costs, rather than making single-project grants, the venture philanthropists have formed a coherent philosophical network with lasting power, she says. Theres power because people arent working at cross-purposes. In recent years, joint grant making by education funders has increased, says Sarah Reckhow, an assistant professor of education at Michigan State University
AFP/Getty Images/Olivier Morin
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in East Lansing. While many cities and organizations get no venture-philanthropy cash, those that do including the New York City and Los Angeles school districts and groups such as Teach for America get a lot, from multiple sources, which helps them make largescale, high-profile changes, Reckhow says. Historically, education politics has been local, with reformers focusing on change in a single district, says Jeffrey Henig, a professor of political science and education at Columbia University. Todays coalition is focused on changing the national system, such as by persuading the federal government to add public dollars for programs that echo foundation initiatives. I dont think this would have been possible without the growing role that states and the federal government have played in education policy, Henig says. (Beginning in the 1970s, most states began creating statewide school-funding formulas to replace purely local ones. The 2002 No Child Left Behind law helped increase federal involvement in assessing student achievement.) Compared to a school systems annual budget, philanthropy dollars are a drop in the bucket, says Reckhow. However, since most school-district money is tied up in salaries, the funding actually provides powerful leverage because its nearly the only money available for new initiatives. Wealthy investment-fund managers who pump money into school-reform efforts such as charter schools honestly think theyre doing good. Plus, its a very strong goodwill builder for an industry whose reputation has suffered from the financial crash and recession, says Columbias Levin. A few million dollars is a rounding error for a wealthy investor. But it is huge for a school. Such funding, Levin says, can make a school highly influential by providing extra resources that may help achieve better results and allow adoption of interesting programs that gain public and media attention.
Education Entrepreneurs
onservative reformers and venture philanthropists tend to stress different aspects of and reasons for school reform, says Montclair States Bulkley. Conservatives, who tend to be skeptical of public systems of any kind, often argue that reforms greatest value is to offer families free choice and to create a market where none existed, she says. By contrast, she continues, venture philanthropists tend to believe in public purposes for schools and often stress the importance of building a public system better equipped to produce a skilled workforce. The Broad Foundation, for example, awards an annual prize to districts that improve disadvantaged students achievement, citing as a key motivation the need to restore the publics confidence in . . . public schools by highlighting success. 55 With their focus on freedom and individual choice, many conservative reformers are as supportive of small oneof-a-kind charter schools as they are of multischool charter-school groups, says Bulkley. But venture philanthropists have their DNA in entrepreneurship having launched small companies that grew into giants and this background translates into a strong interest among venture philanthropists in socalled charter-management organizations that seek to run many individual schools based on a single school-management philosophy, Bulkley says. Venture philanthropy dollars have spurred development of numerous entrepreneurial groups. New Leaders for New Schools is a New York Citybased private training program for aspiring urban-school principals. The Brooklyn-based New Teacher Project founded in 1997 by Rhee before she became D.C. school chancellor aims to change school practices to allow more hiring of teachers without traditional certifications. 56
Venture philanthropists favor working with cities where mayors, not school boards, are in control. Both Chicago and New York, where schools have been under mayor control since 1995 and 2002, respectively, receive substantial private funding. 57 Old-style industrial-based foundations tended to work within institutional constraints, taking local politics into account, for example, Henig says. But Silicon Valley-influenced philanthropists inhabit a fast-moving world. I do understand the frustration that leads them to prefer the one-stop shop of mayoral control, Henig says. Why would you want to wait two generations to implement change incrementally, in part because its hard to get top-heavy bureaucracies to move? Nevertheless, incremental change that seeks widespread buy-in is probably the best path to lasting improvement, he suggests.
CURRENT SITUATION
Budget Battles
everal newly elected conservative governors are bringing school reform to the front pages this spring. Recession-triggered budget problems in such states as Wisconsin, Ohio, Idaho, Florida and New Jersey have opened the way for battles over teachers benefits and unions cherished right to bargain collectively. Conservative reformers, especially, have welcomed the reform efforts. Except for one year during the Great Depression, public-school funding has gone up every year for 100 years, says the Hoover Institutions Hanushek. Much of the money went into salaries and retirement plans for teachers and for reContinued on p. 402
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At Issue:
Has spending on public schools risen too high?
yes
POLICY ANALYST, CATO INSTITUTE

WRITTEN FOR CQ RESEARCHER, APRIL 2011
ADAM B. SCHAEFFER
RESEARCH ASSOCIATE, ECONOMIC POLICY INSTITUTE

RICHARD ROTHSTEIN
eal, per-pupil spending, adjusted for inflation, has more than doubled over 40 years, while test scores have remained flat at the end of high school. Thats around $12,000 or $13,000 per student every year. Weve spent more every decade with no return in student performance. Thats not investment defined as getting a positive return on your money. Its just spending. This poses a particularly difficult problem for state and local governments who bear most of the burden. State and local education spending consumes 46 percent of all tax revenue, or two-and-a-half times whats spent on Medicaid/CHIP. Its also taking a bigger share of tax revenue. State education spending as a share of tax revenue has increased 90 percent in two decades. Its increased over 70 percent as a share of local revenue. Its time to replace the spending model of education policy with an investment model. We can make public education a lot more efficient. The number of public school staff per student increased 70 percent since 1970; cutting back on unnecessary personnel will bring significant savings. But school choice, particularly through education tax credits, is the best way to invest in education. Its a proven way to improve public school performance, save money and increase choice. Its an effective, efficient investment in education. Choice is the most intensively studied education reform there is, and the verdict is clear: It works. Decades of evidence and dozens of studies provide proof. It works in Chile and Sweden, and it works in Florida and Wisconsin and a dozen other states. The vast majority of studies analyzing private choice policies demonstrate positive impacts on participants and children who remain in public schools. None have shown negative impacts. And choice programs are far less costly to taxpayers. According to a 2008 fiscal analysis by the state Office of Program Policy Analysis and Government Accountability in Florida, the state gained $1.49 in savings for every $1 it lost in tax revenue to its education tax credit program. David Figlio, a Northwestern University researcher and official analyst of the program, found it significantly boosted performance in Floridas public schools. Citizens and businesses want to invest directly in our education system. We should encourage them to do so. Lets stop just spending money on education. Lets really start investing in it.
no
yes no
s
tates education spending varies widely, even after adjustment for purchasing-power differences. Real costs also vary, because disadvantaged students need more support than those whose early-childhood, after-school, home-literacy and cultural experiences supplement their schooling. For decades, spending nationwide increased, largely for children with disabilities. Their individualized attention accounts for much of the staff increases. Nonetheless, achievement for regular students also improved, substantially so for the disadvantaged: On the gold standard National Assessment of Educational Progress, black 12th-graders gained nearly two-thirds of a standard deviation in math and reading since 1980. Some states clearly spend too little. Others may spend more than needed for graduates workplace success, because wealthier taxpayers choose to provide more fulfilling (and expensive) experiences for their children. Mississippi spends less per pupil about $8,500 than almost any state. Its percentage of lowincome children is higher, test scores are lower and capacity to fund education (per-capita personal income) is less. Massachusetts spends more about $14,500 with proportionally fewer low-income children than elsewhere. Its test scores are highest of all. Its fiscal capacity is greater than most states. Then there is California, spending less about $10,000 than most, with many low-income children, low scores and high income. It chooses not to tax itself to educate disadvantaged youth well, spending instead on prisons for those who fail. More money should not be spent unwisely, but Mississippi cannot spend whats needed without greater federal aid. California should spend more, but with greater state effort. Both should invest in early childhood. Children from less literate homes have worse verbal skills than middle-class children by age 3. This early gap cannot be overcome by more spending later, but better schools can sustain benefits from early investments. Well-qualified (and better-paid) teachers in smaller primary-grade classes for low-income children would be wise. Massachusetts should also invest more in early childhood for disadvantaged students, but it need not boost average spending. Wealthy taxpayers should contribute more, choosing whether to do so by reducing suburban expenditures. Today, federal aid exacerbates inequality. Subsidies for lowincome students are proportional to existing state spending, so Massachusetts inexcusably gets more federal dollars per child than Mississippi. The question is not whether we overspend but whether we spend on the right programs for children most in need. The answer is no.
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SCHOOL REFORM
ducing class sizes, neither of which improves education, he argues. The budget battles provide an entry point for ensuring accountability for every dollar and every child, wrote former Washington school chancellor Rhee, who continues to enjoy heavy venturephilanthropy backing. To save money, wrote Rhee, districts must shift new employees from defined-benefit pension programs traditional pensions that promise retired workers a specific benefit level for the rest of their lives to portable, defined-contribution plans whose payout depends on investment returns. And because the budget crisis inevitably requires layoffs, she said, states can take the opportunity to begin basing firing decisions on teachers effectiveness, not on their seniority, as most districts do today. 58 In March, Florida Republican Gov. Rick Scott, who has hired Rhee as a consultant, signed legislation to gradually eliminate tenure and base firings and pay raises on teachers performance in raising student test scores. 59 In April, Republican Gov. C.L. Butch Otter of Idaho signed a measure ending tenure for new teachers, instituting merit pay and banning unions from bargaining over workload and class size. 60 There have also been lots of statelaw proposals for school choice this year, says John Witte, a professor of public affairs and political science at the University of Wisconsin, Madison. In the past, Republican lawmakers have pushed bills to bolster charter schools but havent often sought voucher expansions, partly because their mostly suburban constituents like their local schools and wouldnt seek vouchers. But now something on the right has changed, and voucher-expansion proposals are on the table all around the country, Witte says. Wisconsins Gov. Walker has proposed repealing enrollment caps both for vouchers and for the number of students who can attend so-called virtual or online
schools. He also wants to phase out income limits for voucher eligibility. 61 Thats a huge change because voucher programs have previously assisted only the poor, says Witte. Walker also proposes ending a requirement that students who use vouchers at private and online schools take state achievement tests. But that would be contrary to the stated principles of some venture-philanthropy reformers. If youre going to have a system of choice, then a common set of learning and achievement standards preferably nationwide is crucial for all schools, not just public ones, says Broad Foundation policy director McGinity. Otherwise, youre not going to have a transparent market in which people can make comparisons. Ultimately, the standards would include both test scores and comparative information to help parents choose a school with the best arts program, for example, he says. Such developments cast doubt on just how much reforms backed by conservatives and venture philanthropists actually coincide, says Columbias Henig. Theres also cleavage on how much money should be spent, he says. Venture philanthropists have learned from charters and cities with mayoral control that its expensive to do this, while conservatives stress cutting education spending.
Racing to the Top?

he Obama administration has worked in concert with reformers since taking office in 2009. Obamas Secretary of Education, Arne Duncan, was CEO of Chicagos public schools and gained reformers favor through his strategy of closing down chronically low-performing schools and reopening them with new staff. 62 Under Obamas Race to the Top program, states have pledged to: Adopt statewide learning standards and assessments;
Build data systems to measure achievement; Recruit, retain and reward effective teachers and principals through measures such as merit pay and retention bonuses; Foster education innovation through such means as laws encouraging charter-school development; and Focus on turning around the lowest-performing schools. Last year, 11 states and the District of Columbia won $4.35 billion in Race to the Top grants, including $350 million to support joint work among states on student assessment. 63 This year, states are pushing forward with these projects. For example, Rhode Island is field-testing a teacher-evaluation program in two districts and a charter school. Delaware will pilot in-school expert coaches to help staff members analyze achievement data and adjust instruction to individual needs. Massachusetts will establish career ladders to encourage teachers to remain in the profession. 64 Yet, some reformers have hit bumps in the road in recent months, at least partly because of public skepticism. Last October, Rhee resigned from her post in Washington after thenmayor Adrian Fenty, who appointed her in 2007, lost his reelection bid, in large part because many city residents were fed up with Rhee. Some teachers and parents complained, for example, that teacher firings Rhee claimed she based on merit actually occurred before her new teacherassessment plan had even gone into operation. 65 Much of Rhees impatience was merited, says Columbias Levin. The idea that the school system is an employment agency for my friends is a bad feature of many districts, including Washington, and needs changing, he says. But I would try to build community support before doing that, he says. Rhee has a big ego, and she instead took pride in her tactics.
402
Levin and others also say that Rhees so-called IMPACT teacher-evaluation plan has merit. The plan is a useful, multifaceted attempt to produce an overall picture of teachers, including not just test scores but evaluations by master teachers, who would seek to recognize good teacher practices both in the classroom and in planning lessons, says Columbias Pallas. Ultimately, external funders helped cause the mischief in Washington, says Levin. Through their venture-philanthropy ties, Rhee and Fenty were getting national attention, funding and chances to air their views, so they took their eye off the local population and viewed funders as their constituency, Levin says. They failed to strike the needed balance between getting external funding and then using it to build capacity for improvement from within, he says. Earlier this month, New York City Mayor Bloombergs hand-picked chancellor, Cathleen P. Black, resigned under pressure after less than four months on the job. Black had been a top publishing executive, heading both Hearst Magazines (publisher of Cosmopolitan and Popular Mechanics, among others) and USA Today. But she had no education-management or teaching experience. 66 Black quickly ran afoul of teachers and parents by making what many considered insensitive jokes about school problems. Could we just have some birth control for a while? It could really help us all out a lot, Black quipped at a parents meeting to discuss school overcrowding. 67 Those kinds of comments show a lack of understanding of what parents are going through, said one parent. 68 But McGinity, of the Broad Foundation, argues that Blacks ouster actually makes a great case for one school-management principle reformers consider key mayoral control. Unlike in districts where schoolboard politics dominate, Black and Bloomberg could see that the situa-
tion wasnt working and made a change quickly before problems worsened, he points out.
OUTLOOK
Common Standards
merican education will change in the coming decades, but the shape of whats to come is hard to discern. Some reform critics fear that private interests could dismantle the public schools Americans once prized. The United States has long had a two-tier system, with schools in higherincome areas having many more resources, observes DePauls Saltman. But what youre seeing now is a new kind of two-tier system being created, in which schools in the bottom tier will be privately managed, he predicts. In poor city and rural areas, reform advocates are quickly turning public distrust into short-term profitmaking industries that will seek some quick bucks from taxpayer-supported schools and get out, he warns. Most Americans dont realize how far along this privatization agenda has gone. But with many Democratic politicians now agreeing that public schools need to compete with the private sector, privatization has largely won, he says. Theres little doubt that databases tracking student performance will be established everywhere fairly soon. But while unions fear that teachers will lose their job security to overly simplified interpretation of standardized test scores, even some reform critics see possible long-term upsides to data tracking. Databases now under construction will include school data only, but down the line databases from multiple socialservice agencies might link information about health, poverty, homelessness and more to school records, muses Colum-
bias Henig. Such data could be revolutionary in revealing all factors that contribute to students achievement, or lack thereof, and help propel holistic solutions, he says. With Republicans and many Democrats now backing school choice, the national learning standards some have recommended for decades will appear at last, some analysts say. 69 Prior to 2002s No Child Left Behind law, everybody said they met standards because they could make up their own rules, says Kenneth K. Wong, an education professor at Brown University. But as assessments increasingly become comparable across state lines, this convenient mode of hiding failure is evaporating, he says. In addition, while accountability requirements so far apply only to public schools, with nearly 5,000 charter schools now in operation, we must think about how we know they are meeting standards, too, Wong says. If we are going to move toward school choice, the nation must confront the highly contentious question of whether were going to have something like a national examination, he says. My hope is that there will soon be a strong set of core [learning] standards with a common assessment for all schools nationwide, says the Broad Foundations McGinity. Expansion of school choice to allow out-of-district enrollments and virtual schools will accelerate a revolutionary trend delinking schooling from ones neighborhood, says Wisconsins Witte. For a hundred years people went to their neighborhood schools, and 90 percent still do. But until 20 years ago, everybody did, he says. Ultimately, this change will affect everything in schools, he says. For example, We govern public schools through an elected school board, so should open-enrollment people [from outof-district] also have seats on the board? Before the nation simply lets such large changes happen, however, I think people need to ask themselves, What are our goals for our children? says Curry Colleges Gratz.
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SCHOOL REFORM
Notes
Jason Felch, Jason Song and Doug Smith, Whos Teaching L.A.s Kids? Los Angeles Times, Aug. 14, 2010, www.latimes.com/news/ local/la-me-teachers-value-20100815,0,258862, full.story, p. A1. 2 Public elementary and secondary schools by type of school, Digest of Education Statistics, National Center for Education Statistics, http://nces.ed.gov/programs/digest/d09/tables/ dt09_093.asp. 3 Eric A. Hanushek, Feeling Too Good About Our Schools, Education Next website, Jan. 18, 2011, http://educationnext.org. 4 Bill Gates, How Teachers Development Could Revolutionize Our Schools, The Washington Post, Feb. 28, 2011, www.washingtonpost.com. 5 Matthew Di Carlo, Teachers Matter, But So Do Words, Shanker blog, July 14, 2010, http://shankerblog.org/?p=74. 6 Richard Rothstein, Fact-Challenged Policy, Economic Policy Institute website, March 8, 2011, www.epi.org/analysis_and_opinion/entry/factchallenged_policy. 7 Employer Costs for Employee Compensation, press release, Bureau of Labor Statistics, March 9, 2011, www.bls.gov/news.release/ecec.nr0.htm. 8 Fact-Checking School Choice Research, The Center for Education Reform, October 2010, www.edreform.com/_upload/No_More_Wait ing_School_Choice.pdf. 9 For background, see Kenneth Jost, PublicEmployee Unions, CQ Researcher, April 8, 2011, pp. 313-336. 10 Jason Song and Jason Felch, L.A. Unified Releases School Ratings Using Value-Added Method, Los Angeles Times, April 12, 2011, www.latimes.com, p. A1. 11 Ibid. 12 Diane Ravitch and Deborah Meier, Bridging Differences, Education Week blogs, March 29, 2011, http://blogs.edweek.org.
1
Education, Leadership for America, Heritage Foundation website, www.heritage.org/Initia tives/Education. 14 Hanushek, op. cit. 15 Ibid. 16 Eric A. Hanushek, Paul E. Peterson and Ludger Woessmann, Teaching Math to the Talented, Education Next, Winter 2011, http:// educationnext.org. Peterson is a government professor at Harvard University; Woessmann is an economics professor at the University of Munich. 17 Rothstein, op. cit. 18 Ibid. 19 Strong Performers and Successful Reformers in Education: Lessons from PISA for the United States, Organisation for Economic Cooperation and Development, 2011, p. 26, www. oecd.org/dataoecd/32/50/46623978.pdf. 20 For background, see Marcia Clemmitt, Fixing Urban Schools, CQ Researcher, April 27, 2007 (update, Aug. 5, 2010), pp. 361-384. 21 Cited in Richard Kahlenberg, Debating Michelle Rhee, Taking Note blog, Century Foundation, Feb. 25, 2011, http://takingnote.tcf.org/ 2011/02/debating-michelle-rhee.html. 22 Strong Performers and Successful Reformers in Education, op. cit., p. 28. 23 Quoted in Jonathan Mahler, The Fragile Success of School Reform in the Bronx, The New York Times Magazine, April 6, 2011, p. 34. See also Joe Nocera, The Limits Of School Reform, The New York Times, April 26, 2011, p. A23. 24 A Lack of Rigor Leaves Students Adrift in College, NPR website, Feb. 9, 2011, www.npr.org. 25 Quoted in Timothy J. Farrell, Arum Research Calls Out Limited Learning on College Campuses, New York University blogs, March 25, 2010, http://blogs.nyu.edu/blogs/dbw1/ata glance/2010/03/arum_research_calls_out_limite. html. 26 For background, see Jennifer Medina, Teachers Set Deal with City on Discipline Process, The New York Times, April 15, 2010, www.ny
13
About the Author

Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Gridlock in Washington and Health-Care Reform.
times.com/2010/04/16/nyregion/16rubber.html. Dont Blame Teachers Unions for our Failing Schools, debate transcript, Intelligence Squared U.S., March 16, 2010, http://intelligencesquaredus. org/wp-content/uploads/Teachers-Unions-031610. pdf. 28 Quoted in Carlo Rotella, Class Warrior, The New Yorker, Feb. 1, 2010, p. 28. 29 Katharine O. Strunk and Jason A. Grissom, Do Strong Unions Shape District Policies?: Collective Bargaining, Teacher Contract Restrictiveness, and the Political Power of Teachers Unions, Educational Evaluation and Policy Analysis, December 2010, p. 389. 30 John Merrow, The Road Not Traveled: Tracking Charter Schools Movement, Taking Note blog, Dec.1, 2009, http://takingnote.learning matters.tv. 31 Dont Blame Teachers Unions for our Failing Schools, op. cit. 32 Ibid. 33 A Stronger Evaluation System, Massachusetts Teachers Association, March 22, 2011, http://mass teacher.org/news/archive/2011/03-22.aspx; MTAs Reinventing Educator Evaluation: Answers to Frequently Asked Questions, www.seateachers.com/ HTMLobj-1742/MTAReinventing_EducatorEval120 11.pdf. 34 David Lewin, et al., Getting It Right: Empirical Evidence and Policy Implications from Research on Public-Sector Unionism and Collective Bargaining, Employment Policy Research Network, March 16, 2011, www.employ mentpolicy.org/sites/www.employmentpolicy. org/files/EPRN%20PS%20draft%203%2016%2011 %20PM%20FINALtk-ml4%20edits.pdf. 35 Quoted in Liana Heitin, 16 Nations Meet to Discuss Improving Teaching, Education Week blogs, March 17, 2011, http://blogs.eduweek.org. 36 Quoted in Bill Turque, Green Dots Barr: Unions Part of Solution, The Washington Post, Sept. 8, 2009, http://voices.washingtonpost.com. 37 For background, see Anthony S. Bryk, Organizing Schools for Improvement, Phi Delta Kappan, April 2010, pp. 23-30. 38 Douglas Lee Lauen, To Choose or Not to Choose: High School Choice and Graduation in Chicago, Educational Evaluation and Policy Analysis, September 2009, p. 179. 39 Andy Smarick, The Turnaround Fallacy, Education Next, Winter 2010, http://education next.org/the-turnaround-fallacy; For background, see Kenneth Jost, Revising No Child Left Behind, CQ Researcher, April 16, 2010, pp. 337-360. 40 School Restructuring Options Under No Child Left Behind, Education.com, www.edu
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cation.com/reference/article/Ref_School_Re structuring. 41 Diane Ravitch, The Death and Life of the Great American School System (2010), pp. 86-87. 42 Quoted in Diane Ravitch, Left Back: A Century of Battles Over School Reform (2000), p. 19. 43 Christopher B. Swanson, U.S. Graduation Rate Continues Decline, Education Week online, June 2, 2010, www.edweek.org/ew/articles/ 2010/06/10/34swanson.h29.html?qs=historical+ graduation+rates. 44 Ibid. 45 Ravitch, The Death and Life, op. cit., p. 13. 46 Swanson, op. cit. 47 Frederick M. Hess, A Policy Debate, Not an Attack, Room for Debate blogs, The New York Times online, March 6, 2011, www.nytimes.com. 48 Chicago Teachers Federation, Encyclopedia of Chicago, www.encyclopedia.chicagohistory. org/pages/271.html. 49 Ravitch, The Death and Life, op. cit., p. 174. 50 Trip Gabriel and Sam Dillon, Teacher Tenure Targeted by GOP Governors, The New York Times, Jan. 31, 2011, p. 1, www.nytimes.com/ 2011/02/01/us/01tenure.html. 51 American Missionary Association, Encyclopedia Britannica online, 2011, www.britannica. com/EBchecked/topic/19996/American-Mission ary-Association. 52 About Carnegie, Carnegie Foundation for the Advancement of Teaching website, www. carnegiefoundation.org/about-us/about-carnegie. 53 Milton Friedman, The Role of Government in Education, School Choices website, www.schoolchoices.org/roo/fried1.htm. 54 For background, see Kenneth Jost, School Voucher Showdown, CQ Researcher, Feb. 15, 2002, pp. 121-144, and Charles S. Clark, Charter Schools, CQ Researcher, Dec. 20, 2002, pp. 10331056. 55 For background, see Frequently Asked Questions, The Broad Prize for Urban Education website, www.broadprize.org/about/FAQ.html#2. 56 Overview, The New Teacher Project website, http://tntp.org/about-us. 57 For background, see Ruth Moscovitch, Alan R. Sadovnik, et al., Governance and Urban School Improvement: Lessons for New Jersey from Nine Cities, Institute on Education Law and Policy, Rutgers University at Newark, 2010, http://ielp.rutgers.edu/docs/MC%20Final.pdf. 58 Michelle Rhee, In Budget Crises, an Opening for School Reform, The Wall Street Journal Online, Jan. 11, 2011, http://online.wsj.com/ article/SB10001424052748704739504576068142 896954626.html. 59 Isabel Mascarenas, Student Teachers Speak

Albert Shanker Institute, 555 New Jersey Ave., N.W., Washington, DC 20001; (202) 879-4401; www.ashankerinst.org. An arm of the American Federation of Teachers that brings together experts to discuss education issues. Annenberg Institute for School Reform, Brown University, Box 1985, Providence, RI 02912; (401) 863-7990; www.annenberginstitute.org. Analyzes school-system issues, works with community partners to improve school districts and publishes the quarterly journal Voices in Urban Education. Economic Policy Institute, 1333 H St., N.W., Suite 300, East Tower, Washington, DC 20005-4707; (202) 775-8810; www.epi.org/issue/education. Examines school reform from a liberal viewpoint. Education Next, Program on Education Policy and Governance, Harvard Kennedy School of Government, 79 JFK St., Cambridge, MA 02138; (877) 4765354; http://educationnext.org/sub/about. A reform-oriented online publication that examines all aspects of K-12 education. The Hechinger Report, http://hechingerreport.org. A nonprofit online news organization based at the Teachers College of Columbia University that publishes in-depth reporting and commentary on education issues. Hoover Institution, 434 Galvez Mall, Stanford University, Stanford, CA 943056010; (650) 723-1754; www.hoover.org. Studies and publishes reports on school reform and other topics from a conservative perspective. National Center for Education Statistics, U.S. Department of Education, 1990 K St., N.W., Washington, DC 20006; (202) 502-7300; http://nces.ed.gov. Provides statistics on every aspect of American education. Thomas B. Fordham Institute, 1016 16th St., N.W., 8th Floor, Washington, DC 20036; (202) 223-5452; www.edexcellence.net. A think tank dedicated to improving school performance through accountability and expanded options for parents.
Out on SB 736 on Teacher Merit Pay, WTSP News website, March 25, 2011, www.wtsp. com/news/article/183421/250/Student-teachersspeak-out-on-teacher-merit-pay; Michael C. Bender, Rick Scott Names Michelle Rhee, Patricia Levesque to Education Transition Team, Miami Herald blogs, Dec. 2, 2010, http://miami herald.typepad.com/nakedpolitics/2010/12/rickscott-names-michelle-rhee-patricia-levesque-toeducation-transition-team.html. 60 Laura Zuckerman, Idaho Governor Signs Education Overhaul Into Law, Reuters, April 8, 2011, www.reuters.com/article/2011/04/09/usidaho-education-idUSTRE7380GA20110409. 61 Amy Hetzner and Erin Richards, Budget Cuts $834 Million from Schools, [Milwaukee] Journal Sentinel online, March 1, 2011, www.js online.com/news/statepolitics/117192683.html. 62 Rotella, op. cit. 63 Nine States and the District of Columbia Win Second Round Race to the Top Grants, press release, U.S. Dept. of Education, Aug. 24, 2010, www.ed.gov/news/press-releases/ninestates-and-district-columbia-win-second-roundrace-top-grants. For background, see Michele McNeill, Race to Top Winners Work to Balance Promises, Capacity, Education Week, March 30, 2011, www.edweek.org/ew/articles/2011/03/30/26rtt -states_ep-2.h30.html?tkn=RMOFJADRisIf48B KX1kxGbHNaOeVRca26WD1&print=1. 65 Andrew J. Rotheram, Fentys Loss in DC: A Blow to Education Reform? Time, Sept. 16, 2010, www.time.com/time/nation/article/0,8599, 2019395,00.html. 66 Cathie Black, Executive Profiles, Bloomberg/ Business Week, http://investing.businessweek. com/businessweek/research/stocks/private/ person.asp?personId=79286149&privcapId=23 675200&previousCapId=4160895&previousTitle =Bill%20&%20Melinda%20Gates%20Foundation. 67 Yoav Gonen, Parents Fume Over Blacks Birth Control Quip About Overcrowding, New York Post online, Jan. 15, 2011, www.ny post.com/p/news/local/black_wisecrack_on_ birth_control_a0EUsHTDjVvWAMvA5qf6KI. 68 Ibid. 69 For background, see Kathy Koch, National Education Standards, CQ Researcher, May 14, 1999, pp. 401-424.
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Bibliography
Selected Sources
Books
Hess, Frederick M., Education Unbound: The Promise and Practice of Greenfield Schooling, Association for Supervision and Curriculum Development, 2010. An analyst at the conservative American Enterprise Institute argues that todays schools shouldnt be reformed so much as scrapped so education entrepreneurs can devise specific solutions for different educational needs. Merrow, John, The Influence of Teachers: Reflections on Teaching and Leadership, LM Books, 2011. Based on his reporting throughout the country, a longtime PBS education reporter explores issues such as teaching quality, payment and evaluation of teachers. Ravitch, Diane, The Life and Death of the Great American School System: How Testing and Choice Are Undermining Education, Basic Books, 2010. A longtime education policymaker explains why she now rejects the market-oriented education-reform theories she helped to develop for President George H. W. Bush. Weber, Karl, ed., Waiting for Superman: How We Can Save Americas Failing Public Schools, PublicAffairs, 2010. The companion book to the acclaimed 2010 school-reform documentary Waiting for Superman includes essays on how to improve U.S. education by charter-school leaders, education journalists and a teachers union leader. Bryk, Anthony S., Organizing Schools for Improvement, Phi Delta Kappan, April 2010, www.kappanmagazine. org/content/91/7/23.abstract, p. 23. The president of the Carnegie Foundation for the Advancement of Teaching describes his research on Chicagos schools, showing that several critical aspects of a schools organization and leadership are major determinants of whether that school can improve. Pellissier, Hank, The Finnish Miracle, Great Schools website, www.greatschools.org/students/2453-finlandeducation.gs. Finlands schools, which rose from mediocre to outstanding over the past quarter-century, have lessons for schools, teachers and parents. Notably, teaching is among Finlands most respected professions. Rotella, Carlo, Class Warrior: Arne Duncans Bid to Shake Up Schools, The New Yorker, Feb. 1, 2010, p. 24. President Obamas Secretary of Education is the former CEO of Chicagos public schools, with a reputation for closing low-achieving schools and reopening them with new staffs.
Reports and Studies

Building a High-Quality Teaching Profession: Lessons from Around the World, Organisation for Economic Cooperation and Development, 2011, www.oecd.org/dataoecd/ 62/8/47506177.pdf. Analysts for the international organization find that most countries with high-achieving schools recruit the best students as teachers, provide extensive on-the-job training and mentoring and involve teachers closely in efforts to improve schools. Corcoran, Sean P., Can Teachers be Evaluated by their Students Test Scores? Should They Be? The Use of ValueAdded Measures of Teacher Effectiveness in Policy and Practice, Annenberg Institute for School Reform, 2010, www.annenberginstitute.org/products/Corcoran.php. A Columbia University assistant professor of economics explains how value-added evaluations of teacher quality work and examines the evidence on their reliability and implications for schools. Suffren, Quentin, and Theodore J. Wallace, Needles in a Haystack: Lessons from Ohios High-performing, High-need Urban Schools, Thomas B. Fordham Institute, May 2010, www.scribd.com/doc/31987794/Needles-in-a-Haystack-FullReport. Analysts for a research organization supportive of school choice examine a group of public, magnet and charter schools in low-income urban areas in search of factors that help the schools improve student achievement.
Articles
Grading the Teachers: Value-Added Analysis, Los Angeles Times online, www.latimes.com/news/local/teachersinvestigation. An ongoing series of investigative articles from 2010 and 2011 explores the effectiveness of teacher evaluations based on students standardized test scores. Includes a database with rankings of individual teachers and schools. Banchero, Stephanie, Bill Gates Seeks Formula for Better Teachers, The Wall Street Journal online, March 22, 2011, http://online.wsj.com/article/SB10001424052748703858404 576214593545938506.html. Microsoft cofounder and philanthropist Bill Gates explains how hes trying to develop better teacher evaluations and argues that cutting education budgets is probably unwise. Barkan, Joanne, Got Dough? How Billionaires Rule Our Schools, Dissent, winter 2011, www.dissentmagazine.org/ article/?article=3781. A writer for a left-leaning magazine argues that venture philanthropists like Bill Gates are gaining too much power.
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CHAPTER
INCOME INEQUALITY
BY MARCIA CLEMMITT
Excerpted from Marcia Clemmitt, CQ Researcher (December 3, 2010), pp. 989-1012.
Income Inequality
BY MARCIA CLEMMITT
Citigroup, the financialservices conglomerate, concurs. As of 2006, the richest Census Bureau report 10 percent of Americans acreleased in September count for 43 percent of inbrought a brief flurry come, and 57 percent of net of press attention to rising inworth, based on Federal Recome inequality in America. serve data, says a Citigroup The gap between rich and analysis. The United States, poor in New York is getting Canada, Australia and the worse, noted the New York United Kingdom have seen Daily News. In 2009, 18.7 perthe rich take an increasing share cent of New York Citys popof income and wealth over the ulation lived in poverty, and last 20 years, to the extent that the median household income the rich now dominate income, fell to $50,033, from $51,116 wealth and spending. The in 2008, even as the combined distribution of wealth the worth of the citys 58 richest value of ones assets such as residents rose by $19 billion. real estate and stocks, minus As a result, the earnings gap ones debts continues to be among New Yorkers is now even more aggressively skewed larger than the gap in India than income, it said. 4 and the African nation of But having an economic Burkina Faso, Joel Berg, exclass with very large amounts ecutive director of the New of disposable money is valuYork City Coalition Against able not harmful to soA Ferrari complements the conspicuous consumption on Hunger, told the paper. 1 ciety, some argue. Thats bedisplay along Rodeo Drive in Beverly Hills, Calif. Experts The finding that income cause only the very richest agree the rich are pulling away from other Americans, inequality is increasing is can make the investments vital but not all think its a problem. Some say investments by generally accepted by anato building businesses and drithe wealthy stimulate the economy by building lysts across the political specving demand for labor, wrote businesses and driving demand for labor, but others say the result has been a severe recession and trum, with the exception of George Reisman, a professor stagnant incomes for most Americans. libertarian commentators, emeritus of economics at who argue that no existing data set Center on Budget and Policy Priori- Pepperdine University, in Malibu, Calif. accurately depicts how money is dis- ties (CBPP) a liberal-leaning think In a market economy, the wealth of tributed. What provokes debate in all tank. 2 the rich . . . is overwhelmingly investAfter-tax incomes also have risen ed in means of production, that is, in quarters, however, is whether steep income inequality in an industrialized more for the highest earners, says CBPP. factories, machinery and equipment, nation is something to worry about and, From 1979 to 2007, the average after- farms, mines, stores, and the like. 5 if it is, what policies would address it tax income of the top 1 percent of Other analysts question that propoearners nearly quadrupled, from sition. Weve had a natural experieffectively. The main story is that the very rich $347,000 to over $1.3 million, a 281- ment recently with what can happen have been pulling away from all others percent increase, based on data from to the economy when the richest peoin income over the past three decades, the nonpartisan Congressional Budget ple make extraordinary gains comOffice. Over the same period, the after- pared to others, says Yale University most analysts agree. The average pretax income for the tax income of the middle fifth of the political scientist Jacob S. Hacker. Weve bottom 90 percent of households is population rose from $44,100 to had a winner-takes-all economy for a almost $900 below what it was in $55,300, or 25 percent, while the bot- while, and its provided limited bene1979, while the average pretax income tom fifth saw its average after-tax in- fits, leaving the country with a severe for the top 1 percent is over $700,000 come grow from $15,300 to $17,600, recession and virtually stagnant inabove its 1979 level, according to the or 16 percent. 3 comes for most people.
THE ISSUES
Getty Images/David McNew
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INCOME INEQUALITY
Richest Americans Have Biggest Share of Income
The top 1 percent of income earners in the United States control nearly 18 percent of Americans total income, the worlds highest such concentration. In 1949, however, the top American earners lagged behind those of several other countries, including Indonesia, Germany and the United Kingdom. Share of Earnings of Top 1% Income Earners in Select Countries, 1949 and 2005
Indonesia Argentina Ireland Netherlands India Germany United Kingdom Australia United States Canada Singapore New Zealand Switzerland France Norway Japan Finland Sweden Spain Portugal Italy China 0% 5 10 15 20
Share of Total Earnings of Top 1%
1949 2005
Source: Anthony B. Atkinson, et al., Top Incomes in the Long Run of History, National Bureau of Economic Research, January 2010
Simmering debates over rising income inequality in America not to mention the solvency of Social Security and the growing federal deficit lie behind many of this years policy and political battles. At the heart of the debates is the system of taxing income: In the Unit-
ed States each additional increment of an individuals income is taxed at a different rate in a so-called marginal tax scheme; marginal income tax rates on higher earnings are generally higher known as a progressive taxation scheme. And while many liberals this year have called for raising the
marginal tax rate on the highest earners, thats a bad idea, said Sen. Joseph Lieberman of Connecticut, a former Democrat who became an independent during a tough reelection campaign a few years ago. To me, these are the people we need to be protecting their income to spend and invest to spur growth and job creation. The fact is that the top 3 percent of . . . earners account for 25 percent of the consumption in our economy. 6 But history casts doubt on whether holding down taxes on the highest earnings boosts the economy, said Cenk Uygur, a journalist and political commentator on the Internet and the Sirius Satellite Radio show The Young Turks. From 1925 to 1931, the highest marginal tax rate was as low as it has almost ever been between 24-25 percent. And between 20032010, the highest marginal tax rate was also at one of its lowest points 35 percent, he said. So what happened . . . ? The Great Depression and the Great Recession. 7 The current high-profile debate over whether Social Security benefits must be cut to keep future federal budgets in balance is skewed by lack of attention to growing income inequality, argued Robert Kuttner, founder and co-editor of the liberal magazine The American Prospect. Social Security is funded by payroll taxes on earnings beneath a certain cap around $107,000 in 2010. In other words, people who earn above $107,000 only pay Social Security tax on that $107,000. Thus, lower-earning people pay a much higher percentage of their income to sustain the system than high earners, he said. If you want to get Social Security well into the black for the indefinite future, the easiest way is to restore wage growth among low earners, which would boost Social Securitys take. Instead, recent earnings growth has gone almost entirely to people whose incomes are high above the cap and
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thus hasnt helped at all to shore up Social Security, he wrote. 8 As economists, lawmakers and the public debate whether economic inequality should be an important publicpolicy agenda item, here are some questions being asked: Is income inequality growing in the United States? In recent years, many analysts have come to agree that income inequality is rising, mostly because incomes of the top earners have skyrocketed. However, some say that studies that find very high inequality are based on incomplete or misleading data. In comparisons that include peoples spending, for example, the effective income gap between the rich and poor is narrower, say some economists. Contrary to what some other studies find, poor households systematically pay less than richer households for identical goods . . . in part because they shop in cheaper stores and in part because they pay less for the same goods even in the same store, most likely by buying things on sale, wrote University of Chicago professor of economics and business Christian Broda, U.S. Department of Agriculture economist Ephraim Leibtag and Columbia University professor of Japanese economy David E. Weinstein. As a result, poorer people effectively have higher-value incomes, something that most research fails to acknowledge, they argue. When the differential spending is taken into account, poverty rates turn out to be less than half of the official numbers. 9 Income studies generally examine households, not individuals, and changes in household size over the years mean that supposed inequality problems are much lower than many estimate, wrote Stephen J. Rose, a research professor at the Georgetown University Center on Education and the Workforce. Americans today are more likely to live in single-adult households than they were 30
Tax Rates Drop for Highest Earners

The average income of the top 400 American households increased from $71 million in 1992 to $357 million in 2007 a 403 percent rise while the effective tax rate dropped from 26 percent to 17 percent. By comparison, the bottom 90 percent of earners saw their income rise from about $29,000 to about $33,000 a modest 14 percent increase. Income and Tax Rates of 400 Highest-Income American Households, 1992-2007
Average income in 2009 dollars
(in millions)
Effective tax rate 26.4% 29.9 22.0 22.8 18.2 16.6
1992 1995 1998 2001 2004 2007
$71.5 $71.6 $125.0 $158.8 $196.2 $356.7
Source: David Cay Johnston, Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data, Tax.com, February 2010
years ago, so actual per-person earnings growth for middle-class people is considerably higher than other studies suggest, he said. 10 The most recent statistics that indicate poverty is rising dont depict longterm poverty but recession-related job loss, argued Atlanta-based, nationally syndicated libertarian radio host and commentator Neal Boortz. If youre out of work, you have no income. Snap! Youre living in poverty. It doesnt matter what your net worth actually is or if you own $3 million homes free and clear. 11 The evidence is incontrovertible that American income inequality has increased . . . since the 1970s, said Robert J. Gordon, a professor of economics at Northwestern University. Nevertheless, its rise has been exaggerated since the most recent increase consists entirely of a tiny group of very high earners pulling far ahead of everyone else. Analysis of census and tax data reveals that there was no in-
crease in inequality after 1993 in the bottom 99 percent of the population, and the remaining increase . . . can be entirely explained by the behavior of incomes in the top 1 percent. 12 Many other commentators, however, including some conservatives, stress that the income gap that opened between 1980 and 2000 is indeed very wide. Income inequality is real; its been rising for more than 25 years, said President George W. Bush in 2007. Furthermore, the gap is serious enough to warrant careful watching, said Bush. 13 This growth in wage inequality is one of the most spectacular and consequential developments of our time, partly because most people have expected that economic development and modernization would create more economically equitable societies, said David B. Grusky, director of Stanford Universitys Center for the Study of Poverty and Inequality, and Kim A. Weeden, an associate professor of sociology at Cornell University. 14
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Data from both . . . income tax returns and . . . W-2 records tell a simple and similar story to the tale of inequality told by analysis of census figures, which is often criticized to some extent correctly for including data on too few people, said Gary Burtless, a senior fellow at the center-left Brookings Institution think tank. The relative incomes and the relative wages of top income recipients have been increasing much faster than the incomes and wages of people further down in the distribution. W-2 records show that an earner in the top .01 percent of the income distribution made 46 times as much as the countrys median wage earner in 1990, but 81 times as much in 2005, for example. 15 Does increasing economic inequality harm society? Most analysts agree that a certain amount of income inequality is valuable because it gives people incentives to work hard and try out new business ideas, in hopes of reaping big rewards. However, many are skeptical that current U.S. inequality levels are risk free or contribute much to building the economy. Some international data suggest that countries with more extreme income inequality experience faster economic growth overall, said Brookings Burtless. From 1990 to 2000, economic growth in the G-7 countries Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, whose top finance officials have met regularly since 1976 was fastest in the United States and the United Kingdom, the countries that also experienced the fastest growth in inequality, he said. While not constituting conclusive evidence, this fact is at least consistent with the view that the rapid rise in U.S. inequality has contributed to the relatively good performance of American output and employment since the late 1970s. 16 While its true that the share of national income going to the richest 20 percent of households has risen, and families in the lowest fifth saw their piece of the pie fall, income statistics dont tell the whole story of Americans living standards, which provide evidence that rising income inequality is highly compatible with a system that produces a better life for all, wrote W. Michael Cox, director of the ONeil Center for Global Markets and Freedom at Southern Methodist University and senior fellow at the Federal Reserve Bank of Dallas, and Richard Alm, an economics writer. Today, large majorities of Americans enjoy the convenience of once-unheard-of consumer goods like cars and clothes dryers while most are employed in clean, well-lit, and air-conditioned environment[s], unlike in the past, they said. 17 Furthermore, a far more direct measure of American families economic status [rather than tax or census data] household consumption indicates that the gap between rich and poor is far less than most assume, and that the abstract, income-based way in which we measure the socalled poverty rate no longer applies to our society, they said. In 2006, while the income ratio between the highest- and lowest-earning quintiles was 15 to one, the spending ratio was only four to one, demonstrating the similarity in living standards. Lowerincome families can spend more than many believe because they have access to various sources of spending money that doesnt fall under taxable income, including sales of property like homes and cars and securities that are not subject to capital gains taxes, insurance policies redeemed, and the drawing down of bank accounts, they pointed out. 18 But markets that produce income inequalities at the present scale are in fact failed markets, inefficient because they provide unreasonably high levels of return what economists dub rents to some people who dont deserve so much, argues Grusky, at Stanfords Center for the Study of Poverty and Inequality. For example, some top executives win extremely high paydays not because they lead their companies to prosper beyond expectations but due to various sweetheart deals and the machinations of corporate governing boards who approve outsize CEO payments because theyre personally beholden to the executives, he argues. International studies conducted over the past decade by the Organization for Economic Co-operation and Development have found no evidence that inequality may be conducive to growth in OECD countries, as some had suggested, said OECD SecretaryGeneral Angel Gurria. On the contrary, our work shows that greater inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve. And the resulting inequality of opportunities . . . inevitably impacts economic performance as a whole. 19 Some fear that having too much income concentrated at the top compromises the ability of a democracy to give equal political voice to all citizens. In international studies, nations with wider income inequality often have political structures in which fewer people have an equal voice and there is less government accountability, said Nancy Bermeo, a professor of comparative politics at Oxford University, in England. 20 The ability of citizens to influence public policy is the bottom line of democratic government, but in recent decades in the United States the ability to influence policy has skewed toward the most affluent people, whose priorities often dont coincide with those of people who earn less, said Martin Gilens, an associate professor of politics at Princeton University. 21 Based on survey data from 1981 to 2002, on issues where Americans
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with different income levels differ in their policy preferences, actual policy outcomes strongly reflect the preferences of the most affluent but bear virtually no relationship to the preferences of poor or middle-income Americans. So stark is this finding that it may call into question the very democratic character of our society, according to Gilens. 22 With money concentrated at the top, there may be a demand for private jets and yachts, but you need a healthy middle-income group to drive the massive consumption that promotes real economic growth, said Kemal Dervis, director of the global economy and development division at the Brookings Institution. 23 Furthermore, when we see income inequality rising, we ought to start looking for bubbles fast-rising prices in some investment sector like the Internet stock bubble of the 1990s and the housing bubble of the 2000s, said Mark Thoma, a professor of economics at the University of Oregon. Such investment bubbles arent sustainable because they ultimately price things beyond their value and out of reach of too many buyers, and their collapse leads to heavy losses and, often, economic recessions. 24 Rising inequality also played another role in sparking the financial-market crash and recession, according to University of Chicago professor of finance Raghuram Rajan. Because policy makers have few tools available for directly raising incomes, Washington took the dangerous step of subsidizing large numbers of high-risk mortgage loans such as no-down-payment loans to people who may have had limited ability to pay, out of concern that the American dream might be slipping away from many people as inequality increased, he said. Those actions helped create the swelling bubble of mortgage debt that exploded when some people began defaulting on their risky loans, said Rajan. 25
Should the government act to limit inequality? Not surprisingly, those who argue that income inequality boosts the economy strongly oppose government actions intended to limit its growth or redistribute incomes. Meanwhile, analysts who argue that inequality is risky dont necessarily agree about policies to address it. Democrats are right about one thing: I can afford to pay more in taxes, said Harvard economics professor N. Gregory Mankiw. My income is not in the same league as superstar actors and hedge fund managers, but I have been very lucky. . . . I dont have trouble making ends meet, and indeed, I could go so far as to say I am almost completely sated. . . . Nonetheless, neither high earnings nor large inherited estates should be subject to higher taxes because such taxes would sap the incentive of top professionals to work hard, Mankiw said. 26 Mankiw noted that he is regularly offered opportunities to earn extra money, but if Bush-era tax rates were raised, the resulting gains for him and for his children who will inherit the money down the line would be too small to provide an incentive for him to take those extra jobs, he wrote. The same would hold true for other highincome taxpayers whose services you enjoy, like movie actors, pop singers, blockbuster novelists, top surgeons, and orthodontists, Mankiw argued. As they face higher tax rates, their services will be in shorter supply. . . . Dont let anyone fool you into thinking that when the government taxes the rich, only the rich bear the burden. 27 Attempts to put a floor under the lowest income, such as a minimum wage, also harm society, said Art Carden, an assistant professor of economics and business at Rhodes College in Memphis. A higher minimum wage is likely to exacerbate rather than mitigate social inequalities because when potential hires arent permitted to compete intensely for jobs
by offering to work for very low wages, then firms can discriminate on the basis of something other than productivity, he argued. 28 With no minimum wage set, a historically disadvantaged jobseeker, such as Crackhead Carl, a middle-aged African-American male who was just released from jail, could win a job over Tad Vanderbilt Rockefeller, a flaxen-haired white teenager from an affluent suburb even from a racially biased employer simply by accepting a rock-bottom wage, said Carden But with a minimum wage in place, Carl could offer a racially biased employer no incentive to hire him rather than Tad, he explained. 29 Many scholars say that if greater economic equity is the goal, its hard to imagine it coming about without government action. What are the pathways to create a more equal society? Taxation, education and health care, says Dan Ariely, a professor of behavioral economics at Duke University. Theres nothing anti-capitalist about saying that the sharp edges of capitalism should be softened by government, says Yales Hacker. A quick look around the globe shows that capitalism is consistent with a lot of different ways of organizing the economy, including some with high taxes and strict regulations. The wide variation in income-inequality ratios in countries with market economies show that high U.S. ratios arent simply the inevitable product of a market economy, he says. In 2008, the ratio between the pay of the average CEO and the average worker was 319 to one in the United States but only 11 to one in Japan, 12 to one in Germany, and 47 to one in Mexico, suggesting that the U.S. distribution is out of line with those in other market economies, including some that are doing fairly well economically, such as Germany, according to the progressive Institute for Policy Studies. 30
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Rich Got Richer While Poor Lagged
The top 1 percent of American earners took in an average of $1.3 million after taxes in 2007, nearly a 300 percent increase over 1979. By contrast, income for the bottom 20 percent of earners rose only 16 percent over the same period. Average After-tax Income, 1979 and 2007 (in 2007 dollars)
Income category Lowest fifth Second fifth Middle fifth Fourth fifth Top fifth Top 1 percent 1979 $15,300 $31,000 $44,100 $57,700 $101,700 $346,600 2007 $17,700 $38,000 $55,300 $77,700 $198,300 $1,319,700 % change 16% 23% 25% 35% 95% 281% $ change $2,400 $7,000 $11,200 $20,000 $96,600 $973,100
Source: Arloc Sherman and Chad Stone, Income Gaps Between Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 2010
In the past, strong economic growth has proven to be compatible with high tax rates on top earnings, argued Clinton administration Secretary of Labor Robert Reich, a professor of economics at the University of California, Berkeley. Under President Dwight Eisenhower (whom no one would have accused of being a radical) it was 91 percent. Now its 36 percent, the lowest its been in more than 80 years. 31 The highest earners have benefited disproportionately from recent workplace productivity gains, so taxing top earnings higher would seem only fair, suggested Northwesterns Gordon and Ian Dew-Becker, a doctoral candidate at Harvard University. Between 2001 and 2004, for example, the U.S. labor force produced an explosion in productivity over 3 percent a year higher productivity gains than at any other period since World War II, they wrote. Nevertheless, median family income actually fell by 3.18 percent from 1999 and 2004, and for the whole period of rising productivity between 1995 and 2004, increased annually by only 0.9 percent, compared to an annual rate
of productivity gains in non-farm businesses of 2.9 percent, they said. 32 During this period of skyrocketing productivity, only the top 10 percent of the income distribution enjoyed a growth rate of total real income . . . equal to or above the average rate of economywide productivity growth. Thus, the no-brainer solution to central social objectives including the budget deficit, Social Security and health care is to raise taxes on the top 1 percent by a major amount, say from 33 to 50 percent, Gordon and Dew-Becker recommended. 33 I know many well-educated professionals convinced that nobody works as hard as they do, wrote Jonathan Cohn, senior editor of The New Republic. . . . But Ive met many people at the bottom of the income ladder who work just as hard, for far less reward. Between 1980 and 2005, the richest 1 percent of Americans got more than four-fifths of the countrys income gains. Does anybody seriously believe that the other 99 percent didnt deserve to take home a much larger share? 34
An investment in postsecondary skills training and education for people who cant find jobs in an increasingly technology-based job market would ease income inequality by holding wages for high-skill jobs down a bit as the supply of skilled workers came closer to meeting the full demand, says Anthony P. Carnevale, a research professor at the Georgetown University Center on Education and the Workforce. The 11 million or so low-income, dislocated or imprisoned adults with an immediate ability to benefit from new training programs are the low-hanging fruit, he wrote. 35 Government policy should focus on education rather than any direct means of redistributing income such as through tax policy, wrote University of Chicago economists Kevin M. Murphy and Gary S. Becker, winner of the 1992 Nobel Prize for economics. Taxing higher incomes is tantamount to taxing college tuition while giving subsidies for dropping out of high school, a strategy no one would recommend, Murphy and Becker write. Instead, the public should focus attention on how to raise the fraction of American youth who complete high school. 36 Not everyone is sure that education funding will help ease inequalities. The last 15 years have actually seen significantly slower job growth in high-earnings growth sectors than in the economy at large, wrote James K. Galbraith, a professor of government, and J. Travis Hale, a graduate student, at the University of Texas, Austin. So even if large numbers of young people acquire the skills needed to advance, there is no evidence that the economy will provide them with suitable employment. Moreover, investments in education presuppose that we know, in advance, what education should be for. For example, students who studied information technology in the mid-1990s were lucky; those completing similar degrees in 2000 faced unemployment. 37
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Bleak Futures Await Those with Limited Education

You need to target kids who are coming out of prison for the first time.
eople up to age 30 who only have a high school diploma or less are in trouble, potentially facing a lifetime of incomes sagging farther and farther behind those of people with a college education or technical training, says Timothy M. Smeeding, a professor of public affairs and economics at the University of Wisconsin, Madison. They face a bleak future because most of the traditional roads to a middle-class income for people with that level of education, such as manufacturing, have dried up. The resulting large oversupply of workers must fight for jobs with low skill requirements, driving down the wages for those positions even further and increasing the nations income inequality, Smeeding says. When the recession ends, it will become clear that there is no work for these people, except jobs like waiting table or mowing lawns. We have to get more people employed or well lose a whole generation. We need to get the less-skilled people to work before they all turn to crime, Smeeding says. Worse, among young men with a high school education or less, 73 percent are fathers by age 30. Furthermore, a high school dropout is likely to have 2.7 children, compared to the 1.9-child average for college graduates, creating a huge additional economic disadvantage for children of low-skilled parents. If after 1983 the country had continued to produce bachelors and associates degree holders at the same rate of increase as it did in earlier years, there would be 10 million more such degree holders competing for high-skill jobs, and the income distribution would look like it did in 1979, according to Anthony P. Carnevale, director of the Georgetown University Center on Education and the Workforce. Instead, high school graduation rates stalled beginning in the mid-1970s and even dropped in some years, curtailing the number of people eligible for post-secondary training, even as the rates of high school graduates who went to college rose. The workplace income gap between high-skilled and low-skilled employees relates more to specific occupations, such as engineering, than to education itself, says Carnevale. For example, you can get a 13-month certificate in engineering and earn more than a significant chunk of people with B.A.s, he says. Its access to an occupation that makes the difference, and education gets you that access. The country needs to produce more people with post-secondary education, especially in technical fields, Carnevale says. Are we going to be able to do that? Its doubtful. Unlike with K-12 education, we tend to see higher education as something families do, not as a public good, and the result is that its tough to expand higher-education opportunities and especially tough to bridge a spending gap between institutions we have huge differentials in spending, he says. The Obama administration is taking a different and somewhat more promising tack than previous administrations, understanding that community colleges and public universities are where the students and the voters are, says Carnevale.
Meanwhile, the premium salaries that go to college-educated people increase income inequality, representing a market failure in the education system, says David B. Grusky, director of Stanford Universitys Center for the Study of Poverty and Inequality. In a rational market, schools would see rising demand for post-secondary education and open up more spots, says Grusky. Any rational market will do that. If a car manufacturer sees more demand, the company increases production of cars. But universities, especially high-status schools like Stanford, are likely to continue to limit their spots, despite increasing demand, because by doing so the degrees and certificates their graduates obtain will be worth higher salaries in a marketplace where demand for the degrees outstrips supply, he explains. As a result, the salary return for a college degree is too high today, and the college-educated people are getting a free ride, Grusky says. We havent had substantial investments in public higher education for a long time, but making them could help, he says. Young people coming out of jail and prison, who are overwhelmingly urban teenagers, face the worst lifetime income gap, says Smeeding. I told our governor that you need to target kids who are coming out of prison for the first time, help them get jobs. Because if they dont get a job quickly, within a few weeks theyll be career criminals, and since three of four are fathers, helping them is a twofer. The widespread incarceration of young men mostly AfricanAmerican but also Latino and white men who have a high school education or less is driving increased social and economic inequality in our society that is sizable . . . enduring and intergenerational, said sociologists Bruce Western at Harvard and Becky Pettit at the University of Washington, Seattle. The social and economic penalties that flow from incarceration are accrued by those who already have the weakest economic opportunities, and their prison records impose additional significant declines in earnings and employment that affect them and their children. 1 Ironically public-spending trends over the past several decades have reinforced these inequality-creating trends, especially at the state level. For example, 30 years ago, 10 percent of Californias general fund went to higher education and 3 percent to prisons. Today, higher educations share has dropped to 8 percent, and nearly 11 percent goes to prisons, so that the state spends more on inequality-increasing incarcerations than on inequalityreducing education. 2 Marcia Clemmitt
1 Bruce Western and Becky Pettit, Incarceration and Social Inequality, Daedalus, summer 2010, p. 8. 2 Rising Above the Gathering Storm, Revisited: Rapidly Approaching Category 5, Members of 2005 Rising Above the Gathering Storm Committee, National Academies of Sciences and Engineering and Institute of Medicine, 2010, www.nap.edu/catalog/12999.html.
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BACKGROUND
All That Glitters
t the end of the 18th century, the young United States was known as the best poor mans country in the world, with fertile farmland plentiful enough for most people to earn a decent living and little of either extreme poverty or extreme wealth to be found. 38 A century later, however, with the industrial age booming, the United States experienced the first of three eras of very high income inequality. The first stretched from around 1870 through the early 1900s and was characterized by ostentatious spending by industrial titans, even as poverty deepened. Humorist and social critic Mark Twain and essayist and novelist Charles Dudley Warner dubbed the period the Gilded Age in their 1873 novel satirizing the corruption in Washington that accompanied what the authors depicted as a mad national scramble after wealth, at the expense of other values. 39 Gradually, unease grew about economic inequality that might threaten the countrys cherished reputation as a land where all residents had the chance to rise. In hopes of demonstrating that Americans at all income levels were enjoying the fruits of booming industry, University of Wisconsin statistician Willford I. King launched the first major study of U.S. wealth and income distribution, publishing two books on the subject. King unhappily reported, however, that economic inequality was steeper than he had expected, with the richest 1 percent of the population taking home about 15 percent of the national income in 1910, giving the wealthiest Americans an income hundreds or even thousands of times greater than that of a working-class citizen. 40
It is easy to find a man in almost any line of employment who is twice as efficient as another employee, but it is very rare to find one who is ten times as efficient, mused King. It is common, however, to see one man possessing not ten times but a thousand times the wealth of his neighbor, largely due to some peoples greater facility of taking advantage of . . . laws and circumstances to acquire property rights and the fact that wealth tends to breed wealth, he wrote. Is the middle class doomed to extinction, and shall we soon find the handful of plutocrats, the modern barons of wealth, lined up squarely in opposition to the property-less masses? 41 The vast sums of heritable wealth amassed by industrialists also posed a danger to society if they were simply passed on to the next generation, opined steel magnate Andrew Carnegie in his 1889 essay The Gospel of Wealth. In many cases the bequests are so used to become only monuments of . . . folly. Far better to establish a charitable institution that pursues a public good thats in accordance with the wealth earners own ideas, said Carnegie, whose own fortune established universities, libraries, museums, research institutions, a pension fund for his former employees and the think tank Carnegie Endowment for International Peace. 42 Leeriness about the rising concentration of income and the political corruption it might spawn built support among the middle and upper classes for a so-called Progressive Era in politics, which brought new regulations for business and the modern-day progressive federal income tax, which taxes higher earners at a higher percentage, among other changes. Congress had levied an income tax in 1861, to help pay for the Civil War. The tax withstood a court challenge but was eventually repealed when military needs lessened. In 1894, Congress enacted a second income tax, in the form of a 2 percent levy on all incomes over $4,000 (the equivalent of around
$100,000 today), aimed at harnessing some of the income of the richest Americans for public purposes. 43 But this time a Supreme Court divided 5-4 struck down the tax a year later. The Constitution barred Congress from enacting any so-called direct federal tax a tax based on ownership, such as the ownership of property unless it would be paid proportionately by the states according to their population, said the court. Unlike the earlier court, the 1895 Supreme Court deemed the income tax such an ownership tax. 44 Proponents were not long deterred, however. In 1909, President William Howard Taft proposed the 16th Amendment to the Constitution to allow Congress to enact a tax on income from any source, such as property or wages without apportioning the tax among states based on population. By February 1913 the amendment had been ratified by the required 36 out of the 48 states. The fortunes of the Gilded Age had largely deflated by 1920, mainly because of capital losses related to catastrophic events like World War I rather than Progressive Era reforms, according to Thomas Piketty, a professor at the Paris School of Economics, in France, and Emmanuel Saez, a professor of economics at the University of California, Berkeley. 45 In the 1920s, however, both the stock market and the nations top incomes began soaring again, and income inequality reached another peak in 1929. The crash of financial markets late in that year, and the Great Depression that followed, cut this second period of inequality very short, however. A number of factors kept economic inequalities from rising steeply again until around 1980, including the loss of capital by the wealthy during the Depression, World War II, and government actions to bolster lower earners and tax the wealthy more. The stability in income equality, where wages rose with national productivity for a generation after the Second World War, was the result of policies that
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Chronology
1860s-1910s 1930s-1960s 2000s U.S. productivity Income and wealth inequality During the Depression, govern- continues to increase, but gains
increase to unprecedented levels in the Gilded Age. 1868 Massachusetts-born writer Horatio Alger publishes Ragged Dick, the first of dozens of popular Alger novels depicting the American dream of poor boys rising to wealth through talent and hard work. 1889 In The Gospel of Wealth, industrialist Andrew Carnegie urges rich people to endow charities rather than passing their money on to their children. 1894 Congress passes a 2 percent tax on incomes over $4,000 (about $100,000 today); the Supreme Court deems it unconstitutional a year later. 1913 The Constitutions 16th Amendment, permitting Congress to enact a federal income tax, is ratified by the required 36 out of 48 states. 1915 In the largest such study to date, University of Wisconsin statistician Willford I. King reports that the richest 1 percent of Americans get at least 15 percent of the income.
ment safety-net programs support low earners; in World War II the top income tax rate rises to over 90 percent.
1932 President Herbert Hoover raises top income tax rate to 63 percent. 1935 Supreme Court strikes down a minimum-wage law. 1938 Fair Labor Standards Act sets federal minimum wage at 25 cents an hour and survives a court challenge. 1959 Since 1950, the percentage of Americans in poverty has dropped from 32 to 22 percent, and median family income has risen 43 percent.
go mostly to highest earners. During the economys expansion from 2002-2007, the top 1 percent of earners capture twothirds of income gains. 2003 Top marginal tax rate is cut to 35 percent. 2006 Richest 10 percent of Americans account for 57 percent of the nations net worth.
2007 Since 1979, the average after-tax income for the top 1 percent of earners nearly quadruples, rising from $347,000 to more than $1.3 million; after-tax income for the bottom fifth averages $17,600, up 16 percent from 1979. 2008 Ratio between the pay of the average CEO and the average worker is 319 to one in the United States, 11 to one in Japan, 12 to one in Germany and 47 to one in Mexico. 2010 Since 1979, the average pretax income has dropped $900 for the bottom 90 percent of households but risen $700,000 for the top 1 percent. . . . The nations growing income gap since 1993 is entirely accounted for by soaring incomes for the top 1 percent of earners. . . . Large majorities of Americans support raising the minimum wage and taxing the wealthy more and creating a more equal income structure, such as that in Sweden; Republicans, who oppose these actions, nevertheless regain control of the House of Representatives in the midterm elections.
1970s-1980s Inequality rises as top incomes

soar, high school graduation rates stagnate and computers and automation squeeze out middle-earning manufacturing and other jobs.
1973 High school graduation rates peak. 1979 U.S. manufacturing employment peaks at 21.4 million workers. 1981 President Ronald Reagan fires 11,000 striking members of the air traffic controllers union, helping to weaken the power of organized labor. . . . Reagan persuades Congress to pass the largest tax cuts in U.S. history.
1920s
Income inequality rises again. The top marginal income tax rate is at an all-time low 25 percent. 1929 Driven by a growing economic bubble at the top, the stock market booms, and then crashes.
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Is Upward Mobility Still Possible?

Research suggests its becoming more difficult.
he gap between rich and poor may be wider than ever in the United States, but the U.S. remains, in the dreams of many, a land of equal opportunity where talent and hard work are the tickets to a better future for anyone. Current data suggest, however, that the dream may have faded a bit. The U.S. today has a lower rate of intergenerational mobility than Europe, and that would be a surprise to most Americans, says Richard J. Murnane, a professor of education and society at the Harvard Graduate School of Education. The key reason for this is the difficulty the poor face trying to get the education they need to get into occupations that would allow them to move ahead, according to Murnane. Americans have an optimistic faith in the ability of individuals to get ahead within a lifetime or from one generation to the next, believing this much more strongly than people in other countries, wrote Julia B. Isaacs, a policy fellow at the Brookings Institution, a center-left think tank. In a survey of people from 27 countries, for example, only 19 percent of Americans thought that coming from a rich family was essential or very important to getting ahead, compared to a median of 28 percent in all the other countries. 1 In reality, however, Americans are much less likely to move from one economic level to another than people in many other countries, said Isaacs. In a study of eight of the most highly industrialized countries, the link between parents earnings and childrens economic attainment was strongest in the United States and the United Kingdom, where it takes an average of
six generations for wealthy families economic advantage to stop influencing the economic status of their children, she reported. In Canada, Norway, Finland and Denmark, by contrast, it takes only three generations to cancel out the effects of being born into a wealthy family. 2 Being born at the top or the bottom of the income distribution affects people much more in the United States than in Canada, said Miles Corak, a professor of economics at Canadas University of Ottawa. For example, in the United States, 22 percent of sons born to fathers in the bottom tenth of the income distribution remain in the bottom tenth as adults, while 18 percent move up only into the next decile; in Canada only 16 percent of those born into the bottom decile stay there and 14 percent move up to the next decile. A similar stickiness holds for the top-earning decile, Corak said. 3 Race plays a major role in trapping people at the bottom of the ladder, according to a 2009 report from the Pew Charitable Trusts Economic Mobility Project. About 47 percent of black children born to families in the middle fifth of the income distribution fall into the bottom fifth as adults, compared to only 16 percent of middle-income white children. 4 Some analysts further argue that society has built-in mechanisms to keep people from high-earning families from falling out of their spots. For example, in a recent analysis of so-called legacy college admissions, Richard D. Kahlenberg, a senior fellow at the Century Foundation, a liberal think tank, reports that at selective colleges alumni children generally make up 10 to 25 percent
began in the Great Depression with the New Deal and were amplified by both public and private actions after the war, wrote Massachusetts Institute of Technology professor of urban economics Frank Levy and professor of economics Peter Temin. 46 For example, in the early days of the Depression President Herbert Hoover raised marginal tax rates for the highest earnings from 25 to 63 percent. Then, in 1936, President Franklin D. Roosevelt, architect of the New Deal, raised the top rate to 79 percent, with the goal of narrowing the income distribution. 47 The first federal minimum wage was enacted in 1933, but the Supreme Court struck it down in the 1935 case Schechter Poultry Corp. v. United States. 48 In 1938,
Congress passed another minimum-wage law, which has survived legal challenge. Meanwhile, the National Labor Relations Act of 1935 often called the Wagner Act, for its sponsor Sen. Robert F. Wagner, D-N.Y. endorsed the right of workers to unionize, strike and engage in collective bargaining with management while limiting the means employers could use to fight unions. 49
Inequality Rises
hen the most recent new era of rising inequality began, around 1980, many were surprised. As Galbraith at the University of Texas explained, the very essence of being a developed nation lies in industrialization,
long believed to foster both democracy and the emergence of a stable, middleclass working population, paid at rates which vary only by the range of skills in the workforce. By contrast, the very essence of underdevelopment is not poverty per se but a skewed income and wealth distribution with a few very wealthy people at the top and the vast majority of people struggling below. 50 Nevertheless, in the past three decades the United States and to a lesser extent other industrialized countries, especially Canada and the United Kingdom, have seen a rise of economic inequality whose cause analysts struggle to understand. Initially, suspicion focused on supplyand-demand trends in the workforce stemming from increased immigration
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of the student body. Since the proportion of alumni children each college accepts varies little from year to year, that suggests an informal quota system, he says. Statistical analysis suggests, he says, that being a legacy boosts a students chance of admission to a selective school by about 20 percentage points say, from a 40-percent to a 60-percent chance over a non-legacy student with a similar transcript and scores. 5 The existence of such a strong tradition of legacy admissions by the most selective colleges whose graduates also may have a leg up in many job markets is especially damaging to African-American and Hispanic students, for example, who have been underrepresented at Americas most prestigious colleges in the past and thus will continue to get no legacy boost for several generations to come, Kahlenberg said. 6 Many conservative and libertarian analysts, however, argue that, as with many purported measures of economic inequality, researchers who find low economic mobility in the United States look at the wrong studies and interpret them too narrowly. Some studies show high mobility, said Jagadeesh Gokhale, a senior fellow at the libertarian Cato Institute, and Pamela Villarreal, a graduate student fellow at the conservative National Center for Policy Analysis. For example, a study has shown that between 1984 and 1994 almost two-thirds of families in the lowest tenth of the income ladder in 1984 had reached a higher rung 10 years later, they pointed out. Meanwhile, 47 percent of the families in the top tenth of earners in 1984 had fallen to a lower decile 10 years later. 7
Furthermore, wealth is highly mobile in the United States, where most fortunes are earned, rather than inherited, write Gokhale and Villarreal. On Forbes magazines annual list of the 400 richest Americans, for example, the vast majority of the 2,218 people listed from 1995 to 2003 87 percent made the cut for only one or two years during the period, they note, indicating that most of the very top earners dont hold onto their top incomes long, as others climb to take their place. 8 Marcia Clemmitt
Julia B. Isaacs, International Comparisons of Economic Mobility, Economic Mobility Project, Pew Charitable Trusts, February 2008, www.economicmobility. org/assets/pdfs/EMP_InternationalComparisons_ChapterIII.pdf. 2 Ibid. 3 Miles Corak, Chasing the Same Dreams, Climbing Different Ladders, Economic Mobility Project, Pew Charitable Trusts, January 2009, www.pewtrusts.org/ uploadedFiles/wwwpewtrustsorg/Reports/Economic_Mobility/EMP_Chasing %20the%20Same%20Dream_Full%20Report_2010-1-07.pdf. 4 Renewing the American Dream: A Road Map to Enhancing Economic Mobility in America, Economic Mobility Project, Pew Charitable Trusts, November 2009, www.economicmobility.org. 5 Richard D. Kahlenberg, 10 Myths About Legacy Preferences in College Admissions, The Chronicle of Higher Education, Sept. 22, 2010, http://chronicle.com. 6 Ibid. 7 Jagadeesh Gokhale and Pamela Villarreal, Wealth, Inheritance and the Estate Tax, NCPA Policy Report No. 289, September 2006, www.ncpa.org/pub/ st/st289. 8 Ibid.
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and more women workers. Recent analyses find that these suspect trends dont tell the whole story, however. For example, since women first began entering the workplace in large numbers, beginning in the 1970s, studies show that theyve actually outperformed men on average when it comes to moving out of moderately skilled jobs and into higher-level, better-paid occupations, said journalist Timothy Noah in a recent series of articles in the online magazine Slate. That statistic means that womens employment isnt holding workers wages down substantially. 51 Immigration, meanwhile, has had some effect in holding down wages for low-skilled workers, but its overall contribution to inequality is less than expected.
In 2000, the average income of a native-born high school dropout was about 7.4 percent lower than it would have been that year had the immigration that occurred between 1980 and 2000 never occurred, concluded George J. Borjas, a professor of economics and social policy at Harvard. Immigration depressed the incomes of high school graduates by only 2.1 percent over the two-decade period, however, Borjas said. 52 It appears that only about 5 percent of the overall increase in income inequality observed over the past three decades is due to immigration, according to Noah. 53 A bigger culprit may be what scholars call skill-based technological change (SBTC) technology-driven changes in the skills workers need to get good jobs,
especially as many medium-skill jobs, such as manufacturing, move overseas in a globalized economy where companies can pay people less to do the same work in less-developed economies. The American economy grew rapidly and its people grew together from World War II to about 1973, wrote Harvard economists Claudia Goldin and Lawrence F. Katz. Each generation of Americans achieved a level of education that greatly exceeded that of the previous one, and this situation allowed businesses based on new technologies to find enough high-skilled workers. At the same time, the emergence of new, larger cohorts of skilled Americans generally created a demand and supply balance in the workforce that kept skilled workers salaries from rising too high and
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INCOME INEQUALITY
Courts Open Door to Big-Money Political Donors

Do the rich wield more political power than the poor?
n the 2010 campaign season, a single political action committee (PAC) poured $600,000 into the Nevada Senate race on behalf of the Republican challenger, Sharron Angle, who came close to unseating Senate Democratic Majority Leader Harry Reid on Nov. 2. Big spending by PACs is nothing new in political campaigns, but the Ending Spending Fund that operated in Nevada represents a new wrinkle a PAC funded by a single big donor. 1 Two 2010 court rulings the Supreme Courts controversial January decision in the so-called Citizens United case and a March ruling by the U.S. Court of Appeals for the District of Columbia Circuit in Speechnow.org vs. the Federal Election Commission cleared the way for outside donors to pour unlimited funds into elections, as long as they dont coordinate with political candidates or party committees. 2 Outside donors can now sponsor election advertising, for example, without abiding by older campaign rules, such as individual-donor spending limits. That opens the door for a PAC like the Ending Spending Fund, bankrolled by J. Joseph Ricketts, the Omaha-based founder of the discount online stock brokerage Ameritrade. 3 This new avenue for wielding political clout is part of a historical trend over the past several decades that is consolidating disproportionate political power in the hands of the richest citizens, some scholars argue. The Founding Fathers believed in political equality, meaning that whether one is rich or poor would determine a persons market power but not their power in the democracy, says Jacob S. Hacker, a professor of political science at Yale University. I believe were falling quite dramatically short of this, as wealthier people have gradually developed institutional means like PACs and lobbies to see their favored policies enacted into law and regulation, and the government has become more friendly to these efforts, he says. There may exist mechanisms or pathways of influence by which a very small set of oligarchs rich people who wield political power could, to a far greater extent than their numbers alone would suggest, have a major impact on policy outcomes, wrote Northwestern University political scientists Benjamin I. Page and Jeffrey A. Winters. They point to the many highly professionalized and extremely expensive lobbying or-
ganizations that have sprung up in Washington since the mid20th century, mostly representing business and professional groups. Meanwhile, once-powerful labor unions now represent only about 15 percent of the U.S. workforce, mostly government workers. The pluralist dream of balance among competing interest groups is thus largely discredited, while those who are able and willing to invest large sums of money in increasingly professional and expensive lobbying efforts have a big advantage, they argue. 4 Politicians increasing need for fundraising has helped lobbies to increase the power of big-money business interests, wrote Hacker and Paul Pierson, a professor of political science at the University of California, Berkeley. For example, beginning in the 1970s, television advertising and modern public-opinion polling allowed candidates to reach unheard of numbers of people with messages shrewdly crafted to tap into voters prime desires. The ads and the pricey political consultants whom candidates hired to poll and develop campaign strategies greatly increased politicians reliance on big-money donors, Hacker and Pierson argue. 5 Based on decades of detailed polling data on different income groups, its clear that when the opinions of the poor diverged from those of the well-off, the opinions of the poor ceased to have any apparent influence: If 90 percent of poor Americans supported a policy change, it was no more likely to happen than if 10 percent did, according to political scientist Martin Gilens at Princeton University. 6 By contrast, when well-off people supported a policy change, it was three times more likely to occur than if they opposed it. Furthermore, the middle class did not fare much better than the poor when their opinions departed from those of the welloff. When median-income people strongly supported a policy change, it had hardly any more chance of occurring than a change that they strongly opposed, Gilens said. 7 The policy preferences of wealthy people tend to diverge from those of other citizens on various issues, according to Page, who has begun an extensive study of this question. His preliminary work finds that 58.8 percent of the richest Americans in the top 4 percent of income identify as Republicans, for
thus driving income inequality compared to low-skilled workers because many people could compete for high-skilled occupations, Katz and Goldin wrote. 54 Historically, education has been the primary pathway of upward mobility in the United States, says Richard J. Murnane, a professor of education and society at the Harvard Graduate School of
Education. In 1973, the United States had the highest high school graduation rate among OECD [Organization for Economic Co-operation and Development] countries, but the education engine stopped in the mid-1970s as high school graduation rates stalled, he says. Levels of income inequality depend very strongly on the supply and
demand for skills, at least among people between the 10th and the 90th percentile of the income distribution, says David Autor, an economist at the Massachusetts Institute of Technology. For example, in the early 1970s, when the huge Baby Boom generation saw a rising proportion of its members go to college, wages for higher-skilled
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example, compared to 36.1 percent of others. Very high-income Americans are more likely than others to be liberal or libertarian on social issues favoring abortion rights and the right of atheists to teach, for example. But they are more likely than others to be conservative on economic issues, not favoring government efforts to reduce economic inequalities. 8 In the 2010 midterm elections, high earners showed a strong preference for Republican candidates and, presumably, policies, while 58 percent of those earning $30,000 or less and 52 percent of those earning between $30,000 and $50,000 voted for Democratic candidates, according to a Wall Street Journal analysis. The Republican preference strengthened all the way up the income ladder, with 52 percent of those earning between $50,000 and $75,000 voting GOP; 56 percent of the $75,000 to $200,000 earners; and a whopping 62 percent of those earning over $200,000. 9 Conservative and libertarian analysts remain skeptical that economic clout helps some gain undue political influence. While highly educated people wield greater influence, it is very difficult to see how income in excess of the threshold necessary to receive a high-quality education adds much to most peoples pool of political resources, said Will Wilkinson, a research fellow at the libertarian Cato Institute. Ideologically motivated wealthy Americans are limited by the menu of preexisting organizations, prevailing ideas and the supply of ideologically congenial labor, he argued. No amount of money can buy you a think tank with your politics if there is no one with your politics to work in it. 10 Capitalism might indeed preclude democracy if capitalism meant that rich people really were a permanent class, wrote Council on Foreign Relations Senior Fellow Amity Shlaes. But one capitalist idea (the railroad, say) brutally supplants another (the shipping canal), and within a few generations . . . this supplanting knocks some parties out of the top tier and elevates others to it. 11 A focus on the dangers of wealth concentration simply provides a political justification for encouraging envy, a state that leads to neglect of family and friends, community involvement and charitable work and bolsters an empty materialism, wrote Jeffrey M. Jones, assistant director of Stanford Universitys Hoover Institution, a conservative public-policy research organization, and Daniel Heil, a graduate student at Pepperdine University. 12
Ironically, when Americans become aware that income inequality is on the rise, that knowledge actually sways the voting public away from liberal policies aimed at decreasing inequality, according to Nathan J. Kelly, an assistant professor of political science at the University of Tennessee, Knoxville, and Peter K. Enns, an assistant professor of government at Cornell University, in Ithaca, N.Y. In the United States, public opinion moves in a conservative direction in response to income inequality, among both rich and poor Americans, potentially making income inequality a self-reinforcing phenomenon, they wrote. 13 Marcia Clemmitt
Amanda Terkel, The One-Person Funded Super PAC, Huffington Post blog, Oct. 22, 2010, www.huffingtonpost.com. 2 The cases are Citizens United v. Federal Election Commission, 130 S.Ct. 876 (2010), www.law.cornell.edu/supct/html/08-205.ZS.html and Speechnow.org, et al. v. Federal Election Commission, No. 08-5223, http://pacer.cadc.uscourts.gov/com mon/opinions/201003/08-5223-1236837.pdf. For background, see Kenneth Jost, Campaign Finance Debates, CQ Researcher, May 28, 2010, pp. 457-480. 3 Terkel, op. cit. 4 Jeffrey A. Winters and Benjamin I. Page, Oligarchy in the United States? Perspectives on Politics, December 2009, p. 731. 5 Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class (2010), p. 171. 6 Quoted in ibid., p. 111. 7 Ibid. 8 Benjamin I. Page and Cari Lynn Hennessy, What Affluent Americans Want From Politics, paper delivered to the American Political Science Association, annual meeting, Washington, D.C., Sept. 2-5, 2010, www.russellsage.org/sites/all/ files/u4/Page%20%26%20Hennessy%2C%20What%20Affluent%20Americans%20 Want%20from%20Politics.pdf. 9 Democratic Coalition Crumbles, Exit Polls Say, The Wall Street Journal online, Nov. 3, 2010, http://online.wsj.com/article/SB1000142405274870377 8304575590860891293580.html?KEYWORDS=voters+election+2010#project%3 DEXITPOLL101102%26articleTabs%3Dinteractive. 10 Will Wilkinson, Thinking Clearly About Economic Inequality, Policy Analysis No. 640, Cato Institute July 14, 2009, www.cato.org. 11 Amity Shlaes, An Age of Creative Destruction, The Wall Street Journal online, Oct. 29, 2010, http://online.wsj.com. 12 Jeffrey M. Jones and Daniel Heil, The Politics of Envy, tech-archives.net website, Aug. 21, 2009, http://sci.tech-archive.net. 13 Nathan J. Kelly and Peter K. Enns, Inequality and the Dynamics of Public Opinion: The Self-Reinforcing Link Between Economic Inequality and Mass Preferences, American Journal of Political Science, October 2010, p. 855.
1
workers temporarily fell somewhat. In the mid-1970s, as high school graduation rates stalled and smaller generational cohorts attained adulthood behind the Baby Boomers, the supply of high-skill workers began to shrink compared to the growing demand for them in technology-based industries, Autor says. At that point, we began
to get a [wage] premium for college grads, and their rising incomes helped increase income inequality. At the same time, the advent of the computer age allowed automation of virtually any repetitive task so that middleskill jobs like bookkeeping, many manufacturing jobs and even many computer programming and sales positions
gradually evaporated from the workplace or shifted overseas, explains Carnevale, at Georgetowns Center on Education and the Workforce. With high school graduation rates stagnant, a growing pool of U.S. workers are left to compete for low-skilled jobs like security guards and home-health workers, where the large supply of available workers drives
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down wages further, Carnevale says. In 1973 the majority of people with a high school education or less were in the middle 40 percent of the income distribution solidly middle class, says Carnevale. Now that number is below 30 percent. People with B.A.s, by contrast, have remained in the middle class, and about a third have moved into the top 30 percent of incomes, he says. This workforce polarization that drives income inequality is evident in European Union and OECD countries, too, says Autor. very top earners. For one thing, financial-industry executives make up nearly 20 percent of the people with salaries in the top 1 percent of the U.S. income distribution, and it strains credulity to say they are . . . the talented tamers of technological change whove benefited from skillbased technological workplace change, write Yales Hacker and University of California, Berkeley, political scientist Paul Pierson. The financial crisis demonstrated that plenty of the so-called financial innovations that their complex computer models helped spawn proved to be just fancier (and riskier) ways of . . . benefiting from short-term market swings, not the true innovation that markets presumably reward. 58 Over the past several decades, wealthy business interests have organized into lobbies, political action committees (PACs) and think tanks, at the same time as the main organizations that once represented the working class labor unions have shrunk, leaving some business sectors like finance with enormous power to influence government policies, Hacker and Pierson argue. Furthermore, beginning in the 1970s, TV ads and pricey opinion-poll surveying became a necessity for political campaigns, greatly increasing politicians need for high-dollar contributors and increasing those contributors influence in Washington, they contend. As a result, government policy has grown much more generous toward the fortunate. Financial deregulation didnt just happen, nor did tax policy that saw corporate and inheritance taxes as well as marginal taxes on high incomes drop significantly, says Hacker. The government has made and remade markets by law and regulation, and the much smaller income differentials that prevail in every other market-based industrialized economy make clear that U.S. income inequalities result from policy choices, he says. For example, not market forces alone but deliberate government policies drove the precipitous decline in U.S. union membership that began just after World War II when more than one in three workers was a union member and continues today, when about one in nine is, and most union members are government, not private-sector, workers, Hacker says. While unions arent blameless in their own demise, and globalization has realigned markets, over the past few decades Congress, state legislatures and successive White Houses dragged their feet on measure after measure that would have strengthened unions bargaining power, he says. The result is the loss of a key political force that was broadly representative of the middle class in a way that no other large, politically influential organization has been a key source of voter turnout and a counterweight in boardrooms to represent the interests of middle- and low-wage workers, Hacker says. Economic troubles fueled lawmakers increasingly business- and wealth-friendly policies beginning in the late 1970s, said University of Arizona professor of sociology and political science Lane Kenworthy. Stagflation slow economic growth combined with rising prices and high unemployment and a surge in imports had turned [Americans longheld] optimism [about the economy] to worry, and the underlying pessimism persisted through the late 1990s, making policy makers more willing to entertain the pleas of business interests, whatever they might be. 59
Winners Take All

ther scholars point to a different trend as the key driver of income inequality a winner-takeall economy in which a few high earners rack up income gains that far outstrip those of everyone else. There was no increase in inequality after 1993 in the bottom 99 percent of the population, and the remaining increase . . . can be entirely explained by the behavior of incomes in the top 1 percent, said Northwesterns Gordon. 55 Unlike in the Gilded Age, it wasnt investment income but high-rising salaries for people like top executives and Hollywood stars that fueled the outsized gains at the top, according to Piketty and Saez. 56 Some argue that superstar salaries simply represent a new, globalized market rationally presenting very high rewards to people whose wares sell to tens of millions of people worldwide. I think there are people, including myself at certain times in my career, who because of their uniqueness warrant whatever the market will bear, said Leo J. Hindery, a managing partner of the New York City-based private equity fund InterMedia Partners. 57 But others say that government structures and policies not just market forces have played a large role in the U.S. shift of income toward the
CURRENT SITUATION
Policies Debated
lthough few members of Congress or candidates in the hotly

Continued on p. 1006
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At Issue:
Should tax cuts on high earnings be extended?
yes
SENIOR FELLOW, CATO INSTITUTE

WRITTEN FOR CQ RESEARCHER, NOVEMBER 2010
ALAN REYNOLDS
DIRECTOR OF FEDERAL TAX POLICY, CENTER ON BUDGET AND POLICY PRIORITIES

WRITTEN FOR CQ RESEARCHER, NOVEMBER 2010
CHUCK MARR
n 2001, Congress assembled a time bomb with a 10-year fuse. Unless the lame duck Congress acts with atypical urgency, all tax cuts enacted in 2001-2003 will vanish on Dec. 31. If lawmakers fail to defuse the tax time bomb by the end of the year, withholding taxes will increase dramatically. Moreover, if lawmakers and the president cant agree on a solution by years end, the top tax on dividends would jump from 15 percent to 39.6 percent, ensuring a stock market crash. The estate tax would jump to 55 percent with only a $1 million exemption. Marginal tax rates would rise by 3-5 percentage points across the board. President Obama has appeared eager to hurl himself on top of this bomb. He threatened economic homicide and political suicide by threatening to veto any solution that did not impose much higher taxes on two-earner couples and small businesses earning more than $250,000. Yet the president has had eight months to enact the tax hikes in his 2011 budget. If he couldnt do it then, he certainly cant now. Everyone knows this is playing with fire. The targets of Obamas planned tax increases account for a fourth of all consumer spending, and a greater fraction of entrepreneurship and investment. Christina Romer, formerly Obamas top economic adviser, found that a U.S. tax increase amounting to 1 percent of gross domestic product (GDP) reduces real GDP by nearly 3 percent within three years, with employment falling 1.1 percent. Harvard economists Alberto Alesina and Silvia Ardagna found that fiscal adjustments, those based upon spending cuts and no tax increases, are more likely to reduce deficits . . . [and] less likely to create recessions. Under the fanciful assumption that Obamas tax hikes on the rich did no damage to the economy, his plan is estimated to raise $35 billion next year. That would cover the budget deficit for just nine days. This is all risk and no reward. The White House is now rumored to be willing to compromise on legislation that postpones the presidents planned tax hikes on upper-income families while supposedly making permanent all other Bush tax cuts. That may not be the ideal solution, but it buys time for the new Congress to tackle the budget in an economy that is rising slowly rather than falling fast.
no
yes no
l
Dec. 3, 2010 CQ Press Custom Books - Page131
etting President Bushs tax cuts for incomes over $250,000 expire on schedule at the end of December is the right move from the standpoint of both equity and economic efficiency. Recent decades have witnessed a stunning shift in incomes from the middle class to those few at the top. Between 1980 and 2005, about 80 percent of the countrys total income gains went to the top 1 percent of the population, according to a report by MIT researchers Frank Levy and Peter Temin. Moreover, while incomes stagnated for middle-class Americans in recent decades, they surged for the wealthy in stark contrast to the decades between the mid-1940s and mid-1970s, when income growth was widely shared. The average middleincome American family had $13,000 less after-tax income in 2007 than it would have had if incomes of all groups had grown at the same average rate since 1979. Tax policy is one of the best tools we have to help offset the troubling trend of growing inequality. Unfortunately, President Bushs tax cuts have had the opposite effect, providing much larger benefits both in dollar terms and as a percentage of income to people at the very top than to middleand lower-income people. In fact, people making more than $1 million a year get an average of about $129,000 each year from the Bush tax cuts, according to the Urban Institute-Brookings Institution Tax Policy Center. The main reason, of course, is the large tax cuts targeted specifically at high-income households. Extending the tax cuts for high-income people would only make inequality worse. (High-income people would still benefit from an extension of the so-called middle-class Bush tax cuts, since the first $250,000 of their income would be taxed at the lower marginal tax rates.) Extending the high-end tax cuts doesnt make sense from an economic perspective, either. The Congressional Budget Office (CBO) rated it the least cost-effective of 11 options for boosting economic growth and job creation. A far better alternative would be to extend President Obamas Making Work Pay tax credit, which is targeted to people who live paycheck-to-paycheck but is also scheduled to expire at the end of December. This would generate two to three times the economic growth and job creation as extending the high-end Bush tax cuts, according to CBO. The right course, then, would be to let the high-end Bush tax cuts expire, locking in significant long-term budgetary savings, while temporarily extending the Making Work Pay credit while the economy remains weak.
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contested 2010 elections have specifically addressed the question of whether growing economic inequality is bad or good, the issue simmers beneath many of the hottest election-year debates, including taxes, the minimum wage and the power of unions. In light of the countrys fiscal problems, many Democrats in Congress, along with President Obama, have called for the wealthiest to take on a greater share of the public burden. In a heated debate that remained unresolved when Congress adjourned its main session in the fall to campaign, the White House and most Democrats backed the idea of extending Bushera tax cuts for family earnings under $250,000 and letting the cuts expire for dollars earned above that level. 60 In order to save our children from a future of debt, we will . . . end the tax breaks for the wealthiest 2 percent of Americans, said Obama. 61 But Republicans and some conservative Democrats argue that high-earners money is the key driver of the whole economy. History shows and good economic theory shows, if you reduce taxes, youre going to have more economic activity, said Republican Minnesota Gov. Tim Pawlenty, on CBS News Face the Nation on Oct. 31. If you dont extend those Bush tax cuts all of them its going to send a very negative signal, said Pawlenty, who is reportedly mulling a run for the White House in 2012. 62 Most recently, the White House reportedly favors a plan to temporarily extend the cuts for earnings over $250,000 while extending the cuts permanently for earnings under that amount. With Congress in upheaval following the elections, its not clear whether lawmakers will tackle the issue in the final days of the 2010 lame duck session, when most newly elected members wont yet be seated. Conservative candidates campaigning around the country this fall spoke
out against government mechanisms intended to push the income distribution more in favor of lower earners. John Raese, West Virginias Republican nominee for the Senate, and Joe Miller, the Republican nominee for Senate in Alaska, for example, argued that the Constitution does not give Congress the power to set a minimum wage for the nation but reserves that power for states. 63 (Similar arguments were made on the two occasions when Congress enacted federal minimum-wage laws, in 1933 and 1938. The Supreme Court struck down the first law as unconstitutional in 1935, 64 but upheld the 1938 Fair Labor Standards Act in a unanimous 1941 decision, U.S. v. Darby. 65) Linda McMahon, the Republican nominee for Senate in Connecticut, opposed increasing the minimum wage, and Rand Paul, Republican nominee for the Senate in Kentucky, suggested a very cautious approach to minimum-wage increases. 66 How big a role candidates views on income redistribution played in election results isnt clear, but for these Senate hopefuls the results were mixed: Paul won his race; Raese, McMahon and Miller lost, but Miller is contesting his narrow defeat to write-in candidate Republican Sen. Lisa Murkowski, the incumbent. Meanwhile, four states voted on ballot measures in November that would slow the growth of unions, and all the measures were approved. Voters in Arizona, South Carolina, South Dakota and Utah approved making a secret vote by workers the sole allowable means of determining whether an authorized workplace union has been formed, outlawing an alternative practice that requires an employer to recognize that a union has been formed any time a majority of workers have signed cards authorizing union formation. 67
Ambivalent Public?
he public, meanwhile, remains both confused and ambivalent about
the underlying question of whether economic inequalities are worrisome. It is usually only left-leaning rich people that care about inequality in the U.S., said Carol Graham, a senior fellow at the Brookings Institution think tank. 68 Nevertheless, some polling suggests that the public may be fairly supportive of government policies to prop up lower incomes, in particular. For example, an October poll found 67 percent of respondents favoring an increase in the minimum wage from its current $7.50 an hour to $10 an hour, even including a majority 51 percent of Republicans. Among people who identified themselves as belonging to the Tea Party, however, 50 percent opposed the increase and 47 percent supported it. 69 Underlying the ambivalence is the fact that few Americans accurately gauge the level of income inequality, some researchers say. The public tends to guess right about lower- and middle-income wages, but few seem aware of how high the highest salaries actually are, reports Benjamin I. Page, a professor of decision making in Northwestern Universitys political science department, and Lawrence R. Jacobs, a professor of political studies at the University of Minnesota. The average person surveyed estimated $250,000 to be the annual income for a heart surgeon and $500,000 for the CEO of a large corporation. The guesses were well off the mark, especially for CEOs. The average heart surgeon earns over $400,000, while the CEOs of Standard & Poors 500 companies average over $14 million in annual income. 70 Even professional economists generally underestimate current levels of inequality, says Dukes Ariely. This finding isnt surprising, says Michael I. Norton, an associate professor of business administration at Harvard Business School. As an average person, we dont really see the very rich or their wealth. Its in trusts
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and other financial forms that make it mostly invisible. People dont see very poor people in their lives, either. At the same time, the public generally believes that society would be more just if incomes varied a bit less widely, says Norton, who, along with Ariely, conducted a recent study asking people how they would like to see income distributed in a hypothetical society, if they knew that they would be placed into that society at some random spot. When you ask people a specific question about a tax cut or some other proposal, you tend to have a very hostile debate. So we stepped back and looked at a very broad level of what kind of society people actually desire, and when we did that, people agreed a lot, Norton says. When shown unlabeled diagrams that actually depicted the income distributions of the United States and Sweden where inequality is much lower than in the United States fully 92 percent of Americans surveyed preferred to live in the unlabeled country with the Swedish distribution, says Ariely. Furthermore, when you look at the apparently differing ideology of Republicans and Democrats, the differences in how members of the two parties answered the question are very, very small, with 90 percent of Republicans opting for the Swedish distribution, compared to 93 percent of Democrats. A desire for overall fairness seems to be the key motivation for most, says Norton. When people are asked about how theyd redistribute societys wealth, they dont just give it to poor, they give it to everybody, and the main sentiment people express is the rich just have somewhat too much. When it comes to taking that broad vision and boiling it down to policy, though, thats very hard to do, Norton acknowledges. At both the macro and the micro level, people have certain ideas about what they want their lives to be, but very often our decisions go the other way.
OUTLOOK
Progressive Era Redux?
hether the American economy will continue the trend toward greater inequality or adopt policies to rein in the widening gap is unclear, and lawmakers and the public vary widely in their views of which course is preferable and what policies might change things for the better. If you look back at the 1890s ultimately there was a reaction to it, there was a cycle that saw an era of progressive taxation and other measures to limit the income inequalities that marked the Gilded Age, says Northwesterns Page. A lot of these reforms were undertaken by the upper middle class and even some wealthier people, he says. And there does now seem to be something in the air that could portend a similar shift to progressive policies, as billionaires like Microsoft founder Bill Gates and investor Warren Buffett suggest that the wealthy should devote large portions of their estates to charitable and public purposes, he says. 71 Indeed, in the Progressive Era, the economic problems dwarfed those we have today, but the nation still came together to shape national policies to overcome them and to rein in rampant inequality, says Yales Hacker. The same thing could happen today, Hacker says. Whatever pessimism I have is not over the scope of the problem but over the lack of a widespread recognition that a problem of inequality exists, he says. We have really only begun to have this debate. We are where we were on climate change a few decades ago. Hacker focuses on government policies related to unions, taxation and business regulation as keys to keeping economic inequalities at a reasonable level, but MITs Autor worries
that such a focus might leave Americans thinking that the whole thing is out of our hands. The best cure for extreme inequality is education because it creates economic opportunity, he says. We havent been keeping pace with the demand for skilled labor, and bolstering technical education and skills training for more young people could go a long way toward rebuilding the American workforce and the businesses that support it, he says. This issue may not matter much to businesses, most of which can locate anywhere in the world that a skilled workforce exists, but it matters greatly to our prosperity. The stagnant buying power of middle- and lower-earning Americans is a severe, growing problem for the wealthiest Americans, whether they realize it or not, says Max Fraad Wolff, an economics writer and commentator who teaches at the New School University Graduate Program in International Affairs. Business leaders may bank on the emergence of global markets to replace U.S. buying power, but thats not a winning strategy, he says. What we know is that Americans can sell to Americans, Wolff says. In this early phase of modernization [in emerging economies like China and India] what it means to be modern is to be Americanized, but in the early history of the United States being modern meant being Europeanized, too, he says. Eventually American pride overtook that, and that will happen to currently modernizing countries like China, too. That makes bolstering the average Americans earning power a critical issue for U.S. businesses, he says.
Notes
1 Christina Boyle, Rich-Poor Gap Grows in the City, Daily News [New York], Sept. 29, 2010, p. 5.
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INCOME INEQUALITY
Ibid. Arloc Sherman and Chad Stone, Income Gaps Between Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 25, 2010, www.cbpp.org. 4 Ajay Kapur, Niall Macleod and Narendra Singh, Revisiting Plutonomy: The Rich Getting Richer, Industry Note, Citigroup, March 5, 2006. 5 George Reisman, For Society to Thrive, the Rich Must Be Left Alone, Mises Daily blog, Ludwig von Mises Institute, March 2, 2006, http://mises.org. 6 Sen. Joseph Lieberman, press statement, Sept. 13, 2010, http://lieberman.senate.gov. 7 Ibid. 8 Robert Kuttner, What Planet Are Deficit Hawks Living On? Huffington Post blog, Nov. 14, 2010, www.huffingtonpost.com. 9 Christian Broda, Ephraim Leibtag and David E. Weinstein, The Role of Prices in Measuring the Poors Living Standards, Journal of Economic Perspectives, spring 2009, http:// faculty.chicagobooth.edu/christian.broda/web site/research/unrestricted/z30002092155p%20% 282%29.pdf. 10 Stephen Rose, Five Myths About the Poor Middle Class, The Washington Post, Dec. 23, 2007, www.washingtonpost.com. 11 Neal Boortz, Nine in 10 Politicians Will Rip This Column, Atlanta Journal-Constitution online, Sept. 17, 2010, www.ajc.com. 12 Robert J. Gordon, Misperceptions About the Magnitude and Timing of Changes in American Income Inequality, National Bureau of Economic Research, Working Paper 15351, September 2009. 13 Growing Unequal? Income Distribution and Poverty in OECD Countries, Organization for Economic Co-operation and Development, October 2008, www.oecd.org/els/social/inequality. 14 David B. Grusky and Kim A. Weeden, Is Market Failure Behind the Takeoff in Inequality?
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forthcoming in David B. Grusky and Szonja Szelenyi, eds., The Inequality Reader: Contemporary and Foundational Readings in Race, Class, and Gender, 2nd ed. 15 Gary Burtless, Comments on Has U.S. Income Inequality Really Increased? Jan. 11, 2007, www.brookings.edu/views/papers/burtless/2007 0111.pdf. 16 Gary Burtless, Has Widening Inequality Promoted or Retarded U.S. Growth? Canadian Public Policy, January 2003, p. S185, www.irpp. org/events/archive/jan01/burtless.pdf. 17 Ibid. 18 W. Michael Cox and Richard Alm, You Are What You Spend, The New York Times, Feb. 10, 2008, www.nytimes.com. 19 Angel Girria, remarks delivered at OECD conference in Paris, France, Oct. 21, 2008, www.oecd.org. 20 Conference Report: Poverty, Inequality, and Democracy, Network of Democracy Research Institutes, Bratislava, Slovakia, April 2628, 2009, p. 2, www.wmd.org/ndri/ndri.html. 21 Martin Gilens, Inequality and Democratic Responsiveness, Public Opinion Quarterly, 2005 (Special Issue), pp. 778-796, http://poq.oxford journals.org/content/69/5/778.full. 22 Ibid. 23 Quoted in Emily Kaiser, Special Report: The Haves, the Have-nots, and the Dreamless Dead, Reuters, Oct. 22, 2010, www.reuters. com/article/idUSTRE69L0KI20101022. 24 Quoted in ibid. 25 Quoted in David Wessel, Professor Finds Many Fault Lines in Crisis, The Wall Street Journal, April 22, 2010, http://online.wsg.com. 26 N. Gregory Mankiw, I Can Afford Higher Taxes. But Theyll Make Me Work Less, New York Times, Oct. 9, 2010, www.nytimes.com. 27 Ibid. 28 Art Carden, The Minimum Wage, Discrimination, and Inequality, Mises Daily blog, Ludwig von Mises Institute, Jan. 19, 2009, http://mises.org.
About the Author

Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Gridlock in Washington and Financial Industry Overhaul.
Ibid. Sidney Weintraub, U.S. Tolerance of Income Inequality, Issues in International Political Economy, Center for Strategic and International Studies, January 2010, www.csis.org. 31 Robert Reich, The Perfect Storm that Threatens American Democracy, Huffington Post blog, Oct. 18, 2010, www.huffingtonpost.com. 32 Ian Dew-Becker and Robert J. Gordon, Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income, paper presented at the Brookings Institution panel on economic activity, Sept. 8-9, 2005, www.brookings.edu/es/commentary/jour nals/bpea_macro/forum/200509bpea_gordon.pdf. 33 Ibid. 34 Jonathan Cohn, Moral Arguments for Soaking the Rich, The New Republic online, Oct. 17, 2010, www.tnr.com. 35 Anthony P. Carnevale, Postsecondary Education and Training As We Know it Is Not Enough, paper prepared for a Georgetown University/Urban Institute conference on poverty, Jan. 15, 2010, www.urban.org/uploadedpdf/ 412071_postsecondary_education.pdf. 36 Gary S. Becker and Kevin M. Murphy, The Upside of Income Inequality, The American: A Magazine of Ideas online, The American Enterprise Institute, May/June 2007, www.ameri can.com. 37 James K. Galbraith and J. Travis Hale, The Evolution of Economic Inequality in the United States, 1969-2007, University of Texas Inequality Project, Working Paper 57, Feb. 2, 2009, http://utip.gov.utexas.edu/papers.html. 38 Claudia Goldin and Lawrence F. Katz, The Race Between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005, May 2009, www.eco nomics.harvard.edu/faculty/katz/files/Chapter8_ NBER_1.pdf. 39 Mark Twain and Charles Dudley Warner, The Gilded Age: A Tale of Today (1873). 40 Timothy Noah, The Great Divergence, Part One, Slate, Sept. 3, 2010, www.slate.com/id/ 2266025/entry/2266026. 41 Willford I. King, The Wealth and Income of the People of the United States (1915), p. 60, http://books.google.com/books?id=dmFsmjETqIC&pg=PA287&lpg=PA287&dq=%22willford +i+king%22+%22the+wealth+and+income+of+ the+people+of+the+united+states%22&source= bl&ots=0hVvJxnasb&sig=ilCydUCzxxTa1YW85i 40XnS7ZAA&hl=en&ei=Y8HFTK36CMH7lwf BhokG&sa=X&oi=book_result&ct=result&resn um=5&ved=0CCAQ6AEwBA#v=onepage&q=ef
30
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ficient&f=false. 42 Andrew Carnegie, The Gospel of Wealth and Other Timely Essays (1901), p. 10, http:// books.google.com/books?id=gAGvb5vIh-AC& printsec=frontcover&dq=%22the+gospel+of+ wealth%22&source=bl&ots=DMxn1bs71e&sig= 7CUUj34D-ignVkYztYo05sC0Rf4&hl=en&ei=JM TFTPjVMoSBlAeV_cED&sa=X&oi=book_result &ct=result&resnum=4&ved=0CCkQ6AEwAw#v =onepage&q&f=false. 43 For background, see 16th Amendment to the Constitution: Federal Income Tax (1913), National Archives and Records Administration website, www.ourdocuments.gov/doc.php?flash =old&doc=57. 44 Pollack v. Farmers Loan and Trust Company, 157 U.S. 429, www.law.cornell.edu/supct/ html/historics/USSC_CR_0157_0429_ZS.html. 45 Thomas Piketty and Emmanuel Saez, The Evolution of Top Incomes: A Historical and International Perspective, Working Paper 11955, National Bureau of Economic Research, January 2006, http://elsa.berkeley.edu/~saez/ piketty-saezAEAPP06.pdf. 46 Frank Levy and Peter Temin, Inequality and Institutions in 20th Century America, MIT Industrial Performance Center, Working Paper, June 27, 2007, www.economics.harvard.edu/ faculty/katz/files/Chapter8_NBER_1.pdf. 47 Ibid. 48 Schechter Poultry Corp. v. United States, 295 U.S. 495, www.law.cornell.edu/supct/html/his torics/USSC_CR_0295_0495_ZS.html. 49 Levy and Temin, op. cit. 50 James K. Galbraith, Inequality and Economic and Political Change, University of Texas Inequality Project, Working Paper 51, Sept. 21, 2008, http://utip.gov.utexas.edu/papers.html. 51 Noah, op. cit. 52 Ibid. 53 Ibid. 54 Goldin and Katz, op. cit. 55 Gordon, op. cit. 56 Piketty and Saez, The Evolution of Top Incomes, op. cit. 57 Quoted in Louis Uchitelle, The Richest of the Rich, Proud of a New Gilded Age, The New York Times, July 15, 2007, www.nytimes.com. 58 Jacob S. Hacker and Paul Pierson, WinnerTake-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class (2010), p. 46. 59 Lane Kenworthy, Business Political Capacity and the Top-heavy Rise in Income Inequality: How Large an Impact? Politics & Society, June 2010, p. 255.

Cato Institute, 1000 Massachusetts Ave., N.W., Washington, DC 20001-5403; (202) 842-0200; www.cato.org. Analyzes economic issues from a libertarian point of view. Center on Budget and Policy Priorities, 820 First St., N.E., Suite 510, Washington, DC 20002; (202) 408-1080; www.cbpp.org. Liberal-leaning think tank that analyzes economic policy implications for low- and moderate-income families. Economic Mobility Project, The Pew Charitable Trusts, 901 E St., N.W., 10th Floor, Washington, DC 20004; www.economicmobility.org. Nonpartisan group studying trends in economic and social mobility. Emmanuel Saezs website, http://elsa.berkeley.edu/~saez. Analysis by University of California, Berkeley, economist supports many arguments about fast-rising income inequality. Ludwig von Mises Institute, 518 West Magnolia Ave., Auburn, AL 36832-4528; (334) 321-2100; http://mises.org. Organization of libertarian economists who argue that economic inequalities are both smaller and less troubling than many believe. My Budget 360 website, www.mybudget360.com/home. Advertising-supported online investment magazine posts data and analysis on economic inequalities. Too Much website, Program on Inequality and the Common Good, Institute for Policy Studies, 1112 16th St., N.W., Suite 600, Washington, DC 20036; (202) 2349382; http://toomuchonline.org. A liberal think tanks website posting news and commentary about economic inequality. U.S. Census Bureau, 4600 Silver Hill Road, Washington, DC 20233; (301) 763-4636; www.census.gov. Federal agency publishes periodic reports and analysis on the economy, including income distribution. University of Texas Inequality Project, http://utip.gov.utexas.edu. Austin-based group studying economic inequality around the world.
For background, see Richard Wolf, How the Tax Cut Debate Affects You, USA Today, Sept. 21, 2010, www.usatoday.com. 61 Quoted in ibid. 62 Transcript, Face the Nation, CBS News, Oct. 31, 2010, www.cbsnews.com/htdocs/pdf/ FTN_103110.pdf. 63 Adam Cohen, Could the Courts Outlaw the Minimum Wage? Time online/CNN, Oct. 20, 2010, www.time.com. 64 A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). www.law.cornell.edu/supct/ html/historics/USSC_CR_0295_0495_ZS.html. 65 U.S. v. Darby, 312 U.S. 100 (1941), http://case law.lp.findlaw.com/cgi-bin/getcase.pl?court= us&vol=312&invol=100. 66 Cohen, op. cit. 67 For background, see Anti-Union Ballot Measures Target Workers Rights, AFL-CIO
60
NOW blog, Oct. 27, 2010, and James Parks, Corporate-Backed, Anti-Union Secret Ballot Measures Pass in Four States, AFL-CIO NOW blog, Nov. 4, 2010, http://blog.aflcio.org. 68 Quoted in Kaiser, op. cit. 69 Arthur Delaney, Two-Thirds of Americans Support Raising Minimum Wage: Poll, Huffington Post blog, Oct. 6, 2010, www.huffington post.com. 70 Benjamin I. Page and Lawrence R. Jacobs, Economic Inequality and the American Public, paper delivered at a conference at the Federal Reserve Bank of Chicago, April 2-3, 2008, http://ctcp.edn.depaul.edu/HGEwebsite/Ab stracts/BenjaminPage_Paper.pdf. 71 For background see Peter Katel, Philanthropy in America, CQ Researcher, Dec. 8, 2006, pp. 1009-1032.
Dec. 3, 2010
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Bibliography
Selected Sources
Books
Cox, W. Michael, and Richard Alm, Myths of Rich and Poor: Why Were Better Off Than We Think, Basic Books, 2000. Cox, a senior fellow at the Dallas Federal Reserve Bank, and Alm, a business reporter, argue that higher living standards for all Americans offset any increases in income inequality that have occurred over the past few decades. Hacker, Jacob S., and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class, Simon & Schuster, 2010. Professors of political science at Yale (Hacker) and the University of California, Berkeley (Pierson), argue that the widening income gap has not occurred mainly because lower-educated workers dont have the skills to compete for jobs in a technological workplace but because the U.S. government has gradually adopted many policies that support the growth of income and wealth at the top. Scholars from across the ideological spectrum examine research showing that social and economic mobility have been diminishing in the United States compared to other nations, despite the widespread belief that Americans have greater equality of opportunity than elsewhere. Lindsey, Brink,Paul Krugmans Nostalgianomics: Economic Policies, Social Norms, and Income Inequality, Cato Institute, 2009, www.cato.org/pub_display.php?pub_id=9941. The libertarian think tanks vice president for research argues that U.S. income dispersion resulted from technological change that keeps low-skilled workers out of many jobs, not from economic or social policies and practices like tax rates or unionization of labor. Norton, Michael I., and Dan Ariely, Building a Better America One Wealth Quintile at a Time, forthcoming, Perspectives in Psychological Science, www.people.hbs. edu/mnorton/norton%20ariely%20in%20press.pdf. When surveyed about their preferred society, large majorities of Americans across demographic groups and the political spectrum opt for an income distribution less skewed toward the top than the current U.S. distribution. Sherman, Arloc, and Chad Stone, Income Gaps Between the Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 25, 2010, www.cbpp.org. In an examination of tax and wage data from the nonpartisan Congressional Budget Office, analysts from a liberalleaning think tank report that U.S. income is more concentrated at the very top of the economic ladder than at any time since 1928, with the income gap between the richest 1 percent of Americans and the lowest three-fifths more than tripling between 1979 and 2007. Weintraub, Sidney, U.S. Tolerance of Income Inequality, Issues in International Political Economy, Center for Strategic & International Studies, January 2010, http:// csis.org/files/publication/issues201001.pdf. A political economist from a bipartisan foreign-policy think tank argues that U.S. citizens and policy makers tolerate and even promote greater economic inequality than people in many other developed nations consider fair or economically efficient. Wilkinson, Will, Thinking Clearly About Economic Inequality, Cato Institute Policy Analysis 640, July 14, 2009, www.cato.org/pub_display.php?pub_id=10351. A research fellow at the libertarian think tank argues that income statistics are a misleading measure of economic inequality and that dispersion of incomes has little relation to either human welfare or social justice.
Articles
Kaiser, Emily, Special Report: The Haves, the Have-nots, and the Dreamless Dead, Reuters, Oct. 22, 2010, www.reuters.com/article/idUSTRE69L0KI20101022. By examining parallels between two eras when economic inequality ran high in the United States the 1920s and the 2000s economists struggle to understand why both periods preceded huge crashes of the financial markets and lengthy economic depressions. Noah, Timothy, The Great Divergence, Slate, September 2010, www.slate.com/id/2267157/. In a 10-part series, a reporter for the online magazine discusses recent research examining the possible causes and effects of rising economic inequality.
Reports and Studies

Income, Poverty, and Health Insurance Coverage in the United States: 2009, Current Population Reports, U.S. Census Bureau, September 2010, www.census.gov/prod/ 2009pubs/p60-236.pdf. This government report finds that the median household income did not change from 2008 to 2009 but that the poverty rate increased. Isaacs, Julia B., Isabel V. Sawhill and Ron Haskins, Getting Ahead or Losing Ground: Economic Mobility in America, Economic Mobility Project/Brookings Institution/Pew Charitable Trusts, October 2008, www.brookings.edu/ ~/media/Files/rc/reports/2008/02_economic_mobility_saw hill/02_economic_mobility_sawhill.pdf.
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CHAPTER
LABOR UNIONS' FUTURE

BY PAMELA M. PRAH
Excerpted from Pamela M. Prah, CQ Researcher (September 2, 2005), pp. 709-732.
Labor Unions Future

BY PAMELA M. PRAH
THE ISSUES
jobs overseas where there are fewer union protections. Others complain that unions llie Robbins may be take members money to supjust what organized port political causes that many labor needs if unions members dont support. are to halt their steep deUnion members have virtucline. Just 22 years old, shes ally no say in how their a recent college graduate unions spend their hard-earned and a card-carrying union money, said Linda Chavez, member. Indeed, shes a president of the Center for union recruiter. * Equal Opportunity, a conserAs the national organizer vative think tank, and author of United Students Against of the 2004 book, Betrayal: Sweatshops, Robbins adHow Union Bosses Shake Down dressed the annual AFL-CIO Their Members and Corrupt convention in Chicago in American Politics. 1 New York police officers protest their contract with the July, giving delegates a new The Chicago convention was city last year. The labor movement suffered a major blow vision of unions future. I supposed to help the union in July when dissident unions formed a rival to the hope many more young peomovement figure out how to venerable AFL-CIO. Union supporters say all workers ple will be involved in all boost declining membership in have benefited from organized labors efforts to levels of the labor movethe face of hostile business and improve wages and working conditions, but critics argue that unions spend too much time politicking ment, said Robbins, standgovernment actions and mend and not enough organizing. Union membership ing nervously before thoua split within its own ranks. has plummeted in the past 20 years. sands of union members Instead, the AFL-CIO suffered gathered at the Navy Pier. a bitter and dramatic divorce Robbins may represent labors future, soon. Labor unions in the 1950s repre- on the first day of the convention. but she was surrounded by stereotypes sented about one in three workers, but The group split nearly in half as of unions past, including beefy, cigar- now its less than one in eight. seven unions formed a rival labor group Union supporters say all Americans, called Change to Win. The seceding smoking men looking for all the world like extras from The Sopranos, the hit including non-union workers, have unions argued that the AFL-CIO had benefited from organized labors ef- lost its way and was spending too much HBO television series about the mob. The biggest misconception is that forts over the last 50 years. They point time and money trying to get Democunions are corrupt and unnecessary, out that union contracts often set the rats elected to national office and not Robbins contends. Her organization wage scale for non-union workers in enough time organizing new members. prods universities to avoid buying their a local area, and that labor has been The post-split AFL-CIO now emT-shirts, coffee mugs and other logo in the forefront of securing workplace braces 53 unions and 9 million workmerchandise from overseas sweatshops. safety and anti-discrimination measures ers, while Change to Win boasts three However, she admits, Its been a that apply to all workers. of the nations largest unions, reprePeople take for granted what their senting 6 million workers in the fastbit of a slow road getting unions to open up to work with younger peo- forefathers fought for all these years, growing service industries. 2 ple. They havent figured out exactly says Linda Dickey, president of Local Andy Stern, president of the Service 419 of the Glass, Molders, Pottery, Employees International Union (SEIU) how to do it yet. But if unions are going to survive, Plastics and Allied Workers, in and a former protg of AFL-CIO Pressupporters say, they need to figure it out Newell, W.Va., during a break at the ident John Sweeney, led the revolt. His convention. group has organized 900,000 workers in But critics argue that unions have the past nine years, often using uncon* Robbins belongs to the International Federation of Professional and Technical Engineers, outlived their purpose, and that in the ventional approaches. For example, in which claims a membership of more than age of a globalized work force unions 1995 the SEIU blocked bridges leading 75,000 professional, technical and administra- outdated practices and protection of poor into Washington, D.C., to call attention performers encourage employers to shift to its Justice for Janitors campaign. tive workers.
Available online: www.thecqresearcher.com CQ Press Custom Books - Page139
Getty Images/Kathleen Voege
Sept. 2, 2005
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Teachers and Police Lead in Union Membership
More than a third of the nations teachers, librarians, fire fighters and policeman are union members, reflecting the generally high union membership of public-sector workers. By comparison, only about 20 percent of blue-collar professionals in the private sector, such as construction workers and carpenters, belong to unions.
documented workers on the cheap, says Chicago management attorney Jules Crystal. Immigrants can legally join unions even if they are here illegally. But many undocumented workers worry that by joining a union more people will find out that they are here illegally, and some employers threaten deportation if immigrants show interest in joining a union, he says. Neither the union nor the employer wants to be basically a party to a fraud upon the government by knowingly having illegals as members and employees, he says. Organized labor, nonetheless, has made headway in recruiting immigrants: The number of immigrants in unions increased to 1.8 million in 2003, from 1.4 million in 1996, a 29 percent increase. 5 Organized labor also is taking a beating from the Bush administration and Congress, according to Richard Hurd, a professor of industrial and labor relations at Cornell University. For example, within months of coming into office, President Bush repealed a Clinton-era ergonomics rule that unions had fought for and eliminated policies that gave unions an edge in some federal contracts. The current administration is the most anti-union in the past 100 years, says Hurd. President Bush and the GOP-controlled Congress are pursuing policies that make it extraordinarily difficult for unions, and that emboldens employers to pursue anti-union strategies. In 2004 unions spent heavily to put Democratic presidential candidate John Kerry in the White House in hopes he would roll back Bush policies. Democrats traditionally have favored union interests and enjoyed their heavy backing in money and votes. We should be fighting the Bush administration and corporations, not each other, says Rogelio Flores, a national vice president of the American Federation of Government Employees, the largest union representing federal employees.
Percentage of Workers Who Are Union Members, by Occupation

Teachers, librarians Police, fire fighters Construction workers, miners Electricians, carpenters, mechanics, plumbers Truck drivers, moving-van workers Social workers Factory workers Nurses, health-care technicians Office managers, administrative assistants Managers Cooks, waiters Retail-clerks Farmers, fisherman, loggers Source: Bureau of Labor Statistics, Jan. 27, 2005 37.6% 37.2 19.6 19.4 18.8 17.4 16.3 12.6 10.7 4.1 4.1 3.6 3.1
Our world has changed. Our economy has changed. Employers have changed, but the AFL-CIO is not willing to make fundamental change as well, Stern said when SEIU and the Teamsters pulled out of the federation, followed a few days later by the United Food and Commercial Workers. Change to Win had wanted the AFLCIO to return to the individual unions half the dues money the federation now collects about $2 billion over the next five years to fund more organizing. They also wanted to spend $25 million collected from union-backed credit-card purchases to launch a campaign to organize Wal-Mart, the countrys largest private employer, which adamantly remains union-free. 3 The dissenting unions also wanted the 70-year-old Sweeney, who has led the AFL-CIO for a decade, to step aside. He refused, calling the union defections
a grievous insult to all the unions and a tragedy for working people. 4 The split comes at a perilous time for unions. Deregulation, globalization, outsourcing and the information revolution have dealt a staggering blow to the labor movement. We got complacent, says Ray Horton, a member of the Tri-County Council of Labor, in Henderson, Ky. Weve had it good for so long, and now were getting hit from all sides. We need to regroup, re-strategize. Layoffs in steel and other heavily unionized manufacturing sectors have undercut Sweeneys efforts to bolster labors sagging membership. The U.S. economy has grown in recent years largely by shifting many unionized manufacturing jobs to Mexico, India, China and other countries with lower labor costs. Unions also have to fight unscrupulous employers, who hire un-
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The CQ Researcher CQ Press Custom Books - Page140
The AFL-CIO says politics and organizing go hand in hand. Political action is certainly a key to workplace rights and probably the No. 1 thing. If you dont elect folks who are sympathetic to the needs of workers, youre only going to lose, says Mike Caputo, a member of the United Mine Workers union and a Democratic West Virginia state legislator. Many observers say unions need to work on their image as well as their message. There is still the perception of people at the top feathering their nests at the expense of the lowestpaid workers at the bottom, says Randel Johnson, vice president of labor, immigration and employee benefits for the U.S. Chamber of Commerce. As unions debate their future, here are some questions being asked: Do todays workers need unions? Unions were created in an era before employment laws required safe working conditions, a minimum wage, unemployment benefits or protections against discrimination. Many of those laws were passed in the early 20th century after organized labor demanded them. Many critics say labor unions today are dinosaurs from a bygone era that are more worried about their own power than workers needs. But supporters say unions are critical. Workers need unions today as much as they ever have, says Robert Korstad, a history professor at Duke University who specializes in labor. Most workers want full-time jobs with health care, retirement and other benefits, he says, but in todays economy workers can often only find part-time work without benefits. Others work full time to collect poverty wages that arent enough to feed a family, he says. Just for financial reasons alone, there are lots of arguments in support of unions, Korstad says. Union workers median weekly earnings are 28 percent higher than their
Union Participation Has Steadily Dropped

Union membership has decreased by 50 percent over the past 20 years. Labor experts blame a number of factors, including globalization, deregulation, outsourcing and changes in the economy. Critics of unions say their outdated practices, including protection of poor performers, encourage employers to shift jobs overseas. Others complain that unions take members money to support political causes that many members dont support.
20%
Percentage of Workers Who Were Union Members
15
10 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Source: Current Population Survey, Bureau of Labor Statistics
non-union counterparts ($781 a week vs. $612) 6 And while only 16 percent of non-union workers have guaranteed pensions, 70 percent of union workers do, according to the AFL-CIO. Moreover, 86 percent of union workers employers offer health insurance benefits, compared with only 59.5 percent among non-union workers. 7 Unions also are credited with helping to build Americas middle class after the Great Depression and World War II, prodding employers to pay wages high enough so workers could afford to buy the products that many made on the assembly lines. If you think back to what made America great 50 years ago, it was because a job at GM, a union job on construction or driving a truck was a job [that allowed] you to own a home, raise a family, have a bridge to the middle class, said SEIU President Stern. Today, it takes two, three, four Wal-Mart jobs to raise a family, you dont get health care and a Wal-Mart job is a bridge to
nowhere. Change to Win unions want to bring back the GM economy, where work is rewarded, he said. 8 But Chavez, whose nomination as Labor secretary for President Bush was defeated largely because of union opposition, sees it very differently. The shift away from unionization in the private sector is a natural one, as private companies have competed for the best workers by offering good wages and benefits, rendering private-sector unions unnecessary in most cases, she writes. 9 However, Johnson of the U.S. Chamber of Commerce says that even though todays workplace laws protect workers from the roughest edges of capitalism, unions are not obsolete. Is there less of a need for unions than there has been in the past? Yes. But that doesnt mean there is no need for unions. If a work force is in the situation in which an employer is truly exploiting them, then the union option is an important one to have.
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If unions are still vital, why arent workers joining them? Labor supporters cite a 2005 AFLCIO poll showing that 54 percent of non-union workers would join a union if they had a choice. 10 But unions contend U.S. labor laws are too weak to protect workers who are too frightened to organize for fear they will lose their jobs. The National Labor Relations Act (NLRA) is the main U.S. law meant to protect workers rights to organize, to bargain collectively and to strike. The Railway Labor Act covers workers in the railroad and airline industries while the Federal Labor Relations Act covers federal government employees organizing and bargaining rights. U.S. labor laws contain weak penalties, are riddled with loopholes and are not effectively enforced, says Carol Pier, labor rights and trade researcher at Human Rights Watch, a New Yorkbased advocacy group. Workers fired for organizing often wait for years for their cases to be decided by labor boards and courts while employers pay no price for deliberate delays and frivolous appeals, the group said, citing a report that concluded the deck is stacked against U.S. workers. 11 Employers also have the upper hand in organizing drives because they can force workers to attend anti-union meetings, but at the same time prohibit organizers from even distributing union literature in work areas, wrote Andrew Strom, a staff attorney for SEIU Local 32BJ, which represents 75,000 building service workers in New York, New Jersey, Connecticut and Pennsylvania. 12 Moreover, Strom said, workers who think they were fired for trying to organize a union a violation of the NLRA cant sue for discrimination like other workers. Instead, they have to go to the National Labor Relations Board; it can order the employer to reinstate the worker and pay back wages, but there are no fines, penalties or punitive damages. The process can take five years, he says. No wonder companies regularly fire workers for trying to organize, he wrote. 13 The business community discounts allegations that the NLRA makes it difficult for workers to join unions. Nowhere in the [U.S.] Constitution [does] it say union organizing has to be easy, employment lawyer Crystal says. Unions want employers to stay impartial during drives and sign neutrality agreements, which he says are a bad idea. Its a big decision for workers; they should hear both sides. Pat Cleary, senior vice president for communications at the National Association of Manufacturers (NAM), agrees. If the unions arent blaming the law, he says, they blame President Ronald Reagans 1981 firing of striking air-traffic controllers and what they call the anti-union policies of the GOP administrations of Reagan, George H. W. Bush and now George W. Bush. But unions numbers continued to slide under President Bill Clinton, a prolabor Democrat, Cleary points out. The unions, he says, have blamed everyone but themselves for their lagging membership numbers. The law is the same as in the 1950s, when unions were riding high, says Johnson, of the U.S. Chamber. Something else is going on here. Maybe there are other reasons, like their message needs to be changed. Marick Masters, a professor of business administration at the University of Pittsburgh, says there is an element of truth in all the reasons unions cite for their membership decline, but the main point is that labor hasnt come up with a model that appeals to most workers. Others say some workers dont need or want unions and join only because they work in states that require workers to pay union fees. (See map, p. 716.) Rather than working to preserve and expand their power to order workers to pay up or be fired, unions should try to improve their product in order to attract workers voluntary support, said Stefan Gleason, vice president of the National Right to Work Legal Defense Foundation, which provides free legal advice to workers who think their rights have been violated by compulsory unionism abuses. 14 Are unions protecting U.S. workers from the effects of globalization? Todays global economy moves products, technology and jobs at lightning speed, shifting millions of unionized jobs to lower-wage countries. 15 Nearly 3 million factory jobs have been lost between 2000 and 2003. 16 And even jobs that have not been shifted overseas are negatively affected by globalization, say union officials, because domestic employers often feel compelled to reduce pay and benefits for U.S. workers to compete with overseas competitors. Corporate greed is driving profit share at the expense of wages, safe workplaces, conditions and entitlements for workers, Sharan Burrow, president of the International Confederation of Free Trade Unions, told the AFL-CIO convention this summer. Without a global governance architecture that protects the rights of workers and their communities, the corporate law of the jungle grows and so does the dislocation of jobs and the consequent divide between the rich and the poor within and across countries. But others say labor needs to get off its protectionist bandwagon and join the global market. Today unions that help U.S. employers remain competitive help American workers keep their jobs, says Johnson of the U.S. Chamber. Its important for unions to approach workers saying, We know there are international competitive pressures, but we can find ways to improve your situation and still keep your employer competitive, he says. Businesses say labor costs are not the only reason they move their operations, but wages and benefits are a big target since they make up about 70 percent of costs.
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For years, the top priority for most Trade Agreement (CAFTA), which and Target, and in the late 1990s it unions representing the auto, steel, Congress approved at the same time put a national spotlight on the sweatshops in Honduras that made chemical and other manufacturing the AFL-CIO held its convention. 19 CAFTA, like NAFTA, will sell out Kathy Lee Giffords Wal-Mart clothsectors was to keep union jobs at home. But in todays globalized labor Americans jobs, said Linda Chavez- ing line. Theres been a tremendous turnmarket, employers say, unions can- Thompson, executive vice president of not come to the bargaining table the AFL-CIO. Multinational corpora- around in U.S. unions understanding with sudden demands and expect tions will speed up their race to the that protectionism is not the answer, bottom when it comes to wages and but fighting overseas sweatshops is cruthe company to stay in business. cial, he says. Unions Cleary of the now realize they need NAM says in a changto be at the table when ing global marketthe global economy is place unions outdatbeing discussed. We cered us vs. them tainly can have more polarized workplace worker-rights standards no longer works. attached to trade agreeToday the trend is ments. away from conThe Steelworkers frontation and toward union was quick to cooperation . . . the catch on to the need for competition is outside international alliances, the plant, not in it. Kernaghan says. The In fact, many emunion got its wake-up ployers say if they call in the 1980s after cannot reduce labor Phelps Dodge broke the costs, they cannot unions copper mine survive. Several iconAFL-CIO President John Sweeney, Secretary-Treasurer Richard Trumka strike in Arizona and ic American corpoand Executive Vice President Linda Chavez-Thompson put up a united front at the federations July 24 Unity rally. The next day, the permanently replaced rations announced Teamsters and Service Employees International unions broke striking workers. We steep layoffs this from the federation, rejecting Sweeneys offer to change policies. had our lunch eaten in summer, citing globthe 1980s. We knew we al competitive pressures. Eastman Kodak is laying off up workplace protections, driving work- had to change, says Marco Trbovich, assistant to the Steelworkers presito 25,000 workers by 2007; Hewlett- ers further into exploitation. 20 Korstad of Duke says unions must dent for communications. After strikPackard will eliminate 14,500 jobs over the next year and Kleenex-maker build international alliances with other ing union members at BridgestoneKimberly-Clark plans to cut 6,000 jobs unions and human rights groups in Firestone were also fired and replaced order to improve working conditions in the 1990s, the union launched a by 2008. 17 Unions have steadfastly opposed in the Third World and to give unions series of strategic alliances with sofree-trade policies with countries that more leverage. The labor movement phisticated militant and reasonably redo not protect workers rights and safe- cant go it alone. sourced unions worldwide, says Gerty or provide benefits. Without such Charles Kernaghan, executive di- ald Fernandez, assistant to the protections written into trade treaties, rector of the National Labor Commit- Steelworkers president for internaunions say, U.S. businesses are enticed tee, a New York City-based labor- tional affairs. to send jobs to countries where work- rights advocacy group, agrees. Youre The Steelworkers forged ties with ers often toil for 12 or 15 hours a day not going to negotiate your way out counterparts in Australia, the Czech in unsafe conditions without health in- of a global economy. Youre not going Republic, Germany, Mexico and surance or pensions. The 1993 North to do it alone with individual unions. Turkey. This past June, for example, some 10,000 unionized workers in American Free Trade Agreement Its not possible. (NAFTA), for example, cost 1 million Kernaghans organization has ex- Mexico, Peru and the United States U.S. jobs, unions say. 18 Unions also posed low-wage overseas factories protested in support of the Steelopposed the Central American Free producing goods for Disney, Nike workers strike against Asarco,
AFL-CIO
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Right to Work Laws Enacted in 22 States
Twenty-two states had right to work laws in 2004 giving employees the right to join or not join a workplace union. In the remaining states, employees must pay union fees at unionized job sites even if they dont join the union. Unions oppose right to work laws because they lower union participation.
Wash. Mont. N.D. Minn. S.D. Idaho Wyo. Neb. Nev. Calif. Okla. Ariz. N.M. Ark. La. Texas Alaska Hawaii Fla. Tenn.
Miss.
Vt. Wis. Mich. N.Y.
N.H. Maine Mass.
Ore.
Iowa Ill. Ind. Ohio Pa. Conn. Va. N.C. S.C. Ala. Ga. Md. D.C. N.J. Del.
R.I.
Utah
Colo.
Kan.
Mo. Ky.
W.Va.
Right to work states Non-Right to work states
Source: National Right to Work Legal Defense Fund
owner of several Arizona copper mines. Cross-border solidarity is the only way to deal with global companies, Fernandez says. Both the AFL-CIO and the Change to Win coalition vow to unite workers across borders, and a primary target is Wal-Mart, the nations largest employer, with 1.2 million U.S. workers. Wal-Martization is a global phenomenon, and a global approach is required, Change to Wins Web site explains. The AFL-CIO kicked off a Wake Up Wal-Mart campaign that calls for massive effort by organized labor to help Wal-Mart workers win a voice at work and ensure that WalMarts business model does not spread to other countries. We are not against unions, the company said. They may be right for some companies but there is simply no need for a third party to come between our associates and their managers. 21 The company eliminated
the butcher shop at a Texas store in 2000 after local workers voted to unionize, and it closed a store in Quebec, Canada, this year rather than negotiate with workers who voted for a union. 22 A major union concern is WalMarts health plan. Its high deductibles and other requirements have forced some employees to rely on Medicaid as a safety net. In Florida, for example, Wal-Mart has some 12,300 employees and family members enrolled in Medicaid more than any company in the state. 23 The company also is facing the countrys largest genderdiscrimination case, affecting some 1.6 million female workers. When Wal-Mart executives calculate that by underpaying employees and providing inadequate health care they can sell a cheaper product, that forces competitors to make the same tough calculations or go out of business, said AFL-CIO President Sweeney. 24
Should unions change their focus? The unions that deserted the AFLCIO in July said it had spent too much on politics and not enough to organize new members. But the federation says both are equally important. Other unionists, however, say neither the AFL-CIO nor the dissenting unions quite get it. They say labor needs a new message and a new role in todays hightech, transient world of work, where jumping from one employer to another is commonplace and where international borders are no obstacle to employers seeking lower wages. The seven unions in the new Change to Win coalition say organizing is their top priority. Representing 6 million workers, the seven the Carpenters, Laborers, Service Employees, Teamsters, United Farm Workers, United Food and Commercial Workers and a merged union of hotel and garment workers known as UNITE-HERE are targeting some 35 million service jobs that cannot be outsourced, such as construction, hospitality and child and health care. Rather than organize workers by one plant or work site at a time, the coalition plans to try organizing an entire company at once, the way industrial unions organized the auto and steel industries in the 1930s. SEIU, the coalitions lead union, used the strategy in Los Angeles and Washington, D.C., to organize janitors across several employers. The coalition says its political clout will grow as its membership grows. We must have more members in order to change the political climate that is undermining workers rights in this country, Teamsters President James P. Hoffa said when the 1.4 million-member union left the AFL-CIO in July. 25 However, Change to Win will not be an ATM money machine for Democrats running for election, unlike the AFL-CIO, coalition leaders say. Nearly 90 percent of labors $61 million in contributions in the 2004 elections went to Democrats, according to the Center for Responsive Politics. 26
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Over the last several years, weve and the rates are even higher for ed by a stodgy bureaucratic organigotten more and more focused on GOP presidential candidates. 29 Some zation than they do in going to work politics and particularly on Democra- 45 percent of union households, for for one. And thats the problem with tic politics, SEIUs Stern has said. And example, voted in 1980 for Repub- labors image. Masters suggests unions provide serI dont think that will grow our labor lican presidential candidate Ronald Reagan, who historians say success- vices for both workers and employmovement stronger. The AFL-CIO, on the other hand, fully appealed to blue-collar laborers, such as employee training or group says labor needs a united front to ers resentment that their tax dollars health insurance, he says, so individfight anti-worker companies and poli- were being squandered on welfare ual employers dont have to carry all the health-care costs. cies, and Sweeney said the federa- parasites. 30 Nelson Lichtenstein, tion would focus a history professor at on the greedy corthe University of Calporations and the ifornia, has suggested right-wing elected turning union hiring officials who are tryhalls into job centers ing to tear our counfor todays programtry apart. 27 Sweeney also mers, consultants and says that despite other professionals lagging union memwho change jobs frebership in recent quently. 31 The idea years, the federation of collective bargainhad been able to ing between one union step up its political and one employer is influence since he clearly an antique notook over as presition, he wrote in his dent in 1995. Even 2002 book, State of the though union Union: A Century of households constiAmerican Labor. tute only 17 percent Cornells Hurd says of the voting-age workers are more indipopulation, they vidualistic than 50 years Georgetown University students protest in February 2005 for living wages represented 24 perago, when they wanted for the schools blue-collar workers. Along with students on many other cent of the 2004 union protection. campuses, unions have lobbied for living-wage ordinances in at least vote, well above the Unions need to find a 100 cities since 1994. Georgetown raised its hourly rate to $13. 19 percent of 1992, way to connect with the AFL-CIO says. 28 workers, he says, parBut Sweeny admits that although Labor supporters and opponents ticularly professional, technical and the AFL-CIO aligns itself primarily with agree that unions need to work on their low-wage workers. It may require Democrats, 25-30 percent of union image and their message. Unions need something totally different from what members are Republicans. We have to a new message other than just saying, unions have offered in the past, hold politicians accountable, regardless Employers are bad, and you need such as continuing education to help of the party, he said. unions to protect you, says Johnson technical workers stay on top of their However, says Korstad of Duke, the of the U.S. Chamber. I dont think that game. Moreover, says Korstad of Duke, labor movement must rethink its politi- sells anymore. cal strategy. Whats the point of giving The University of Pittsburghs Mas- The labor movement needs to really money to candidates that your own ters says todays workers look at unions think about its public relations, how members wont even vote for? as providing rigid work rules and con- it convinces members of the American The percentage of union house- flictual types of relationships that dont middle class that people working in holds that voted for Republican con- have much appeal to them. Workers, the service sector deserve the kinds of gressional candidates has stayed in and young people in particular, have benefits and opportunities that the Unitthe 30-40 percent range since 1952, no more interest in being represented States has to offer.
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LABOR UNIONS FUTURE
BACKGROUND
Birth of the Movement
hen the labor movement was born in the 1880s, most Americans including children worked 14-hour days, six days a week, often in dangerous conditions for little pay. Overtime and sick pay were non-existent. Machines were just starting to replace the workers who knitted stockings, stitched dresses and cut leather for shoes. But the pace was fast and furious for the new machine operators. Children in cotton mills put in 14-hour shifts for seven cents a day, or toiled in coal mines wearing harnesses that enabled them to drag buckets or carts of coal. 32 At first, labors future appeared to lie with the Knights of Labor, one of the first large unions. 33 But the organization of skilled and unskilled workers, farmers and small-business men, floundered in the face of competition from the American Federation of Labor, which targeted only skilled workers, such as carpenters and printers. However, it took several years for the AFLs dominance to emerge. In 1881 leaders of local craft unions created the Federation of Organized Trade and Labor Unions, which five years later morphed into the AFL. Samuel Gompers, the leader of a cigar-making union, became its first president in 1896. In the 1890s bitter labor strikes occurred at Homestead Steel in Pennsylvania (1892) and the Pullman railway car company in Illinois (1894). Both led to riots that killed several workers. In both cases, the federal and state governments helped end the strikes by sending in thousands of troops. For a brief time, radical elements in the labor movement contributed to the publics perception that anarchists or socialists dedicated to the destruc-
tion of the free-enterprise system ran the unions. For instance, the International Workers of the World (IWW), or Wobblies, called on workers to take over factories, but their movement fizzled in the face of severe opposition, particularly after they called for a strike in industries manufacturing war goods during World War I. Meanwhile, hundreds of IWW leaders were found guilty of sedition, swept up along with other dissidents during an anti-communist red scare that gripped the country in 1919. In some cases, mobs beat, tarred-and-feathered and lynched IWW members. 34 Although unions were regarded with suspicion, labors legislative agenda won support from populists and progressives in the late 19th and early 20th centuries.
Protecting Labor
n the early 1900s, the labor movement helped gain passage of state wage and hour laws, aided by the imfamous Triangle Shirtwaist Fire, which killed 146 young women and girls working in a New York City garment factory. The tragedy led to new factory-inspection laws and improved safety conditions. It also boosted the International Ladies Garment Workers Union. A year later, Congress created the U.S. Department of Labor. However, when the Great Depression began in 1929, workers still lacked federal laws allowing them to form or join a union or establishing a minimum wage or maximum workweek. That changed with the election of Franklin D. Roosevelt as president. In 1935, FDR proposed the National Labor Relations Act, also known as the Wagner Act for its chief sponsor, Sen. Robert F. Wagner, D-N.Y. The Wagner Act still guarantees most private-sector workers the right to join unions and prohibits employers from unfair labor practices that discriminate
against workers trying to unionize. It also requires employers to bargain in good faith with unions. The Railway Labor Act of 1926 provided similar protections for railroad workers; it was amended in 1936 to cover airline workers. In 1938 the federal Fair Labor Standards Act outlawed child labor and established the first minimum wage 25 cents an hour and a 40-hour workweek. But even as the reforms made it easier for workers to join unions, labor leaders bickered over how best to organize workers. The dispute led to the creation in 1935 of the Committee for Industrial Organizations (CIO) within the AFL. The dispute centered around whether the labor movement should target workers with specific crafts or trades the AFLs strategy or go after unskilled workers, the strategy advocated by the CIO. The AFL said any attempt to organize workers in an entire factory had to recognize separate crafts. So, for example, workers in a car plant who painted the cars could join the Painters union while workers who made the cars could join the Machinists union. The CIO, led by firebrand John L. Lewis, wanted all the workers in the plant to belong to the same union, contending that the AFLs craft classifications were irrelevant in an economy that by the 1930s was becoming dominated by massproduction industries. The CIO didnt wait for the AFLs blessing. It proceeded to organize the steel, auto, glass and rubber sectors and quickly enlisted more new members than the AFL. It broke away from the AFL in 1938, but its acronym now stood for Congress of Industrial Organizations.
Mafia Ties
larmed by a series of strikes in the 1940s, business and conservative leaders pressed Congress in 1947 to pass
Continued on p. 720
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Chronology
Before 1900
Workers start to organize into unions as the country industrializes and moves westward. 1886 Unionization of skilled trade workers such as printers and cigar makers leads to founding of the American Federation of Labor (AFL). 1890s Bitter strikes at Homestead Steel (1892) in Pennsylvania and the Pullman railway car company in Illinois (1894) lead to riots, killing several workers.
communist, becomes AFL president in 1952 and heads AFL-CIO until 1979. 1955 AFL-CIO is created, representing some 15.5 million workers. 1959 Congress passes Landrum-Griffin Act to root out organized crime in labor unions; unions must file annual financial reports showing how union dues are spent. 1977 Congress rejects unions bids for stiffer penalties for employers who break the law when workers try to organize and speedier unionrepresentation procedures
1954, undercutting organized labors political agenda. October 1995 John Sweeney, head of the Service Employees International Union, replaces Lane Kirkland as head of the AFL-CIO. March 1996 Top AFL-CIO leaders endorse President Clinton for re-election and OK increasing dues to help build a $35 million political fund to target House Republicans.
2000s
1900-1940s
Several unions split off from the AFL-CIO to create the Change to Win coalition to focus more on organizing. 2001 Newly elected President Bush repeals a Clinton-era ergonomics rule that unions had sought for more than a decade. June 2005 Dissident AFL-CIO unions form the Change to Win coalition and threaten to pull out of the federation, arguing it is not spending enough time on organizing. July 2005 Two of the AFL-CIOs largest unions the Service Employees International Union and the Teamsters pull out of the AFL-CIO on the first day of the federations convention in Chicago, followed by the United Food and Commercial Workers Union. Four other unions make up the coalition: Carpenters, Farm Workers, Laborers and UNITE-HERE. The AFL-CIO and the coalition both vow to step up organizing and to target non-union companies such as Wal-Mart.
New laws provide tools to settle workplace problems. 1935 National Labor Relations Act gives workers the right to join unions while prohibiting employers from using unfair labor practices. 1938 Differences between the trade unions of the AFL and industrial unions lead to a formal split in the AFL and creation of the Congress of Industrial Organizations (CIO). 1947 Congress passes the Taft-Hartley Act outlawing the practice of hiring only union members, known as closed shops.
1980s-1990s
Union membership drops amid increasing global competition. 1981 President Ronald Reagan fires 11,000 striking air-traffic controllers and decertifies their union, signaling to private-sector employers that they can hire permanent replacements during work stoppages. 1984 Unions help Walter F. Mondale win Democratic presidential nomination, but he loses in a landslide to Reagan as union members deliver votes to the GOP. November 1993 Congress and President Bill Clinton override labors opposition and approve the North American Free Trade Agreement (NAFTA). November 1994 Republicans capture both chambers of Congress for the first time since
1950s-1970s
Links between unions and organized crime are discovered. George Meany, a fervent anti-
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Married to the Mob?
icodemo Little Nicky Scarfo, Vincent Chin Gigante and Anthony Gaspipe Casso are just some of the mobsters who have been involved with organized labor. Scarfo, serving a 69-year prison sentence for racketeering, extortion and murder, ran the Hotel and Restaurant Employees union in the late 1980s. Genovese crime boss Gigante who had allegedly infiltrated the International Longshoremans Association was later convicted of racketeering. And Casso former underboss of the Luchese crime family and now serving a life sentence after admitting to 36 murders was accused in 2001 of taking money to influence several construction unions, including a local of the Laborers International Union of North America. 1 Several major U.S. Senate investigations beginning in the 1950s have documented organized crimes involvement with unions. Live telecasts of 1950-51 hearings of a special Senate panel chaired by Sen. Estes Kefauver (D-Tenn.) were credited with increasing the publics awareness of organized crime and the breadth of its stranglehold on unions and their pension funds. In a book about his committees work, Kefauver wrote, the Mafia is no fairy tale and is engaged in almost every conceivable type of criminal violence, including murder . . . smuggling . . . kidnapping and labor racketeering. 2 Another probe, conducted in 1957-58 by the Senate Select Committee on Improper Activities in the Labor or Management Field, found systemic racketeering in both the International Brotherhood of Teamsters and the Hotel Employees and Restaurant Employees (HERE) union. 3 The federal government took over both unions in the late 1980s and early 90s the most drastic step it could take to weed out mob influence. In 1959 Congress passed the Landrum-Griffin Act, which requires that unions file annual financial reports showing how union dues are spent. Congress then passed the Racketeer Influenced and Corrupt Organizations Act of 1970 the socalled RICO act which allowed the Justice Department to go after unions with mob ties. In 1986, the Presidents Commission on Organized Crime reported that the Laborers International Union was dominated by organized crime. 4 In the early 1980s, former Gambino family boss Paul Castellano was overheard saying, Our job is to run the unions, according to the FBI, which had planted bugs in Castellanos house in 1983. 5 Castellano was shot and killed in
front of a steakhouse on New Yorks East Side in 1985 on the orders of future Gambino crime boss John Gotti. According to federal authorities, union and mob bosses often team up to demand kickbacks from union members in return for prime job assignments. Crime families also have been known to demand money from contractors in exchange for labor peace. And contractors on union projects sometimes must pay salaries for ghost employees crime family members who either dont show up or show up but do not work. Prosecutors say union corruption in New York City inflates the already high cost of building union projects in Manhattan by $200 million to $500 million a year, an amount prosecutors sardonically call the mob tax. 6 By 2004, the Labor Departments inspector general had 359 pending labor racketeering investigations, of which more than a third involved organized crime. 7 Internal affairs of the big four unions Teamsters, HERE, Laborers and International Longshoremans Association still make up a significant portion of the Labor Departments racketeering investigations, the department said. Union pension funds are a tempting target for labor racketeers. Union officials with mob ties have been found diverting union pension funds for their own personal use or investing the money in mob-tied businesses. Money from the Teamsters pension fund, for example, reportedly financed 85 percent of the casino hotels that appeared on the Las Vegas Strip in the late 1970s. 8 Three major unions with longtime corruption problems are still trying to rid their unions of corruption: International Brotherhood of Teamsters To many observers, the Teamsters is the poster boy for mob-run unions. The federal government deems the union so corrupt that it took over the union in 1989 and continues to oversee its operation. The legendary Jimmy Hoffa, president of the Teamsters from 1957-71, was convicted of attempted bribery of a grand juror in 1967 and sentenced to 15 years in prison. In 1971, however, President Richard M. Nixon commuted his sentence to time served on the condition he not participate in union activities for 10 years. Hoffa disappeared in 1975, never to be found, after leaving for a lunch with men linked to the Mafia. His son, James P. Hoffa, a labor lawyer, is now president of the 1.3-million-member
the Taft-Hartley Act limiting unions powers. Enacted over the veto of President Harry S Truman, the law, still in effect today, outlawed closed shops, or workplaces that hired only union members. The law also allowed states to pass right to work laws, which give em-
ployees the right to decide not to join a union. The measure also required a mandatory cooling-off period in any strike deemed by a president to constitute a national emergency. The 1950s kicked off a period of relative labor peace, as the country basked in a robust postwar economy.
A twist of fate in 1952 found both the AFL and CIO needing new leaders when the presidents of both groups died within two weeks of one another. The new leaders AFLs George Meany and CIOs Walter Reuther agreed to bury the hatchet. In 1954 the two federations signed a no-raiding pact and re-
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Philadelphia. 14 In 1995, the Justice Deunion. He took over as president in 1998 after federal investigators dispartment asked the courts to take over covered that union funds were being the entire HERE union, maintaining that diverted to support President Ron the union was run by organized crime. 15 Careys 1996 re-election. Carey never It was the first time the government reserved jail time, but some of his assorted to such drastic action since it took sociates did. Last year, former fedover the Teamsters in 1989. The federeral prosecutor Edwin Stier, whom al government oversaw the union until the Teamsters hired to clean up the 2000, when the Justice Department deunion, resigned, saying Hoffa termined the organization had largely who has vowed to get rid of federpurged its ties with organized crime. 16 al oversight of the Teamsters was 1 George McEvoy, Mob Influence Checked in retreating from his anti-corruption Some Years Ago, Palm Beach Post, Aug. 30, 9 pledges. 1995, p 1A; Carl Horowitz, Union Corruption Laborers International Union in America: Still a Growth Industry, National Institute for Labor Relations Research, p. The federal government also keeps 36; and U.S. Department of Labor press reFormer Teamsters union President James R. close tabs on the 800,000-member lease: Scalamandre Brothers Plead Guilty to Hoffa testifies in 1957 before the Senate Laborers union, which represents conMob Payoffs in Exchange for Labor Peace, Rackets Committee. He disappeared in 1975, Oct. 31, 2001. struction, maintenance and food ser2 Estes Kefauver, Crime in America (1952). presumably killed by former Mafia associates. vice workers, but the union isnt in 3 FBI Investigative Programs, Organized Crime, trusteeship. In 1995, the Justice Deavailable at www.fbi.gov/hq/cid/orgcrime/ lcn/laborrack.htm. partment decided not to pursue formal criminal charges but re- 4 Presidents Commission on Organized Crime, Report to the President and tained the right to file a racketeering suit if the union didnt clean the Attorney General, The Edge: Organized Crime, Business and Labor up its act. In 2000 the union reached an agreement with the Jus- Unions, U.S. Government Printing Office, March 1986. 5 tice Department after promising to retain anti-corruption reforms 6 FBI Investigative Programs, op. cit. Steven Malanga, How To Run the Mob Out of Gotham, City Journal, through 2006. 10 The union has removed at least 226 corrupt of- winter 2001. 11 Pres7 Office of Inspector General, U.S. Department of Labor, The Evolution of ficials, including 125 who were linked to organized crime. ident Arthur A Coia Jr., a fund raiser for the Democratic Party Organized Crime and Labor Racketeering Corruption, November 2004. and a visitor to the White House during Clintons presidency, 8 Heroes of Law Enforcement: Peter Wacks, Retired FBI Special Agent, Illinois Police & Sheriffs News, available at www.ipsn.org/wacks.htm, uppleaded guilty in 2000 to a felony tax-evasion charge and was dated Aug. 9, 2005. 9 Steven Greenhouse, Citing Pullback, Antigraft Team Quits Teamsters, The banned for life from holding any positions of power within the union. However, he was allowed to collect his $250,000 salary New York Times, April 30, 2004, p. A1. as general president emeritus. 12 Terrence OSullivan, a top aide 10 Press release, U.S. Department of Justice, Justice Department Announces New Agreement Continuing Laborers Union Reforms Until 2006, Jan. 20, 2000. to Coia, took over as president in 2000. 11 Carl Horowitz, Union Corruption in America: Still A Growth Industry, HERE-UNITE The 2004 merger of the hotel workers union National Institute for Labor Research, 2004, p. 17. and the Union of Needletrades, Industrial and Textile Employees 12 Mike Stanton, Coia enters guilty plea to felony fraud charge, The Provcreated HERE-UNITE, which represents nearly 450,000 hotel, casi- idence [Rhode Island] Journal, Feb. 1, 2000, p. B1. 13 McEvoy, op. cit. no and garment workers. In the 1930s, organized crime was linked 14 Press Casino Workers Union Officers to HERE locals in New York City and in the 1970s to locals in released release, News Wire; Horowitz, op. cit. to Step Down, April 12, 1991, by PR Florida. 13 In 1991, the Justice Department took control of HEREs 15 McEvoy, op. cit. Local 54 in Atlantic City, N.J., which represented hotel and casi- 16 Steven Greenhouse, U.S. Agrees to End Oversight of Hotel-Restaurant no workers and reportedly had ties to organized crime figures in Union, The New York Times, Dec. 3, 2000. Section 1, p. 47.
unified the following year. The new AFL-CIO represented some 15.5 million workers, its all-time high. In 1950-51, televised Senate hearings chaired by Sen. Estes D. Kefauver, DTenn., exposed the darker, organizedcrime side to some unions. Then in 1957, McClellan committee investigators,
led by Chief Counsel Robert F. Kennedy, discovered that the Mafia had infiltrated the Teamsters union. Over the next two decades, the U.S. economy shifted from union mining, manufacturing and transportation jobs to non-union service and retail jobs. In the 1970s, the Northeast and Mid-
Getty Images/Al Muto
west the epicenters of unionized, industrial jobs were devastated by increased competition from Asian producers of steel, ships and automobiles. Yet organizing was not a high priority for AFL-CIO President Meany, who remained steadfastly committed to the increasingly divisive Vietnam War.
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It was not uncommon In the 1984 presidential to see unionized workelection, unions played a big ers wearing hard hats role in winning the Demoand waving American cratic presidential nominaflags beating up antition for Walter F. Mondale, war demonstrators. 35 only to see their candidate During the 1970s, the lose in a landslide, as many AFL-CIO enjoyed a mixed union members dubbed legislative record. ConReagan Democrats degress enacted worker-prolivered votes to the GOP. tection measures in the Organized labor hoped Occupational Safety and that Democrat Bill ClinHealth Act and approved tons election as president minimum standards for in 1992 would change its workers pension plans political fortunes. In 1993, under the Employee ReClinton pushed through the labor-backed Family tirement Income Securiand Medical Leave Act, a ty Act in 1974. success for labor. But that When Democrat same year, the DemocratiJimmy Carter won the cally controlled Congress presidency in 1976, approved the North Amerlabor hoped it had a betican Free Trade Act despite ter chance to stiffen labors concerns it would penalties against emcost U.S. jobs and thus ployers who block union members. union organizing efforts Vincent Chin Gigante, former boss of the powerful Genovese crime family in New York, was convicted of labor racketeering Labors political hopes and to speed up the NLRB in 1997 and sentenced to 12 years in prison. Federal prosecutors union-representation prowere dashed, however, in say some unions still have ties to organized crime. cedures. But vehement 1994, when Republicans capbusiness-community optured control of both chamTo labors horror, most Americans bers of Congress for the first time position killed the effort in 1977. endorsed Reagans take-charge handling since 1954. Since FDR, unions have tied of the strike. In the coming years, Rea- their fate to that of the Democrats, algan and other Republicans increasing- though there have been exceptions. The ly cast organized labor as a selfish spe- Teamsters, for instance, endorsed Reacial interest unconcerned about ordinary gan for president and have reached out he legislative defeat was a har- citizens needs. 36 to Republicans and business on issues Reagans actions signaled to em- such as drilling in the Arctic National binger of what was to come during the Reagan and Bush adminis- ployers in the private sector that it was Wildlife Refuge in Alaska. 38 trations in the 1980s and early 90s. OK to hire permanent replacements durAFL-CIO activists demanded a Reagan, a former head of the Screen ing work stoppages as Reagan had change, charging that Lane Kirkland Actors Guild, won the presidency in done. Over the next few years, sever- who had replaced Meany in 1979 1980 and again four years later, in al major companies, including Grey- wasnt doing enough to help U.S. part, by winning over conservative hound, Phelps Dodge and Eastern Air- workers. SEIU head Sweeney ousted union voters. Yet he set an anti-union lines, followed suit. Kirkland in 1995. Moreover, in the first full year after tone for his presidency in 1981 when Sweeney came in promising to orhe fired striking air-traffic controllers PATCO, the number of major strikes fell ganize more workers and boost unions government employees represent- from several hundred a year to less than influence. 39 He aggressively confronted by the Professional Air Traffic 100 and has continued to fall ever since. ed business, rallied workers and joined Controllers Organization (PATCO) The federal government in 2004 record- forces with students and community acand decertified the union. Reagan ed only 17 major strikes or lockouts in- tivists. In 1996, the AFL-CIO launched volving at least 1,000 workers. 37 Union Summer to train student acsaid the strike was illegal.
Busting Unions
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tivists in organizing picket lines and holding demonstrations. Then in 2000, the group unveiled Seminary Summer to involve religious leaders in workplace issues. The groups fanned out to campuses and cities to protest overseas sweatshops and promote fair trade policies that incorporate labor protections in trade treaties. Unions also have lobbied for socalled living-wage ordinances in nearly 100 cities since 1994. The laws require companies that receive tax breaks or contracts from cities to pay workers more than the federal minimum wage. 40 In 2003 the AFL-CIO created a community affiliate called Working America, through which nonunion workers can get involved in labor issues. By July 2005 the group had 1 million members and hoped to have 2 million by 2006. Unions have also invested pension funds in corporations as leverage to curb executive pay and to promote global labor codes of conduct. In 2004, unions submitted fully 43 percent of all corporate governance proposals, many of which target pay for top CEOs. 41 Politically, labor stirred up Republicans in 1996 with a plan to spend $35 million to defeat House Republicans. But the plan failed, only to be followed by the controversial 2000 presidential election, when labors candidate, Al Gore, had the popular votes but lost the election to Republican Bush. 42 Within months of coming into office, Bush: Rescinded a Clinton-era ergonomics rule on repetitive workplace injuries, which unions had worked on for a decade; Required employers to post notices informing workers of their right to avoid unionization and union dues used for political activities; Revoked Clintons policy encouraging federal contractors to pay union wages; and Dissolved the National Partnership Council, which Clinton used to try
to improve relations between unions and federal agencies. 43 Bush also targeted the unions stronghold: government-employee unions. After the Sept. 11, 2001, terrorist attacks on New York and the Pentagon, Bush insisted that the new Department of Homeland Security operate outside civil-service rules a move that unilaterally canceled the collective bargaining rights of 170,000 workers, unions said. 44 Then in 2003, the president unveiled plans to make it easier for private companies to compete for 850,000 federal jobs. 45 Moreover, Clinton-era pro-labor regulatory rulings were reversed by Bush appointees to the National Labor Relations Board (NLRB). Bushs NLRB also has issued rulings that unions say threaten new recruiting tactics. The board also ruled that graduate assistants, who often teach college courses, are students not employees and therefore cannot join a union. 46 The ruling was a blow to the United Auto Workers, which had begun organizing at Columbia, Brown and other top universities. 47 Finally, AFL-CIO activists said they had had enough. Under Sweeneys watch, they complained, union numbers had continued to slide, and laborbacked presidential candidates had lost twice. It was time for change.
CURRENT SITUATION
Change to Win
en years after Sweeney became AFL-CIO leader, seven unions complained that the federations failure to boost union membership was costing labor clout at the bargaining table and in Congress.
Were not trying to divide the labor movement, were trying to rebuild it, the SEIUs Stern said in July. When youre going down a road and its headed in the wrong direction . . . you got to get off the road and walk in a new direction. 48 But the 70-year-old Sweeney refused to step down. Thats been the issue from the beginning, said Sheet Metal Workers International President Michael Sullivan at the convention. 49 Its not about organizing; were all interested in organizing. The convention was supposed to celebrate the 50th anniversary of the merger of the AFL and the CIO, but after the SEIU and Teamsters pulled out, the United Food and Commercial Workers followed suit. The Carpenters union, which had quit the AFL-CIO in March 2001, also has joined Change to Win. The AFL-CIO continues to operate under the rules and procedures of an era that passed years ago, while the industries that employ our members change from day to day, Carpenters President Douglas McCarron said in pulling out. 50 Besides asking Sweeney to return some $2 billion in dues money over the next five years, the dissenting unions also wanted the federation to earmark $25 million in yearly profits from a unionbacked credit card program to organize Wal-Mart. Instead, the AFL-CIO decided to devote $22 million to organizing. Cornells Hurd is among the labor observers who see the recent defections as historic. The last time we saw a major split in the national labor movement was in the mid-1930s, Hurd says, when John L. Lewis left the AFL to form the CIO. The disagreement today is the same: How best to organize workers in the economys growth sectors. In the 1930s, the CIO wanted to organize workers in the emerging, mass-producing steel, auto and rubber industries. The Change to Win coalition wants to organize workers in growing industries such as construction, child and health care and hospitality.
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Student Activists Fight for Workers Rights
n campuses across the country, student activists have teamed up with unions and nonprofit groups to prod universities to pay fair wages to their low-level workers and to shun firms that treat overseas workers inhumanely. They also are encouraging university workers to join unions. But whether the activists themselves will join unions after graduation remains uncertain. At Georgetown University, for example, 22 students went on a hunger strike in March, demanding that the university pay its workers a living wage of $15/hour, compared to the $6.60 some custodial and dining hall workers earned. The university now pays a minimum of $13 per hour. 1 Students from Duke, the University of North CarolinaChapel Hill, Florida State, Michigan State and other schools supported the AFL-CIOs Farm Labor Organizing Committees efforts to win better pay and conditions for 8,000 migrant cucumber pickers at the Mt. Olive Pickle Co. in North Carolina. The contract that resulted provides for a union hiring hall in Mexico for recruiting workers, among other benefits. 2 Student activists also encouraged 191 colleges and universities to join the Washington-based Fair Labor Association (FLA), created in 1999 after a White House initiative on sweatshops launched by President Bill Clinton. Schools affiliated with FLA promise to promote fair and decent conditions in the production of goods bearing their logo and to disclose factory locations where licensed products are manufactured. Students joined in boycotting Taco Bell restaurants on 21 campuses over allegations the company bought tomatoes from suppliers who paid substandard wages to farmworkers. The Coalition of Immokalee Workers ended the boycott in
March after Taco Bell agreed to work with the coalition to improve pickers working conditions. 4 The question remains, however, whether campus labor activism will convert young people into union members after they graduate and enter the work force. Only 4.7 percent of workers ages 16 to 25 were union members in 2004. 5 Recruiting young people is key to the future of the labor movement, says Mike Caputo, a member of the United Mine Workers and a Democratic lawmaker in the West Virginia legislature. The key is bringing young people into the labor movement and constantly reminding them why they have what they have and what they stand to lose if they dont get involved, which he says includes dignity on the job, workplace safety, wages and benefits. Allie Robbins, national organizer of the United Students Against Sweatshops, says unions havent done enough to attract young people but are beginning to with programs such as paid internships that some unions offer and the AFL-CIOs Union Summer, which hires student interns to work with unions. A lot of people dont understand what a union does, or why they would need a union in the workplace, she says.
1 Dan DiMaggio, Student-Labor Activism Spreading, Justice, No. 43, MayJune 2005, the newspaper of Socialist Alternative. 2 Press release, Farm Labor Organizing Committee, Precedent Setting Agreement Reached, Mt. Olive Pickle Boycott Over, Sept, 16, 2004, and Steven Greenhouse, Growers Group Signs First Union Contract for Guest Workers, The New York Times, Sept. 17, 2004, p. A16. 3 Evelyn Nieves, Florida Tomato Pickers Still Reap `Harvest of Shame; Boycott Helps Raise Awareness of Plight, The Washington Post, Feb. 28, 2005, p. A3. 4 Press statement, Comments by Coalition of Immokalee Workers CoDirector Lucas Benitez at Press Conference Announcing Settlement of the CIWs Taco Bell Boycott, March 8, 2005. 5 Press release, Union Members in 2004, U.S. Bureau of Labor Statistics, Table 1, Jan. 27, 2005.
The CIO did not organize one Ford plant; they organized Ford, Stern said in July. The only way to rebuild this labor movement is . . . to organize all of a company at one time, not one plant, one shop, one work site at a time. 51 The Change to Win unions also had argued for a one-union per industry approach that would curb the competition among unions for the same workers. Health-care workers, for example, are divided into more than 30 unions. The dissenting unions argue bigger unions would have more leverage at the bargaining table. Sweeney agrees but says the unions themselves must decide to consolidate.
Anti-Union Climate
ashingtons attitude toward unions today is starkly different from the 1930s, says the University of Pittsburghs Masters. Unions were growing then, not declining, he points out, and a wave of legislation gave workers the right to organize. Today, any sort of pro-worker legislation is far off the radar screen on Capitol Hill, Masters says. Indeed, Cornells Hurd calls the Bush administration one of the most antiunion in history. Besides rolling back policies important to unions, he says,
the administration and Congress are trying to block an organizing strategy unions have used in recent years to recruit up to 550,000 new members. 52 The new approach, called card-check recognition, allows unions to bypass the NLRB. Essentially, workers convince employers to voluntarily accept a union if enough workers sign cards saying they want a union. Unions want to avoid the NLRB because the formal process is time consuming and because the board has become a deathtrap for union organizers, rather than the impartial referee for union and management disagreements it was supposed to be, according to Andy
Continued on p. 726
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At Issue:
Will the split in the AFL-CIO revive the labor movement?
ROBERT REICH
FORMER SECRETARY OF LABOR PROFESSOR OF SOCIAL AND ECONOMIC POLICY, BRANDEIS UNIVERSITY
WRITTEN FOR THE CQ RESEARCHER, AUGUST 2005
RICHARD W. HURD
PROFESSOR OF LABOR STUDIES CORNELL UNIVERSITY
WRITTEN FOR THE CQ RESEARCHER, AUGUST 2005
orty years ago, over a third of the American work force belonged to a labor union. Today, its fewer than 8 percent of private-sector workers. What happened? First came global competition. Then technology, which automated lots of jobs. Mega-retailers like Wal-Mart forced thousands of suppliers to become even leaner and meaner. Meanwhile, privatization and deregulation allowed lots of new entrants into government services. Wages and benefits typically account for 70 percent of a companys total costs. So as companies have scrambled to cut costs, theyve done everything possible to cut the wages and benefits and numbers of their employees. One method, of course, has been to fight unions. Industrial workers have been hardest hit. Deficit-ridden federal and state governments also have cut costs by trimming payrolls and outsourcing to the private sector. Not surprisingly, workers want to hold on to what they have left. Unions that represent them constitute the core of the AFL-CIO. While theyre interested in gaining new members, they see their primary mission as preserving the good jobs and relatively high incomes of their members in the face of these fierce headwinds. Their future depends largely on what happens in Washington. Theyre using whats left of their political muscle to fight trade agreements, oppose privatization and deregulation, join with their companies to get government contracts and preserve their members health and pension benefits. Contrast them with the other blue-collar workers who inhabit the local service economy. Their jobs cant be outsourced, and most wont be automated. In fact, these jobs keep growing. Their problem is low wages and few benefits. Most of these jobs have never been unionized. If they were, these workers might have more bargaining clout with their employers. By and large, the unions who look out for these workers are the ones now leaving or threatening to leave the AFL-CIO. They see their mission less as preserving good jobs in danger of disappearing and more as boosting the prospects of people trapped in lousy ones. Theyre less interested in gaining political clout because the fate of their members is not closely tied to votes taken in Washington. Their future depends instead on how many other local service workers become union members, and how quickly. Thats why organizing is of such central importance to them. Given the evolution of the American economy, its just possible that the split in the AFL-CIO will mark a rebirth or at least the rejuvenation of organized labor.
yes no
Sept. 2, 2005 CQ Press Custom Books - Page153
he fissure in the AFL-CIO has little to do with the key challenges facing the labor movement. Prior to secession, the unions in the Change to Win coalition promoted an aggressive restructuring plan and a streamlined, central federation. They argued that by concentrating resources in 15 or so national unions in core industries, and by committing substantial resources to organizing, labor could simultaneously increase bargaining leverage and reverse the slide in membership. It is hard to imagine how a divided labor movement could stimulate growth. Instead of consolidating and uniting behind an organizing priority, the split actually achieves the opposite. Now it appears that there will be two federations with different foci, and it would not be surprising to see direct competition for members, especially in growth industries like health care. In order to re-establish a powerful presence in the private economy, unions will need to adapt to globalization and the changing workplace. Twenty-first century labor markets do not match the experience of organizations long associated with job security, seniority and the protection of domestic production. There is little practical incentive for workers to embrace organizations whose culture and strategic perspective are captive to an historical framework that is no longer operational. There are three key challenges: If unions hope to recruit successfully in the low-wage service sector, they must transform internally to build social-movement zeal that embraces the culture of service workers predominately women, African-Americans and immigrants from Latin America and Asia. Unions must simultaneously connect with the expanding professional and technical work force. These workers identity is occupational, and they are most likely to be drawn to new forms of representation that operate beyond the framework of traditional collective bargaining. Globalization presents what is probably the greatest paradox for unions accustomed to operating almost exclusively within the confines of the United States. The new, corporate world order mandates global labor alliances that go well beyond contemporary practice. The split in the AFL-CIO detracts attention from challenges that will ultimately determine labors future. As the feuding continues, unions lose precious time, and the chances for revival diminish. Hope now rests with grass-roots activists and strong leaders of individual national unions, who must rise above the internecine squabbling and show that a new form of unionism can emerge from the ashes of the old.
Available online: www.thecqresearcher.com
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The mechanics strike against Northwest Airlines Levin, director of the AFLCorp. that began on Aug. 20 CIOs Voice at Work orthis year shows how labor ganizing campaign. unions have lost the strike as Arguing the technique a threat against management. allows union organizers When the mechanics walked to intimidate workers into off the job, the airline already signing the cards, busihad temporary workers lined ness wants Congress to up to replace the strikers, outlaw card-check and which is legal. While the airPresident Bush to appoint line and union offer different new NLRB members reports of the strikes effect, who oppose the policy. the airline is still running. Meanwhile, the Labor If a corporation can elimDepartment also has ininate an entire work force creased its scrutiny of and bring in replacement union finances. In 2003 workers, it has ramifications it updated regulations refor every other unionized quiring unions to show company, said Steve Machow they spend their Farlane, a spokesman for the money. The AFL-CIO Aircraft Mechanics Fraternal called the proposal a Association (AMFA). 56 huge tangle of red Although Northwest is tape that would cost seeking more than $100 unions $1 billion a year million in concessions, AMFA to comply. 53 The new says the issue isnt money regulations went into efbut job security. 57 fect this year. AMFA is not a member of While the Labor Dethe AFL-CIO or the Change partment is spending Striking Northwest Airlines mechanics picket at OHare to Win coalition and is getmore time inspecting International Airport in August 2005. When the mechanics ting little support from the unions books, labor struck, the airline already had temporary workers lined up to labor community. The lack of says the Bush adminisreplace the strikers. The mechanics union is not a member of union solidarity is due in tration is giving emthe AFL-CIO or the Change to Win coalition and is getting little support from the labor community. large part to AMFAs reputaployers a pass when it tion for recruiting other workcomes to enforcing wage and hour and safety laws. At the Bush administrations Immigration ers from other unions to join AMFA, what current staffing and inspection levels, and Customs Enforcement (ICE) agency other unions call raiding or poaching. To some, the Northwest strike also ilfor example, it would take the U.S. for using the pretext of an OSHA Occupational Safety and Health Ad- meeting and free coffee and dough- lustrates organized labors fragmentation. ministration (OSHA) 108 years to in- nuts to lure about 50 immigrant con- The AMFA strike has all the issues that spect each workplace under its juris- struction workers in North Carolina to should excite the labor movement into diction just once, the AFL-CIO said in a location where they were hand- mass demonstrations, Gary Chaison, a a 2005 report, Death on the Job. 54 cuffed and taken into custody for al- professor of industrial relations at Clark University in Worcester, Mass., told NaIn addition to the ergonomics rule, legedly using false documents. 55 Instead of scaring workers into si- tional Public Radio. It [the strike] has outunions also say the Labor Department rolled back other important workplace lence by these types of immigration en- sourcing of union jobs, it has employer rules, including new regulations in 2004 forcement actions, the Bush adminis- pressure to reduce wages and it has the that unions say robbed 6 million tration should be focusing on crafting use of striker replacements. The labor workers of the right for overtime pay. real solutions to our broken immigra- movement is so in disarray and confused And while the Labor Department tion system, AFL-CIO Executive Vice about its priorities right now, it really doesnt know how to react to this. 58 says it was not involved, unions fault President Chavez-Thompson said.
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Legal Action
bright spot for labor came in August when a district court in Washington, D.C., prevented the administration from implementing portions of its new personnel rules for the Department of Homeland Security, which scrapped certain collective-bargaining protections. 59 This is a truly astronomical win, said Mark Roth, general counsel for the American Federation of Government Employees. 60 The ruling could prevent the administration from making similar changes for civilian workers at the Defense Department. Organized labor says governors and businesses are taking their cues from Washington and going after unions. Republican Govs. Mitch Daniels of Indiana and Matt Blunt of Missouri both used executive orders to wipe out the collective-bargaining rights of some 50,000 state workers shortly after taking office in 2005. 61 They followed the lead of Republican governors in California, Kentucky, Maryland and Massachusetts. Federal labor laws protect the collectivebargaining rights of private-sector employees, but its up to the individual states to pass laws providing protection for state and local public employees. Twenty-five states have such laws on the books. The governors who rescinded public-sector bargaining did so by executive order, not by repealing any laws. Gerald McEntee, president of the American Federation of State, County and Municipal Employees (AFSMCE), said these actions are a coordinated assault by right-wing forces on a part of the union movement that is growing. Government workers are the nations most unionized. Less than 8 percent of private workers are organized, compared with 36 percent of government workers. 62 In California, Republican Gov. Arnold Schwarzenegger is pursuing what labor calls an anti-union agenda, backing a ballot initiative this November to pro-
hibit public unions from collecting dues for political purposes without first obtaining the workers written permission. He also has rankled nurses unions by trying to block new rules that would require hospitals to have more nurses. But a court intervened, and the rules went into effect. 63 Schwarzenegger was thwarted in another anti-union effort. He was forced to drop a controversial bid to revamp the pension plan for state workers that would have forced state employees to use a 401(k)-style benefit rather than the current system, which pays set benefits. The governors not only attacked teachers but hes attacked the entire core of California, said Barbara Kerr, president of the California Teachers Association. Hes attacked firefighters, hes attacked police officers, teachers and state workers. We are the people that make this state run. 64
OUTLOOK
Recruiting Push
mployers expect a burst of organizing activity in the coming months as the two rival labor groups vie for the same workers to join their ranks. But the picture is less clear on Capitol Hill and in statehouses, where politicians and lobbyists are still trying to figure out what the labor split means for them. Harvard University economist James Medoff called the breakup good news for the corporations and political conservatives. A divided labor movement is a weaker labor movement, and employers know this very well. 65 Masters of the University of Pittsburgh doesnt agree. This notion that labor has to be united in the form of all standing behind the AFL-CIO in lockstep is just nonsense. But Masters says labor desperately needs to quickly score major
organizing successes. A breakthrough at Wal-Mart or Comcast would go a long way in justifying the need for the split that has taken place, he says. Labor has already been using some non-traditional tactics to attack antilabor practices at firms like Wal-Mart. Among other things, unions have initiated corporate campaigns that attack a companys labor practices through negative ads, consumer boycotts and legal action, such as lawsuits against the company for allegedly breaking wage and safety laws. Businesses can expect more of those tactics from unions, says Charles S. Birenbaum, a San Francisco labor attorney. Activist unions also are vowing to step up efforts to organize and bargain globally. In August, SEIU joined forces with unions representing service workers across the globe to help organize cleaners in the Netherlands and security officers employed by multinationals in India, Germany, South Africa and Poland. 66 Its much easier to change the behavior of a company thats unionized at an 80 percent level globally than it is when its unionized at 10 percent, said SEIU President Stern. 67 We need a global strategy to hold global employers accountable to the public they serve and to their employees, said Philip Jennings, general secretary of the Swiss-based Union Network International (UNI), a global coalition of 900 national unions representing service workers. Among other things, UNI wants to end what it calls union busting in Britain and the United States by T-Mobile, a subsidiary of Deutsche Telecom. 68 However, back at home, unions are already fighting over workers, including some who are unionized, and the infighting could get worse. Stern of SEIU, who leads Change to Win, has promised not to poach other unions members, but some expect a free-for-all. When [Stern] says he is not going to raid other unions, he is lying, AFSCME member Mike Fox said at the convention. Fox charged that SEIU is trying to
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steal 10,000 home-care providers in Riverside County, Calif., whom AFSCME represents. Business groups are not convinced the renewed attention on organizing will translate into more union members. Just putting more organizing troops on the ground isnt going to change the equation, Johnson of the U.S. Chamber says. Politically, the rift could affect which candidate and policy get labors support. I think its a disaster for Democrats, said Steve Elmendorf, a senior adviser to Sen. John Kerry during the 2004 campaign. 69 Democrats, whom unions of both camps complain have taken their votes and political donations for granted, may have to work harder to win labors support. Sweeney vowed to make Democrats who voted against labor in the recent CAFTA trade legislation pay the consequences for their sell-out votes. The Change to Win coalition promises to hold Democrats accountable for their vote but also plans to reach out to Republicans. We absolutely believe the AFL-CIO has become too much in the back pocket of Democrats, said coalition Chairwoman Anna Burger. 70 The AFL-CIO, which used to be the one organization that spoke for all of organized labor, now has competition when it goes to Capitol Hill and statehouses to lobby its causes. Johnson says the split is advantageous to the business community and will hurt organized labors political agenda, but only in the short term. Although they are divided, they will get their house together, he predicts.
Notes
1 Linda Chavez, A tough year for the AFLCIO, July 20, 2005, available at www.lindachavez.org. 2 Fact sheets from AFL-CIO at www.aflcio.org/aboutus/faq/ and Change to Win, www.changetowin.org, August 2005. 3 For background, see Brian Hansen, BigBox Stores, CQ Researcher, Sept. 10, 2004, pp. 733-756. 4 Keynote address of AFL-CIO President John Sweeney, AFL-CIO convention, July 25, 2005 at www.afl-cio.org/mediacenter/prsptm/ sp07252005a.cfm. 5 Migration Policy Institute, Immigrant Union Members, Numbers and Trends, May 2004. 6 Bureau of Labor Statistics, Median weekly earnings of full-time wage and salary workers, annual averages 1983-2004. 7 AFL-CIO Fact Sheet, The Union Difference. 8 All Things Considered, National Public Radio, July 25, 2005. 9 Linda Chavez and Daniel Gray, Betrayal: How Union Bosses Shake Down Their Members and Corrupt American Politics (2005), p. 16. 10 Peter D. Hart Research Associates, The Public View of Unions, February 2005. 11 Statement, Deck is stacked against U.S. workers, Human Rights Watch, Aug. 31, 2000. 12 Andrew Strom, How the United States stacked labor laws make it nearly impossible for workers to gain union representation, Dollars & Sense Magazine, No. 249, September/October 2003. 13 Ibid. 14 Press release, National Right to Work Legal Defense Foundation, July 25, 2005. 15 For background, see Mary H. Cooper, Exporting Jobs, CQ Researcher, Feb. 20, 2004, pp. 149-172. 16 Ibid, p. 152.
About the Author

Pamela M. Prah is a veteran reporter who recently joined CQ Researcher after several years reporting in Washington for Stateline.org, Kiplingers Washington Letter and the Bureau of National Affairs. She holds a masters degree in government from Johns Hopkins University and a journalism degree from Ohio University.
Company news releases: Kodak Accelerates Digital Transformation Strategy, July 20, 2005; HP Unveils Targeted Program to Streamline Company, Reduce Costs, Drive Greater Customer Focus, July 19, 2005, available at www.hp.com/hpinfo/newsroom/press/2005/050 719a.html; and Kimberly Clark Announces Second Quarter Results And Initiatives to Further Improve Competitive Position, July 22, 2005. 18 For background, see Mary H. Cooper, Rethinking NAFTA, CQ Researcher, June 7, 1996, pp. 481-504. 19 Robert E. Scott and David Ratner, NATFAs Cautionary Tale, Economic Policy Institute, Issue Brief 214, July 20, 2005. 20 Linda Chavez-Thompson, To boost workers, turn down CAFTA, San Antonio ExpressNews, May 15, 2005. 21 Wal-mart statement, www.walmartfacts.com/ keytopics/unions.aspx. 22 Doug Struck, Wal-Mart Leaves Bitter Chill, The Washington Post, April 14, 2005, p. E1. 23 Sydney P. Freedberg and Connie Humburg, Lured employers now tax Medicaid, St. Petersburg Times, March 25, 2005. 24 John Sweeney, Wal-Mart leads way in lowering standards for employees, Detroit Free Press, Feb. 25, 2005. 25 Statement of James P. Hoffa on the Teamsters Disaffiliation from the AFL-CIO, July 25, 2005. 26 Business-Labor Ideology Split in PAC and Individual Donations to Candidates and Parties, Center for Responsive Politics, based on data released by the FEC, March 28, 2005. 27 Remarks by John J. Sweeney, president of the AFL-CIO, Building and Construction Trades Department Convention, Boston, Aug. 9, 2005. 28 Fact Sheet, AFL-CIO Political Program Gives Working Families A Voice, July 2005. 29 National Election Survey, University of Michigans Center for Political Studies. 30 Foster Rhea Dulles and Melvyn Dubofsky, Labor in America: A History (Fifth ed.), 2004, p. 392. 31 Nelson Lichtenstein, State of the Union: A Century of American Labor (2002). 32 For background, see Charles S. Clark, Child Labor and Sweatshops, CQ Researcher, Aug. 16, 1996, pp. 721-744. 33 Dulles & Dubofsky, op. cit., p. 120. 34 Ibid, p. 213. 35 Ibid. 36 Ibid, p. 392. 37 U.S. Bureau of Labor Statistics, Major Work Stoppages in 2004, April 8, 2005. Major strikes
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peaked in 1952 at 470, according to federal data that go back to 1947. 38 John Cochran and Rebecca Adams, Fresh From a Set of Hill Victories, Can Labor Keep the Momentum? CQ Weekly, Sept. 1, 2001. 39 For background, see Kenneth Jost, Labor Movements Future CQ Researcher, June 28, 1996, pp. 553-576. 40 For background, see Jane Tanner, Living Wage Movement, CQ Researcher, Sept. 27, 2002, pp. 769-792. 41 AFL-CIO Fact Sheet, Whats Wrong With Executive Pay And What Union Funds Are Doing About It, 2005; www.aflcio.org/corporatewatch/paywatch/retirementsecurity/index.cfm. 42 For background, see Kenneth Jost and Gregory L. Giroux, Electoral College, CQ Researcher, Dec. 8, 2000, pp. 977-1008. 43 Rebecca Adams, GOP-Business Alliance Yields Swift Reversal of Ergonomics Rule, CQ Weekly, March 10, 2001. 44 AFL-CIO, BushWatch, May 2003. 45 Office of Management and Budget, Revision to Office of Management and Budget Circular No. A-76, Performance of Commercial Activities, May 29, 2003. Available at www.whitehouse.gov/omb/fedreg/rev_a76_052903.html. 46 National Labor Relations Board decision, Brown University and International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW, AFL-CIO, Case No. I-RC-21368, July 13, 2004. 47 Jennifer John and Mike Rosenbaum, Graduate Student Workers Need More Than Prestige, United Auto Workers, Solidarity, January/February 2002. 48 Steven Greenhouse, Two Large Unions Say They Are Leaving the AFL-CIO, The New York Times, July 25, 2005. 49 Michael Bologna, AFL-CIOs Sweeney Angered by Defection of Dissident Unions as Convention Kicks Off, BNA Daily Labor Report, July 26, 2005. 50 Carpenters union pulls out of AFL-CIO, Northwest Labor Press, April 6, 2001, www.nwlaborpress.org/2001/4-6-01Carpenters.html. 51 Future of the US labor movement, Talk of the Nation, National Public Radio, July 19, 2005. 52 Peter Szekely, Labor Board Ruling Threatens Union Recruiting, Reuters, June 10, 2004. 53 Statement by AFL-CIO President John J. Sweeney on New Regulations for Union Reporting, Dec. 23, 2002. 54 For background, see David Hatch, Worker Safety, The CQ Researcher, May 21, 2004, pp.

AFL-CIO, 815 16th St., N.W., Washington, DC 20006; (202) 637-5000; www.afl-cio.org. A federation representing 9 million U.S. workers in 53 unions. Change to Win, c/o Service Employees International Union, 1313 L St., N.W., Washington, DC 20005; (202) 898-3200; www.changetowin.org. A new coalition of seven unions representing 6 million workers. Economic Policy Institute, 1600 L St., N.W., Suite 1200, Washington, DC 20036; (202) 775-8810; www.epi.org. A labor-backed think tank that researches labor conditions, jobs, trade and globalization. National Association of Manufacturers, 1331 Pennsylvania Ave., N.W., Washington, DC 20004; (202) 637-3000; www.nam.org. An influential lobbying group representing small and large manufacturers. National Right to Work Legal Defense Foundation, 8001 Braddock Road, Suite 600, Springfield, VA 22160; (703) 321-8510; www.nrtw.org. A nonprofit providing free legal aid to workers who feel their rights have been violated by compulsory unionism abuses. U.S. Bureau of Labor Statistics, 2 Massachusetts Ave., N.E., Washington, DC 20212; (202) 691-5200; www.bls.gov. A Department of Labor agency providing information about wages, work stoppages, collective bargaining and unionization rates. U.S. Chamber of Commerce, 1615 H St., N.W., Washington, DC 20062; (202) 659-6000; www.uschamber.org. An influential business-lobbying group representing 3 million businesses and 2,800 state and local chambers.
445-468. For background, see Peter Katel, Illegal Immigration, The CQ Researcher, May 6, 2005, pp. 393-420. 56 Keith L. Alexander, Northwest Says Its Prepared for Strike; Airline Taking Tough Stance With Mechanics, The Washington Post, Aug. 19, 2005, p. D1. 57 Statement, Aircraft Mechanics Fraternal Association, Aug. 24, 2005. 58 National Public Radio, All Things Considered, Aug. 23, 2005. 59 National Treasury Employees Union v. Michael Chertoff, Department of Homeland Security, Civil Action No. 05-201 (RMC), U.S. District Court for the District of Columbia. 60 American Federation of Government Employees, press release, Labor unions win case against agencys proposed regulations, Aug. 14, 2005. 61 Kathleen Hunter, GOP governors trim state employees bargaining clout, Stateline.org., Feb. 25, 2005. 62 Bureau of Labor Statistics, Union Members in 2004, Jan. 27, 2005.
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Califor nia Nurses Association vs. Schwarzenegger (Case No. 04CS01725) www. saccourt.com/courtrooms/trulings/dept16/d1604cs01725-06.07.05.doc. 64 BBC, Fight looms over Schwarzenegger plans, Aug. 10, 2005, http://news.bbc.co.uk/2/hi/ americas/4136128.stm. 65 Alonso Soto, Weakened AFL-CIO pledges to organize workers, Reuters, July 26, 2005. 66 Press release, Groundbreaking Union Alliance to Help Raise Standards in Global Service Industries, Service Employees International Union, Aug. 25, 2005. 67 Harold Meyerson, Workers of the World Uniting, op. ed. column, The Washington Post, Aug. 27, 2005, p. A17. 68 Press release, UNI global union targets global corporations, Union Network International, July 18, 2005. 69 Labor split could hurt Democrats Campaigns, The Seattle Times, July 26, 2005. 70 Jeanne Cummings, Unions Recast Their Political Role, The Wall Street Journal, July 27, 2005, p. A4.
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Bibliography
Selected Sources
Books
Brody, David, The American Labor Movement, University Press of America, Reprint edition, 1985. Essays by various authors look at trade unionism, socialism, unions and the black community and other issues that shaped the U.S. labor movement. Brody is professor emeritus of history at the University of California at Davis. Chavez, Linda, and Daniel Gray, Betrayal: How Union Bosses Shake Down Their Members and Corrupt American Politics, Three Rivers Press, 2005. Chavez, president of the Center for Equal Opportunity, a conservative think tank, recommends that unions be prevented from spending members dues on politics without their permission. Dubofsky, Melvyn, and Foster Rhea Dulles, Labor in America: A History [7th edition], Harlan Davidson, 2004. The authors trace U.S. labor history from Colonial times. Historian Dulles wrote the first three editions, beginning in 1949 and Dubofsky, a professor of history at the State University of New York at Binghamton, has updated the book since. Geoghegan, Thomas, Which Side Are You On? Trying To Be for Labor When Its Flat on Its Back, Plume Books, 1992. A labor lawyer employed by Chicago-area local unions concludes that steel-mill closings, leveraged buyouts and Third World competitive labor have contributed to the decline of organized labor. Lichtenstein, Nelson, State of the Union, A Century of American Labor, Princeton University Press, 2002. A professor of history at the University of California provides historical analysis of labor since the New Deal. He concludes that a larger, more powerful labor movement is central to the health of American democracy. Fields, Gary, et al., Reinventing the Union, The Wall Street Journal, July 27, 2005, p. B1. Fields looks at labors new strategies in the face of factory job losses, outsourcing and the growth of domestic service jobs. Fine, Janice, Debating Labors Future, The Nation, Aug. 1/8, 2005, pp. 15-22. Fine poses questions about the future of organized labor to leaders of the AFL-CIO and the newly formed Change to Win coalition, including AFL-CIO President John Sweeney and Andy Stern, president of the dissident Service Employees International Union. Greenhouse, Steven, Democrats Concerned by Prospects of a Labor Schism, The New York Times, July 24, 2005, Section 1, p. 19. Greenhouse looks at the impact the labor split may have on the Democratic Party, which has relied heavily on unions for donations and get-out-the-vote drives. Hirsch, Stacey, 2 once-close labor leaders take diverging paths, The Baltimore Sun, July 27, 2005, p. D1. Hirsch looks at the two main labor leaders involved in the split, John Sweeney, president of the AFL-CIO, and Andy Stern, president of the Service Employees International Union, and their relationship. Paulson, Amanda, Unions look ahead and inward too, The Christian Science Monitor, July 6, 2005, p. 1. Paulson presents a balanced look at the issues facing organized labor in the 21st century.
Reports and Studies

Masters, Marick, et al., The Divided House of Labor: A Report on Competing Proposals to Reform the AFL-CIO, Center on Conflict Resolution and Negotiations, Katz Graduate School of Business, University of Pittsburgh, July 14, 2005. The director of the Katz school concludes that the Change to Win coalition may be a step toward developing a new vision for unions. Scott, Robert E., and David Ratner, NAFTAs Cautionary Tale, Economic Policy Institute, July 20, 2005. Two economists from the left-leaning think tank provide a state-by-state estimate of jobs lost to Canada and Mexico, concluding that the trade pact cost the United States 1 million jobs.
Articles
Benenson, Bob, and John Cochran, Breakaway Labor: A Fragile Unity, CQ Weekly, Aug. 1, 2005, pp. 2092-2093. Veteran political writers look at how both hope and doubt greet the dissident unions that pulled out of the AFL-CIO and how Democrats weigh the impact of the split. Bernstein, Aaron, The House of Labor Divides, Business Week, July 26, 2005. A labor reporter recaps the infighting that led to the historic breakup of the AFL-CIO.
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The Next Step:

Change to Win Coalition
Greenhouse, Steven, Five Unions to Create A Coalition on Growth, The New York Times, June 13, 2005, p. A12. Dissatisfied with the AFL-CIOs leadership, five unions merged to create the Change to Win Coalition. Stern, Andrew, New Union Coalition Will Fight for Workers, The Miami Herald, Aug. 2, 2005, p. A23. The SEIUs president explains why he led his union to join the Change to Win coalition. Von Bergen, Jane M., Split Growing in Labor, The Philadelphia Inquirer, June 16, 2005, p. C3. Leaders of five AFL-CIO unions announced the creation of the Change to Win coalition, with three of the five unions threatening to withdrawal from the AFL-CIO.
AFL-CIO
Edsall, Thomas B., Dissident Unions Propose AFL-CIO Reorganization, The Washington Post, May 17, 2005, p. E2. A coalition of dissident unions called for half of the AFLCIOs $120 million annual budget to go to organizing. Edsall, Thomas B., Insurrection Is a Big Gamble for Labor, The Washington Post, July 30, 2005, p. A11. Andrew Stern, president of the SEIU, pulled his 1.8 million members out of the AFL-CIO and inspired two other large unions totaling 2.6 million members to also quit the federation. Grant, Allison, Labor Groups Want Link, Court Breakaway Unions, The [Cleveland] Plain Dealer, Aug. 18, 2005, p. C3. Anna Burger, chairwoman of the Change to Win coalition, rejected AFL-CIO President John Sweeneys plan to offer solidarity charters to breakaway unions. Greenhouse, Steven, AFL-CIO Leader Says Split Hurts Labor, The New York Times, July 29, 2005, p. A14. AFL-CIO President Sweeney accused SEIU President Andrew Stern of attempting a power grab by creating a new labor group. Peterson, Kyle, Competition Could Be Good For Unions, The Houston Chronicle, July 29, 2005, p. 8. Some but not all analysts say the splintering of the AFLCIO could re-energize organizing efforts and breed fresh ideas. Von Bergen, Jane M., Union to Target Comcast Workers, The Philadelphia Inquirer, March 28, 2004, p. E1. The AFL-CIO will join with the Communication Workers of America and the International Brotherhood of Electrical Workers to organize Comcast workers.
Politics
Confessore, Nicholas, Labor Leaders Denounce 2 Congressmen for Backing CAFTA, The New York Times, Aug. 8, 2005, p. B6. Labor leaders are angry with Democratic Reps. Gregory Meeks and Edolphus Towns for supporting the Central American Free Trade Agreement (CAFTA). Edsall, Thomas B., Republicans See Opportunity in Labor Rift, The Washington Post, July 27, 2005, p. A2. Democrats worry the recent AFL-CIO split will boost Republican congressional candidates. Von Bergen, Jane M., Labor Resolution Urges Pullout of Troops in Iraq, The Philadelphia Inquirer, July 28, 2005, p. A11. AFL-CIO convention participants urged the Bush administration to leave Iraq.
CITING THE CQ RESEARCHER

Organizing
Chan, Erin, Asian Workers Flex Their Union Muscles, Los Angeles Times, Sept. 3, 2002, p. A4. The AFL-CIOs Asian Pacific American Labor Alliance has made significant gains in organizing Asian laborers. oyce, Amy, Labor Split Centers on Failure to Organize, The Washington Post, July 27, 2005, p. D1. Many analysts blame labors membership problems on an anti-union legal system, hostile employers and globalization. Kinzie, Susan, Students Clout Helping Workers and Unions, The Washington Post, April 8, 2005, p. B1. College students are proving to be a bright spot in the fledging labor movement.
MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. The CQ Researcher 16 Nov. 2001: 945-68.
APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. The CQ Researcher, 11, 945-968.
CHICAGO STYLE
Sept. 2, 2005
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Updated Nov. 22, 2011
Future of Labor Unions

Here are key events, legislation and court rulings since publication of the CQ Researcher report by Pamela M. Prah, Future of Labor Unions, Sept. 2, 2005.
or two months plastic sheets and small tents covered the ground, and hundreds of protest signs hung from the trees. From time to time the crowd chanted slogans or sang. A food center handed out meals around the clock; clusters of police, some in riot gear, watched from a distance. But it wasnt Cairos Tahrir Square. It was Zuccotti Park in Manhattans financial district, where protesters in the Occupy Wall Street movement began camping out on Sept. 15 to focus attention on what they saw as the financial sectors culpability in the global economic crisis. Initially, it was just a few hundred mainly young demonstrators. Their numbers began to grow, however, and two weeks later the group got an unexpected boost when labor union members turned up in force to join the demonstration. On Nov. 14, police cleared the park forcibly, though not violently. By then the alliance of labor and the demonstrators had given new impetus to the protest but more important, the unions came out of the doldrums, says Paula Finn, associate director of the Center for Labor, Community and Pol-
A Delicate Dance Janice Fine, a professor of labor relations at Rutgers Universitys School of Management and Labor Relations in Piscataway, N.J., says, union leaders were worried that they might be seen as trying to co-opt the protest. The unions came on board not to take control, but as support, she says. But the labor movement is quite hierarchical and institutional, so its a delicate dance. In deciding to get involved the unions were going on the offensive after a long period of decline. In 2010, with widespread layoffs and unemployment cutting a swath through the U.S. workforce, union membership in the United States continued its downward slide, dropping to 11.9 percent
Nurse Margret Sweeney, center, joined thousands of union members who gave a high-profile boost to the Occupy Wall Street protest during a march in Lower Manhattan on Oct. 5, 2011. Labor experts say the alliance between labor and the demonstrators has given new impetus to the protest against Wall Street abuses and economic inequality and helped get the unions out of the doldrums.
(14.7 million), down from 12.3 percent of the workforce (15.3 million workers) in 2009, according to a Bureau of Labor Statistics report. Thats less than half what it was at its peak of 28 percent in 1954. 72 Moreover, a summer 2010 Gallup Poll showed that for the first time ever, less than half of the U.S. public approved of labor unions a significant drop from the nearly 60 percent
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icy Studies at the City University of New York (CUNY). Union leaders had agonized for days over the implications of joining forces with the amorphous, free-wheeling throng in the park. Eventually the union members decided that the weakened labor movement can tap into Occupy Wall Streets vitality, according to The New York Times. 71
FUTURE OF LABOR UNIONS

who approved a year earlier. Experts say the decline reflected public anger at major economic institutions in general business, government and unions over the economys slow recovery. For every [percentage] point that unemployment increases, the approval rate for labor unions goes down 2.6 points, according to a recent study by the liberal Center for American Progress think tank. 73 ponents of public-sector unions to push an agenda. And fiscal situations were so extreme that it fell on sympathetic ears, she says. Public-Union Woes The public sector is the American labor movements last stronghold: 36.2 percent of government workers ranging from teachers and fire fighters to health workers and federal employees In February, thousands of publicsector workers occupied the Wisconsin state capitol building for weeks to protest legislation proposed by Walker the self-described Tea Party governor that would end all union collective bargaining except for limited negotiations over wages. 76 Despite the protests, the legislation passed. But in apparent retaliation, organized labor joined forces with Democrats in a campaign to recall Walker a move that would require 540,208 supporting signatures by January 2012. 77 By October, the battleground had moved to Ohio, where Republican Gov. John Kasich planned to push through a law imposing a deadline on collective bargaining and eliminating binding arbitration, pensions and senioritybased promotions. 78 But the legislation was overwhelmingly struck down by voters in a November referendum, with unions spearheading a vigorous campaign to kill it. 79 Turning Tide? The assault on public-sector unions in America is the greatest moment of reckoning for organized labor in the last quarter-century, said Londons leftleaning newspaper The Guardian. 80 But some union leaders see developments in Ohio and Wisconsin as a sign that the tide may be turning in favor of organized labor. Harold Schailberger, president of the International Association of Firefighters, called it an absolute momentum-shifting victory for the labor movement. 81 Finn, at the Center for Labor, Community and Policy Studies, says the anti-public-union offensive is a politically motivated attempt to weaken the most active union spearhead in supporting Democratic politicians. With private-sector unions close to disappearing, she says, the publicsector unions are the main support for Democratic candidates through campaign contributions and grassroots activists. (In 2008, 59 percent
Unionized public employees occupied the Wisconsin state capitol in Madison for more than three weeks last March to protest Gov. Scott Walkers attempt to push through a bill restricting collective bargaining for most of the states government workers. The measure was adopted, and now unions are trying to recall Walker.
The study also may have signaled public dismay over the key role unions played in securing the deeply unpopular government bailouts that helped General Motors and Chrysler avoid bankruptcy. In the publics eyes, unions were collaborating with these corporations instead of acting as a check on the power of big business, the study noted. 74 Fine points out that private-sector unions have been having really tough times for a while, with jobs going overseas, new technology cutting into employment and hostile court decisions. But the recent recession, she says, has provided an opening for op-
are union members, compared to only 6.9 percent in the private sector. But labor experts like Fine say the nations mostly Republican governors and state legislatures, faced with increasing financial problems, are not just slashing worker benefits and imposing pay freezes to save money but also are attempting to eviscerate union collectivebargaining and arbitration rights. For instance, labor-rights advocates point out, at the same time that Wisconsins Republican Gov. Scott Walker was cutting back on union benefits in the name of austerity, he was proposing significant tax cuts for businesses. 75
Getty Images/Justin Sullivan
Chronology
2008
July 14 The American Federation of Teachers, with more than 70 percent female membership, elects women for the first time to the unions top three posts. September Collapse of U.S. subprime mortgage market and real estate boom, among other factors, triggers global financial meltdown. Dec. 19 President George W. Bush proposes $17.4 billion bailout for U.S. automobile industry, with United Auto Workers strong support.
with pilots, cabin crews and ground staff before reaching a compromise. Hard hit by the global recession, Continental, United, US Airways and Southwest also negotiate with their respective unions. December More workers were idle for longer periods in 2010 than in the previous year, with 45,000 workers losing 302,000 days. (In 2009, 13,000 workers were out of work for 124,000 days.)
governor-declared state of emergency. Firefighter and lawenforcement unions were exempt from the changes. Public employees occupy Wisconsin capitol for weeks, but the bill passes anyway. March 2 As other states try to mimic Wisconsin, a bill in the Ohio Senate seeks to end collective bargaining by public employees, including lawenforcement and firefighter unions. After protests, bill is amended to permit union negotiations for wages, but not for benefits. Nov. 2 As world leaders met in France at the G20 summit, the U.N. International Labor Organization reported that 80 million new jobs would be needed over the next five years just to return to pre-recession job levels. Nov. 8 Voters in Ohio referendum reject new state legislation limiting collectivebargaining rights and benefits for public employees. The 61-39 percent vote against the measure is seen as a setback for Republican Gov. John Kasich and is expected to discourage other states from citing budget cuts to justify putting pressure on local employees.
2011
Jan. 21 U.S. Bureau of Labor Statistics reports that union membership dropped to 11.9 percent of the workforce in 2010, down from 12.3 percent the previous year. But 36.2 percent of public-sector workers were unionized, compared to only 6.9 percent in the private sector. Feb. 11 Wisconsin Republican Gov. Scott Walkers budget bill limits collective bargaining by public-sector unions and grants authorities the right to terminate any employees who participate in strikes or walkouts during a
2009
January As the new Obama administration battles a worsening economic crisis, unemployment rises to 7.2 percent, the highest in 15 years.
2010
March 9 American Airlines engages in contentious talks
of people in union households voted for Barack Obama, as compared to 51 percent of those in non-union households.)
Grover Norquist, president of the conservative anti-tax group Americans for Tax Reform, calls unions one of the five pillars of Democratic strength. He
recently wrote that some states face financial ruin in part because of goldplated government employees pension plans that most Americans could
CHAPTER
ENERGY POLICY
BY JENNIFER WEEKS
Excerpted from Jennifer Weeks, CQ Researcher (May 20, 2011), pp. 457-480.
Energy Policy
BY JENNIFER WEEKS
mental standards imposed after the BP spill. 2 The debate is as much s Americans mark about money as it is about the one-year anenergy and the environment. niversary of the DeepA key issue is whether, as water Horizon oil disaster, conservatives argue, the fedconservationists see a eral government should conpainful irony. At the same tinue to provide oil and gas time that Americans acproducers with tax subsidies knowledge the environmenthat total some $4 billion per tal damage along the Gulf year. (See At Issue, p. 473.) coast, political leaders remain Many analysts believe it is locked in a titanic struggle unlikely that Congress will over the future of national settle the issue before the 2012 energy policy a struggle presidential election and that that essentially pits fossil fuels the battle could even outlast against clean energy. a shift in congressional party The Obama administration control or a change in adis pressing for more federal ministrations. But others are investment in renewable enoptimistic that Congress will ergy, such as solar and wind act this year. I think $5 a galpower, and emerging techlon gasoline is the best innology such as clean coal centive I know to find a raplants that could capture and tional energy plan that would bury their greenhouse gas create jobs, make us more Oil rig workers symbolize the environmental and emissions. 1 Congressional Reenergy independent, clean up political battles being waged over the nations energy publicans, on the other hand, the air, Sen. Lindsey Graham, future. Republicans acknowledge the potential danger of offshore drilling, as reflected in last years Gulf oil spill, advocate increased developR-S.C., said in March. 3 but say a failure to produce more domestic oil, coal and ment of domestic oil and natEnergy debates for the past natural gas will cost jobs and leave the U.S. too ural gas and other carbontwo years have been pretty dependent on foreign oil producers. Democrats say based energy sources. catastrophic theyve taken failing to pursue alternative energy sources will hasten The stakes in the debate an issue that historically has enclimate change and squander opportunities to sell new energy technologies to other countries. are huge and far-reaching. joyed pretty strong bipartisan Democrats say a failure to support and created a war dypursue alternative energy sources will gy demand, cant begin to substitute namic around it, says Jason Grumet, heighten global damage from climate for oil and coal in handling the na- president of the Bipartisan Policy Cenchange, make the nation increasingly tions energy needs. ter, a think tank that proposes policies Last week President Barack Obama designed to win support from Republibeholden to unstable foreign oil producers and hurt the economy, in part made several concessions in the face cans and Democrats. We need to probecause of lost opportunities to sell of Republican pressure to expand do- mote more constructive dialogue. new environmentally friendly energy mestic energy production. Obama anDebate over how to meet U.S. ennounced that annual auctions would ergy needs has simmered for several technologies to other countries. Republicans, however, say a failure begin for oil and gas leases in Alaskas decades, intensifying when supplies grow to produce more domestic oil, coal National Petroleum Reserve, and that short and prices rise. Today federal agenand natural gas will cost jobs and eco- the federal government would speed cies are still cleaning up damage from nomic growth. They, too, worry about up a review of possible impacts from the Gulf oil disaster, which spilled neardependence on foreign oil producers offshore drilling along the Atlantic coast. ly 5 million barrels of crude into rich but say renewable and other new tech- He also said that current offshore lease- fishing grounds, and political turmoil in nologies, which together supply only holders would have additional time to the oil-rich Middle East has driven gasoabout 8 percent of the nations ener- meet new, tighter safety and environ- line prices above $4 per gallon, lend-
THE ISSUES
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Oil Imports Outpace Domestic Production
The United States imported nearly 10 million barrels of oil per day in 2010 71 percent more than was produced domestically. Imports have exceeded domestic production over the past two decades and reached a high in 2006 of more than 12 million barrels daily. U.S. Petroleum Production and Imports, 1974-2010 (in millions of barrels per day) (millions of barrels)
15 12 9 6 3
1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Net imports Dometic production
Source: Oil: Crude and Petroleum Products Explained, U.S. Energy Information Administration, October 2010, www.eia.doe.gov/energyexplained/index.cfm?page= oil_home#tab2
ing support to President Obamas argument that the nation needs to wean itself from fossil fuel. To create markets for alternative energy, Obama has set a goal of generating 80 percent of the nations electricity from cleaner fuels by 2035, including renewable energy, nuclear power, clean coal plants and natural gas, which is less polluting than oil and coal but not completely free of environmental effects. The United States of America cannot afford to bet our long-term prosperity, our long-term security on a resource that will eventually run out, and even before it runs out will get more and more expensive to extract from the ground, Obama said. 4 Declaring in his State of the Union address in January that this is our generations Sputnik moment, he said investing in clean energy and other high-tech industries would strengthen our security, protect our planet, and create countless new jobs for our people. Yet, conservatives argue that the nations federal deficit ($1.3 trillion in 2010), 9 percent unemployment rate and relatively young stage of alternative-energy development all lend support to their
view that traditional energy sources represent the best way to secure the nations long-term energy future. Wishful thinking about magic bullet alternatives is not going to heat and cool our homes, get us where we need to go, and power the businesses that provide jobs, said Rep. Fred Upton, R-Mich., chair of the House Energy and Commerce Committee. Reflecting the view of many congressional Republicans, Upton said the Obama administration was spending too much money on energy efficiency and renewable energy and not enough on fossil fuel development. The reality is we still need fossil fuels and will continue to do so for the foreseeable future, he said. 5 However, clean-energy advocates point out that as well-established industries, fossil fuels have competitive advantages that make it hard for newer technologies to compete, even if those alternatives are environmentally preferable. Its cheap to finance polluting energy, because big utilities have been building coal and gas plants for a long time, so the market understands them and they can get lowCQ Press Custom Books - Page166
cost capital, says Bracken Hendricks, a senior fellow at the Center for American Progress, a liberal think tank in Washington. Renewable energy projects often are seen as more risky ventures, so they have higher costs. Also, fossil fuels dont pay for the environmental harms they cause. We underestimate risk and overestimate benefits of fossil fuels, and do the opposite for renewables. The energy debate doesnt always split neatly along party lines many legislators in both parties support nuclear energy, for example, despite this springs nuclear disaster in Japan but congressional support for Obamas renewable- and clean-energy agenda has come almost exclusively from Democrats. In 2009-2010, Democratic majorities in the House and Senate tried to limit greenhouse gas emissions and require polluters to buy permits for their excess emissions. This system, known as cap-and-trade, was a top priority for environmentalists and was widely expected to push the U.S. toward cleaner energy sources by making it more expensive to generate energy from fossil fuels. The House passed a cap-and-trade bill in 2009 albeit by a razor-thin margin but the Senate did not act. Opponents argued that putting a price on greenhouse gas emissions would make energy more expensive and harm the economy as it struggled to recover from the recession. 6 Republicans, who gained control of the House and expanded their Senate ranks from 41 seats to 47 in 2010, have other ideas. Most want to focus on established, large-scale energy sources in particular, oil and gas produced from domestic sources, plus nuclear power, which now supplies 20 percent of the nations electricity and 9 percent of its total energy. Many advocate cutting government support for energy efficiency and renewable energy, arguing that these sources should compete on their own.
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On April 5, House Budget Committee Chairman Paul Ryan, R-Wis., released a long-term budget plan that would slash federal spending for social programs, defense and research and development. The plan would reduce spending on energy from about $8 billion per year, as Obama proposed in his 2012 budget request, to $1 billion per year. Ryan said the plan rolls back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration. 7 Nearly all Republicans and some Democrats oppose limiting greenhouse gas emissions. But Obama is using the Environmental Protection Agency to regulate those emissions under the Clean Air Act, citing a 2007 Supreme Court ruling that the EPA has such authority. 8 That move has further polarized Republicans and Democrats and made compromise on an energy policy more elusive. Yet critics on both sides of the ideological divide argue that more delay in crafting a comprehensive energy policy could make the United States more dependent on unstable foreign producers and less competitive in the global marketplace. National energy policy since the 1970s has stumbled, marked by uncertain goals and shifting priorities, an inability to measure the impact of our choices, and a stark lack of accountability across the government, a Bipartisan Policy Center task force, led by former senators and Cabinet-level officials, declared in April. The group called for clear, achievable energy objectives that gradually shift the U.S. economy away from oil. Our nation does not want for a lack of ideas, it said. What we suffer is a lack of discipline and follow-through. 9 As the Obama administration, Congress and interest groups debate what kind of energy strategy the U.S. should pursue, here are some issues they are considering:
Energy Sources Fit Different Demands

More than 70 percent of petroleum is used in cars, diesel locomotives and other modes of transportation. Twenty-two percent is used for industrial power. By contrast, only 3 percent of natural gas and 12 percent of renewable sources are used for transportation, but natural gas outpaces petroleum as a source of residential and commercial energy. More than 90 percent of coal is used to generate electricity.
(Percentage of energy used)
Energy Flow by Source and Sector, 2009

93% 100%
100 80 60 40 22% 20 5%1% 0 Petroleum 3% Natural gas 0% 7% 32%35% 30% 72%
53% 26% 12% 1% 9% 0%0% 0% Renewable energy Nuclear electric power
Coal
Energy Source Type of Use Source: Annual Energy Review 2009, U.S. Energy Information Administration, August 2010, www.eia.doe.gov/totalenergy/data/annual/ pdf/aer.pdf
Transportation Industrial Residential and commercial Electric power
Is a shift away from fossil fuels necessary? President Obamas energy policy calls for more production from a variety of energy sources, including domestic oil and natural gas and nuclear power. 10 But it also assumes that the nation needs to shift to a clean-energy future that emphasizes energy efficiency, renewable fuels and other advanced lowcarbon and carbon-free technologies. Instead of subsidizing yesterdays energy sources, we need to invest in tomorrows, Obama said in his weekly radio address on April 23. In the long term, Obama asserted, investing in clean, renewable energy is the key to helping families at the pump and reducing our dependence on foreign oil. 11 Obamas proposed budget for fiscal 2012 would eliminate $4 billion in yearly tax subsidies for fossil fuel production and
spend the money on clean-energy sources instead. 12 The shift to clean-energy sources is widely supported by scientists, who say the burning of fossil fuels and other human activities are major causes of global climate change. A 2010 review of climate research by the congressionally chartered National Academies of Science put it bluntly: Climate change is occurring, is caused largely by human activities and poses significant risks for and in many cases is already affecting a broad range of human and natural systems. 13 Many conservatives argue, however, that the core goal of U.S. energy policy should be to deliver abundant, low-cost energy, which is most readily available from fossil fuels. We want energy to be cheap, and we want a surplus, says Kenneth Green, a scholar at the American Enterprise Institute, a
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Fracking Dirties Image of Natural Gas Drilling

Gasland documentary shows flammable drinking water.
atural gas is widely hailed as a clean fuel because when burned it produces much lower levels of conventional air pollutants and carbon dioxide than oil or coal. And in contrast to nuclear power plants which generate electricity without producing any carbon dioxide or conventional air pollutants gas-fired electric plants can be built much more quickly and at lower costs. But natural gas is stirring controversy because of an increasingly popular method of extracting it from deep inside the earth. Called hydraulic fracturing, or fracking, the approach involves pumping millions of gallons of water and chemicals under high pressure into rock formations to crack them open and let gas flow upward. Many landowners complain that fracking is polluting drinking water supplies with chemical additives and flammable methane, the main component of natural gas. 1 Drillers add many types of chemicals to fracking water to help dissolve rock, reduce friction or for other purposes. And when fracking fluids flow to the surface, they can carry dissolved metals and salts from underground. 2 Fracking has been in use since 1947, but only recently have energy developers combined it with another technique horizontal drilling to extract vast quantities of natural gas trapped in underground shale formations. Horizontal drilling allows developers to drill thousands of feet into the earth, then turn the drill sideways to penetrate gas formations trapped tightly between rock layers. Between 2000 and 2006, production from shale gas formations grew at an average rate of 17 percent annually. Then, as methods improved, production surged, rising at an average yearly rate of 48 percent through 2010. 3 The natural gas industry estimates that fracking and horizontal
drilling have increased available domestic supplies from about 60 years worth to at least 100 years supply at current levels of production. Yet fracking has stirred alarm in localities where it is being used. Controversy has been most intense in states located over the Marcellus Shale, an immense formation of gas-rich sedimentary rock that stretches from upstate New York through parts of Pennsylvania, Ohio and West Virginia. In Pennsylvania alone, more than 2,400 gas wells were drilled in 2006-2010 using either fracking or conventional methods. 4 State officials welcomed the economic activity, but media investigations documented widespread problems, including spills of contaminated wastewater and pollution escaping into drinking water. 5 The documentary film Gasland showed homeowners lighting their tap water on fire to demonstrate how much methane it contained. 6 The natural gas industry, which issued a detailed rebuttal of charges in Gasland, argues that fracking takes place at levels well below the water table and does not threaten human health or the environment. 7 No allegations of fracking contaminating drinking water have been proven, says Bruce Vincent, chair of the Independent Petroleum Association of America. He argues that the flammable tap water shown in Gasland was caused by naturally occurring methane. Fracking has moved into areas that arent used to gas development, which is raising concern from local communities, Vincent says. Our industry needs to get out and do a better job of educating and communicating so that people understand how the process works and see the economic benefits. Just this month, however, four Duke University scientists published the first peer-reviewed study linking fracking to contaminated drinking water. The researchers sampled 68 wells
conservative think tank in Washington. Were a wealthy country, and we can pay more for oil than China or India. Renewables are simply more expensive than fossil fuels, are slower to deploy and are slower to ramp up in times of economic prosperity. Unlike many congressional Republicans, Green does not deny that climate change is occurring, although he thinks its near-term effects may have been overstated. In his view renewable energy is too small-scale to be a solution. The trivial role that low-carbon energy sources could conceivably play in the energy economy would do virtually noth-
ing to influence the climate, except for nuclear power, which is the only noncarbon source of electricity that could be deployed at a large enough scale to displace coal, he asserts. Even then, there would have to be a global dash to nuclear power, which is unlikely given the disaster in Japan. The oil and gas industry and its supporters seek to boost domestic production, which they say will be more reliable than relying on imports. In the past several years, improved drilling techniques and other technical advances have enabled energy producers to extract large quantities of
natural gas from once inaccessible sources, especially shale formations. That has driven down prices and increased supplies of natural gas, which accounts for 25 percent of the nations total energy supply. Natural gas is an American treasure, says Bruce Vincent, chair of the Independent Petroleum Association of America. Technical advances have allowed us to unlock an incredible resource that can fuel the country for a long time, and we should take advantage of it. Those new extraction techniques specifically, a method called hydraulic
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near gas-production sites 1 Natural gas is a mixture of hydroin Pennsylvania and New carbon gases but is typically 70 to 90 percent methane. See What is Natural York and found that water Gas?, www.naturalgas.org. from wells within one kilo2 For background see Jennifer Weeks, meter of drilling had much Water Shortages, CQ Researcher, June 18, 2010, pp. 529-552. higher levels of dissolved 3 Annual Energy Outlook 2011, U.S. methane than water from Energy Information Administration, wells farther away. The April 26, 2011, p. 2, www.eia.doe.gov/ forecasts/aeo/pdf/0383%282011%29.pdf. methanes chemical signa4 Bryan Walsh, Could Shale Gas ture was consistent with gas Tap water containing methane gas is ignited Power the World? Time, March 31, 2011, from nearby wells and unin the documentary film Gasland. www.time.com/time/health/article/0,85 derground shale formations. 99,2062331,00.html. The scientists did not find evidence that fracking fluids were 5 Buried Secrets: Gas Drillings Environmental Threat, Pro Publica, Dec. 2, 2010, www.propublica.org/series/buried-secrets-gas-drillings-environmental-threat; contaminating groundwater. 8 Ian Urbina, Drilling Down, The New York Times, Feb. 27-April 8, 2011, The gas industry argued that the study lacked key data that http://topics.nytimes.com/top/news/us/series/drilling_down/index.html?scp=2& would be needed to validate its conclusions, but federal reg- sq=fracking%20radioactive&st=cse. 6 Jeremy Egner, Muckraking Road Movie on Natural Gas Drilling, The New ulators are stepping up oversight of fracking. 9 Currently the York Times, June 21, 2010, http://artsbeat.blogs.nytimes.com/2010/06/21/aprocess is almost entirely regulated at the state level, but the muckraker-targets-onshore-drilling/. Environmental Protection Agency is reviewing the drilling methods 7 The Energy You Need, the Facts You Demand, Energy in Depth, June 9, impacts on drinking water. In April Robert Perciasepe, EPA 2010, www.energyindepth.org/2010/06/debunking-gasland/. 8 Stephen G. Osborn, et al., Methane Contamination of Drinking Water Acdeputy administrator, accused companies that had injected frackcompanying Gas-Well Drilling and Hydraulic Fracturing, Proceedings of the ing fluids containing diesel fuel underground without permits National Academy of Sciences, Early Edition, published online May 9, 2011, of violating the Safe Drinking Water Act, which limits under- www.pnas.org/content/early/2011/05/02/1100682108. ground injection of fluids. 10 Fracking is exempt from federal 9 Bryan Walsh, Another Fracking Mess for the Shale-Gas Industry, Time, May regulation under the act except for one additive diesel fuel, 10 9, 2011, www.time.com/time/health/article/0,8599,2070533,00.html. Mike Soraghan, Fracking for Natural Gas With Diesel Violated Law, EPA which contains several toxic compounds. Says, The New York Times, April 13, 2011, www.nytimes.com/gwire/2011/04/ And this month Energy Secretary Steven Chu created an- 13/13greenwire-fracking-for-natural-gas-with-diesel-violated-81979.html?scp=3& sq=fracking%20diesel&st=cse. other expert panel to review impacts from fracking and rec- 11 John M. Broder, Fracture on Fracking, The New York Times, May 6, 2011, ommend ways to make the process cleaner and safer, with ini- http://green.blogs.nytimes.com/2011/05/06/fracture-on-fracking/?scp=2&sq= tial recommendations due by August. 11 fracking%20diesel&st=cse. Jennifer Weeks
Gaslandthemovie.com
fracturing, in which developers pump millions of gallons of fluid underground to crack open rock formations have triggered protests in areas where opponents say they are polluting drinking water supplies. (See sidebar, above.) Nonetheless, many experts say natural gas gradually will replace a significant fraction of older coal-fired power plants over the next 20 to 30 years.
14
Oil, which accounts for 37 percent of the nations total energy supply, poses problems as well. It is more carbon intensive than natural gas and produces air pollutants that are ingre-
dients in smog and acid rain. Moreover, since oil is traded on a global market, supply disruptions anywhere in the world can create shortages and price spikes. Foreign oil is a myth, says Grumet of the Bipartisan Policy Center. Even if the U.S. produced all the oil it needed, our economy would be just as impacted when oil prices rose worldwide as it is now. Although regulation of greenhouse gas emissions has stalled in Washington, the United States continues to negotiate with other countries over ways to slow long-term climate change. If those talks eventually lead to limits on greenhouse
gases, the three main carbon-based fuels oil, natural gas and coal will become more expensive and the United States will need alternatives. Just because we wont have a carbon policy in the next couple of years doesnt mean that we wont face greenhouse gas limits 10 years out, says Bruce Biewald, president of Synapse Energy Economics, a consulting firm in Cambridge, Mass. We need to think carefully about the impact of federal energy policies and try to drive investments in a forward-looking direction, instead of locking ourselves into 30- or 40-year-old technologies.
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Fossil Fuels Are Big Carbon Emitters
When burned, all fossil fuels produce carbon dioxide, the main greenhouse gas, and sulfur dioxide and nitrogen oxides pollutants that contribute to acid rain and smog. But emissions from combustion of natural gas are signicantly lower than those from coal or oil. Hydropower and nuclear plants do not produce greenhouse gases or conventional air pollutants during energy generation. Average Air Emissions by Energy Source
(Emissions in pounds per megawatt hour)
2,500 2,249 2,000 1,500
Carbon dioxide Sulfur dioxide Nitrogen oxides
1,672 1,135
Getty Images/Andreas Rentz
1,000 500
13
0
12
0.1 1.7
Coal
Oil Energy Source
Natural gas
Source: Air Emissions, Environmental Protection Agency, December 2007, www.epa.gov/cleanenergy/energy-and-you/affect/air-emissions.html
Can clean-energy sources compete? Although renewable energy provides less than 8 percent of total U.S. energy today, experts say that share could grow substantially over the next several decades. Some renewable fuels are more advanced and affordable than others, but many types are competitive now with conventional energy at good sites that is, places that are sunny enough to generate significant solar power, breezy enough to generate substantial wind power or rich in some other renewable resource. Wind, biomass power, and geothermal energy are used worldwide, says Bobi Garrett, senior vice president at the U.S. Department of Energys National Renewable Energy Laboratory in Colorado. Wind is the fastest-growing renewable and can compete economically with conventional sources in many markets. Electricity from solar power costs about four times as much as other sources, but in February the Energy Depart-
ment announced an initiative called SunShot, which seeks to make solar power competitive by 2020. Thats a stretch goal and a grand challenge, but its not unreasonable, says Garrett. Theres been a lot of investment in the underlying science in recent years, and we can draw on it to make new breakthroughs. And, she points out, solar power is already costeffective in some areas, such as the Southwest, where peak sunlight hours match up with peak electricity demand periods (for example, on hot summer afternoons). But skeptics argue that solar and wind power and other clean technologies cannot compete without federal support. Renewables basically rely on subsidies, says the American Enterprise Institutes Green. Without supports, they just dont get built. Estimates of the value of government energy measures vary widely. According to one study, from the early 1970s through 2003 solar, wind, bioCQ Press Custom Books - Page170
mass and geothermal energy received more than $38 billion in broadly defined federal support. 15 The Environmental Law Institute, a research and education group in Washington that works to strengthen environmental protection, calculates that from fiscal 2002 through 2008, renewable fuels received $29 billion in more narrowly defined federal subsidies that is, direct spending or tax breaks. 16 However, the federal government spends much more money on fossil fuels and nuclear power than on renewables. From the early 1970s through 2003, oil received more than $302 billion in federal support, followed by coal ($80 billion) and nuclear power ($63 billion). 17 From 2002 through 2008, the Environmental Law Institute estimates that traditional fossil fuels received more than $70 billion in federal subsidies. 18 Clean-power advocates argue that these subsidies to large, mature industries make it hard for new, cleaner sources to compete. Subsidies can help young industries that are growing and developing overcome certain cost barriers, says Hendricks of the Center for American Progress. They can also be very destructive when they give windfall profits to mature industries. Renewable energy is receiving subsidies to drive its costs down and make it more competitive. Most producers agree that as technology matures, that support should sunset. On a truly level playing field without subsidies, renewables would do quite well. Oil and gas producers argue, however, that the tax breaks their industry receives are not subsidies at all. They are cost-recovery mechanisms, similar to what other industries get, says Vincent, at the Independent Petroleum Association of America. A subsidy is designed to help something become commercially competitive in a market where it otherwise wouldnt be. Programs such as SunShot seek to help companies in new industries grow
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from early pilot opranked the United States erations to largesecond after China in its scale commercial spring 2011 Renewable operations that can Energy Country Attracattract funding from tiveness Indices, which major private inrank nations based on vestors. Advocates how strongly their laws, say that helping new regulations and investtechnologies scale ment climates support up in this way is renewable energy desmart policy. Under velopment. Other counour last major retries rounding out the search grant from top 10 are Germany, the Department of India, the United KingEnergy, we comdom, Italy, France, Spain, mercialized six Canada and Portugal. major innovations China surpassed the within a three-year United States in mid-2010, Steam from the cooling towers at the Limerick Generating Station, contract, including but Ernst & Young noted a nuclear power plant in Pottstown, Pa., rises over a high-efficiency panels some positive U.S. develnearby neighborhood. and high-efficiency opments, including Presphotovoltaic cells, says Julie Blunden, successes, the popular Motley Fool in- ident Obamas proposed goal of generexecutive vice president at SunPower, vestment website rated the company ating 80 percent of the nations electricity a San Jose, Calif., company that de- as a Rising Star. Motley Fools report from clean sources by 2035. 22 We absolutely are in a race, says signs and manufactures solar-energy noted that renewable energy compasystems. Thats a great return on fed- nies still depend heavily on govern- Hendricks of the Center for American ment support and are fairly risky in- Progress. Some of the fastest innovaeral dollars. In April SunPower and a partner vestments. Still, it argued, the market tion in the energy sector is happencompany opened a jointly operated for alternative energy wont go away. ing around clean tech in areas like the plant in Milpitas, Calif., that will man- . . . There are myriad reasons why so future of the auto industry, energy ufacture 75 megawatts of highly effi- many people all over the globe are storage and materials science. If we cient solar panels for homes and power looking for better, cleaner, cheaper al- lose leadership here, we will lose leadership much more broadly. plants annually. At the plant opening, ternatives to fossil fuels. 20 U.S. manufacturers have moved Democratic Gov. Jerry Brown signed production abroad for decades in search a bill expanding Californias renewable Is the United States in a global of cheap labor, but Hendricks argues electricity standard, which now requires clean-energy race? Investment in clean-energy indus- that clean-energy companies have other utilities to generate one-third of their tries has surged worldwide in the past reasons for looking overseas. China power from renewable sources. 19 Earlier this year SunPower won a five years, rising from $51.7 billion in has made a bigger commitment to encontract to generate and deliver more 2004 to $243 billion in 2010. 21 Cur- ergy efficiency and renewable energy than 700 megawatts of solar power to rently China and Europe are the largest than the U.S. has, he asserts. Beijing Southern California Edison, one of Cal- growth centers for clean power. Many just issued a five-year plan with very ifornias largest utilities, for resale to observers worry that if the United States specific targets for adopting different the utilitys customers. We came in at does not give clean energy enough types of energy efficiency in buildings a price that was competitive with a support, it will lose the chance to be and for building systems like highnew natural gas plant, Blunden says. a global leader and forfeit jobs and speed rail and a smart grid. The U.S. Thats something we could never investment to other countries. Ulti- doesnt have a planned economy like have achieved if we hadnt been able mately, some warn, America might re- China, but our current energy policies to scale up our manufacturing and if place its dependence on foreign oil are making it hard for clean energy we hadnt had Californias renewable with dependence on imported green- companies to build a clean economy power technologies. because theyre not getting predictable electricity standard driving demand. Consulting firm Ernst & Young market signals. Based partly on SunPowers recent
AFP/Getty Images/Stan Honda
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Michael El-Hillow, owner of Evergreen Solar, the third-largest U.S. manufacturer of solar panels, cited Chinas offer of extremely low-interest loans on favorable terms from state-owned banks in his decision to close Evergreens main factory in Massachusetts early this year and shift production to a plant it owned in Wuhan, China. El-Hillow made the move despite having received more than $58 million in incentives from Massachusetts to locate there. 23 Massachusetts officials were angry at the companys decision but said the U.S. government was not doing enough to compete with China on clean energy. The federal government has brought a knife to a gun fight, said Ian Bowles, the states former secretary of energy and environmental affairs. 24 Others say, however, that the spread of green-technology industries is good for the United States even if the systems are manufactured elsewhere. Chinas investments offer spillover benefits to the rest of the world, UCLA economics professor Matthew Kahn wrote in The New York Times. In Kahns view, Chinas massive investments will push clean-energy costs down and make items like solar panels cheaper for everyone who wants them. 25 Conservatives dismiss the Obama administrations efforts to compare U.S.China competition in clean energy to the Sputnik-era space race. [I]t is true that China is spending money on energy hand over fist, argued analysts Nicolas Loris and Derek Scissors of the conservative Heritage Foundation think tank. But China has very little to show for it. Massive regulatory intervention and tens of billions of dollars in annual spending on green energy have produced results that are drastically inferior to those of the United States both economically and environmentally and have left China falling behind rather than marching ahead, contrary to the popular myth. 26 One of the largest U.S. manufacturing companies, General Electric, is betting heavily on solar power. In April GE announced that it would invest $600 million to build the largest solar panel production plant in the nation. The factory, whose location is yet to be chosen, is expected to open in 2013 and employ some 400 workers. Although many solar companies are struggling to compete with inexpensive mass-produced silicon panels from China, GE plans to produce a different type: thin-film panels that convert sunlight to electricity somewhat less efficiently than silicon but are less expensive to make. 27 America excels at research and development and at innovation, and U.S. solar companies that are succeeding have developed distinctive technologies, says SunPowers Blunden. The question is whether they can grow at the pace at which Chinese companies are growing. Growth begets cost reduction, which begets competitiveness. We need policies that will make it possible for companies in the U.S. to make longterm investments in research and development that will drive our costs down and help us be competitive. war economic boom and expansion of the Interstate Highway System. To meet growing demand, developers started drilling for oil in the Gulf of Mexico. But U.S. domestic oil production peaked in 1970. As yields began to decline, the United States cultivated links with oil-producing countries in the Middle East and North Africa and relied increasingly on oil imports. The natural gas industry grew more slowly because the federal government set price ceilings starting in 1954, based on where gas was produced. This policy sought to protect consumers, but prices were set so low that producers had little incentive to enter the market. As a result, natural gas was not widely sold outside of major producing states such as Texas in the 1950s and 60s. But the federal government fostered another large-scale energy industry during this time: nuclear power, an outgrowth of the top-secret Manhattan Project to develop an atomic bomb during World War II. Congress allowed private utilities to own nuclear reactors starting in 1954. In 1957 it passed the PriceAnderson Act, which capped private liability for reactor accidents at $560 million. This step sought to allay energy companies fear that they would have to pay for potentially massive damages if an accident occurred at a commercial nuclear plant. By 1970, 20 reactors were operating, and dozens more were under construction. Through the 1950s most Americans viewed rapid economic growth and high consumer spending as positive trends. But it gradually became clear that prosperity was fouling air and water and damaging natural resources. In a preface to a 1965 expert study, President Lyndon B. Johnson observed, Pollution is now one of the most pervasive problems of our society. 28 The backlash affected some big energy projects. In 1966, when federal officials proposed building hydropower dams on the Colorado River that would
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BACKGROUND
Cheap and Abundant
ince the Industrial Revolution in the 1800s, fossil fuels have provided most of the energy that drives the U.S. economy. Coal fueled factories, heated homes and powered trains and ships in the 19th century. In the early 1900s a drilling boom in Texas introduced a new, versatile source: oil. And energy companies started developing natural gas (which was often found along with oil deposits) during World War II, both for energy and as an integral part of making chemicals and fertilizer. Oil surpassed coal as Americas primary fuel in 1950, driven by the post-
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Chronology
1950s-1960s U.S. relies on coal and oil, starts
to develop nuclear power. 1953 President Dwight D. Eisenhower proposes Atoms for Peace program. 1957 Price-Anderson Act limits nuclear plant owners liability.
1978-79 Revolution in Iran halts oil exports, triggering a second global oil shock. . . . Congress begins deregulating natural gas prices. . . . Explosion and partial core meltdown at Pennsylvanias Three Mile Island nuclear power plant undercut public support for nuclear energy. 1986 Major accident at Chernobyl nuclear plant in Ukraine further intensifies safety fears. 1989 Exxon Valdez runs aground in Alaskas Prince William Sound, spilling 11 million gallons of oil.
2000s
National energy policy focuses on production under a Republican administration, then on energy efficiency and low-carbon sources under President Obama. 2001 President George W. Bush advocates more use of fossil fuels and nuclear power. 2005 Energy Policy Act of 2005 provides loan guarantees and tax credits for new nuclear reactors and extends industrys liability protection. 2007 Supreme Court rules that the Environmental Protection Agency can regulate carbon dioxide as a pollutant under the Clean Air Act. 2009 House passes carbon cap-and-trade legislation, but Senate fails to move a similar bill. . . . Congress approves more than $26 billion in economic stimulus funds for clean-energy development and deployment. 2010 Coal mine explosion in West Virginia kills 29 workers. . . . BPs Macondo well in the Gulf of Mexico suffers a blowout and spills nearly 5 million barrels of oil. . . . Republicans win control of the House and press for major federal spending cuts. 2011 After a massive earthquake and tsunami, three reactors at Japans Fukushima nuclear power station suffer partial core meltdowns. Used fuel rods at another reactor overheat, releasing radiation into the air. . . . Unrest in North Africa and Middle East drives oil prices well above $100 per barrel.
1970s-1980s Arab oil shocks temporarily
boost support for conservation and alternative fuels, but renewable sources struggle to reach commercial scale. 1970 U.S. oil production peaks at 11.3 million barrels per day and begins gradual decline. . . . Environmentalists hold first Earth Day partly in response to major undersea oil well leak near Santa Barbara, Calif., on April 22, 1969. 1973 Arab members of Organization of Petroleum Exporting Countries (OPEC) embargo oil exports to the U.S., sparking a national energy crisis. 1975 Congress creates the Strategic Petroleum Reserve to reduce the impact of future oil shortages, and adopts Corporate Average Fuel Economy standards. 1977 President Jimmy Carters energy plan aims to reduce dependence on oil imports through conservation and efficiency standards. . . . Oil from Alaskas North Slope reaches markets.
1990s
Environmental concerns dominate energy-policy debates. Natural gas becomes an increasingly popular alternative to oil and coal. 1990 Congress amends Clean Air Act to limit pollution from electric power plants through a cap-and-trade system. 1992 World Environmental Summit in Rio de Janeiro, Brazil, adopts Framework Convention on Climate Change to cut greenhouse gas emissions voluntarily. . . . Energy Policy Act of 1992 increases U.S. investments in energy efficiency, renewable energy and alternative fuels. 1997 Clinton administration signs Kyoto Protocol, pledging the U.S. to cutting greenhouse gas emissions 7 percent below 1990 levels by 2012; Senate refuses to ratify the treaty.
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Energy Companies Receive Tax Breaks, Other Federal Aid

Obama seeks to end $4 billion in benefits.
nergy producers receive an abundance of government subsidies and other benefits, from grants and tax breaks to research programs and rules requiring federal agencies to buy certain types of fuel to operate vehicles and heat offices. Budget analysts typically define subsidies as policies that cost the U.S. Treasury money: direct payments, such as cash grants, and tax breaks, which represent income that the government chooses not to collect. But many other government policies also benefit specific fuels or technologies. For example, in 2005 Congress required refiners to blend certain amounts of renewable fuel mainly cornbased ethanol into gasoline, and lawmakers expanded the policy in 2007 to include bio-based diesel fuel. For 2011 the rule requires use of nearly 14 billion gallons of biofuels. 1 Because ethanol is more expensive to produce than gasoline, consumers pay the extra cost at the pump. In addition, oil companies receive a tax credit for every gallon of ethanol they blend into gasoline, and domestic ethanol producers are protected by tariffs that block cheaper imports. 2 President Obama has called for ending eight tax provisions that benefit the oil and natural gas industries at a total cost of about $4 billion annually. Most of the expected revenue ($3.38 billion per year) would come from three programs: Tax write-offs in place since 1913 for certain drilling costs, such as labor expenses and drilling fluids. Ending the writeoffs would generate $1.9 billion in additional federal tax revenue in 2012, or nearly $12.5 billion from 2012 through 2021. Depletion allowances in place since 1926 allow producers to deduct 15 percent from their gross income to compensate for the reduction in supply of a finite resource oil and natural gas. If the allowance ended, producers would pay $607 million more in taxes in 2012, or an additional $11.2 billion from 2012 through 2021. Deductions for domestic manufacturing enacted in 2004 allow oil and natural gas companies to deduct 6 percent of their net income for production in the U.S. The program is intended to lower labor costs and stimulate employment. Ending it would generate $902 million in additional tax revenue in 2012, or about $18.3 billion in the 2012-2021 period. 3 Other energy sources also receive subsidies. The nonpartisan Environmental Law Institute estimates that renewable fuels received almost $29 billion between 2002 and 2008, including: $11.5 billion in tax credits to refiners for blending fuel ethanol into gasoline; $5.4 billion in production tax credits for electricity generation from wind, solar, biomass and other renewable fuels; $5 billion in payments to farmers for growing corn used to make ethanol; and $294 million in low-cost federal financing for public utilities that distribute electricity from federally owned hydropower dams. 4 The institute notes that tax credits for renewable energy pro-
duction were time-limited, while most large tax subsidies for fossil fuels are permanent tax code provisions. 5 Federal spending for research and development also helps many energy sources by paying for some work on basic science and new technologies. The Department of Energy (DOE) spends about $2 billion each year for applied R&D in energy efficiency, renewable energy, fossil fuels and nuclear power systems. DOE also spends about $4 billion for basic research on fundamental issues, such as energy storage and high-energy physics. From 1978 through 2008, DOE spent $57.5 billion on energy research and development, not including basic research. At its spending peak, in 1978, when the United States was reacting to severe oil shocks in the Middle East, DOE spent $6 billion on energy R&D. Through the next two decades that figure fell drastically to a low of $505 million in fiscal 1998 before rising gradually to its current level. However, when spending is adjusted for inflation, DOE is spending far less on energy R&D today than it did 30 years ago. 6 Another major policy that benefits the nuclear industry is the Price-Anderson Act, enacted in 1957, which requires utilities to buy a set amount of primary insurance (currently $375 million) for each nuclear plant and to contribute to a secondary insurance pool for the entire U.S. nuclear industry, which currently stands at about $12.6 billion. If an accident causes damages higher than this amount, however, Congress is responsible for deciding how to pay any higher costs. The nuclear industry argues that Price-Anderson has not cost taxpayers any money since it was enacted. 7 But critics argue that if nuclear operators had to carry full, private liability insurance, the cost of nuclear power would be much higher. 8 According to the Government Accountability Office, No credible quantification of the value [of this liability limit] is available. Jennifer Weeks
1 U.S. Environmental Protection Agency, Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel Standards, Federal Register, Dec. 9, 2010, p. 76791. 2 Tom Doggett and Charles Abbott, Senate Votes to Extend Ethanol Subsidy for 2011, Reuters, Dec. 15, 2010. 3 Summarized from Robert Pirog, Oil and Natural Gas Industry Tax Issues in the BY2012 Budget Proposal, Congressional Research Service, March 3, 2011, www.nationalaglawcenter.org/assets/crs/R41669.pdf. 4 Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, Environmental Law Institute, September 2009, pp. 21-24, 5 Ibid., p. 3. 6 Advanced Energy Technologies: Budget Trends and Challenges for DOEs Energy R&D Program, U.S. Government Accountability Office, March 5, 2008, www.gao.gov/new.items/d08556t.pdf. 7 Price-Anderson Act Provides Effective Public Liability Insurance at No Cost to the Public, Nuclear Energy Institute, June 2010, www.nei.org/resourcesand stats/documentlibrary/safetyandsecurity/factsheet/priceandersonact/. 8 Nuclear Power: Still Not Viable Without Subsidies, Union of Concerned Scientists, executive summary, February 2011, p. 9, http://earthtrack.net/files/up loaded_files/nuclear%20subsidies_summary.pdf.
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have flooded more than 100 miles of the Grand Canyon, thousands of people protested and the project was canceled. Then in 1969 an undersea wellhead off Santa Barbara, Calif., leaked 200,000 gallons of oil, contaminating 35 miles of coastline. The disaster helped to catalyze the first Earth Day rally in 1970 and led to state and federal bans on new offshore drilling along much of the U.S. coastline.
Subsidies Favor Fossil Fuels

Federal energy subsidies totaled $101.5 billion from 2002 to 2008, according to the Environmental Law Institute. Nearly 70 percent of the total more than $70 billion went to traditional fossil-fuel producers, such as oil and natural gas companies. Federal Subsidies for Fossil Fuels and Renewable Energy, 2002-2008
Carbon capture and storage
2.3% ($2.3 billion)
Oil Shocks
he era of cheap oil ended on Oct. 20, 1973, when Arab members of the Organization of Petroleum Exporting Countries (OPEC) cut off oil exports to the United States after it supported Israel in the Yom Kippur War. The embargo, which lasted six months, raised the prices of gasoline, home heating oil and other petroleumbased products and energy-intensive processes, triggering a deep economic recession in the United States from 1973-75. In response, President Richard M. Nixon imposed gasoline rationing for the first time since World War II. To reduce dependence on oil imports, the Nixon administration started building a pipeline to bring crude oil from Alaskas Prudhoe Bay to the Lower 48 states. In 1975 Congress imposed the first Corporate Average Fuel Economy (CAFE) standards on automakers, requiring them to raise the fuel efficiency of new passenger cars to 27.5 miles per gallon on average by 1987. Congress also created the federally owned Strategic Petroleum Reserve and started deregulating oil prices so that they would rise to market levels. Shortly after taking office in 1977, President Jimmy Carter delivered a blunt speech about Americas energy options. The oil and natural gas we rely on for 75 percent of our energy are running out, Carter warned. Each
Traditional fossil fuels
Corn ethanol
16.6% ($16.8 billion)

Traditional renewables
69.2% ($70.2 billion)
12% ($12.2 billion)

* Percentages do not total 100 due to rounding. Source: Energy Subsidies Black, Not Green, Environmental Law Institute, September 2009, www.eli.org/pdf/Energy_Subsidies_Black_Not_Green.pdf
American uses the energy equivalent of 60 barrels of oil per person each year. Ours is the most wasteful nation on earth. Just as coal had replaced wood in the 19th century as the worlds primary fuel, and oil and gas had later supplanted coal, Carter argued that it was time to shift again this time to strict conservation and reliance on coal (which the United States still had in abundance) and to renewable sources like wind and solar power. 29 Carters words spurred Congress to create a Cabinet-level Department of Energy and approve new energy-efficiency standards and tax incentives for investments in renewable energy sources, such as solar, wind and geothermal power. To encourage more domestic energy production and let prices rise to market levels, Carter also deregulated natural gas prices. Some of these steps worked. For example, the share of U.S. electricity generation produced from oil
dropped from 20 percent to 3 percent as utilities switched to natural gas and coal. 30 Others were less successful. Notably, developers received tax credits for wind- and solar-power projects based on how much money they invested, not on actual electricity generated, so some facilities were built haphazardly and performed poorly. 31 In another setback, Pennsylvanias Three Mile Island nuclear plant suffered a hydrogen explosion and partial meltdown in 1979. The accident undercut public support for nuclear power, which was already reeling from massive cost overruns and construction delays. 32 The Iranian Revolution in the winter of 1978-79 brought a militant, fundamentalist Islamic regime to power in Tehran, shutting off Iranian oil exports and triggering a new wave of worldwide panic-buying and price spikes. The outbreak of the Iran-Iraq War in 1980 severely damaged both countries oil industries, worsening the shortage.
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In the 1980s, President Ronald Reagan asserted that markets, not government, were key to meeting energy needs and reviving the economy. Reagan speeded up deregulation of oil and natural gas prices and slashed subsidies for renewable energy. Symbolically, he also had solar panels that had been installed during Carters term removed from the White House roof. In spite of this philosophical shift, U.S. oil consumption fell in the early 1980s in response to high world prices. But as other oil-producing countries entered the market and made up for Iran and Iraqs lost output, prices fell, and energy use rose again. Prince William Sound in March 1989, spilling 11 million gallons of oil and contaminating more than 1,000 miles of shoreline. In 1990 Congress amended the Clean Air Act to address smog- and ozone-forming emissions produced by electric power plants that burned fossil fuels. President Bush supported a market-based approach that capped emissions of sulfur dioxide (SO2), one of the most serious pollutants, and allowed sources to buy and sell emission allowances. Over the next decade, this system reduced SO2 emissions by nearly 30 percent from 1990 levels. The cost for the program had been projected at $4.6 billion, but actual reductions cost only about $1 billion, partly because polluters were allowed to choose the most cost-effective way to meet their emission targets. 34 Bush supported other voluntary efforts to conserve energy and reduce pollution moves that he said also would lower greenhouse-gas emissions. But he argued that too much uncertainty existed about the scale and timing of climate change to take more aggressive action. 35 Bushs successor, President Bill Clinton (1993-2001), opposed opening ANWR to oil and gas exploration, and he used his executive authority to protect public lands in other regions from energy development. Clinton also proposed higher funding for energy efficiency and renewable fuels and supported action to reduce GHG emissions. In 1997 the Clinton administration signed the Kyoto Protocol, which committed the United States to reducing greenhouse gas emissions to 7 percent below 1990 levels by 2012. But Republican majorities in Congress opposed budget increases for low-carbon energy research, and the entire Senate passed a resolution opposing the Protocol, so Clinton never submitted it for ratification.
Seesawing Policies
resident George W. Bush (20012009), who had followed his fathers early career path into the oil business, switched the focus back to increasing energy supplies and argued that the case for global warming had not been proven. Bushs energy policy called for boosting supplies of oil, gas and coal, plus expansion of nuclear power. His administration moved to reduce barriers to energy production on public lands, lobbied vigorously for energy development in ANWR and called for building a new generation of nuclear power reactors. Bush cut spending on energy efficiency and renewable sources, except for hydrogen power for vehicles and electricity production a long-term goal that its sponsors did not expect to produce results before 2020. 36 Congressional Democrats and environmental advocates harshly criticized the Bush energy plan for emphasizing production over conservation and downplaying the environmental impact of energy development. During the 2008 presidential campaign, high gasoline prices brought energy issues to the forefront. Sen. John McCain, R-Ariz., the Republican nominee, and his running mate, Alaska Gov. Sarah Palin, called for more domestic oil production, leading chants of Drill, baby, drill! at campaign rallies. Illinois Sen. Barack Obama, the Democratic nominee, proposed strategies to move away from oil, including government investments to develop and commercialize cleaner energy sources and higher fuel-economy standards for automobiles. 37 As president-elect, Obama promised action on these issues, even though oil prices had fallen sharply from their summer peak of $147 per barrel. The United States could not afford complacency just because oil was cheap for the moment, Obama argued.
Greener Energy
n the late 1980s scientists began to speak publicly about a new concern: global warming, driven mainly by human activities that were raising the concentrations of greenhouse gases (GHGs) in the atmosphere. By far, the largest human-driven contribution to climate change was carbon dioxide emissions from fossil-fuel combustion. It is time to stop waffling so much and say that the evidence is pretty strong that the greenhouse effect is here, NASA scientist James Hansen told a Senate committee in a widely publicized June 1988 hearing. Hansen and other panelists called for sharp cuts in fossil-fuel use to avoid impacts such as severe droughts and melting of polar ice caps. 33 President George H. W. Bush (198993), who had worked in the oil industry in Texas as a young man, maintained Reagans focus on increasing energy supplies. Bush supported opening the Arctic National Wildlife Refuge (ANWR) to oil and gas exploration, but this policy lost support after the tanker Exxon Valdez ran aground in Alaskas
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We go from shock to trance, Obama said a week after the election. You know, oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity. And then the prices go back down, and suddenly we act like its not important, and we start, you know, filling up our SUVs again. And, as a consequence, we never make any progress. Its part of the addiction, all right. That has to be broken. Now is the time to break it. 38
AFP/Getty Images/STR
CURRENT SITUATION
Budget Focus
fter several years of polarized debate over energy and climate change, some observers are cautiously hopeful that Congress will take constructive steps to ease U.S. dependence on oil and shape a more proactive national energy policy. Negotiations over federal spending could provide a framework. I think there will be energy legislation before the 2012 elections, especially if gasoline prices keep rising, says Grumet of the Bipartisan Policy Center. It wont be comprehensive, but there are opportunities. For example, our national political dialogue will be driven by debt issues for the next few years. Theres growing concern that our tax system is not encouraging economic growth. We might see energy pricing or a carbon tax emerge in a debate over tax reform. Budget concerns could also reshape energy subsidies. Saying I dont like yours, you dont like mine isnt a constructive approach, Grumet contends. We should take it as given that when Congress decided to devote taxpayer money to a specific energy
Oil Shocks and Spills

Iranian protestors display a poster of religious leader Ayatollah Khomeini during a demonstration in Tehran against the shah in January 1979 (top). The Iranian Revolution in the winter of 1978-79 brought a militant fundamentalist Islamic regime to power, shutting off Iranian oil exports and triggering a new wave of worldwide panic buying and price spikes. Tugboats tow the oil tanker Exxon Valdez after it went aground in Alaskas Prince William Sound in March 1989, spilling 11 million gallons of crude oil and contaminating more than 1,000 miles of shoreline (bottom).
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AFP/Getty Images/Chris Wilkins
ENERGY POLICY
source, it had a legitimate purpose. But many of the policies we have now were passed years ago. Why dont we go back and try to identify what their purpose was, and whether were achieving those ends efficiently? If were not, we can save money by reforming subsidies that arent working. So far, however, both parties have engaged in angry debates over oil and gas subsidies. Democrats have seized on the issue as a way to show But oil companies have resisted these critiques, which Exxon Mobil CEO Rex Tillerson called misinformed and discriminatory at a May 12 hearing of the Senate Finance Committee. 41 Republicans argue that raising taxes on oil companies (their wording for eliminating the provisions at issue) will reduce domestic production and drive up gasoline prices. But some key figures have wavered. In April, when House Speaker John ural gas industries was an acceptable way to reduce the federal deficit, and 57 percent supported significantly cutting subsidies to build new nuclear power plants. 44 On May 17, the Senate voted 5248 to reject a Democratic resolution to cut five tax breaks for oil companies, but Democrats vowed to pursue the issue as part of negotiations over reducing the federal deficit. 45
What is Clean Electricity?

We go from shock to trance. . . . You know, oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity. And then the prices go back down, and suddenly we act like its not important, and we start, you know, filling up our SUVs again.
Barack Obama President, United States of America
s of April 2011, 29 states plus the District of Columbia and Puerto Rico had adopted legally binding renewable portfolio standards (RPSs), which require utilities to generate specific percentages of their electricity from renewable fuels by certain dates. Another seven states have nonbinding renewable electricity targets. 46 These measures have created growing market demand for renewable energy since the early 1990s. The U.S. does not have a national RPS, although Congress has debated proposals for the past decade. The American Clean Energy and Security Act of 2009 (the House-passed cap-and-trade bill) would have established a national RPS requirement of 20 percent by 2020. In the Senate, Energy Committee Chairman Jeff Bingaman, D-N.M., has proposed a 15 percent RPS several times, most recently in late 2010. Regions like the Pacific Northwest, where most electricity comes from hydropower, are more receptive to a national RPS than areas like the Midwest that rely heavily on fossil fuels. President Obamas proposal for an 80 percent clean-electricity standard (CES) by 2035 defines the target much more broadly. It includes natural gas plants with newer, more efficient designs; nuclear power; and coal-burning plants that would capture and store their carbon emissions. The Obama admin-
concern over gasoline prices and federal spending. They cite former Shell Oil CEO John Hofmeister, who asserted publicly in February that with oil prices high, tax subsidies were not an issue in large energy companies production decisions in other words, that companies did not need subsidies to persuade them to drill more wells. 39 While families across the country are being squeezed, your industry is doing better than ever. And yet the U.S. government continues to dole out $4 billion a year in tax breaks to your companies. These subsidies are not sustainable, and we intend to end them, five Senate Democrats wrote to the CEOs of Exxon Mobil, Chevron, ConocoPhillips, Shell, and BP in May. 40
Boehner, R-Ohio, was asked about the issue during a television interview, he answered, We certainly ought to take a look at it. . . . Were in a time when when the federal government is short on revenues. We need to control spending, but we need to have revenues to keep the government moving. And they ought to be paying their fair share. 42 Boehner quickly backtracked, but in May House Budget Committee chair Ryan said of his long-term budget plan, We go after fossil fuel subsidies, we go after renewable subsidies. We propose to go after all that stuff. 43 And the public is receptive to cutting energy subsidies. In a February NBC News/Wall Street Journal poll, 74 percent of respondents thought that eliminating tax credits for the oil and natCQ Press Custom Books - Page178
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At Issue:
Should the government end tax breaks for oil and gas production?
yes
EXECUTIVE DIRECTOR, OIL CHANGE INTERNATIONAL, WASHINGTON, D.C.

WRITTEN FOR CQ RESEARCHER, MAY 2011
STEVE KRETZMANN
ets start with what we agree on. America needs energy for transport, light and heat. America needs to reduce its spending. The questions are, how we are going to get energy in the future, and how we are going to use our limited government funds? Roughly 10 percent of global oil production is here at home, despite the fact that the U.S. has only 2 percent of global reserves. But as President Bush noted in 2005, with $55 [per barrel] oil we dont need incentives to the oil and gas companies to explore. Oil is more than twice that price today, and the justification for phasing out subsidies is at least twice as strong. President Obama has proposed eliminating $4 billion annually in oil subsidies. While these are not all the subsidies that this mature and very profitable industry enjoys, they are some of the most obvious. Responsible policymakers are of course concerned about what impact removing these subsidies (an act the industry deceptively calls imposing new taxes) will have on domestic production, jobs and consumers at the pump. The short answer to those three questions is little to none. Our reliance on foreign oil has been a fact since the 1970s, and no amount of additional drilling or subsidies is going to change that. The only way to end our reliance on foreign oil is to end our dependence on all oil. According to the Treasury Department, removing these domestic subsidies will reduce U.S. oil production less than one half of 1 percent and increase exploration and production costs less than 2 percent. Considering the price that the domestic industry receives for crude has more than doubled over the past several years, the industry should be able to afford that without laying anyone off or jacking up the price at the pump. The global oil market, not the domestic industry, determines gas prices. The Treasury Department estimates that subsidy removal would cause a loss of less than one-tenth of 1 percent in global oil supply and thus would have no impact on global or U.S. prices. Many think that money saved from subsidies removed should simply be used to offset the deficit toward the goal of a balanced budget. Others think that at least some of these funds should help level the playing field for clean energy. But thats a different discussion, for another day hopefully soon.
no
yes no
p
VICE PRESIDENT OF GOVERNMENT RELATIONS, INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA, WASHINGTON, D.C.
WRITTEN FOR CQ RESEARCHER, MAY 2011
LEE FULLER
olicymakers in Washington are, once again, talking about raising taxes on U.S. producers of oil and natural gas tax increases that have been proposed for the last three years and have been soundly rejected. Contrary to popular belief, these tax proposals do not target Big Oil, but instead go after 18,000 American independent oil and natural gas producers, who on average employ only 12 workers. American production activities are dominated by these independent producers, who drill 95 percent of the nations natural gas and oil wells, accounting for 67 percent of total U.S. natural gas and oil production. Americas independents are dedicated to finding and producing Americas energy resources, creating jobs, generating revenues and supplying reliable and affordable energy all across the United States. In fact, a recent IHS Global Insight study showed that independent oil and natural gas producers operating onshore in the United States accounted for nearly 4 million American jobs in 2010, a number that represents more than 3 percent of the total U.S. workforce. Very few industries have the potential to create as many better-than-average-paying jobs as quickly and effectively as we do. The study also projects that onshore independents will return more than $930 billion to state, local and federal governments in the form of taxes, rents and royalties over the next 10 years all driven by a forecast that predicts an ever-expanding role for U.S. independents in developing more onshore wells and delivering greater volumes of reliable and affordable oil and natural gas to American consumers. However, these positive forecasts cannot be realized if the government raises taxes on these producers, which will consequently reduce capital investments. Historically, independent producers have reinvested as much as 150 percent of their American cash flow back into new American production. Drilling costs are a key component of capital-expenditure budgets for independent producers. Without the ability to expense these ordinary and necessary business costs, an independent would have to reduce its drilling budget by 20 to 35 percent almost immediately. Increasing taxes on independent producers will reduce capital investment in the industry. It also will result in fewer jobs, reduce revenue to federal and state treasuries, hurt American retirees whose mutual funds, pension plans and IRAs are invested in oil and gas companies and harm American energy security.
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for developing energy efficiency and CES idea shapeless and argued that istration estimates that about 40 percent renewable electricity sources. You can it would undercut existing congresof U.S. electricity comes from clean do this by dividing a clean-electricity sional efforts while doing little to build sources today and that that share can standard into tiers and allocating spe- new coalitions. 48 cific shares of generation to renewbe doubled by 2035. Adding those sources could expand able electricity and energy efficiency, support, since most regions have some he says. Without doing that, a cleanof those resources. Importantly, how- electricity standard wont do enough. On March 21, Sens. Bingaman and lean-energy advocates have anothever, carbon capture and storage for er tool available: regulating greenpower plants has not been commer- Lisa Murkowski, R-Alaska, the top Recialized in the United States yet, al- publican on the Senate Energy Com- house gas emissions (GHGs) as polluthough the Energy Department is mittee, released a white paper on how tants under the Clean Air Act. This funding research and 25 demonstra- to design a CES. The paper illustrated a approach would have a similar impact common criticism of Obamas CES pro- to cap-and-trade legislation: It would limit tion projects at industrial sites. 47 how much carbon dioxDesigning a naide and other GHGs poltional CES will be luters could release, which extremely complex, would make low-carbon since the rules will and carbon-free energy have major impacts sources more attractive. on utilities finances Carbon dioxide and (especially for small other GHGs have not tracompanies) and on ditionally been regulatmarket demand for ed this way because they various fuels. A were not thought to have major concern is direct harmful impacts on whether natural gas health or the environment. would dominate a But as scientists painted clean-energy portan increasingly detailed folio, since it propicture of impacts from duces fewer carbon extreme climate change emissions than fos(including droughts, sil fuels and generfloods and heat waves), ates electricity and Congress failed to more cheaply than A coal scraper works at the American Electric Power Co. plant in New Haven, W. Va. In 2009 the facility became the first coal-fired power pass laws limiting GHG nuclear power or plant in the nation to capture a portion of its carbon dioxide emissions emissions, activists startmany renewables. and inject them underground. The U.S. has the worlds largest coal ed addressing the issue The Obama adreserves and 1,500 coal-fired electricity generating plants. through the courts. ministration has proIn a case brought by Massachuposed to award half credits for elec- posal: that it was too vague. Is the goal tricity from combined cycle natural to reduce greenhouse gas emissions, setts and 11 other states, the U.S. gas plants, which are highly efficient. lower electricity costs, spur utilization of Supreme Court ruled in 2007 that the But some experts worry that natural particular assets, diversify supply, or some Environmental Protection Agency had gas could crowd out other, less-mature combination thereof? Bingaman and authority to regulate carbon dioxide Murkowski asked, inviting comments and other greenhouse gases. 49 As the sources that are even cleaner. Clean Air Act requires, the court diWe could meet an 80 percent clean- from industry and advocates. Its a pretty good rule of thumb that rected EPA to conduct a study of electricity goal almost entirely by substituting natural gas generation for if you cant lay out the goals of your pol- whether GHGs in the atmosphere enpower from old coal plants, says the icy clearly, youre unlikely to design it dangered public health and welfare. Center for American Progresss Hen- well, wrote journalist David Roberts in In late 2009 the agency released a dricks. Instead, Hendricks recommends the online environmental magazine formal finding, based on technical studdeveloping a renewable electricity stan- Grist. In contrast to Bingamans 2010 ies, that carbon dioxide and other dard that will create a predictable path recent RPS proposal, Roberts called the GHGs in the atmosphere threaten the
GHG Regulations
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AFP/Getty Images/Saul Loeb
public health and welfare of current and future generations. 50 Although President Obama supported congressional action on climate change as the best way to address the issue, EPA Administrator Lisa Jackson announced in December 2010 that the agency would issue rules to limit GHGs, since it was clear that there would not be enough votes in the new Congress to address the problem through legislation. 51 But opponents including most congressional Republicans and some Democrats say that doing so would have the same impacts that they had predicted earlier from a capand-trade bill: driving energy prices up and hurting the economy. Studies estimated that a cap-andtrade national energy tax would produce job losses in the millions. Yet EPA is unilaterally acting to impose the very same types of policies that Congress rejected [in 2009-2010], House Energy and Commerce Committee chair Upton asserted in a March 1 hearing. 52 Some legal experts disagree with that view. EPA regulation is not capand-trade by another name. Its far less efficient, and if we had done a comprehensive cap-and-trade approach, we would be dealing with these major pollution sources more effectively, says Scott Schang, vice president of the Environmental Law Institute. On April 7 the House voted 255-172 to block EPA from regulating GHGs under the Clean Air Act. 53 No Republicans voted against the bill, and 19 Democrats, mostly from Midwestern and Southern states, supported it. The White House issued a statement saying Obama would veto the bill if it reached his desk, but the Democrat-controlled Senate was not expected to take it up. Next, opponents may try to deny EPA funds in the final 2012 budget to regulate GHGs. But Schang says that approach would not end the debate. Defunding EPA doesnt repeal requirements under the Clean Air Act, so companies would still have to comply with the law.
States implement the Clean Air Act and issue permits, and Congress cant regulate the states, so defunding EPA could really complicate the issue, he says. Moreover, Schang notes, an extended fight over this issue will leave the power industry in limbo. Utilities hate uncertainty, and they dont know what to do here. They have to make multibillion-dollar decisions about power plant investments. Thats not fair to them, he says.
OUTLOOK
How Green?
ndustry leaders and advocates generally agree that growing Americas energy supply and reducing reliance on imported oil are high priorities. But theres less consensus over how large a role green sources should play, and how quickly the U.S. needs to develop cleaner fuels. We need an all of the above strategy. World energy needs are growing, and it will be challenging to keep supplies growing at the same pace, says the Independent Petroleum Association of Americas Vincent. Energy policy should encourage the development of oil and gas resources, because they will be the main sources for decades. Eventually, well develop technology that will let us power society in other ways, like advanced nuclear power and renewables. We cant rule anything out, but we need to be practical about how much of the equation they can provide. Environmentalists want more aggressive efforts to shift away from dirty sources. We need to reduce emissions from existing fossil fuels. That means making sure that natural gas is produced and transported to minimize leakage, so we get its full low-carbon benefits. It also means closing old, dirty coal plants and replacing them with cleaner resources,
says Jim Marston, energy program director with the Environmental Defense Fund, a national environmental advocacy group. We also need to put more money into next-generation fuels, and set modest requirements [in a national cleanor renewable energy standard] that will create economies of scale for solar, geothermal and wind power, Marston continues. You can believe in the market and understand that there are market failures that prevent these new resources from getting into the market and going to scale. Energy choices will be shaped by the ongoing national debate over how to reduce U.S. budget deficits and stimulate economic growth. Many Democrats and Republicans agree that we need to invest in advanced technology, says the Bipartisan Policy Centers Grumet. But with total spending shrinking, federal support for energy research and development will have to show significant returns to win support. Were going to have to find the right balance of investments in our most critical needs, with an eye toward those that protect our nation and that create jobs but at a much lower funding level, Rep. Steve Womack, R-Ark., said at a House Appropriations subcommittee hearing on Energy Department programs in March. 54 Unexpected events around the world may roil the U.S. energy debate even more. For example, many observers speculate that the post-earthquake meltdowns at Japans Fukushima nuclear reactor will undercut nascent support in the United States for new investments in nuclear power. But the National Renewable Energy Laboratorys Garrett draws a broader lesson from Fukushima. The accident in Japan suggests that government should have an ongoing role in all energy technologies, she says. As you move forward in time, you face new challenges, and government can accelerate transitions from the status quo to new ways of
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doing things. Government can speed transitions that need to happen.
Blueprint for a Secure Energy Future, March 30, 2011, pp. 4-8, www.whitehouse.gov/ sites/default/files/blueprint_secure_energy_ future.pdf. 11 Weekly radio address, April 23, 2011, www. whitehouse.gov/the-press-office/2011/04/23/ weekly-address-instead-subsidizing-yesterdaysenergy-sources-we-need-inv. 12 Blueprint for a Secure Energy Future, op. cit., p. 39. 13 National Research Council, Advancing the Science of Climate Change (National Academies Press, 2010), p. 3, www.nap.edu/catalog. php?record_id=12782. 14 Massachusetts Institute of Technology, The Future of Natural Gas (2010), http://web.mit. edu/mitei/research/studies/report-natural-gas. pdf; Dave Roberts, Chart of the Day: The U.S. Energy Mix in 2035, Grist, April 22, 2011, www.grist.org/climate-energy/2011-04-22-chartof-the-day-the-u.s.-energy-mix-in-2035. 15 Roger H. Bezdek and Robert M. Wending, A Half Century of U.S. Federal Government Energy Incentives: Value: Distribution, and Policy Implications, International Journal of Global Energy Issues, vol. 27, no. 1 (2007), p. 43. This figure includes spending for geothermal energy ($5.7 billion), which the article counts separately from other renewable fuels ($32.6 billion). 16 Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, Environmental Law Institute, September 2009, www.eli.org/ Program_Areas/innovation_governance_ener gy.cfm. 17 Bezdek and Wending, op. cit., p. 43. 18 Environmental Law Institute, op. cit., p. 3. 19 Ian Bauer, Governor Dedicates Solar Plant, San Jose Mercury-News, April 13, 2011. 20 Alyce Lomax, Rising Star Buy: SunPower, Fool.com, Jan. 11, 2011, www.fool.com/investing/ general/2011/01/11/rising-star-buy-sunpower. aspx.
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Notes
No commercial-scale clean-coal plant is currently operating in the United States. For background, see Jennifer Weeks, Coals Comeback, CQ Researcher, Oct. 5, 2007, pp. 817-840, and David Hosansky, Wind Power, CQ Researcher, April 1, 2011, pp. 289-312. 2 John M. Broder, Obama Shifts to Speed Oil and Gas Drilling in U.S., The New York Times, May 14, 2011, p. A1. 3 Jean Chemnick, Climate: Rising Oil Prices Demand Bipartisan Cooperation On Energy, Graham Says, E&E News, March 8, 2011. 4 Remarks by the President on Americas Energy Security, Georgetown University, March 30, 2011, www.whitehouse.gov/the-press-office/2011/ 03/30/remarks-president-americas-energy-security. 5 Statement prepared for delivery, http://re publicans.energycommerce.house.gov/Media/ file/Hearings/Energy/031611/Upton2.pdf. 6 For background see Marcia Clemmitt, Energy and Climate, CQ Researcher, July 24, 2009, pp. 621-644. 7 John Collins Rudolf, Clean Energy Is a Target of Ryan Budget Plan, The New York Times, April 6, 2011, http://green.blogs.nytimes.com/2011/ 04/06/clean-energy-is-a-target-of-ryan-budget-plan/; Paul Ryan, The GOP Path to Prosperity, The Wall Street Journal, April 6, 2011, http://online. wsj.com/article/SB10001424052748703806304576 242612172357504.html. 8 The case is Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007). 9 An Open Letter to the American People and Americas Leaders: A New Era for U.S. Energy Security, April 12, 2011, www.bipartisan policy.org/library/energy-project/open-letter.
1
About the Author

Jennifer Weeks is a Massachusetts freelance writer who specializes in energy, the environment, science and technology. She has written for The Washington Post, Audubon, Popular Mechanics and more than 50 other magazines and websites and worked for 15 years as a public policy analyst, congressional staffer and lobbyist. She has an A.B. degree from Williams College and masters degrees from the University of North Carolina and Harvard.
Clean Energy Investment Storms to New Record in 2010, Bloomberg New Energy Finance, Jan. 11, 2011, http://bnef.com/Down load/pressreleases/134/pdffile/. 22 Ernst & Young, Renewable Energy Country Attractiveness Indices, Issues 26 (August 2010) and 28 (February 2011), www.ey.com/Publi cation/vwLUAssets/Renewable_energy_country_ attractiveness_indices_-_Issue_28/$FILE/EY_ RECAI_issue_28.pdf. 23 Todd Wallack, Plant Will Shut After $58m in State Aid, The Boston Globe, Jan. 12, 2011, http:// articles.boston.com/2011-01-12/business/2933 8294_1_evergreen-solar-plant-state-funds. 24 Keith Bradsher, Solar Panel Maker Moves Work to China, The New York Times, Jan. 14, 2011, www.nytimes.com/2011/01/15/business/ energy-environment/15solar.html. 25 Matthew E. Kahn, How We Gain From Chinas Advances, The New York Times, Jan. 18, 2011, www.nytimes.com/roomfordebate/2011/ 01/18/can-the-us-compete-with-china-on-greentech/how-we-gain-from-chinas-advances. 26 Nicolas Loris and Derek Scissors, Chinas Sputnik Moment, Heritage Foundation, Jan. 21, 2011, http://origin.heritage.org/Research/ Commentary/2011/01/Chinas-Sputnik-Moment. 27 GE Invests $600m to Build Largest US Solar Plant, Reuters, April 8, 2011. 28 Restoring the Quality of Our Environment: Report of the Environmental Pollution Panel, Presidents Science Advisory Committee, White House, November 1965, p. iii, http://dge.stan ford.edu/labs/caldeiralab/Caldeira%20down loads/PSAC,%201965,%20Restoring%20the%20 Quality%20of%20Our%20Environment.pdf. 29 Televised address by President Jimmy Carter, April 18, 1977, online at www.pbs.org/wgbh/ americanexperience/features/primary-resources/ carter-energy/. 30 Stephen Hoff, Was Jimmy Carter Right? Cleveland Plain Dealer, Oct. 1, 2005, www. energybulletin.net/node/9657. 31 Joshua Green, The Elusive Green Economy, The Atlantic, July/August 2009, www.the atlantic.com/magazine/archive/2009/07/theelusive-green-economy/7554/. 32 Michael Grunwald, Three Mile Island at 30: Nuclear Powers Pitfalls, Time, March 27, 2009, www.time.com/time/nation/article/0,8599,1888 119,00.html. 33 Philip Shabecoff, Global Warming Has Begun, Expert Tells Senate, The New York Times, June 24, 1988, www.nytimes.com/1988/ 06/24/us/global-warming-has-begun-experttells-senate.html.
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National Research Council, Air Quality Management in the United States (2001), pp. 199-202. 35 Larry Parker and John Blodgett, U.S. Global Climate Change Policy: Evolving Views on Cost, Competitiveness, and Comprehensiveness, Congressional Research Service, Jan. 29, 2009, pp. 5-7, http://assets.opencrs.com/rpts/RL30024_ 20090129.pdf. 36 For background, see Mary H. Cooper, Alternative Energy, CQ Researcher, Feb. 25, 2005, pp. 173-196. 37 Council On Foreign Relations, Barack Obama, www.cfr.org/experts/world/barackobama/b11603#6. 38 Andrew Revkin, Obama on the Shock to Trance Energy Pattern, The New York Times, Nov. 17, 2008, http://dotearth.blogs.nytimes. com/2008/11/17/obama-on-shock-to-tranceenergy-pattern/. 39 Amy Harder, Ex-Shell CEO Says Big Oil Can Live Without Subsidies, National Journal.com, Feb. 11, 2011, www.nationaljournal. com/daily/ex-shell-ceo-says-big-oil-can-livewithout-subsidies-20110211. 40 Democrats Urge Oil CEOs to Admit They No Longer Need Taxpayer-Funded handouts, Use Money to Cut Deficit Instead, online at http://menendez.senate.gov/newsroom/press/ release/?id=649ae0ba-6219-4fa6-9173-e1cc83a 135a0. 41 John M. Broder, Oil Executives, Defending Tax Breaks, Say Theyd Cede Them if Everyone Did, The New York Times, May 12, 2011, www.nytimes.com/2011/05/13/business/13oil. html?_r=1&hp. 42 Jonathan Allen and Darren Goode, Boehner Gaffe Creates Dem Opening, Politico.com, April 26, 2011. 43 Evan Lehmann, Ryan, the Republicans Budget Hawk, Opposes Tax Breaks for Clean Energy and Oil, The New York Times, May 9, 2011, www.nytimes.com/cwire/2011/05/09/09 climatewire-ryan-the-republicans-budget-hawkopposes-tax-73991.html?scp=1&sq=ryan%20 tax%20breaks%20clean%20energy%20oil%20& st=cse. 44 Study # 11091, Hart/McInturff, February 2011, pp. 15-16, http://online.wsj.com/public/ resources/documents/wsj-nbcpoll03022011.pdf. 45 Carl Hulse, Senate Refuses to End Tax Breaks for Big Oil, The New York Times, May 18, 2011, p. A1. 46 Database of State Incentives for Renewables & Efficiency, Summary Maps RPS Policies, www.dsireusa.org/summarymaps/index.cfm?ee= 1&RE=1.
34

American Petroleum Institute, 1220 L St., N.W., Washington, DC 20005; (202) 682-2000; www.api.org. National association for the oil and natural gas industry. Center for American Progress, 1333 H St., N.W., 10th Floor, Washington, DC, 20005; (202) 682-1611; www.americanprogress.org. Liberal think tank that advocates in fields including energy and the environment. Environmental Defense Fund, 257 Park Ave. South, New York, NY 10010; (800) 684-3322; www.edf.org. National advocacy group known for promoting market-based solutions to environmental challenges. Institute for 21st Century Energy, 1615 H St., N.W., Washington, DC 20062; (202) 463-5558; www.energyxxi.org. Research initiative affiliated with the U.S. Chamber of Commerce that advocates strategies to ensure affordable, reliable and diverse energy supplies, improve environmental stewardship, promote economic growth and strengthen national security. Lawrence Berkeley National Laboratory, 1 Cyclotron Road, Berkeley, CA 94720; (510) 486-4000; www.lbl.gov. Laboratory of the U.S. Department of Energy, managed by the University of California, that conducts unclassified research on subjects including energy efficiency and advanced energy technologies. MIT Energy Initiative, Massachusetts Institute of Technology, 77 Massachusetts Ave., E19-307, Cambridge, MA 02139-4307; (617) 258-8891; http://web.mit.edu/mitei/. University-wide initiative at MIT designed to help transform the global energy system through research, classroom teaching and campus energy-use reductions. Synapse Energy Economics, 22 Pearl St., Cambridge, MA 02139; (617) 661-3248; www.synapse-energy.com. Research and consulting firm specializing in energy, economic and environmental issues that works to inform sound regulatory and policy decisions. U.S. Department of Energy, 1000 Independence Ave., S.W., Washington, DC 20585; (202) 586-5000; www.energy.gov. Manages research, development and policy initiatives to meet U.S. energy needs. Key offices for energy supply include Energy Efficiency and Renewable Energy, Fossil Energy and Nuclear Energy.
U.S. Department of Energy, Office of Fossil Energy, Carbon Sequestration, http://fossil. energy.gov/sequestration/. 48 David Roberts, Bingaman Tries to Make Policy Out of Obamas Hopey-Changey Clean Energy Standard, Grist, March 23, 2011, www. grist.org/energy-policy/2011-03-23-bingamantries-to-make-policy-out-of-obama-clean-energystandard. 49 Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007), www.supreme court.gov/opinions/06pdf/05-1120.pdf. 50 U.S. Environmental Protection Agency, Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, Dec. 7, 2009, www.epa.gov/ climatechange/endangerment.html.
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Matthew L. Wald, E.P.A. Says It Will Press on With Greenhouse Gas Regulation, The New York Times, Dec. 23, 2010, www.nytimes.com/ 2010/12/24/science/earth/24epa.html. 52 Hearing of the Energy and Power Subcommittee, March 1, 2011, http://energycom merce.house.gov/hearings/hearingdetail.aspx? NewsID=8270. 53 H.R. 910, the Energy Tax Prevention Act of 2011. 54 House Committee on Appropriations, Subcommittee on Energy and Water Development, hearing March 31, 2011, http://appropriations. house.gov/_files/033111EnergyandWaterARPAE LoanGuaranteeWomack.pdf.
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Bibliography
Selected Sources
Books
Buchar, David, The Rough Guide to the Energy Crisis, Rough Guides, 2010. A senior research fellow at the Oxford Institute for Energy Studies surveys current energy choices and options for shifting to cleaner sources. Hofmeister, John, Why We Hate the Oil Companies: Straight Talk from an Energy Insider, Palgrave Macmillan, 2010. A former president of Shell Oil argues that U.S. energy debates are polarized and that a Federal Energy Resources Board is needed to plan and manage the nations energy system. Madrigal, Alexis, Powering the Dream: The History and Promise of Green Technology, Da Capo Press, 2011. A journalist shows that American innovators have refined many green energy concepts for decades, including wind and geothermal power and electric cars, but inconsistent policies have often kept them from expanding to a large scale. National Research Council, Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use, National Academies Press, 2010. The study, conducted in response to a congressional request, concludes that energy production and use cause billions of dollars in damages yearly that are not reflected in energy prices. Harder, Amy, Can Obama Budget a Clean Energy Future? National Journal, Feb. 14, 2011, http://energy.national journal.com/2011/02/can-obama-budget-a-clean-energ.php. Policy experts and energy company leaders debate whether President Obamas proposed investments will help create a green economy. Klare, Michael T., The Relentless Pursuit of Extreme Energy, The Nation, May 18, 2010, www.thenation.com/ article/relentless-pursuit-extreme-energy. A professor of peace and world security studies at Hampshire College argues that more major accidents like the 2010 BP oil spill can be expected. Room for Debate: Can the U.S. Compete with China on Green Tech? The New York Times, Jan. 19, 2011, www.ny times.com/roomfordebate/2011/01/18/can-the-us-competewoth-china-on-green-tech. Lawyers, economists and other policy experts give their perspectives on American companies efforts to win global market shares in clean-energy industries. Rotman, David, Praying for an Energy Miracle, Technology Review, March/April 2011, www.technologyreview. com/energy/32383/. Many companies are developing new clean-energy sources, but deploying new technologies into the market is harder than inventing them and requires government support.
Articles
Clayton, Mark, Is EPA Greenhouse-Gas Plan a Job Killer? History Might Offer Clues, The Christian Science Monitor, March 2, 2011, www.csmonitor.com/USA/Politics/ 2011/0302/Is-EPA-greenhouse-gas-plan-a-job-killer-Historymight-offer-clues. Carbon-intensive industries say regulating greenhouse gases as pollutants would wreck the U.S. economy, but many economists say the impact would be insignificant or positive. De Gorter, Harry, and Jerry Taylor, Ethanol: Let Protectionism Expire,National Review (online), Dec. 8, 2010, www. cato.org/pub_display.php?pub_id=12623. Two libertarian scholars argue against continuing federal tax credits and trade protections for ethanol. Goldberg, Jonah, Obamas Sputnik Analogy Doesnt Fly, USA Today, Jan. 31, 2011, www.usatoday.com/news/opinion/ forum/2011-02-01-column01_ST_N.htm. A conservative argues that the United States should not spend billions of dollars to emulate Chinas energy policy.
Reports and Studies

Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, Environmental Law Institute, 2009, www. elistore.org/reports_detail.asp?ID=11358. The United States provided $72 billion in subsidies for fossil fuels and $29 billion for renewable-energy sources. Hendricks, Bracken, and Lisbeth Kaufman, Cutting the Cost of Clean Energy 1.0, Center for American Progress, November 2010, www.americanprogress.org/issues/ 2010/ 11/cleanenergycosts.html. A liberal think tank lays out a strategy for clean-energy investments led by the private sector but spurred by government policies, including regulatory reforms. MIT Energy Initiative, The Future of Natural Gas: Interim Report, Massachusetts Institute of Technology, 2010, web.mit.edu/mitei/research/studies/report-natural-gas.pdf. An interdisciplinary study finds that abundant natural gas could serve as a bridge fuel to a low-carbon future, especially as a substitute for coal to generate electricity, but that it should not be allowed to crowd out cleaner fuels.
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CHAPTER
MASS TRANSIT BOOM

Excerpted from Thomas J. Billitteri, CQ Researcher (January 18, 2008), pp. 49-72.
Mass Transit Boom

THE ISSUES
powered trains that share at least part of the right-of-way with cars. (See Glossary, p. ampa officials think 64.) From 2002 through 2006, they might have the for instance, 921 new lightanswer to a big rail cars were delivered up headache for travelers: get75 percent from the previous ting to and from the airport five years. Deliveries of heavwithout getting tangled in trafier commuter-rail cars rose by fic gridlock. more than 200 percent. 4 Last fall, Tampa officials Growing traffic congestion showed a video animation is a major problem driving of a six-car electric train the transit boom. The Texas whisking airport passengers Transportation Institute estialong a 3.5-mile track to their mates that congestion cost driterminal. If built, the train vers 4.2 billion in lost hours could link to a possible rail and 2.9 billion gallons of wastnetwork connecting downed fuel in 2005 the equivtown Tampa to St. Petersalent of 105 million weeks of burg 25 miles away. vacation and 58 fully loaded Tampa Mayor Pam Iorio, supertankers. 5 Easing cona big supporter of building gestion not only relieves agpassenger rail service, urged gravated drivers and saves gas people to compare the airbut also improves business. port systems estimated cost A study of the San FrancisTo ease traffic congestion in Manhattan, Mayor Michael $190 million to $235 milco Bay Area found that every R. Bloomberg has proposed a congestion-pricing lion to the enormous sums 10 percent rise in commutscheme to charge motorists to drive into the most spent to improve the regions ing speed increased work outcrowded sections of the city on weekdays. The approach has been used in London and Stockholm, Sweden, Interstate highways. put by 1 percent. 6 and is getting close attention in the United States. In the long run, this is cheapSoaring vehicle ownerAbove, 42nd Street on Thursday, June 7, 2007. er, she said. Moreover, it ship also fuels congestion. would be congestion-proof. 1 Roughly 30 million vehicles Similar zeal for public transit is offer quick short-term access to vehi- were added to the national fleet bespreading nationwide. Pressed by cles when needed, reducing the need tween 1990 and 2000, and more than population growth, rising gas prices, for car ownership. Planners are fash- 13 million of those were in houseglobal warming and dizzying levels of ioning specially wired e-burbs, such holds that already had two or more traffic congestion, cities are pouring as La Plata, Md., in suburban Wash- vehicles. 7 In 2000, three of every four unprecedented amounts of money ington, D.C., to ease communication commuters got to work by driving into light-rail systems, commuter with remote headquarters and make it alone. 8 Many of those drivers were trains, rapid-transit buses and other easier for workers to telecommute immigrants of working age (25-45) a move that takes cars off the road. 2 people who are on the roads, comforms of public transportation. In addition, the Bush administra- muting to jobs. Meanwhile, new ideas and technologies are helping to alleviate con- tion has been promoting toll lanes and Some light-rail systems are designed gestion in traffic-choked metropolitan other congestion-pricing tools as part to help invigorate urban areas with tranareas. Smart card fare-collection sys- of a broad congestion initiative aimed sit-oriented development upscale, tems allow electronic transfers among at mitigating gridlock in the nations walkable mixed-use neighborhoods built buses, subways and other transit modes. transportation systems. 3 around transit stations. In 2001 a new Perhaps the most notable trend, streetcar system in Portland, Ore., spurred Online travel-planning tools, such as Google Transit and hopstop.com, en- though, is an explosion in urban rail the transformation of a down-at-theable commuters to navigate around projects, including streetcars and other heels industrial zone, kicking off a surge cities. Car-sharing networks like Zipcar light-rail systems, typically electrically of interest in streetcars that has spread
AP Photo/Richard Drew
Jan. 18, 2008
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MASS TRANSIT BOOM

Transit System Mileage on the Increase
Track mileage within the U.S. transit system has significantly increased over the past two decades. Commuter and light-rail mileage doubled and tripled, respectively.
No. of miles in system
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1985
Track Mileage for Commuter, Heavy and Light Rail, 1985-2005
Commuter Rail Heavy Rail Light Rail

CQ Press/Olu Davis
1990
1995
2000
2005
Source: Bureau of Transportation Statistics, Department of Transportation
from Albuquerque, N.M., and Sacramento, Calif., to Columbus, Ohio, and Kenosha, Wis. 9 Today, 30 to 50 cities are planning, designing or building streetcar projects, according to Charles Hales, a former Portland city commissioner who led that citys streetcar revival. Its not a fad, declares Hales, now a transit consultant for cities, or if it is, its going to be one that lasts a long time. Advocates cite a recent rise in transit ridership as evidence drivers are ready to park their cars at least occasionally and take public transportation. After hitting bottom in the 1970s, trips on trains, trolleys, buses and other transit bounced up and down in a narrow range until the mid-1990s, then began to trend upward. (See graph above.) Socalled unlinked * passenger trips totaled 9.8 billion in 2005, the most recent year
* Unlinked passenger trips denote the number of passengers who board public transportation vehicles. Passengers are counted each time they board vehicles no matter how many vehicles they use to travel to their destination.
for which data are available, compared with 7.8 billion in 1995, according to the American Public Transportation Association. 10 The associations president, William W. Millar, says transits growth has important policy implications. Public transit helps us meet the needs of people and solve problems that are important at all the levels to meet national goals like reduction in greenhouse gases, reduce our reliance on foreign energy sources, you name it, he says. It also helps local communities support economic growth and deal with sprawl and a burgeoning elderly population, he adds. But not all urban transportation experts are so enthusiastic. Critics argue that investing in expensive projects makes little sense outside of traditional urban megalopolises like the New York region, which alone accounts for about 35 percent of the nations transit ridership. Despite the recent uptick in ridership, they point out, transit accounts for only a fraction of overall urban travel and ridership remains far
below the World War II-era peak, when trips approached 25 billion per year. The rush to build light rail comes in for especially harsh criticism. Theres a huge amount of money wasted on building rail, says Jonathan Richmond, an urban transportation consultant who has written widely on the subject. It has pathetically low ridership and very little to show for it. Some argue, too, that local leaders have created unrealistic expectations that transit systems will make urban life easier. Transit has been sold as a way to solve congestion, air quality and other environmental problems and make places more livable, says Genevieve Giuliano, senior associate dean for research and technology at the University of Southern Californias School of Policy, Planning and Development. Under most circumstances notably, outside of very high-density corridors where demand exceeds the capacity of buses operating at the shortest possible intervals rapid bus service is as effective as rail transit and far less expensive to build, she says. The list of urban ills that transit is expected to solve is very long, says Giuliano. And, unfortunately, it could not possibly live up to that list. But you need the list to get the political support to fund it. Transit projects also stir passionate debate between smart growth enthusiasts who advocate reducing sprawl by encouraging high-density, close-in development along transit corridors and those who call such efforts social engineering. The notion that government agencies should be forcing people into situations because of a belief in how people ought to live in cities is crazy, says Robert Bruegmann, author of the controversial book Sprawl: A Compact History, which argues that mobility, choice and privacy are much easier for most people to find in sprawling areas than in densely populated ones. With the population growing and with most people wedded to their cars,
52
transit will remain an insignificant factor on the transportation scene, short of some completely unforeseen turn of events, says Bruegmann, an expert on urban planning at the University of Illinois, Chicago. The only real way for transit to work is to completely change our cities, he says. Theres simply no evidence that will occur. But developers in places like Charlotte, N.C., are betting on a growing demand for public transportation as well as places to live and work near transit lines. They are investing more than $1 billion in projects near stations planned for the region. We always saw transit as a means, not an end, Planning Director Debra Campbell said. The real impetus for transit was how it could help us grow in a way that was smart. This really isnt even about building a transit system. Its about place-making. Its about building a community. 11 As cities continue to build and expand public-transit systems, here are some of the questions being asked by transit supporters and critics: Will spending more on transit ease congestion? Of all the benefits touted by publictransportation supporters, none resonates with the public as much as the idea that transit might reduce the mayhem on traffic-choked roads. Congestion is a scourge on the United States, declares Millar of the American Public Transportation Association. He adds, A comprehensive public transportation system . . . helps to reduce congestion and saves energy. 12 Its an oft-repeated mantra among transit advocates. I never got caught in a traffic jam on I-96 15 years ago, U.S. Rep. Vernon J. Ehlers, a Michigan Republican from the Grand Rapids area, was quoted by the Michigan Land Use Institute, a smart-growth advocacy organization. Today, you drive in every morning and its jammed up. . . . With
Buses Are Top Public Transportation Mode

More than 20 million so-called unlinked* bus rides were taken during the average weekday in 2005, constituting nearly 60 percent of all U.S. public-transportation trips. Heavy rail was a distant second with just under 10 million rides, about 29 percent. Average Weekday Unlinked Passenger Trips, 2005
Mode Bus Commuter rail Ferryboat Heavy rail Light rail Other rail Paratransit Trolleybus Vanpool Total Average weekday unlinked trips 20.1 million 1.5 million 225,000 9,626,000 1,304,000 114,000 427,000 367,000 61,000 33,641,000 Percent of total 59.7% 4.3% 0.7% 28.6% 3.9% 0.3% 1.3% 1.1% 0.2% 100.1%
Note: Percentages do not total 100 due to rounding; unlinked trips do not add to total due to rounding. * Unlinked passenger trips are the number of passengers who board public transportation vehicles. Passengers are counted each time they board vehicles Source: Public Transportation Fact Book, 58th ed., American Public Transportation Association, May 2007
the increase in traffic, what do you think is going to happen? Well need light rail in 15 years. Public transit is very important for our future. 13 But transportation specialists hotly debate the notion that public transit can curb traffic congestion. Attempts to cope with rising traffic congestion by shifting more people to public transit are not going to work, argues Anthony Downs, a senior fellow at the Brookings Institution, a Washington think tank. The automobile is and will remain a better form of movement for most people in spite of congestion. 14 The author of the 1992 book Stuck in Traffic and the 2004 sequel Still Stuck in Traffic, Downs notes that only
a fraction of commuting is done by public transit, a proportion that drops even more if New York is excluded. In 2000 transit provided about 46.6 billion miles of movement while passenger miles traveled [in cars, small trucks and SUVs] . . . totaled about 4 trillion, Downs said. In fact, transits share of all passenger miles traveled in the U.S. from 1985 through 2000 averaged only 1.26 percent. 15 Others also doubt the ability of transit particularly expensive rail projects to make a significant dent in congestion in a large urban region. While transit can reduce congestion on some high-density traffic corridors, says Michael D. Meyer, a professor of civil and environmental engineering at the
Jan. 18, 2008
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MASS TRANSIT BOOM

Georgia Institute of Technology and for- wise drive, reducing congestion on E. Pisarski, a transportation consultant mer director of transportation planning roads running parallel to transit sys- and the author of a series of statistical and development for Massachusetts, tems. It stimulates transit-oriented de- reports on commuting trends published most indicators show it can provide an velopment, thereby reducing vehicle by the Transportation Research Board, almost insignificant impact on conges- travel. And, it can lower travel-time part of the National Academy of Scition across a metropolitan region. costs incurred by people who shift ences. Typically thats one of the If you talk to the elected officials to transit. weakest areas, in terms of getting peobehind the scene, Meyer adds, they Even if transit takes more minutes, ple where they want to go when they will often say they need to build tran- according to Litman, many travelers want to go. sit systems because Randal OToole, a . . . you cant be a senior fellow at the Cato world-class city unInstitute, is blunter. less you have a rail Light rail and streetsystem, you need to cars may be cute, but be prepared for a futhey are S-L-O-W, ture where gas may wrote OToole, a longbe God knows how time transit critic. Portmany dollars per gallands fastest light-rail lon and you need to line averages 22 miles be more sustainable. per hour. Portlands But deep down, streetcar goes about 7 Meyer says, most remiles per hour. I am alize that transit isnt waiting to see a develgoing to reduce conoper advertise, If you gestion significantly lived here and rode tranNew streetcars in Kenosha, Wis., run on electricity on tracks alongside cars. Madison, Wis., is considering throughout a region. sit home from work, streetcars similar to those in Kenosha. But transit advoyoud still be sitting on cates see things difthe train. 17 ferently. How did we get into the consider their cost per minute lower But transit advocates say such analyproblem of road congestion? Millar than driving if transit service is com- sis is misguided as it pertains to streetsays. We spent . . . trillions of dol- fortable . . . allowing passengers to cars and congestion. Hales, the former lars building the 4 million miles of relax and work. . . . 16 Portland city commissioner, says that Cities with high-quality transit some transit projects including Portpublic road we have today. You simply cannot build your way out of con- systems benefit in other ways as lands streetcar line are actually not gestion. Yes, there will be cases when well, Litman argues. Energy con- meant to diminish congestion, but rather roads need to be expanded or new sumption, pollution and traffic fa- to increase it. The aim, he says, is to roads need to be built, but it is a more talities drop substantially, as do park- boost population density in downtown balanced, multimodal approach that is ing-related costs, he says. The areas by attracting residents, shoppers ultimately going to give us the long- research . . . shows very clearly that and office workers to transit-oriented term solutions that we desire. For some- households save money by living in neighborhoods, making it easy for thing like congestion, its always easy a city that has high-quality rail tran- them to circulate among stops on the streetcar line. to take a look at the short term and sit, Litman says. Yet some urban transportation exBefore Portland added the streetcars immediate cost and forget that you get perts argue that even with congestion, to its Pearl District in 2001, Hales says, a long-term benefit. Todd Litman, executive director of cars can be faster and more flexible the neighborhood had fewer than half the Victoria Transport Policy Institute, than rail transit, which operates on a dozen businesses and only a couple of hundred residential units. Now the a research organization in British Co- fixed routes and schedules. If you think in terms of the value streetcar has helped transform the Pearl lumbia that studies international transportation and land use policies, says of time as being one of the great fac- District into a trendy neighborhood with high-quality rail transit has several con- tors in peoples thinking, then public more than 250 commercial enterprises gestion-reduction benefits. It tends to transit is going to have to compete to and 5,000 residences, he says. So far, attract passengers who would other- meet peoples time needs, says Alan theres $3 billion of development withAP Photo/Morry Gash
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in three blocks of the line. Its occurring at two to three times the density and pace thats happening in the rest of downtown. Its that density and pace not the lack of congestion that city leaders wanted to generate with the streetcar line, says Hales, who now is helping to plan streetcars in Sacramento. In the United States, the streetcar has been about circulation in busy downtowns, or actually about making them busier, he says. So I hope that theyre causing congestion. That seems like an absurd thing to say, but whats absurd is that the only thing were measuring when it comes to transit projects is their effect on road congestion. Thats a very limited view. Should government spend less on roads and more on transit? Linked to the debate over congestion is the question of whether more government money should be flowing to transit projects. Total government spending on transit grew about 80 percent in inflation-adjusted terms between 1980 and 2004, faster than the 12 percent growth in passenger trips and 24 percent growth in passenger miles traveled on transit, according to the Congressional Research Service. It is often pointed out that while transit spending [amounted in 2004] to about 16 percent of all government highway and transit spending and about 14 percent of federal highway and transit capital expenditure . . . only about 2 percent of all trips are made by this mode. Even for commuting trips, for which transit is better suited, transit accounts for only 5 percent nationwide, a share that has changed little over the past two decades. Only in two cities, New York and Chicago, does the transit share rise above 10 percent. The effect, according to transit critics, is to shortchange highway spending, thereby causing highway
conditions and performance, including highway congestion, to be worse than they would otherwise be. 18 Many transit advocates argue, however, that the governments transportation funding priorities have been shortsighted. For decades, they say, the governments bias toward funding roads has encouraged sprawling development patterns that have limited Americans mobility a problem that is likely to grow more acute as the population ages and people look for alternatives to driving. 19 Why do we have [sprawling] development today? Because we followed for 80-some years a single-minded policy of subsidizing the automobile and the road system, says Millar of the American Public Transportation Association. So you get what you pay for. This year we will spend close to $2 trillion on transportation thats public and private spending, he adds. Eighty percent of that will be spent on the highway network and private automobiles and things like that. We are simply underinvested in public transit, so that in most communities in America public transit is not a viable option for most Americans. Public-transportation advocates also cite what they see as a variety of economic benefits from funding transit systems. For instance, investing in transit creates new jobs and can raise real estate values, especially near stations, they say. David Lewis, senior vice president of HDR/Decision Economics, a division of HDR Engineering, told a congressional subcommittee in 2007 that in Washington, D.C., for the average commercial property of about 30,500 square feet, each 1,000-foot reduction in walking distance to a Metrorail station increases the value of a commercial property by more than $70,000. Transit creates statistically measurable economic value for communities, with benefits extending to both transit users and nonusers, he said. 20
But critics of transit argue that far from being tilted too far toward highway spending, Washington bureaucrats have actually gone too far in promoting transit. The Cato Institutes OToole argued that the federal government has created a system that promotes wildly extravagant spending on mass transit and on rail lines in particular. [R]ail transit poses three major threats to regional transit service, he wrote. Overruns in construction costs often force agencies to raise fares or cut service; rail construction tends to put transit agencies so heavily in debt that, during recessions and periods of low tax revenue, they are forced to make large cuts in service; and rail lines must be rebuilt about every 30 years, and reconstruction costs nearly as much as the original construction. 21 OToole, who is director of the Thoreau Institute, a group in Oregon that says it seeks ways to protect the environment without regulation, bureaucracy or central control, also argued that current laws give transit and labor unions power to veto federal grant projects. That, he contended, is a bargain [that] favors high-cost transit systems over lowcost bus systems. Transit agencies could contract out all their service to provide better service at lower cost, according to OToole, but any plans by transit agencies to do so without a state mandate would be opposed by transit unions and thus would make the agencies ineligible for federal funds. Worse, OToole argued, the Environmental Protection Agency (EPA) subsidizes anti-highway activist groups to participate in transportation planning initiatives and ties the funds to mandates for air-quality improvement projects. Both the anti-auto groups and the EPA guidelines, he contended, favor rail transit over new roads. Most cities would never consider building new rail systems without federal incentives to waste money. In fact, buses
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Solitary Commuting Is Most Popular
Nearly 100 million commuters drove alone to work in 2000 more than a 50 percent increase over the previous 20 years. Carpooling and public transit have remained relatively constant.
(thousands of commuters)
Workplace Commuting, 1980-2000
100,000 80,000
1980
60,000 40,000 20,000 0 Drive Carpool Transit alone Taxi Motorcycle Bike
1990 2000
Walk
Work at home
Source: Commuting in America III: The Third National Report on Commuting Patterns and Trends, Transportation Research Board, 2006
can provide the same level of service as trains for far less money. 22 In a detailed rebuttal of OTooles analysis, Litman of the Victoria Transport Policy Institute calls it outdated and biased, looking backward at the last century . . . rather than looking forward toward the changing transportation needs of the next century. Although highways showed high annual return on investment during the 1960s when the Interstate Highway System was developed, Litman wrote, this has since declined significantly, a decline likely to continue because the most cost-effective projects have been implemented. Thus, he added, it makes sense to invest less in roadways and more in public transit to maximize economic returns. 23 Do toll lanes and other congestionpricing schemes work? In traffic-choked New York City, Mayor Michael R. Bloomberg last year
proposed a controversial method for easing congestion and generating money for transit: Charge motorists to drive into the most crowded sections of Manhattan on weekdays. 24 Bloombergs proposal is a form of congestion pricing, an approach that has been used in London and Stockholm and that is getting close attention in the United States including strong support from the Bush administration. Congestion pricing can take many forms, from high-occupancy toll (HOT) lanes to higher tolls during peak traffic hours to fees for driving into certain congested areas of cities. It is similar to the idea behind utility usage: consumers pay for what they use and sometimes pay more when demand is high. I think theres perception roads are free, but were paying one way or another, points out Paul Larrousse, director of the National Transit Institute at Rutgers University.
Congestion pricing can be used to manage traffic flows in order to relieve congestion, to encourage the use of mass transit and to generate revenue for transportation projects, including train or bus systems. Transportation experts say taxpayers and local politicians object to congestion pricing less when it is applied to new highways rather than being imposed on existing ones. Supporters of congestion pricing say it eases bottlenecks on busy traffic corridors and speeds commutes for transit riders who share the road with autos. Grace Crunican, director of the Seattle Department of Transportation, calls congestion pricing a good tool to manage and rationalize our system. In Washington state, tolling operations began last summer on the Tacoma Narrows Bridge, using high-speed, nonstop electronic toll collection to help pay for bridge construction, maintenance and operation. This spring the state is expected to open nine miles of HOT lanes on busy State Road 167 using the same technology, with pricing varying with traffic demand. 25 Elsewhere, congestion pricing has helped ease bottlenecks, encouraged people to shift to transit and raised money for transportation, according to a 2006 report by the U.S. Department of Transportation (DOT). For example, it said the number of vehicles with more than three passengers rose 40 percent within the first three months of opening priced express lanes on Californias SR-91, while ridership on buses and a nearby rail line remained steady. Along Interstate 15 HOT lanes in San Diego, revenues generated by toll-paying drivers helped pay for transportation improvements that contributed to a 25 percent increase in bus ridership, the DOT report said. 26 Were faced with increasing growth in population and employment, and theres nowhere near enough [money for roads] to handle the demand, says Meyer, the Georgia Tech professor. The
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only clear option, he adds, is to adopt some form of congestion pricing, an approach being considered in his own city of Atlanta, where despite a large rail system traffic backups are among the worst in the nation. Transportation Secretary Mary E. Peters made similar arguments in a newspaper op-ed column last year, in which she criticized the notion of raising gasoline taxes to pay for building and maintaining roads, bridges and other transportation infrastructure. In addition to breeding wasteful spending, the gas tax does virtually nothing to reduce the explosion in highway congestion, she wrote, reflecting the Bush administrations long aversion to raising fuel taxes. Gas taxes are levied regardless of when and where someone drives, creating a misperception that highways are free. Peters continued, [C]harging directly for road use holds enormous promise both to generate large amounts of revenue for reinvestment and to cut congestion. Ultimately, it will allow political leaders to reduce reliance on or even cut the inefficient array of fuel taxes, sales taxes and property taxes that are being funneled into transportation systems nationwide. 27 But critics of congestion pricing argue that pricing schemes are no substitute for higher fuel taxes to finance crucial maintenance on Americas aging roads and bridges. 28 Moreover, they say, congestion pricing hits poor and middle-class commuters the hardest. Proponents of congestion pricing say those who dont want to pay or cannot afford to pay increased commuting costs have other choices, Bill Graves, CEO of the American Trucking Associations and a former Republican governor of Kansas, wrote in a newspaper column last year. But many low-income motorists cannot change their work hours or child-care needs. Not everyone has access to public transit, which can take longer and is less reliable than traveling by car. The
motorists alternative to paying more at the toll booth is to find another route that is time-consuming and merely shifts congestion to other roads and neighborhoods. 29 Rep. Anthony Weiner, D-N.Y., who represents sections of the boroughs of Queens and Brooklyn, called the Bloomberg congestion-pricing scheme a regressive tax on working middle-class families and small-business owners. While I applaud the mayor for focusing on a long-term sustainability plan for the city, in this case the cure seems to be worse than the disease. 30
BACKGROUND
Transits Golden Age
ike a trolley running on hilly terrain, transit in America has had its steep ups and downs over the years. The first horse-drawn street railways began service in New York in 1832, and the service had expanded to Cincinnati, Baltimore, Philadelphia and other cities well before the Civil War. 31 Cable cars came on the scene in 1873 in San Francisco and soon appeared elsewhere. 32 Then in 1888 came a huge advance in public transit: the electric streetcar. 33 During the remainder of the golden age of mass transit in the late 1800s and early 1900s, the electric streetcar reigned supreme as the common mans magic carpet, wrote transportation expert George M. Smerk. It was the shaper of cities. Electric lines were much cheaper to build than cable lines and much less costly to operate than animalpowered railways. They were also tokens of progress for most cities and, as such, many lines were built that were uneconomic, merely to show that a city was progressive. 34
In the 1920s the nations postWorld War I economy boomed, and motorized vehicles began to take center stage. Buses became a popular mode of transit. At the same time, the car culture was becoming a central feature of U.S. society, fueling a rivalry between private mobility and public transit that grew more intense as time went on. By 1929, more than 23 million private and commercial automobiles were registered in the United States or roughly one car for every five Americans. 35 In prosperous cities such as Detroit and Los Angeles, automobiles were the most common means of transportation for most families. 36 With more and more people traveling by car, transits golden age was receding in the rear-view mirror. Then, as the Great Depression (1929-1939) battered the economy, transit ridership plunged. Suddenly tens of thousands of Americans had no jobs to travel to, and leisure trips were a luxury few could afford. Meanwhile, transit hit another bend in the tracks. Electric utilities had for years provided money and management expertise to transit systems, but that trend faded after Congress passed the Public Utility Holding Company Act of 1935. The law forced the power companies to start shedding their transit subsidiaries and weakened transits financial and management underpinnings. 37 With the advent of World War II, transit ridership turned around. Suddenly, America was back on the job, with factory workers boarding streetcars, subways and buses to get to defense plants making bullets, ships and airplanes. The government rationed gasoline as well as rubber used in car tires, prompting the fortunate few who owned automobiles to keep them parked. Transit ridership soared to an all-time high of 23.4 billion trips in 1946. 38
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too, cities began to recognize the deBut the transit boom was shortstructive effects of massive highway conlived. In the postwar economic revival, struction on the urban community. 43 Americans abandoned transit in droves, choosing instead to get behind the Pressure also was growing for the ot everyone liked the shift to federal government to subsidize the wheel. By 1960, transit ridership had an auto culture. Criticism of struggling urban transit systems. In 1961 plunged to 9.3 billion trips 40 percent of its wartime high eventually cars swelled in the 1950s. In his President John F. Kennedy signed the falling to an all-time low in 1972 of book on sprawl, Bruegmann of the Omnibus Housing Act, which providUniversity of Illinois at Chicago wrote: ed limited funds for loans and grants 6.5 billion trips. 39 Several trends accounted for the Led by upper-middle-class resi- for public transportation. In signing downturn some of them subsidized dents of central cities in the North- the act, Kennedy said mass transby the federal government. During the east . . . this group took a pas- portation was a distinctly urban prob1950s and 60s, millions of families sionate dislike not just to the lem and one of the key factors in often headed by veterans using low- automobile but to an entire world- shaping community development. 44 interest government loans bought view that they believed supported The next year, Kennedy asked Conhomes and moved to the suburbs, it. For them the automobile was gress to establish a program to help cities places ill-served by transit systems. 40 symptomatic of an individualistic, build and maintain public transportation Along with suburban sprawl came the consumerist society run amuck. 42 systems. To conserve and enhance valnations huge inues in existing urban areas vestment in roads, is essential, Kennedy said most notably the Inin a message to Congress. terstate Highway SysBut at least as important tem inaugurated durare steps to promote ecoing the Eisenhower nomic efficiency and livadministration. Autoability in areas of future mobile registrations development. Our nationdoubled in less than al welfare therefore rea generation from quires the provision of about 40 million in good urban transportation, 1950 to 80 million in with the properly balanced 1967. In 1973, they use of private vehicles and broke the 100-milmodern mass transport to lion mark and kept help shape as well as serve climbing, despite an urban growth. 45 Seattles new streetcar begins its inaugural run from downtown on oil embargo, rocketThe year after Dec. 12, 2007. The 1.3-mile line serves the developing area around ing gas prices and Kennedys assassination, the Fred Hutchinson Cancer Research Center. A streetcar recession. 41 President Lyndon B. passes one of the lines 11 stops every 15 minutes. Meanwhile, other Johnson signed into law To some degree, these sentiments the Urban Mass Transportation Act, eschanges in American life discouraged transit ridership. The postwar workweek fell took hold. By the 1960s, many cities tablishing permanent federal support to five days, reducing work travel. While were starting to rethink the idea of for transit. 46 downtowns continued to be major em- autos as a solution to their transportaIn the 1970s, some of Americas ployment hubs, many new jobs sprang tion needs, William D. Middleton, a largest cities began building big heavyup in outlying areas not easily accessi- transportation historian and journalist, rail systems that changed not only travble by transit. Retailing shifted from Main wrote in a history of rail transit in Amer- el habits for tens of thousands of resiStreet to suburban malls. Televisions grow- ica. While the development of ex- dents and visitors but also the urban ing popularity kept people at home and pressways and freeways had encour- landscape itself. San Franciscos Bay Area reduced outings to the movies. And aged and facilitated a massive shift of Rapid Transit District (BART) started pasmany inner-city neighborhoods, particu- urban population to the suburbs, no senger service on its regional metro syslarly in the Northeast, became blighted, amount of road building ever seemed tem in 1972; the system now covers 104 accelerating flight to the suburbs and re- to be enough to meet the growing de- miles. The first segment of Washingtons mand that it created. More and more, Continued on p. 60 ducing transit use even more.
An Urban Problem
58
AP Photo/Elaine Thompson
Chronology
1800-1920
Early transit services begin on the East Coast. 1832 Horse-drawn street railways introduced in New York City. 1873 San Francisco starts cable car service. 1880s Electric streetcars introduced. 1892 First Chicago elevated line opens. 1904 New York begins subway service.
1961 President John F. Kennedy calls mass transportation a key factor in shaping community development. 1964 Congress enacts Urban Mass Transportation Act. 1968 Federal government creates Urban Mass Transportation Administration.
1990s
U.S. strengthens role of local planning organizations in charting future needs. 1990 Americans with Disabilities Act requires transit agencies to serve people with disabilities. 1990 Los Angeles County opens initial light-rail segment. 1990 Clean Air Act imposes tough pollution standards on transit buses. 1991 Landmark Intermodal Surface Transportation Efficiency Act gives states new flexibility in use of transportation funds. 1995 Ridership in public transit begins to show a gradual increase
1970s-1980s
Transit enters the modern age as big cities begin ambitious urban rail operations. 1970s Recession and high inflation hit the nation; ridership on public transit reaches an historic low. 1970 National Environmental Policy Act requires environmental impact statements for transit and highway projects that receive federal money. 1972 San Francisco launches first computercontrolled heavy-rail transit agency. 1976 First segment of Metrorail system opens in Washington, D.C., area. 1979 Metropolitan Atlanta Rapid Transit Authority (MARTA) opens its first line. 1981 San Diego Trolley helps to start light-rail renaissance. 1984 Miami completes first part of Metrorail.
1920-1940s
1926 Peacetime ridership on public transportation hits 17.2 billion.
After losing ground to the automobile, transit rebounds.
2000-Present Policy makers put new focus

on reducing congestion. 2007 Gasoline prices exceed $3 per gallon. . . . Texas Transportation Institute study says traffic congestion creates a $78 billion annual drain on the economy. . . . Interstate 35 West bridge over Mississippi River in Minneapolis collapses, putting renewed focus on highway infrastructure. . . . Congressional Budget Office says highway account in Highway Trust Fund could run out of money by fiscal 2009. 2008 Washingtons Metrorail imposes largest fare increase in its history.
1939 General Motors Futurama exhibit at New York Worlds Fair features automated superhighways. 1940s World War II industrialization and rationing of rubber and gas spur surge in transit ridership to record 23.4 billion passenger trips.
1950s-1960s
Growth of suburbs leads millions of Americans to buy cars and abandon public transportation.
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New Transit Projects Raise Questions

Do they ignore the needs of less-affluent riders?
s cities rush to embrace new transit projects and congestion-pricing ventures, some experts worry that the poor may be shortchanged. Among the concerns: That tax-financed commuter-rail projects may benefit wealthier people, while bus services heavily used by poor people who dont own cars or have jobs near rail stops may suffer; That fare policies typically favor peak-hour long-distance commutes to downtowns and other white-collar destinations over shorter, off-peak trips common to low-income people juggling second- and third-shift jobs, child-care duties and other necessities; That light-rail systems are often intended to attract discretionary riders an approach that may come at the expense of improving transportation services generally, including for the poor. Transit has two objectives, says Genevieve Giuliano, senior associate dean for research and technology at the University of Southern Californias School of Policy, Planning, Policy and Development. One is solving congestion and air-quality problems. The other is about basic mobility. By putting our eggs in the congestion and air-quality basket, weve made people who need mobility worse off. If we actually paid attention to the quality and availability of service, wed be doing well toward both of those objectives. But were going in the wrong direction. In some localities, grass-roots advocates have taken up the call for greater equity in local transit.
In Los Angeles, the powerful Bus Riders Union gained a federal consent decree a little over a decade ago that forced the city to expand bus service. In part, too, the equity issue has surfaced because of the way cities have developed. Central cities once were dominated by low-income and working-class residents, but rising urban real estate values and job creation in sprawling suburbs have pushed many of those people into the far reaches of metro areas. That makes their transit needs different from those who commute to downtown professional jobs. Theres massive gentrification at the center of many cities, very often centered around these transit stops, says Robert Bruegmann, a professor at the University of Illinois, Chicago, who studies urban planning and sprawl. If youre wealthy enough and youve got a job in the central business district, it provides a wonderful choice. But, adds Bruegmann, the lower middle class increasingly has moved out to the outer edge of cities and relies on autos or buses to get to jobs that frequently are scattered throughout metro areas. Even bus service, which Bruegmann says can be long, arduous and uncomfortable, doesnt always meet the needs of the poor and can add to a citys traffic and pollution problems. One solution, he says, is to put more money into ondemand transit that allows patrons to summon vans or other transport vehicles exactly when and where they are needed. The issue of transit equity can put local politicians in a difficult spot. On one hand, they have a responsibility to ease
Metrorail system opened in 1976, and Atlanta opened the first of its MARTA metro system lines in 1979. 47 The Ronald Reagan administration did not share the Kennedy eras interest in the health and welfare of urban transit systems, however. Reagan sought to reduce federal spending through budget cuts and privatization of programs traditionally supported by government. The Reagan administration made it clear that it wanted to do away with what it deemed to be the unseemly federal role in mass transportation, transportation expert Smerk wrote. 48 Still, Congress ensured that money for rail project was available. The reason for the interest of Congress is
proof of the dictum of longtime Speaker of the House Thomas P. Tip ONeill [D-Mass.] that all politics is local politics, Smerk wrote. . . . [T]he simple and straightforward fact is that the federal mass-transit program touches virtually every congressional district and at least some of the constituents of every senator. 49
Light Rails
ot all systems relied on federal money, though. In 1981, using only local money, San Diego became the first U.S. city to open a new lightrail system, using existing tracks. 50 Other cities also opened light-rail lines
Buffalo in 1984, Portland in 1986 (using money from a canceled freeway project) and then Sacramento and San Jose in California. 51 Seattle began a downtown trolleybus tunnel, and Los Angeles started building its subway system. 52 Transit continued growing steadily in the 1990s, with new emphasis on intermodalism combining various forms of transport, such as roads, rail, buses and ships. The landmark Intermodal Surface Transportation Efficiency Act of 1991 gave states and localities flexibility to shift federal highway funds to transit projects. Seven years later the laws successor legislation, the Transportation Equity Act for the 21st Century,
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Metropolitan Transportation Authority traffic and pollution problems, and was building two rail projects, the they may also see new systems such Expo Line to Culver City and the Gold as light rail as a way to project a Line extension to East Los Angeles, modern, progressive image of their at a $1.5 billion price tag. The MTA cities. But they also have a duty to said that while rail accounted for only serve the transportation needs of all about 17 percent of the citys transit citizens, including those who may ridership, it was growing. never step foot in a trolley or train. But critics werent buying the rail A few years ago, the Los Angeles projects. You see how crowded the Times noted the juggling act that buses are, and yet . . . the Gold Line faced Los Angeles Mayor Antonio at 4 in the afternoon is practically Villaraigosa as he sought to deal with empty, Joel Kotkin, a Los Angles resthe citys massive transportation chalident, told the newspaper. Obviouslenges. The mayor wields considerly, the buses are in demand much able power over local transit decimore than the more expensive stuff, sions . . . but that power comes fraught so why arent we putting more money with political peril, the newspaper Some transit experts worry that city into the buses? editorialized. transit buses in Los Angeles, above, and Added Kotkin, the author of The City: Invariably the [Metropolitan Transother cities will receive less funding than A Global History, It seems to be unconportation Authority board on which tax-financed commuter-rail projects. scionable we could be raising fares so a the mayor serves] has to choose befew yuppies from Santa Monica can go tween pleasing the powerful Bus Riddowntown on the subway. 2 ers Union by maintaining and expanding bus service or pleasing business interests and wealthier 1 The Politics of Power: Pumped-up public transit, Los Angeles Times, Aug. 13, constituents by expanding the rail system. 1 2005, p. 18B. Villaraigosa promised to do both, but seeking transit eq- 2 Rong-Gong Lin II and Francisco Vara-Orta, Transit fare hikes called unwise, uity hasnt been easy. Last year the Times noted that the Los Angeles Times, April 28, 2007, p. 1A.
Getty Images/David McNew
enabled states and local authorities to shift $8.5 billion from highways to transit but only $40 million from transit to highways, Rep. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, said in 2003. He added, 99.5 percent of the time, states and local authorities choose to flex funds from highways to transit. 53 By the turn of the 21st century, cities were clamoring to build or upgrade big transit networks and create smaller systems, such as streetcar lines, to help revitalize urban neighborhoods. In 2005, as part of a Transportation Department reauthorization bill, Congress enacted a program to finance projects costing up to $250 million in which the federal
portion is $75 million or less. Under that Small Starts program transit advocates saw a bright future for projects such as streetcar systems designed not just to move people but also to promote smart growth and spark economic development in urban neighborhoods. Transit and urban planning proponents have complained, though, that the Federal Transit Administration has erected high hurdles for streetcar funding and is using Small Starts to emphasize rapid-transit bus routes over rail. The actions reflect the Bush administrations efforts to focus on easing highway gridlock rather than longterm urban planning. The administration has a very arduous and arcane process for project
evaluation with criteria that favor costand travel-time savings and congestion relief, says Hales, the former Portland city commissioner. But, he adds, Does the federal government care about how Americans settle on the landscape and how they live? People are willing to pay handsomely to live in a more sustainable way. If the answer is yes, then the transit issue is one place where the federal government can make a huge difference. Hales says cities like Portland have come up with much of the money themselves for their streetcar projects, relying largely on local tax money. I dont see states and localities falling over themselves to come up with 50 percent of the cost of new
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Can a Daily Transit Pass Save the Planet?

Skeptics say claimed benefits are hyped.
mong the many arguments that advocates make for transit, impact on the environment is at or near the top of the list. The most powerful weapon you can use to combat global climate change may be a daily transit pass, the American Public Transportation Association (APTA) declared last September in announcing a new study on reducing greenhouse gases. But critics argue that transits environmental benefits are vastly overstated. No big deal, Wendell Cox, a prominent transit critic, wrote in response to transits claimed role in cutting greenhouse gases. 1 The study found that in comparison to other household actions that limit carbon dioxide, taking public transportation can be more than 10 times greater in reducing that greenhouse gas. 2 A solo commuter switching his or her commute to existing public transportation in a single day can reduce their CO2 emissions by 20 pounds, or more than 4,800 pounds in a year, the study concluded. It also said transit helps support higher-density land uses that reduce vehicle travel while helping cut household carbon dioxide emissions. The carbon footprint of a typical U.S. household is about 22 metric tonnes per year, the study concluded. Reducing the daily use of one low-occupancy vehicle and using public transit can reduce a households carbon footprint between 25 [and] 30 percent.
In testimony to a congressional panel in spring 2007, APTA president William W. Millar said a separate study concluded that public transportation reduces petroleum consumption by 1.4 billion gallons of gasoline annually. 3 That savings results from the fact that transit carries multiple passengers per vehicle, reduces traffic congestion and does not rely exclusively on petroleum to power its fleets, Millar said. The transportation sector is the largest consumer of petroleum in the United States accounting for 67 percent of Americas petroleum consumption and 28 percent of our greenhouse gas . . . emissions, Millar stated. If we are serious about reducing Americas addiction to oil and reducing [greenhousegas] emissions, then we must also reduce transportation-related petroleum consumption. This will require a multi-pronged approach that must include expanded public transportation use. Millar told the panel that Congress should take a variety of legislative steps to promote public transportation use, including increasing federal support for transit agencies to buy buses that use new fuel- and pollution-reduction technology, and extending tax credits for alternative fuel vehicles past a scheduled 2009 expiration. But transit critics argue that public transportations role in reducing pollution and saving energy is overblown. Rail is not the environmental panacea its advocates promise, contends Randal OToole, director of the Thoreau Institute and a senior fellow at the Cato Institute, a Washington think tank.
highways, he says. But here are cities waving wads of dollar bills [for streetcar projects], saying, Well pay at least half of these things if [the federal government] will just say yes. So in terms of leveraging federal dollars, transit projects in general and urban streetcar projects in particular, win hands down if the test is putting local money where the mouth is. Yet, some analysts question the costeffectiveness of light-rail projects. Researchers from the St. Louis Federal Reserve Bank wrote that light rail is kept afloat by taxpayer-funded subsidies that amount to hundreds of millions of dollars each year. If light rail is not cost-efficient, nor an effective way to reduce pollution and traffic congestion, nor the least costly means of providing transporta-
tion to the poor, why do voters continue to approve new taxes for the construction and expansion of lightrail systems? they wrote in 2004. Then they answered their own question: One reason is that although the benefits of light rail are highly concentrated, the costs are spread over the tax-paying population. They wrote: The direct benefits of a light-rail project can be quite large for a relatively small group of people, such as elected officials, environmental groups, labor organizations, engineering and architectural firms, developers and regional businesses, which often campaign vigorously for the passage of light-rail funding. In St. Louis, they wrote, light rail ran about $6 per taxpayer annually a sum modest enough to attract
voter support even if a transit system is financially inefficient. A large group of taxpayers facing relatively minimal costs can be persuaded to vote for light rail based on benefits shaped by the interested minority, such as helping the poor, reducing congestion and pollution and fostering development. Even if these benefits are exaggerated and the taxpayer realizes the costineffectiveness of light rail, it is probably not worth the $6 for that person to spend significant time lobbying against light rail. 54 But transit supporters say rail transit does pay off. A 1999 study underwritten by private-sector business members of the American Public Transit Association found major economic benefits to transit investment. The study concluded, for instance, that in the
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Light rail may seem to use less energy and emit less pollution than buses or cars. But rail lines must be supplemented by feeder buses that tend to run much emptier than the corridor buses the rail lines replaced. Empty buses mean high energy use and pollution per passenger, so the transit system as a whole ends up consuming more energy and producing more pollution, per passenger, than if it ran only buses. OToole also criticized transit advocates who brag that transit produces less carbon monoxide than autos. But carbon monoxide is no longer a serious environmental threat. Todays problems are nitrogen oxides, particulates and greenhouse gases. Diesel buses, and rail cars whose electric power comes from burning coal, produce far more of these pollutants than todays automobiles. 4 Taking aim at the APTA study released in September, Cox said on the Thoreau Institutes Web site that a full cost accounting of greenhouse gas emissions would include emissions from construction of transit and highway systems, construction of vehicles, extraction of fuel for electricity generation and refining, disposal of vehicles and other materials, vehicle maintenance and administrative support. Cox conceded that without transit use, more congestion would occur near the cores of the largest downtown areas, such as Manhattan and Chicagos Loop. But, he wrote, the impact would be slight elsewhere, in places like Portland, Phoenix and perhaps Paducah . . . where the great bulk of the nations traffic-congestion delay occurs.
[R]elatively tiny (and low-cost) improvements to automobiles will do far more to reduce [greenhouse gas] emissions without reducing peoples mobility or forcing people to change their travel habits, Cox wrote. 5 But Millar has a different view. While it is good public policy to require more fuel-efficient automobiles, increasing the use of transit can have a more immediate impact on our nations transportation fuel consumption, he said. It could take 20 to 30 years to see a complete turnover of the vehicle fleet. A household does not need to go to the expense of buying a new vehicle to make a difference. They can simply take advantage of the nations existing bus or rail services to dramatically reduce their carbon footprint. 6
1 Wendell Cox, Transits Role in Reducing Greenhouse Gases: No Big Deal, accessed at http://ti.org/antiplanner/?p=257. 2 American Public Transportation Association, Public Transportation Use Substantially Reduces Greenhouse Gases, According to New Study, news release, Sept. 26, 2007. The study is Todd Davis and Monica Hale, Public Transportations Contribution to U.S. Greenhouse Gas Reduction, Science Applications International Corp., September 2007. 3 The study is ICF International, Public Transportation and Petroleum Savings in the U.S.: Reducing Dependence on Oil. 4 Randal OToole, Dispelling Transit Myths, Charlotte Observer, Oct. 12, 2007, p. 8A. The article is from remarks OToole prepared for a John Locke Foundation forum in Charlotte. 5 Cox, op. cit. 6 American Public Transportation Association, op. cit.
year following each $10 million in transit capital funding, 314 jobs were created, business sales rose $32 million for each $10 million in transit operations spending, and more than $15 million was saved in transportation costs to highway and transit users for every $10 million invested in transit in major metropolitan areas. 55 And according to Litman, of the Victoria Transport Policy Institute, the St. Louis analysis ignored many benefits of rail transit and understated the costs of automobile travel on the same corridors. [It] would not be cost effective to provide light rail transit service everywhere, Litman wrote, but when all costs and benefits are considered, rail transit is often the most cost-effective way to improve transportation on major urban travel corridors. 56
CURRENT SITUATION
Budget Woes
he current transit debates are occurring at a time when gasoline prices are rising, local and federal budgets are limited and policymakers increasingly are concerned about curbing climate change. This past fall, for example, Congress debated a climate-change bill that would limit carbon emissions and auction the right to emit them, earmarking some of the revenues for transit projects. Others
are calling for more of the burden for congestion and new infrastructure to be borne by automobile drivers, by using congestion-pricing and privatizing some roads and bridges which essentially means charging tolls. For instance, faced with a $1.8 billion financing gap for road improvements, Indiana negotiated a $3.85 billion deal with a foreign consortium to lease and operate the Indiana Toll Road for 75 years. 57 In Florida, more than 90 percent of new roads since the early 1990s have been toll roads, according to a state Transportation Department spokesman. 58 Transit funds are limited because the Highway Trust Fund which provides 80 percent of the federal portion of transit funding and is financed with gasoline taxes is running out
Jan. 18, 2008
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MASS TRANSIT BOOM

A Mass Transit Glossary
Aerial Tramway Unpowered passenger vehicles suspended from
a system of aerial cables and propelled by separate cables attached to the vehicle suspension system. The cable system is powered by engines or motors at a central location not on board the vehicle.
Well be OK until Congress gets around to the next [transportation] authorization bill in 2009, says Jeffrey Boothe a Washington lawyer who chairs the New Starts Working Group, a coalition that backs federal funding for transit projects unless lawmakers move money from the transit account to the highway account as a stopgap measure. In recent months policymakers and federal officials have been debating what to do about the nations aging bridges and other infrastructure prompted in part by last years Interstate 35 West bridge collapse in Minneapolis. The gasoline tax is central to the debate. House Transportation Committee Chairman Oberstar wants to raise the federal gasoline tax, which has remained at 18.4 cents per gallon since 1993. 61 He has proposed raising the tax by 5 cents and dedicating the revenue to a new bridgemaintenance fund. 62 Rep. Peter DeFazio, D-Ore., who chairs the committees Highways and Transit Subcommittee, also wants a gastax hike. There is a tremendous cost to doing nothing, he said. We have been treading water, and now we are beginning to sink. 63 In January a divided National Surface Transportation Policy and Revenue Study Commission urged an increase of up to 40 cents per gallon in federal gas taxes over five years to help fix aging bridges and roads and expand transit, but dissenters including Transportation Secretary Peters, the commissions chairwoman disagreed, saying tolls and private investment are better options. A dramatic increase in the gas tax does not stand a snowballs chance in hell of passing Congress, said Rep. John Mica, R-Fla., the top Republican on the House Transportation and Infrastructure Committee. 64 But President Bush opposes any hike in gas taxes, as do fiscal conservatives. The last thing we should
Continued on p. 66
Automated Guideway Transit Guided transit vehicles

operating singly or multi-car trains with a fully automated system (no crew on transit units). Service may be on a fixed schedule or in response to a passenger-activated call button. Automated guideway transit includes personal rapid transit, group rapid transit and people-mover systems.
Bus Rubber-tired vehicles operating on fixed routes and

schedules on roadways, powered by diesel, gasoline, battery or alternative fuel engines.
Commuter Rail Urban passenger train service for local shortdistance travel operating between a central city and adjacent suburbs.
Monorail Guided transit vehicles operating on or suspended from a single rail, beam, or tube. Monorail vehicles usually operate in trains. Light Rail Lightweight passenger rail cars operating singly (or
in short, usually two-car, trains) on fixed rails in right-of-way that is not separated from other traffic for much of the way. Light-rail vehicles are driven electrically with power being drawn from an overhead electric line via a trolley or a pantograph.
Heavy Rail High-speed, passenger rail cars operating singly or in trains of two or more cars on fixed rails in separate rights-of-way from which all other vehicular and foot traffic are excluded.
Source: Federal Transit Administration
of money. The shortfall is blamed on a variety of causes, including a growing demand for infrastructure projects, an overcommitment of transportation spending by Congress, greater auto fuel efficiency (which reduces fuel-tax revenues) and spiraling infrastructureconstruction costs. The Congressional Budget Office projected last fall that if annual spending continued at authorized levels, the transit account would have enough revenue to cover expenditures until 2012,
but the highway account would be exhausted in fiscal 2009. 59 The Senate Finance Committee and the Transportation Department have been considering ways to shore up the fund. 60 Federal money pays for about half of the $13 billion a year spent on transit construction and equipment, and about 5 percent of operating costs, with the rest of operating costs covered by state and local funds and fare-box revenue. Still, transit supporters are watching the fund carefully.
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At Issue:
Is congestion pricing a good strategy?
Yes
JEFFREY N. SHANE
UNDER SECRETARY FOR POLICY, U.S. DEPARTMENT OF TRANSPORTATION
FROM TESTIMONY BEFORE SUBCOMMITTEE ON HIGHWAYS AND TRANSIT, JUNE 7, 2007
JAMES J. BAXTER
PRESIDENT, NATIONAL MOTORISTS ASSOCIATION
FROM TOLL ROADS: THE SLIPPERY SLOPE, WWW.MOTORISTS.ORG
axing fuel consumption rather than road usage disconnects the price travelers pay for using the transportation system and thus their decisions about when and how much to use it from the true [cost] of travel. Today a U.S. automobile driver pays the equivalent of about 2-3 cents per mile in federal and state gas taxes. Yet, when that driver uses a congested roadway during rush hour, he or she imposes between 10 and 50 cents per mile and in some cases even more in costs upon the other drivers stuck in traffic by taking space on the highway and exacerbating congestion. Similarly, gas-tax charges for off-peak travel are not adjusted to reflect the lower costs of such travel. Moreover, the enormous cost savings potentially available from highway pricing are even closer than previously believed. Research in recent years confirms that very small reductions in the number of vehicles using a congested highway facility can produce significant increases in traffic speeds. . . . By substantially increasing traffic speeds and preventing gridlock, pricing can substantially increase facility throughput. Counterintuitively, this means that an initial diversion of drivers actually allows for more customers to be served in a given time period. . . . The benefits of congestion pricing extend beyond simply enhancing the speed of travel and the efficiency of highways. Road pricing encourages the use of mass transit, and by reducing traffic delays it can enable the operation of highspeed, reliable, commuter transit services such as bus rapid transit. . . . Pricing will improve fuel economy and reduce greenhouse gas emissions by cutting out stop-and-go movement and idling. Pricing will encourage more sustainable land-use patterns by providing transparent signals about the true costs of real estate development on the outskirts of major cities. Finally, congestion-based user charges can dramatically improve project-planning processes by providing clear signals as to where and when the benefits of expanding capacity are likely to exceed the costs of providing that capacity. As prices rise, the case for adding new lanes or roads becomes increasingly obvious, to say nothing of the new supply of revenues from pricing that can be used to finance the improvements. . . .
No
yes no
onservative and libertarian organizations have been on a campaign to convince the public that the solution to Americas traffic problems, primarily congestion, is toll roads. The arguments for toll roads are laced with references to free-market principles, proper pricing, supply and demand and economic incentives. Most of these discussions have become so obfuscated with nonsensical ruminations that important realities are ignored. A real market-based system has willing sellers, willing buyers and reasonably unfettered competition among sellers and among buyers. The limited role of government in this system is to make sure everyone operates under the same rules. . . . Ultimately, sellers base their prices on their costs and the demand of buyers who want to buy their products or services. Competing sellers can drive the price down. Competing buyers can drive the price up. . . . Any highway of any consequence falls flat . . . when it comes to market principles. First, highway corridors are not assembled by willing buyers in competition with other willing buyers who must negotiate with willing (and unwilling) sellers who are also in competition with one another. The state identifies the corridor it wants, establishes what it considers to be a politically and judicially acceptable price and condemns the land of those sellers who disagree. This is market principles figuratively at the end of a gun barrel. In the case of so-called private toll roads, the state [exclusively] grants its eminent domain . . . authority to the toll road owner. Does this seem like an unfettered, private, market-based system? . . . Toll road advocates argue that those who use the system the most will pay the most. . . . [B]ut who determines what the buyers should pay? Is it competing sellers of similar services? Do the buyers really have viable alternatives to buy highway services from other sources? . . . [N]ew highways are not being delayed for lack of money. There are billions of gas-tax dollars being siphoned off for non-highway purposes, or covering the federal deficit. New highways arent being built because there is significant political opposition to new highways. . . . Toll roads are an inefficient, counterproductive component of our highway system. They foster corruption, political patronage and detract from needed improvements on the rest of the highway system. . . .
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support for transit-related do is raise the federal ballot initiatives. In Charlotte, gas tax, which would N.C., voters in Mecklenburg give members of ConCounty overwhelmingly gress a bigger slush fund turned aside an effort to refor earmarks, said Rep. peal a half-cent transit sales Jeff Flake, R-Ariz. 65 tax that generated $70 milTransportation Secrelion in 2006, allowing the tary Peters told the Charlotte Area Transit System House Transportation to continue with an ambiand Infrastructure Comtious plan to expand rail and mittee that an increase bus service. 67 in federal taxes and But in the Seattle area, spending would likely voters in King, Snohomish do little, if anything, and Pierce counties rejectwithout a more basic ed the largest transportachange in how we antion tax proposal in Washalyze competing spendington states history. It ing options and manage would have raised the existing systems more sales tax to 9.4 percent efficiently. She also and boosted car-license fees cited a disturbing evoin order to add 50 miles lution in the federal of light rail (at a cost of transportation program, $30.8 billion), 186 miles of with more than 6,000 new highway lanes ($16.4 earmarks in the 2005 billion) and provide money funding bill, which for a new bridge. 68 Some added up to a truly stagobservers blame the meagering $23 billion. 66 sures defeat on its high The fate of the Highcost and the fact that it To reduce traffic congestion, certain lanes on I-394 in St. Louis Park, Minn., are restricted around-the-clock to toll-payers, bus way Trust Fund remains combined highway and rail riders, carpoolers and motorcyclists. Experts estimate that unclear. Some observers spending, which may have congestion cost U.S. drivers 2.9 billion gallons of wasted fuel think it is unlikely that turned off transit supporters in 2005 the equivalent of 58 fully loaded supertankers. whoever wins next years who chafe at seeing more presidential election will highway lanes and cars. walk into the White House in early Crunican, the Seattle transportation 2009 and raise the federal gasoline tax director, is optimistic about transit in to shore up the fund. On the other he shortfall in federal transporta- her region. She notes that growth in hand, a funding crisis could spur Washtion funds is likely to push states average vehicle miles traveled in the ington to pass a stopgap measure to and localities to come up with more Puget Sound region leveled off to zero keep the fund from running dry. money for transit systems, which would in the past five years and that vehicle Theres nothing like a good crisis mean persuading voters to pay high- ownership statewide has fallen 20 perto get peoples attention, says Meyer, er sales or gas taxes or tolls. cent in 20 years. the Georgia Institute of Technology proBoothe, the Washington lawyer, says But in last falls vote, some Seattlefessor. In any event, he adds, some- voters have approved 70 percent of area voters showed that they are carething will have to happen. If nothing transit-related ballot initiatives in the fully judging current transit projects and else, the construction industry is in- past five years. Theres a fair amount being cautious about further expancredibly powerful. If theyre not build- of support at the local level, he says. sion. I want to see how the [light-rail ing those roads and transit systems and We hope that doesnt cause a with- line linking downtown Seattle with the all those things they make money on, drawal of funds at the federal level. Seattle-Tacoma International Airport] there will be pressure brought to bear Last falls campaign season underscored goes before we put up 50 more miles on Congress. the strong but not always universal of it, teacher Amy Larson said in
Local Support
66
AP Photo/Ann Heisenfelt
explaining why she voted against the tax measure. 69 The 15.6-mile Sea-Tac line is scheduled to open in 2009. Meanwhile, transit projects continue to spread. Dallas, Denver, Orlando, Phoenix, Salt Lake City and Sacramento are building or expanding transit systems, as are other cities. 70 Everybody talks about smart growth now, said Robert Dunphy, senior resident fellow for transportation and infrastructure at the Urban Land Institute. These cities understand that transit is a huge part of that. 71 In Seattle, local leaders are working on several fronts to expand public transit, encourage development near stations and reduce car traffic. Besides the airport line, which is expected to carry 40,000 riders a day, a new streetcar line opened in December to serve a newly developed South Lake Union area, a former industrial zone that planners are making into a biotech hub for the region. Last year the City Council voted to require Seattle, when building a new road or maintaining an existing one, to try to provide for as many travel modes as possible, including bike lanes, sidewalks and transit. Plus, Seattle-area voters recently passed a measure to boost funding for bus services, the city established a program to provide space for shared cars and it helped start a trip-planning service that seeks to reduce drive-alone commutes. Seattle also has eased the parking-space requirements for developments around light-rail stations and other urban centers. If you provide more parking, it just encourages people to drive, said John Rahaim, the citys planning director. 72 As with many cities, Seattle sees transit as part and parcel of a larger plan that aims not only to bring sanity to the roadways but also to produce a healthier environment and a more economically vibrant economy. Were a metropolitan area, and were trying to manage congestion,
says Crunican. If youre adding new jobs, which were doing, and youre adding new housing units, which were doing, you should expect more activity. And then the question is, can you leverage some of that activity onto greenhouse-friendly trips. Besides, she says, Were also an overweight society in general, and theres nothing wrong with healthier lifestyles.
OUTLOOK
Proactive Planning
ith traffic congestion building, greenhouse gases growing and large numbers of Americans seeking sidewalk-friendly urban neighborhoods, public transit clearly seems to be on a roll. Even so, obstacles lie on the tracks. For instance, transportation problems need regional solutions, but political and taxing jurisdictions typically stop at city or county borders. Tim Lomax, who heads the national congestion studies undertaken by the Texas Transportation Institute, warned in congressional testimony in 2007 against a patchwork of solutions to large interregional problems with little to no continuity. We already recognize regional and in some cases national consequences flowing from any of a number of transportation problems. 73 Within localities conflict among proponents of various transportation modes such as buses, rail and highways can lead to decision-making gridlock. Better financing techniques, stronger management and greater political courage are needed to bring down the separate silos that characterize metropolitan transportation networks and integrate them
into smooth-running systems, says Joseph M. Giglio, a business professor at Northeastern University with extensive experience in transportation issues. Transit has its own operating mode, financing and engineering basis. And highways do. But the commonality is the customer, he says. Transit will also have to move in lockstep with land-use planning, experts say. Otherwise, systems designed to reduce sprawl and ease congestion could have the perverse effect of making those problems worse. And that risk doesnt exist only within cities. In California, sprawl could increase several orders of magnitude if high-speed train services come to the Central Valley, connecting Bakersfield to [Los Angeles] and Fresno to San Francisco, warned Robert Cervero, chair of the Department of City and Regional Planning at the University of California, Berkeley. Expanding rail services between metropolitan areas and even between states underscores the need for proactive state land-use planning and management . . . if the unintended sprawl-inducing consequences of these investments are to be avoided, he wrote. 74 Ultimately, the outlook for public transit seems mixed. On the one hand, population growth, global warming, traffic gridlock and the desire for new kinds of close-in development suggest significant demand for rail lines, rapid buses and other kinds of transit. On the other hand, tight financing, sprawl and Americans reluctance to leave their cars present significant obstacles. In the end, cities face difficult choices in how to allocate their precious transportation dollars. As Pisarski, the author of the Transportation Research Boards exhaustive studies on commuting, says, One question I always ask is, what percent of a problem am I solving with what percent of my resources?
Jan. 18, 2008
67
MASS TRANSIT BOOM

Notes
1 Steve Huettel, Airport board takes light rail for a virtual ride, The St. Petersburg Times, Nov. 2, 2007, wwww.sptimes.com. 2 For background see Kathy Koch, Flexible Work Arrangements, CQ Researcher, Aug. 14, 1998, pp. 697-720. 3 In 2006, the U.S. Department of Transportation began a broad initiative, the National Strategy to Reduce Congestion on Americas Transportation Network, to help state and local governments develop strategies to deal with congestion. Approaches related to road congestion include Urban Partnership Agreements with metro areas that in part encompass plans for congestion-pricing demonstrations and expansion of rapid bus services. For background, see: http://transportation.house.gov/Media/File/Highways/ 20070607/SSM_HT_6-7-07.pdf. 4 American Public Transportation Association, Public Transportation Fact Book, 58th Edition, May 2007, p. 19. Data are from Railway Age, 2006 totals are preliminary. 5 Press release, Annual study shows traffic congestion worsening in cities large and small, Texas Transportation Institute. Data are from the institutes 2007 Urban Mobility Report, based on 2005 data, the latest available. 6 Robert Cervero, Economic Growth in Urban Regions: Implications for Future Transportation, prepared for Forum on the Future of Urban Transportation, Eno Transportation Foundation, Washington, D.C., December 2006, p. 14. 7 Alan E. Pisarski, Commuting in America III, Transportation Research Board, 2006, p. 38. 8 Ibid., p. 62. 9 For background, see Alan Greenblatt, Downtown Renaissance, CQ Researcher, June 23, 2006, pp. 553-576.
American Public Transportation Association, op. cit., p. 12; 2005 data are preliminary. 11 Zach Patton, Back on Track, Governing, June 2007. 12 Statement on Texas Transportation Institutes Congestion Report by American Public Transportation Association President William W. Millar, www.apta.com, Sept. 17, 2007. 13 Andy Guy, Looking for Modern Transit, Great Lakes Bulletin News Service, Michigan Land Use Institute, Jan. 27, 2006. For background, see Mary H. Cooper, Smart Growth, CQ Researcher, May 28, 2004, pp. 469-492. 14 U.S. General Accounting Office, Surface Transportation: Moving Into the 21st Century, May 1999, p. 24. 15 Anthony Downs, How Real Are Transit Gains? Governing, March 2002. 16 Todd Litman, Smart Transportation Investments II: Reevaluating the Role of Public Transit for Improving Urban Transportation, Victoria Transport Policy Institute, Sept. 10, 2007. 17 Randal OToole, Debunking Portland: The Public Transit Myth, TCSdaily.com, Aug. 15, 2007. 18 William J. Mallett, Public Transit Program Issues in Surface Transportation Reauthorization, Congressional Research Service, Sept. 10, 2007. 19 By 2025, a fifth of Americans will be 65 or older, many of them unable to drive, the American Public Transportation Association states in its Public Transportation Fact Book, May 2007. It cites an AARP/Surface Transportation Policy Project study that found that half of non-drivers age 65 and over stay home on any give day in part because they dont have transportation options. The study cited is Linda Bailey, Surface Transportation Policy Project, Americans: Stranded without Options, April 2004. 20 Testimony before House Committee on Transportation and Infrastructure, Subcommittee on Highways and Transit Implemen-
10
About the Author

Thomas J. Billitteri is a CQ Researcher staff writer based in Fairfield, Pa., who has more than 30 years experience covering business, nonprofit institutions and public policy for newspapers and other publications. He has written previously for CQ Researcher on Domestic Poverty, Curbing CEO Pay and Teacher Education. He holds a BA in English and an MA in journalism from Indiana University.
tation of New Starts and Small Starts Program, May 10, 2007. 21 Randal OToole, A Desire Named Streetcar: How Federal Subsidies Encourage Wasteful Local Transit Systems, Cato Institute, Jan. 5, 2006. 22 Cato Institute news release, Federal Subsidies Derail Local Train Systems, Jan. 5, 2006. 23 Todd Litman, Responses to A Desire Named Streetcar, Victoria Transport Policy Institute, Feb. 1, 2006. 24 Michael M. Grynbaum, New York Pitches Congestion Pricing to Federal Officials, The New York Times, June 26, 2007, p. 4B. 25 Testimony of Craig J. Stone, deputy administrator, Washington State Department of Transportations Urban Corridors Office, U.S. House of Representatives Committee on Transportation and Infrastructure, Subcommittee on Highways and Transit, Congestion and Mobility Hearing, June 7, 2007. 26 Federal Highway Administration, U.S. Department of Transportation, Congestion Pricing: A Primer, December 2006. 27 Mary E. Peters, The Folly of Higher Gas Taxes, The Washington Post, Aug. 25, 2007, p. A15. 28 For background, see Marcia Clemmitt, Aging Infrastructure, CQ Researcher, Sept. 28, 2007, pp. 793-816. 29 Bill Graves, Add roads, not tolls, USA Today, www.usatoday.com, Feb. 27, 2007. 30 Press release from office of Anthony D. Weiner, Weiner Applauds Mayor for Thinking Big, But Says Put the Brakes on Regressive Congestion Tax, April 21, 2007. 31 William D. Middleton, Metropolitan Railways: Rapid Transit in America (2003), pp. 1-2. 32 Brian J. Cudahy, Cash, Tokens and Transfers: A History of Urban Mass Transit in North America (1990), p. 22. 33 George M. Smerk, The Federal Role in Urban Mass Transportation (1991), p. 35. 34 Ibid. 35 Federal Highway Administration, www.fhwa. dot.gov/ohim/summary95/mv200.pdf. 36 Robert Bruegmann, Sprawl: A Compact History (2005), p. 130. 37 Smerk, op. cit., p. 43. 38 American Public Transportation, Public Transportation Fact Book 2007, p. 11. 39 American Public Transportation Association, op. cit. 40 The 1944 GI Bill of Rights provided lowinterest home loans for veterans. For back-
68
ground, see Peter Katel, Wounded Veterans, CQ Researcher, Aug. 31, 2007, pp. 697-720. 41 Federal Highway Administration, op. cit. 42 Bruegmann, op. cit., p. 130. 43 Middleton, op. cit., p. 107. 44 Federal Transit Administration, The Beginnings of Federal Assistance for Public Transportation, accessed at www.fta.dot.gov. 45 Ibid. 46 Middleton, op. cit., p. 107. 47 Ibid., p. 243. 48 Smerk, op. cit., pp. 6-7. 49 Ibid., p. 241. 50 Cudahy, op. cit., p. 202; and Middleton, op. cit., p. 151. 51 Ibid., p. 152. 52 Smerk, op. cit., p. 241. 53 Remarks of James Oberstar, Intermodal Transportation: The Potential and the Challenge, Center for Transportation Studies, University of Minnesota, March 16, 2003, accessed at www.cts.umn.edu/Events/ObserstarForum/203/Speech.html. 54 Molly D. Castelazo and Thomas A. Garrett, Light Rail: Boon or Boondoggle? Federal Reserve Bank of St. Louis, 2004. 55 Cambridge Systematics Inc. with Economic Development Research Group, Public Transportation and the Nations Economy, October 1999. The study was underwritten by the private sector business members of the American Public Transit Association, the predecessor of the American Public Transportation Association, Washington, D.C. 56 Todd Litman, Evaluating Public Transit Benefits in St. Louis, Victoria Transport Policy Institute, July 27, 2004. 57 Jim Abrams, The Associated Press, Frozen gas tax leads to toll roads, www.usatoday.com, May 20, 2007. 58 Ibid. 59 Statement of Robert A. Sunshine before the Committee on the Budget, U.S. House of Representatives, Public Spending on Surface Transportation Infrastructure, Oct. 25, 2007. 60 Abrams, op. cit. 61 Humberto Sanchez and Lynn Hume, Report on Traffics Economic Drain Prompts Calls for Gas Tax Hike, The Bond Buyer, Sept. 19, 2007, p. 33. 62 Jim Snyder, Democrats, White House diverge on gas tax, The Hill, Sept. 6, 2007. 63 Sanchez and Hume, op. cit. 64 The Associated Press, Transit Panel Urges Gas Tax Increase, The New York Times, Jan. 15, 2008.

American Public Transportation Association, 1666 K St., N.W., Suite 1100, Washington, DC 20006; (202) 496-4800; www.apta.com. Represents public bus and commuter rail systems and others involved in transit. Center for Transportation Excellence, 1640 19th St., N.W., #2, Washington, DC 20009; (202) 234-7562; www.cfte.org. Policy research center on public transportation. Community Transportation Association of America, 1341 G St., N.W., 10th Floor, Washington, DC 20005; (800) 891-0590; www.ctaa.org. Advocates for effective public and community transportation and improved mobility. Federal Transit Administration, 1200 New Jersey Ave., S.E., 4th & 5th Floors East Building, Washington, DC 20590; (202) 366-4007. Administers federal funding for public transit systems. Reason Foundation, 3415 S. Sepulveda Blvd., #400, Los Angeles, CA 90034; (310) 391-2245. www.rppi.org. Research organization that studies market-oriented transportation policies. Reconnecting America, 436 14th St., Suite 1005, Oakland, CA 94612; (510) 268-8602; www.reconnectingamerica.org. Advocates integrating transit into communities and hosts the Center for Transit-Oriented Development. Surface Transportation Policy Partnership, 1100 17th St., N.W., 10th Floor, Washington, DC 20036; (202) 466-2636; www.transact.org. Nonprofit coalition that advocates transportation options that improve public health, the economy, the environment and social equity. Taxicab, Limousine & Paratransit Association, 3849 Farragut Ave., Kensington, MD 20895; (301) 946-5701; www.tlpa.org. Trade association for taxi companies, airport shuttles and other passenger transporters. University Transportation Center for Mobility, Texas Transportation Institute, Texas A&M University System, 3135 TAMU, College Station, TX 77843-3135; (979) 845-2538; http://utcm.tamu.edu. Studies congestion management and other transportation issues. Victoria Transport Policy Institute, 1250 Rudlin St., Victoria, BC V8V 3R7 (Canada); (250) 360-1560; www.vtpi.org. Independent research organization that produces useful background on transportation issues.
Kevin Bogardus, Flake joins Bush administration in opposition to gas tax increase, The Hill, Sept. 7, 2007, p. 13. For background, see Marcia Clemmitt, Pork Barrel Politics, CQ Researcher, June 16, 2006, pp. 529-552. 66 Statement of Mary E. Peters before House Committee on Transportation and Infrastructure, Sept. 5, 2007. 67 Steve Harrison, Tax supporters, foes surprised by margin of victory, Charlotte Observer, Nov. 7, 2007, p. 1A. 68 Larry Lange, Proposition 1: Voters hit the brakes, Seattle Post Intelligencer, Nov. 7, 2007,
65
updated Nov. 9, 2007. 69 Ibid. 70 Patton, op. cit. 71 Ibid. 72 Keith Schneider, Seattle and Other Cities Mantra: Improve Transit, Reduce Traffic, The New York Times, Oct. 24, 2007. 73 Testimony before House Committee on Transportation and Infrastructure Subcommittee on Highways and Transit, The Many Dimensions of Americas Congestion Problem And a Solution Framework, June 7, 2007. 74 Cervero, op. cit., p. 17.
Jan. 18, 2008
69
Bibliography
Selected Sources
Books
Bruegmann, Robert, Sprawl: A Compact History, University of Chicago Press, 2005. An urban planning expert at the University of Illinois, Chicago, argues that many problems blamed on sprawl, such as traffic congestion, are, if anything, the result of the slowing of sprawl and increasing density in urban areas. Cudahy, Brian J., Cash, Tokens, and Transfers: A History of Urban Mass Transit in North America, Fordham University Press, 1990. Cudahy spans American transit history from horse-drawn rail cars to automated transit systems. Middleton, William D., Metropolitan Railways: Rapid Transit in America, Indiana University Press, 2003. This oversize book by a noted authority traces the history of rapid transit and includes a useful appendix that maps metro and light-rail transit lines in major North American cities. Smerk, George M., The Federal Role in Urban Mass Transportation, Indiana University Press, 1991. The director of the Institute for Urban Transportation at Indiana University traces the long history of transit policy and explores both its successes and failures in intricate detail. Maguire, Meg, Kevin McCarty and Anne Canby, From the Margins to the Mainstream: A Guide to Transportation Opportunities in Your Community, Surface Transportation Policy Partnership, Final Edition, 2006. Planning, community design and transportation options for communities are among the topics covered. Heffernan, Kara, ed., Preserving and Promoting Diverse Transit-Oriented Neighborhoods, Center for Transit Oriented Development: A collaboration of the Center for Neighborhood Technology, Reconnecting America, and Strategic Economics, October 2006. A study sponsored by the Ford Foundation offers recommendations for creating more mixed-income, mixed-race housing near transit stations. Mobility 2030: Meeting the Challenges to Sustainability, World Business Council for Sustainable Development, 2004. A report based on the work of a dozen international automotive and energy companies concludes that the way people and goods are transported today will not be sustainable if present trends continue. National Strategy to Reduce Congestion on Americas Transportation Network, U.S. Department of Transportation, May 2006. The plan calls for more-efficient bus systems, new privateinvestment opportunities in transportation infrastructure, a reduction in freight bottlenecks and other steps to relieve congestion. Pisarski, Alan E., Commuting in America III, Transportation Research Board, The National Academies, 2006. The third report in a series going back 20 years gives a detailed snapshot of commuting patterns and trends. Public Transportation: Benefits for the 21st Century, American Public Transportation Association, 2007. The report surveys in great detail what it calls the benefits that public transportation brings to individuals, communities and our nation as a whole. Public Transportation Fact Book, 58th Edition, American Public Transportation Association, May 2007. This thick compendium of transit data covers modes ranging from trolleys to ferryboats and vanpools. Davis, Todd, and Monica Hale, Public Transportations Contribution to U.S. Greenhouse Gas Reduction, Science Applications International Corp., September 2007. This technical study examines the growth in pollution from vehicles and the potential role of public transportation in reducing it.
Articles
Bernstein, Sharon, and Francisco Vara-Orta, Near the rails but still on the road, Los Angeles Times, June 30, 2007. This article analyzes the results of the Los Angeles regions efforts to wean people away from autos through transitoriented residential development. Patton, Zach, Back on Track: Sprawling Sun Belt cities discover a new way to grow, Governing, June 2007. While focusing on Charlotte, N.C.,s ambitious transit plans, Patton writes: Sun Belt cities from Orlando to Phoenix are building out light-rail systems, in an historic break from the car-bound past. Pucher, John, Renaissance of Public Transport in the United States?, Transportation Quarterly, winter 2002. A professor in the Department of Urban Planning at Rutgers University traces developments in public transit during the 1990s.
Reports and Studies

Hennessey, Bridget, Jason Jordan, Mary Karstens and Stephanie Vance, Transportation Finance at the Ballot Box, Center for Transportation Excellence, 2006. The report provides details on transportation ballot measures since 2000, plus five local case studies.
70
CHAPTER
10
OIL JITTERS
BY PETER KATEL
Excerpted from Peter Katel, CQ Researcher (January 4, 2008), pp. 1-24.
Oil Jitters
BY PETER KATEL
THE ISSUES
creases reflected a variety of concerns, including worries that supplies would be inn a recent trip to terrupted by possible U.S. or Beijing, David SanIsraeli military strikes against dalow saw the Iran or a potential Turkish inworlds energy future, and it cursion into northern Iraq. wasnt pretty. They tell me The latest run-up . . . has there are almost 1,000 new to do with fear, said Lawrence cars a day on the streets, J. Goldstein, an economist at says Sandalow, a senior felthe Energy Policy Research low at the Brookings InstiFoundation. 5 tution think tank. If those Fears of Middle East war cars and trucks use oil in the choking off oil flow have hit same way the current fleet several times since 1973, when does, were in trouble, for a Arab nations launched an oil lot of reasons. embargo against the United Sandalow, author of the States and other countries in 2007 book Freedom From Oil, retribution for their support isnt alone. 1 The top ecofor Israel in a war with its nomic researcher at the Inneighbors. Iraqi dictator Sadternational Energy Agency dam Hussein prompted an(IEA) recently gave oil indusother scare when he invadtry representatives in London ed Kuwait in 1990. a dire warning. If we dont This time, though, the do something very quickly, headline-induced jitters have and in a bold manner, said emerged along with deeper Fatih Birol, our energy sysworries about a variety of detems wheels may fall off. 2 velopments: rising oil demand Heavy traffic in Beijing last August reflects the rising demand for energy in China and other developing Demand for the key fuel from rapidly industrializing nations. China had just 22 million cars and light-duty of modern life is shooting up, China and India; depletion of vehicles in 2005, with 10 times as many projected especially in the developing oil reserves in the United States, by 2030. By comparison, the United States, with a world, but production isnt Europe and possibly the Midquarter of Chinas 1.3 billion population, keeping pace, the IEA reports. dle East and the fact that since had 250 million motor vehicles. Within the next seven years, the 1960s, most of the Birol predicted, the gap will exceed 13 account for 45 percent of the increase worlds oil has switched from corpomillion barrels of oil a day or 15 in demand in this scenario. 4 rate to government ownership, as in The IEA delivered its message Iran, Venezuela and Russia. 6 percent of the worlds current output. 3 Rising global energy demand poses when intense oil jitters had pushed Nationally owned companies are a real and growing threat to the worlds crude oil prices as high as theyve ever less efficient, and the traditional inenergy security, said the IEAs 2007 been: close to $100 a barrel in De- ternational majors [big oil firms] dont annual report. If governments around cember 2007 and more than $3 per control as much of the resource as the world stick with current policies, gallon at U.S. gas pumps.* The in- they used to, says Kenneth B. Medthe worlds energy needs would be lock III, an energy studies fellow at well over 50 percent higher in 2030 the James A. Baker III Institute for * On Jan. 2, 2008, crude oil prices hit the milethan today. China and India together stone $100-a-barrel mark for the first time. Vio- Public Policy at Rice University in Houslence in Nigerias oil-producing region and spec- ton. Meanwhile, the worlds total pro* The IEA was founded in Paris in 1974 dur- ulative trading were blamed for the jump. In ing the first post-World War II oil crisis to help April 1980, during the turmoil that followed the duction of about 84 million barrels a ensure a steady supply of reasonably priced 1979 Iranian revolution, prices were actually high- day is spoken for. There is virtually er when adjusted for inflation: $102.81 a barrel. no spare oil excess capacity, in fuel for the worlds industrialized nations.
AFP/Getty Images/Teh Eng Koon
Jan. 4, 2008
OIL JITTERS
industry jargon. 7 The United States alone consumes nearly a quarter of todays world production about 20 million barrels a day. Concern about rising demand for oil by industrializing nations is compounded by the fact that oil is a nonrenewable resource and plays such a major role in other parts of the global economy. Oil (and natural gas) are the essential components in the fertilizer on which world agriculture depends; oil makes it possible to transport food to the totally non-self-sufficient megacities of the world, writes Daniel Yergin, an oil historian and chairman of Cambridge Energy Research Associates, a consulting firm. Oil also provides the plastics and chemicals that are the bricks and mortar of contemporary civilization a civilization that would collapse if the worlds oil wells suddenly went dry. 8 Oils central role in the world marketplace means that an economic slowdown can push down demand for oil, while an economic boom raises demand. With the subprime mortgage crisis slowing down the U.S. economy, oil prices are likely to fall somewhat, says J. Robinson West, chairman of PFC Energy, a Houston-based consulting firm. Then the economy rebounds, and oil demand picks up again. Thats when youre going to see prices go through the roof. Theres going to be a crunch, where demand outstrips supply. West, who directed U.S. offshore oil policy during the Reagan administration, doesnt think the world is about to run out of oil altogether. He is a member of the chorus of oil-watchers who generally fault state-owned oil companies (except Saudi Arabias and Brazils) for not reinvesting at least some of their oil income in exploration and equipment maintenance so they can keep the oil cash pouring in. Politicians dont care about the oil industry, they care about the money. Some other experts question how
Global Oil Production to Continue Rising

Global daily oil production is expected to hit 116 million barrels by 2030, nearly 40 percent over 2006 levels. World Oil Production, 1980-2030
(in millions of barrels/day)
120 100 80 60 40 20 0
116.3 84.6 91.1 98.5
76.8 65.2
1980 2000 2006 2010* 2015* 2030*
Average annual rate of growth, 2006-2030:

* predicted
1.3%
Source: World Energy Outlook 2007: China and India Insights, International Energy Agency, 2007
much of the run-up in oil prices is driven by doubts over supply capacity, and how much by financial speculators who benefit financially if prices move in the direction they have forecast. The biggest thing that traders are now playing is the fear card, says Fadel Gheit, head energy analyst at Oppenheimer & Co., a Wall Street investment firm. Commodity traders are spinning every piece of information that can embellish their position. A 2006 report by the Senates Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs traced an energy futures trading boom to congressional action in 2000 that freed energy commodity trading on
electronic exchanges from regulatory oversight. 9 But traders make a convenient target, one economics writer argues. They are speculating against real risks the risk that oil from the Persian Gulf could be cut off; that hurricanes in the Gulf of Mexico could damage U.S. oil rigs and refineries; that political events elsewhere (in Russia, Nigeria, Venezuela) could curtail supplies, columnist Robert Samuelson wrote in The Washington Post. High prices reflect genuine uncertainties. 10 Further complicating the oil-supply picture, Saudi Arabia and other big producers are devoting an increasing percentage of their petroleum to expanding their own economies effectively withholding oil from the market (See Current Situation, p. 18.) Advocates of the peak oil thesis argue that major global oil reserves including those in Saudi Arabia have hit the point at which about half of the oil they can yield has already been produced. Over the years, weve just always assumed that over time we always find more oil because over time we always found more oil, says Houston energy consultant Matthew R. Simmons, a leading proponent of the peak oil theory. But the world seems to have run out of mega-fields, he says. In fact, Simmons says, major discoveries since the late 1960s can be counted on the fingers of one hand. In 1967 came Prudhoe Bay in Alaska; about 10 billion of its 13 billion barrels of recoverable oil already have been pumped, according to BP, which operates the field. 11 Since then, exploration has yielded a 13-billion-barrel Caspian Sea reservoir owned by Kazakhstan, a 3-to-5-billionbarrel U.S. field 3,500 feet under the Gulf of Mexico and a 5-to-8-billionbarrel field off the Brazilian coast. 12 Some experts say such recent discoveries suggest that new exploration and production technology will supply
the world with oil into the indefinite future. Whats really happening is the opening up of a whole new horizon in the ultra-deep waters of the Gulf of Mexico, and it looks like the upside is very significant, said Yergin, a critic of peak oil theory. But, he added, It will take time and billions of dollars to get there. 13 Indeed, recent discoveries come nowhere near the spectacular discoveries that launched the oil age. The Middle East set the standard for megadiscoveries. Even after decades of production, its reserves were estimated at 266.8 billion barrels in 2006. Oil behemoth Saudi Arabia, for example, was producing 8.6 million barrels a day in August 2007. 14 U.S. production for 2006 was 5.1 million barrels a day. But because Saudi Arabia doesnt release detailed figures on oilfield-by-oilfield production, Simmons questions the countrys reserve estimates. I dont think theres a shred of evidence to back up Saudi reserve numbers, he says. More cautiously, the Government Accountability Office (GAO) notes the potential unreliability of reserve data from members of the Organization of Petroleum Exporting Countries (OPEC), among whom Saudi Arabia leads in reported reserves. That issue is particularly problematic, the GAO reports, because OPEC countries together hold more than three-quarters of the worlds known oil reserves. 15 Cambridge Energy Research Associates estimates Middle Eastern reserves at 662 billion barrels as of November 2006 or about 15 percent of the worlds total reserves of 4.82 trillion barrels. Key producing countries such as Saudi Arabia have a vast reserve and resource base, the firm reported. There is no credible technical analysis that we are aware of that demonstrates its productive capacity will suddenly fall in the near term. 16 Other experts see production problems even if the peak oil theorists are wrong. Edward L. Morse, chief ener-
U.S. Oil Consumption Exceeds Production

The U.S. has continually consumed more oil than it has produced. The disparity between consumption and production exceeded 12 million barrels per day in 2006, forcing America to import more oil. U.S. oil consumption and production, 1965-2005
(millions of barrels/day)
25 20 15 10 5 1965 1970 1975 1980 1985 1990 1995 2000 2005 2006 Source: U.S. Energy Information Administration
Production Consumption
gy economist at Lehman Brothers, a New York investment bank, calculates that if Venezuela, Nigeria, Iraq and Iran were producing oil more efficiently, 6 million barrels a day more would be available to the world market. By contrast, the peak debate centers on technical issues, including the geology of oil reservoirs. Consequently, Why should I believe in peak oil? asks Morse, a deputy assistant secretary of State for energy policy during the Carter administration. The International Energy Agency guardedly shares Morses skepticism about supply. New capacity additions . . . are expected to increase over the next five years, the agency said. But it is far from clear whether they will be sufficient to compensate for the decline in output at existing fields. 17 To compensate, Birol said China, India and other big energy consumers need to step up energy efficiency efforts right away and in a bold manner. We want more action, instead of more targets, more meetings and more talks. 18 As oil-watchers monitor trends and conservation plans, here are some of the issues in debate:
Have global oil supplies peaked? When a countrys oil resources peak or hit the point where half the oil is gone it happens without warning, said a veteran energy company executive and researcher, Robert L. Hirsch, who conducted a peak-oil study in 2005 for the U.S. Department of Energy. Thats what happened in North America, Britain, Norway, Argentina, Colombia and Egypt, Hirsch said. In most cases, it was not obvious that production was about to peak a year ahead of the event. . . . In most cases the peaks were sharp, not gently varying or flat-topped, as some forecasters hope. In some cases, post-peak production declines were quite rapid. 19 But Cambridge Energy Research Associates argues that a global peak when it is reached many decades from now will not mark the beginning of a precipitous drop-off. Global production will eventually follow an undulating plateau for one or more decades before declining slowly, the firm said. 20 A study by the nonpartisan GAO adds to the uncertainty over oil reserves. The amount of oil remaining
Jan. 4, 2008
OIL JITTERS
in the ground is highly uncertain, the investment banker Simmons says that Some oil insiders accept parts of agency concluded, in part because a lack of verifiable information about the peak oil argument, but others disthe Organization of Petroleum Ex- Middle Eastern reserves lies at the miss it as panic-mongering that only porting Countries controls most of the heart of peak oil theory. drives up prices for the benefit of estimated world oil reserves, but its These optimists Im happy price speculators. Peak oil theory is estimates . . . are not verified by in- theyre so happy about things but a lot of baloney, says energy analyst dependent auditors. 21 they have no data to base their case Gheit, at Oppenheimer & Co. We are In part, debate turns on the extent on, Simmons says. We have passed consuming more, but we are finding to which oil producers can turn to so- peak oil, and demand is not going to more than we consume; reserves concalled unconventional sources. Shale slow down. Simmons 2005 book, Twi- tinue to bulge. oil a form of petroleum extracted light in the Desert, is a major text of Vastly improved technology has faby applying very high temperatures to the hypothesis. 25 cilitated the discovery of new reservoirs certain types of rock even in well-developed formations abundant fields, Gheit and others in parts of the Amerargue. For example, he ican West has says, In the old days, when they built the first been viewed for platform in the North Sea, decades as an alterit was like a very big native to conventable made of concrete tional crude oil. The with hollow legs. Now GAO reported that there is something called one-half million to 1 sub-sea completion, million barrels a day where all the equipment could be extracted is sitting on the ocean from U.S. shale floor, and everything is within 10 years, robotically controlled. though the process West of PFC Energy is expensive and energy-intensive. 22 agrees that while onshore Oil can also be U.S. fields and the North extracted from tar Sea have peaked and been A gas station burns in Tehran on June, 27, 2007, during protests against efforts by the Iranian government to reduce sands which have squeezed dry thanks to consumption by imposing gas rationing. become one of Canatechnological advances, das major sources of petroleum. An Simmons insists his projections and there are parts of the Middle East and oil-sands boom is under way in Cana- forecasts are more data-driven than Russia that are virtually unexplored. da, which is producing about 1.2 mil- those of peak oil critics. Thats one of But peaking may be more widelion barrels of oil from sands in Al- the reasons I boldly predicted in 1995 spread than some industry insiders berta Province, though the process that the North Sea was likely to peak say, another oil expert argues. Peorequires burning so much natural gas by 1998-2000, Simmons says. The ple are asking the right questions that emissions have done considerable major oil company people said I was about peak oil, but theyre asking about environmental damage. 23 nuts. All I did was look at the reports. the wrong country, says David Cambridge Energy Research AssociExperts agree the North Sea passed Pursell, managing director of Tudor ates said in its rebuttal of the peak its high point and that the industry is Pickering, a Houston-based investthesis that oil sands and other uncon- doing its best to pump out the re- ment firm. We know that Mexico has ventional sources may account for 6 per- maining crude. Oil and gas produc- peaked. When does Russia peak? cent of global production by 2030. 24 tion has peaked, [and] the industry is Peak oil thesis advocates argue that concentrating on managing the de- Will the rising energy needs of unconventional sources wont suffice cline, said Trisha OReilly, communi- India, China and other developing for the worlds needs. They turn the cations director of Oil and Gas UK, countries keep oil prices high? argument back to the region still con- the trade association of North Sea oil The newest twist in the volatile sidered the globes main petroleum producers. Theres still a sizable prize world of global oil economics is growreservoir, the Middle East. Houston out there. 26 ing petroleum demand by Earths two
AP Photo
population giants China (1.3 billion people) and India (1.1 billion people) which together account for more than a third of the planets 6.6 billion population. The two huge nations have been maintaining annual economic growth of about 10 percent a year, sparking intense demand among new members of their rising middle classes for cars and other energy-intensive consumer goods. China had 22 million cars and lightduty vehicles on the road in 2005, with 10 times as many projected in 2030. In India, a tenfold increase is also expected from 11 million to 115 million, according to the Parisbased International Energy Agency (IEA). 27 By comparison, there are about 250 million cars and other motor vehicles in the United States, or slightly more than one for each of the approximately 240 million adults in the population. 28 If all countries maintain their present energy policies, the IEA says developing countries will account for 74 percent of the increase in worldwide energy use from all sources between 2005 and 2030, with China and Indian accounting for 45 percent of that boost. Developing countries now make up 41 percent of the global energy market. By 2030, if no policies change, those countries would account for 54 percent of world consumption. 29 All in all, the IEA concludes, The consequences for China, India, the OECD [Organization for Economic Cooperation and Development] and the rest of the world of unfettered growth in global energy demand are alarming . . . the worlds energy needs would be well over 50 percent higher in 2030 than today. The report goes on to recommend international efforts to reduce demand for environmental reasons as well as to conserve oil and keep prices from skyrocketing. But some experts say the growing presence of China and India in the world energy market
will keep prices high no matter what measures are taken. Youre talking about economic development in two countries that comprise a little over one-third of the world population, says Medlock at the Baker Institute. Its going to be difficult for the energy supply to expand production at a significant enough pace to drive down prices. Only an international economic slowdown could have that effect, he adds. But Gheit of Oppenheimer & Co. argues that major price increases generated by continued growth in demand will force China and India to adapt, just as other nations do. Energy conservation accelerates when prices go higher even in China and India, he says. Thats the mitigating factor. Any developing economy becomes more energy-efficient with time. Gheit adds that the Chinese and Indian governments have a highly efficient tool at their disposal if they want to curb demand: Both countries keep gasoline prices low through subsidies. If gasoline subsidies were to cease, demand would crash, he says. Roads will be half-empty. But some oil experts say Chinas energy demands reflect far more than stepped-up car use. The big thrust on Chinese demand is really on production of energy-intensive goods for their export industry, says Morse at Lehman Brothers. Chinas policy of keeping its currency undervalued to make exports cheaper is maintaining that effort and causing the high energy demand that results. Communist Party leaders in China oppose ending gasoline price subsidies, according to a Lehman Brothers analysis. And even if they were eliminated, Chinese motorists might dip into their savings, and businesses might borrow more from banks to foot higher energy bills. In the long run, however, higher prices likely would force down demand, the analysis says. 30 In the United States, meanwhile,
high gasoline prices, perhaps combined with wider economic troubles, have reduced demand. Normally, lower demand would send prices down. But some experts say the high oil demand from China and India has changed the outlook. Long term, says Pursell of Tudor Pickering in Houston, prices are going to be higher in the next 10 years than in the past 10 years. Nonetheless, the market system continues to function, some economists point out. At these prices, an enormous incentive exists to develop new [oil] sources, says Robert Crandall, a senior fellow at the Brookings Institution and former director of the Council on Wage and Price Stability in the Ford and Carter administrations. My guess is that after three-four-five years, new pools will be found. But, Crandall cautions, new oil fields may sit in regions that are difficult to reach, for geographical or political reasons. Can the federal government do anything to significantly reduce energy demand? American worries about oil dependence and its effects on the global environment reached critical mass in December, when Congress passed, and President Bush signed, an energy bill designed to force major reductions in U.S. petroleum consumption. Bush, a former oilman, had previously acknowledged that the political climate now favors energy conservation. In his 2006 State of the Union address, he said, America is addicted to oil. 31 The new energy law includes tougher corporate average fuel efficiency (CAFE) requirement for cars and light trucks (including SUVs). They will have to meet a fleetwide average standard of 35 miles per gallon by 2020, compared with the present 27.5 miles per gallon for cars and 22.2 miles per gallon for light trucks. The bill also requires the production of 36 billion gallons of
Jan. 4, 2008
OIL JITTERS
Most Oil Belongs to OPEC Nations
Members of the Organization of Petroleum Exporting Countries (OPEC) held more than three-quarters of the worlds 1.2 trillion barrels of crude oil reserves in 2006 (left). Most OPEC oil reserves are in the Middle East, with Saudi Arabia, Iran and Iraq holding 56 percent of the OPEC total (right). Share of world crude oil reserves, 2006 Share of OPEC crude oil reserves by country, 2006
Indonesia Angola
0.5%
Iran
1.0%
Algeria
1.3%
Non-OPEC nations 23% OPEC nations
15.0%
Iraq
Venezuela
9.4% 10.6%
United Arab Emirates
12.5%
Kuwait
77%
11.0%
Saudi Arabia
28.6%
Libya
4.5% Nigeria 3.9%

* Percentages may not total 100 due to rounding. Source: Organization of Petroleum Exporting Countries, 2007
Qatar
1.6%
ethanol, the plant-based gasoline substitute, by 2022 five times more than present production levels. 32 Due to the combined effects of the fuel efficiency standard and the ethanol production boost, We will save as much oil as we would import from the Persian Gulf 2.59 million barrels a day, says Brendan Bell, Washington representative of the Union of Concerned Scientists, citing projected oil demand if the law hadnt been enacted. Some disappointment could be heard amid the cheers, however, because lawmakers balked at dealing with renewable electricity. Its really unfortunate that we didnt have the renewable electricity standard or the incentives
for wind and solar, Sen. Barbara Boxer, D-Calif., chairwoman of the Senate Environment and Public Works Committee, said. But well fight for those another day. 33 Still, opposition hasnt entirely died away. Rep. F. James Sensenbrenner Jr., R-Wis., who voted against the bill, had argued at a Nov. 14 hearing of the House Select Committee on Energy Independence and Global Warming that the new energyuse standards were unlikely to have much global effect on auto efficiency or on tailpipe emissions. These regulations may work if everybody all over the world agreed to them and then actually complied with them, Sensenbrenner said. 34
In addition to skepticism about the likely impact of a U.S. law on world energy use, critics are also asking whether markets can be relied on, without government involvement, to resolve supply-demand imbalances. That is, will prices rise in response to scarcity? In the classic supply-demand scenario, higher prices encourage companies to find and produce more oil, because theyll make more money though if prices rise too much, demand drops. Some experts who hold that world oil supplies are diminishing argue that the resulting problems are too big for the market alone to handle. Intervention by governments will be required because the economic and social implications of oil peaking would otherwise be chaotic, said the report to the Energy Department directed by former energy executive Hirsch in 2005. 35 But two years later, Hirsch warns that government action to reduce demand wont produce immediate results. We have to do it, but we cant be unrealistic in our expectations, Hirsch says. If you pass a dramatic increase in CAFE now, a significant number of new cars will not show up for about three years. It takes that long to get prepared with parts suppliers, assembly lines and so forth. And people may not buy the cars unless theyre feeling pained or are required to by the government. Government intervention would do far more harm than good, argues Jerry Taylor, a senior fellow at the Cato Institute, a libertarian think tank. One thing markets are good at doing is allocating scarce resources among competing users, based on ability to pay, he says. A peak in global oil production would send a very strong signal to consumers that oil is going to become scarce. If government decides to help steer the economy through a peak scenario, its main mission will be to dull that price signal
to make sure consumers dont get it in the teeth. But even some Wall Street energy experts argue that tougher fuel efficiency standards are long overdue. If wed had [the 35-miles-per-gallon] standard in place in 1990, says Morse of Lehman Brothers, wed be consuming 2 million barrels a day less now, and wed be consuming 3 million barrels a day less if we had imposed the fuel efficiency standards on trucks that we have on cars. No new standards or sudden consumer preference for fuel-efficient gasoline-electricity hybrid cars in the near future will have a dramatic effect on oil demand, another industry expert says. Its a feel-good measure in the near term, says Pursell of Tudor Pickering in Houston. In the long term, it probably makes sense. But we have roughly 150 million cars on the road. With so many cars, he says, requiring better fuel efficiency for new cars would take years to show results. So what can you do in the near term? Pursell asks. Drive less. He adds that his fellow Texans, who favor big vehicles on the long roads they travel, dont cotton to the idea of cutting back on time behind the wheel. Another veteran oil analyst argues that market reaction to changing conditions is already well under way. We have reached a saturation point on cars, says Gheit of Oppenheimer & Co., citing anecdotal but plentiful evidence of jam-packed streets and highways throughout the country. Everywhere you go youre stuck in traffic. You go out and you cant find parking. These things are beginning to take a toll on the number of cars sold in North America. And the cars that are sold are more fuel-efficient than earlier models, Gheit says. Hence the market is coming up with its own solutions. Youre seeing more and more advancement. Economic advancement comes with much more energy efficiency.
Top Oil Companies Are State-Owned

Six of the worlds 10 biggest firms are state-owned oil companies from the Middle East or Asia. The largest is Saudi Arabias Saudi Aramco, valued at $781 billion. The worlds 10 largest companies, 2005
(Value, in $ billions)
$800 700 600 500
$781
State-owned companies Publicly traded companies

$415
400 300 200 100 0
$388
$378
$367
$344 $266 $242 $232 $224
Saudi Petrleos Petrleos Kuwait General Petroleum Electric de Aramco Mexicanos Corp Venezuela S.A.
Exxon Mobil
Microsoft Citigroup Petroliam Sonatrach Nasional (Algeria) Berhad (Malaysia)
Source: McKinsey & Co., December 2005
BACKGROUND
Energy Shock
n 1956, M. King Hubbert, a geologist for Shell Oil, told the American Petroleum Institute (API) that he had determined when U.S. oil production would hit its peak. After calculating the maximum reserves of U.S. oil fields (200 billion barrels) and the rates at which oil companies would keep pumping, he announced that the peak year would arrive in the 1970s. 36 As it happened, U.S. production peaked in 1970, many experts say, when the United States was producing about 10 million barrels a day. Today, production has fallen by about half. 37 We picked up again in the
late 70s but still didnt go back to the previous high, says Ron Planting, an API economist. But in 1956, Americans in general and the oil industry in particular believed American wells would be spouting oil and gas into the indefinite future. So when Hubbert announced his conclusion, It was as if a physician had diagnosed virulent, metastasized cancer; denial was one of the responses, writes Kenneth S. Deffeyes, a retired professor of geology at Princeton University who was a protg of Hubberts at Shell. 38 Some analysts take issue with the notion that Hubbert has been proved right. Technological advances have made it possible to probe oil and gas formations more accurately, leading to increased production in some cases, and recalculation upwards of reserves. At the time of Hubberts forecast, there was growing resentment among the oil-producing countries of the
Jan. 4, 2008
OIL JITTERS
Middle East and Latin America of the power wielded by the big eight foreign oil companies, half of them American (the so-called Seven Sisters, plus Frances state-owned oil company). While the foreign companies controlled the price of a resource that the world depended on, the supplying countries had little say. 39 After a few years of quiet discussion, ministers from Saudi Arabia, Venezuela, Kuwait, Iraq and Iran convened in Baghdad in 1960 to form the Organization of Petroleum Exporting Countries. The objective was simple: to manage prices by controlling production. In its early years, however, OPEC swung little weight, largely because the big oil companies were making major discoveries in countries that werent yet members of the new organization. Over the years, the membership expanded to include Qatar, Indonesia, Libya, Nigeria and Angola. Two other countries Ecuador and Gabon joined in the 1970s but dropped out in the 90s. As soon as the United States began depending on foreign oil, events showed that dependency had made the country vulnerable. Following the 1973 Yom Kippur War, which pitted Israel against Egypt, Syria and Iraq, Arab OPEC nations retaliated against the United States and other Israeli allies by launching an oil embargo against them. The embargo began on Oct. 17, 1973, and almost overnight 4 million barrels of oil a day were removed from world supplies. Demand rose 7 percent above supply, and international prices quadrupled from $3 a barrel to $12. Some saw the boycott as vindication of predictions that the energy foundation on which Western civilization depended would dry up. The party is over, declared E. F. Schumacher, a British economist who had long prophesied an end to cheap oil. 40 To prevent the high oil price from rippling through the economy, President Richard M. Nixon imposed price controls on oil. And his successor, Gerald R. Ford, established the Strategic Petroleum Reserve, an emergency stockpile that today has about 695 million barrels. 41 But the boycott that gave rise to those measures ended in March 1974 five months after it had begun. Egyptian President Anwar Sadat declared that the supply cutoff had served its purpose: to demonstrate to the West that it needed to push Israel to resolve its longstanding conflict with its Arab neighbors and with the Palestinians. Even as the memories and frustrations of the Arab boycott faded, Fords successor warned the country about potential future emergencies. This is the greatest challenge our country will face during our lifetimes, President Jimmy Carter said in a nationally televised speech on April 18, 1977. 42 Some commentators said the speech paved the way for Ronald Reagans 1980 election as president. Reagan portrayed himself as the optimistic alternative to gloomy Democrats. Meanwhile, however, the 1979 Iranian revolution renewed Americas sense of energy vulnerability after Shah Mohammed Reza Pahlavi a close U.S. ally who ruled an oil superpower was toppled by Muslim radicals who made anti-Americanism a tenet of their doctrine. On Nov. 4, 1979, Iranian revolutionaries seized the U.S. Embassy and took 52 employees hostage holding them for 444 days. Panic took hold of energy markets again, and prices shot up to the $45-per-barrel range, as high as theyd ever been. 43 During both the 1973 and 1979 crises American motorists sat in long lines at service stations, and some station owners who were short on supplies began rationing gasoline. During the second oil shock, Congress funded research into alternative fuels and encouraged Americans to conserve fuel. Then, even before the hostages were released in early 1981, Iraqi dictator Saddam Hussein attacked Iran. Oil exports by the two countries virtually ceased for a time, as production facilities were bombed during the first months of fighting in 1980. About 4 million barrels a day vanished from the market, setting off a new round of panic buying. The eight-year war eventually had little lasting effect on oil markets.
Consumers Go Wild
fter the disruptions caused by war and revolution, market forces restored stability to oil trade. The law of supply and demand got a big assist from Saudi Arabia, the worlds biggest oil producer. Worried that a prolonged period of high prices would cut oil demand by newly conservationminded Western countries and force prices lower Saudi Arabia had been steadily increasing its production. Non-members of OPEC followed suit. Other developments were at work as well. After the oil shocks of the 1970s, energy companies stepped up exploration outside the turbulent Middle East. By the early 1980s, the results began pouring in. At least 6 million barrels a day were added to world oil supplies by Britain and Norways production in the North Sea, a new pipeline from Alaskas rich North Slope to the port of Valdez and a major discovery in Mexican waters in the Gulf of Mexico. The new output, coming from outside the OPEC circle, was within striking distance of Saudi Arabia, which in 1981 reached a top daily production level of about 9.8 million barrels. 44 Meanwhile, the effects of conservation measures adopted during the 1970s kicked in. The most significant was a 1975 law setting tough corporate average
Continued on p. 12
10
Chronology
1950s-1970s
1956 Shell Oil geologist forecasts that the U.S. oil supply will plateau in the early 1970s. 1960 Saudi Arabia, Venezuela and other oil giants form Organization of Petroleum Exporting Countries (OPEC). 1970-72 U.S. oil reserves peak, as predicted. 1973 Arab members of OPEC cut off oil exports to the United States and other allies of Israel, causing oil prices to skyrocket. The embargo ends in March 1974. 1975 President Gerald R. Ford signs the Energy Policy and Conservation Act, imposing fuel economy standards on carmakers. 1977 President Jimmy Carter calls energy conservation the countrys biggest challenge. 1979 Revolution topples the U.S.-backed shah of Iran, prompting oil price spikes in the United States and other big oil-consuming nations.
Oil imports ease concerns about decreasing U.S. oil supplies until big oil-producing nations suspend their shipments.
1980 Non-OPEC oil supply expands by about 6 million barrels a day after Mexicos daily production rises, new North Sea sources come online and drilling is stepped up in Alaska. . . . Iraq attacks Iran. 1983 OPEC cuts prices from $34 a barrel to $29. 1985 Oil falls to $10 a barrel; Saudi Arabia steps up output and abandons efforts to prop up prices. 1988 Iran-Iraq War ends, removing source of potential oil-market disruption.
2000s
Terrorism, war and fear of war disrupt oil prices in the Middle East. Sept. 11, 2001 Arab terrorists crash hijacked U.S. jetliners into the World Trade Center and Pentagon, killing nearly 3,000 people. 2002-2003 Venezuelan oil workers strike against the Chvez governments efforts to reduce production, pushing prices up. 2003 U.S.-led coalition invades Iraq, topples Saddam. 2004 Insurgents attack Iraqi oil facilities, prompting price fluctuations. 2005 Gas hits $3 a gallon in the U.S. . . . Author of a report on peak oil tells lawmakers government should prepare for possible oil shortage. 2006 Saudi Arabias oil consumption rises by 2 million barrels a day in one year. . . . Chvez pledges to sell China 1 million barrels of oil a day by 2012. 2007 International Energy Agency warns of looming oil shortfall. . . . Crude oil price nears $100 per barrel. . . . President George W. Bush signs new energy bill including a fuelefficiency standard of 35 miles per gallon for cars and light trucks by 2020. . . . Environmental Protection Agency denies California and 16 other states the right to set auto emission standards. Jan. 2, 2008 Crude oil price hits $100.
Jan. 4, 2008
1990s
Steady supply of cheap oil sparks popularity of gas-guzzling sport-utility vehicles (SUVs), but trouble looms by decades end. 1990 Automakers sell 750,000 SUVs; annual sales hit 3 million 10 years later. . . . Iraqi leader Saddam Hussein invades Kuwait, prompting fears about Saudi oil security. 1991 U.S.-led forces oust Iraq from Kuwait, maintain protective presence in Saudi Arabia. 1996 Russia begins developing oil production facilities in its Far East region. . . . Saudi Islamist Osama bin Laden releases manifesto attacking U.S. military presence in Saudi Arabia. 1998 Socialist Hugo Chvez is elected president of Venezuela.
1980s
New non-OPEC oil sources are discovered or come online, vastly expanding world oil supplies and causing prices to plummet.
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OIL JITTERS
How Times Have Changed

Now petrostates are bailing out U.S. firms.
nly a few decades ago, American oil companies stood among the petroleum giants that controlled most of the worlds oil, and their profits largely were recycled back into the United States. But times have changed. For some time now, writes former Treasury Secretary Lawrence H. Summers, the large flow of capital from the developing to the industrialized world has been the principal irony of the international financial system. 1 In todays world, a tiny Persian Gulf state can rescue a major American bank from financial catastrophe using money earned from selling millions of barrels of oil. And politicians in Europe and the United States are nervous about their nations companies being bought up by cash-swollen petrostates. Their wealth is a reminder to our politicians that the West is no longer the force it once was in the world, wrote Michael Gordon, fixed-income director at Fidelity International, a giant investment-management firm. And just maybe, business leaders are ahead of the politicians in welcoming this infusion of new money into the global financial system. 2 Last year, U.S. lawmakers of both parties scuttled a deal that would have allowed a company owned by the government of Dubai* to run six major U.S. ports. This proposal may require additional congressional action in order to ensure that we are fully protecting Americans at home, wrote House Speaker J. Dennis Hastert, R-Ill. 3 Political jitters over the wide range of foreign government funds invested dont all center on the oil-rich countries. China, which
* Dubai is one of seven Arabian Peninsula city-states that constitute the United Arab Emirates.
has grown rich selling cheap goods to the rest of the world, has set alarm bells ringing on Wall Street over attempted investments in American and other Western companies. In 2005, a political firestorm forced Chinas state-owned oil company to abandon a bid to buy Unocal, a U.S. oil company. 4 Chinas sheer size and strategic importance guarantee continuing interest in its investment projects. But high oil prices in 2007 have focused attention on efforts by oil-exporting countries to invest their profits totaling a mind-boggling $3.4$3.8 trillion much of it in the West, according to the McKinsey Global Institute. And the developing worlds cash situation is expected to get even more dramatic in the future. The most conservative assumptions you could think of, absent some catastrophic event, would have [these assets] double by 2012, Diana Farrell, the institutes director, said in December. 5 In fact, even if the price of oil falls from current levels (now above $90 a barrel) to $50 a barrel, petrodollar assets would expand to $5.9 trillion by 2012, the institute says, fueling investment at a rate of about $1 billion a day. 6 Political resistance to Middle Eastern oil profits buying up American companies surfaced even before oil prices skyrocketed in 2007. In 2006, Dubai PortsWorld bought a British firm that ran port operations in New York City, New Jersey, Philadelphia, Baltimore, Miami and New Orleans. Lawmakers of both parties lost no time in denouncing the deal with an Arab nation as a threat to national security, and the government of Dubai eventually sold its interest in the U.S. operations. 7 But some international finance experts urge politicians and others to look at other implications, such as whether foreign-
fuel efficiency (CAFE) standards for new cars of 27.5 miles per gallon by 1985. The measure would save about 2 million barrels of gasoline a day. 45 Production from the new oil fields combined with new conservation efforts would have been enough by themselves to push oil prices down. But a third factor emerged as well: In a newly restabilized geopolitical environment, oil companies began selling off oil that theyd been holding in storage against the possibility of long-lasting shortages. Companies couldnt justify the considerable expense of warehousing the oil.
By March 1983, OPEC was feeling the pressure from an oil glut that it couldnt control by shutting down production, because much of the new supply came from outside the organizations control. So OPEC took the unprecedented step of cutting prices from about $34 per barrel to about $29. With the world oil supply still plentiful and with new CAFE standards reducing demand, prices kept falling even further. In 1985, with oil at $10 a barrel, Saudi Arabia gave up trying to limit OPEC output and stepped up its own shipments. American automakers and consumers, meanwhile, reacted in their
own ways. Unconcerned (for the moment) about oil prices and supplies, manufacturers began expanding their production of popular SUVs. Classified by the government as light trucks, the gas-guzzling SUVs were subject to less rigorous fuel efficiency standards. Gasoline remained readily available, and its price stayed flat instead of soaring to the $20 a gallon level once predicted by energy forecasters, a journalist specializing in the auto industry wrote in 1996. 46 In 1990, carmakers sold 750,000 SUVs nationwide. By 2000, annual sales were approaching 3 million.
12
the whole world goes in the owned companies could tank, says Kenneth Medlock III, end up unduly influencing an energy research fellow at the domestic policy. What about James A. Baker III Institute for the day when a country joins Public Policy at Rice Universisome coalition of the willty in Houston. That would put ing and asks the U.S. presa crimp in oil demand. ident to support a tax break for a company in which it 1 See Lawrence Summers, Sovereign has invested? Summers funds shake the logic of capitalism, asked, using Bush adminisFinancial Times (London), July 30, tration terminology for U.S. A firm owned by the government of Dubai backed out of 2007, p. A11. 2 See Michael Gordon, Ignore the allies in the Iraq War. Or a 2006 deal to run six U.S. ports after murk and myths on sovereign funds, U.S. lawmakers protested. when a decision has to be Financial Times (London), Dec. 12, made about whether to bail 2007, p. A13. out a company, much of whose debt is held by an allys cen- 3 Quoted in Jim VandeHei and Jonathan Weisman, Bush Threatens Veto Against Bid to Stop Port Deal, The Washington Post, Feb. 22, 2006, p. A1. tral bank? 8 In the 1950s, the oil-rich countries worried about foreign 4 See Jad Mouwad, Foiled Bid Stirs Worry for U.S. Oil, The New York Times, Aug. 11, 2005, www.nytimes.com/2005/08/11/business/worldbusiinvolvement in their economic and political affairs. For instance, ness/11unocal.html?_r=1&oref=slogin. the Iranians did not take kindly to the U.S.-organized 1953 5 See Sovereign Wealth Fund Briefing, (transcript) Brookings Institution, coup in Iran that ousted Prime Minister Mohammed Mossadeq, Dec. 6, 2007, p. 16, www.brookings.edu/~/media/Files/events/2007/1206_sovereign_wealth_funds/1206_sovereign_wealth_funds.pdf. who had nationalized a British-owned oil company. And oil- 6 See The New Power Brokers: How Oil, Asia, Hedge Funds, and Private producing countries also resented foreign oil companies control Equity are Shaping Global Capital Markets, McKinsey Global Institute, Ocof petroleum pricing and marketing. Eventually, most countries tober 2007, pp. 12-13, www.mckinsey.com/mgi/publications/The_ New_Power_Brokers/index.asp. nationalized their oil resources. 9 7 See Richard and Peter to Fight for Los Now the situation is almost reversed, with the industrialized coun- Angeles Times,Simon 22, 2006, Wallsten, Bush Firm Details Port Deal, U.S. Feb. p. A1; Dubai Plans for tries coming to depend on the oil countries for oil as well as cash. Ports, Los Angeles Times (The Associated Press), March 16, 2006, p. C3. But thats not necessarily a bad thing, some experts note, 8 See Summers, op. cit. because investments in the industrialized world give the oil 9 See Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power countries a stake in maintaining stability and prosperity, not to (1992), pp. 511-512, 467-470. mention a market for petroleum. If the U.S. goes in the tank,
AP Photo/Kamran Jebreili
By the mid-1990s, however, there were warning signs that the latest cheap-oil era might be ending. The signs included a little-noticed 1996 anti-American manifesto by a Saudi Arabian millionaire and veteran of Afghanistans U.S.-aided war against Soviet occupation in 1979-1989. By then, Osama bin Laden had developed a deep hatred for the United States, and he decried the presence in Saudi Arabia of American troops, which had been providing security for the oil giant ever since Saddam Hussein invaded Kuwait during the Persian Gulf War of 1990-1991. 47
Tide Turns Again
he terrorist attacks of Sept. 11, 2001, for which bin Laden later claimed responsibility, might have been expected to cause a major disruption in the oil market. Indeed, only hours after the terrorists struck, prices on the International Oil Exchange in London rose by 13 percent, to $31.05 a barrel. And as rumors of major shortages swept through parts of the United States, some drivers in Oklahoma City saw prices at the pump surge to $5 a gallon. 48
But the wholesale and pump price spikes proved momentary. No terrorists hit any oil facilities, and OPEC immediately issued a market-calming declaration that it would not use the oil weapon against the United States for whatever military action it took to answer the attacks. Overall, the average wholesale price paid by U.S. refineries in September was lower than theyd paid the previous month a drop from $24.44 a barrel to $23.73. By October 2001, the economy was having more effect on the price of oil in terms of weakening oil demand and reducing oil prices than the price of oil was having on the econ-
Jan. 4, 2008
13
OIL JITTERS
Plug-in Hybrids Offer Clean-Energy Future

New technology may enable motorists to burn less oil.
ts cities separated by hundreds of miles of windswept, open spaces, Texas may not be the place to start up a conversation about carpooling. Thats a very unpopular discussion to have here in Houston, says Kenneth B. Medlock III, speaking from his car. You look out on a freeway, says Medlock, an energy studies fellow at the James A. Baker III Institute for Public Policy at Houstons Rice University, and all you see is car after car with a driver and no passengers. Texans may be especially fond of their cars but Lone Star State drivers arent unique. Transportation (including airplanes and trucking) accounts for two-thirds of U.S. petroleum use, according to a July 2007 study by the National Petroleum Council. 1 Thats hardly a surprising statistic, given the size of the U.S. car and truck fleet: nearly 250 million vehicles in a nation of about 300 million. Relying on fuel efficiency standards alone to hold gasoline use in 2017 to what it was in 2005 would require improving average vehicle performance to 22 miles per gallon a 25 percent improvement over today, researchers at the Baker Institute calculate. 2 To reduce oil consumption to 2005 levels by conservation alone, every American would have to drive 45 miles a week less. Basically, its a lifestyle change, says Medlock, who worked on the study.
But some energy experts are arguing that new automotive technology will allow Americans to keep driving while burning less oil. They tout the plug-in hybrid electric vehicle (PHEV), a variant of the gasoline-electric hybrid car whose electric motor gets recharged from an ordinary wall socket. Limited-edition PHEVs Toyota Priuses retrofitted by conversion companies or by enthusiasts boast bigger batteries that allow drivers to cruise for about 20 miles on electric power alone, burning no gasoline. Unmodified Priuses can travel only about a halfmile on electricity alone, according to the Institute of Electrical and Electronics Engineers. PHEV advocates also say that recharging the cars at night uses surplus electricity that utilities hold in reserve for emergencies. 3 The reliance on wall current, though, raises the question of whether the plug-ins wind up burning as much energy as the hybrid models now on sale. Alternative-energy advocates raise another objection. If you start plugging in hundreds of cars all at once, youll be finding out what the limits of the electricity grid are real quick, Paul Cass, a representative of Ballard Power Systems, a Canadian firm, told the Los Angeles Times at an alternative-vehicle convention. 4 Ballard makes hydrogen fuel cells for use in cars. Hydrogen technology, attractive to many because it uses no fossil fuels at all, is getting a big push from the government $195.8 million
omy, the Congressional Research Service concluded in a report a year after the attacks. Demand weakened in part because airplane travel dropped in the immediate aftermath of the attacks. 49 As the decade wore on, however, a series of developments began to push prices higher. By late 2004, oil was commanding about $50 a barrel. Analysts cited the effects of the war in Iraq in reducing that countrys production and export capacity, as well as the economic booms already under way in China and India. By 2005, gas prices nationwide had passed $3 a gallon. Oil and marketing experts had long contended that the $3 price was a critical threshold. Rebecca Lindland, an automotive industry analyst for Global Insight, a research firm in Waltham, Mass., had told The New York Times in 2004 that
consumers would change their driving and car-buying behavior if prices at the pump exceeded $3 a gallon for at least six months. 50 The forecast proved accurate. As higher prices stayed steady, SUV lovers started shying away from sport-utility vehicles. I really want my Explorer back, but Im thinking about not getting it because of gas prices, said Angie Motylinski, a bank teller in Sylvania, Ohio, whose lease was expiring. If they gave me an awesome, awesome deal, I might consider it. But whos going to want it when gas is $3.19 a gallon? 51 Other Sylvanians were thinking similar thoughts. If I had a dollar for every time that somebody said Im looking for something with better gas mileage, Id be a wealthy man, said Bill Roemer, the manager of a local Chevrolet dealership. With gas prices
the way they are, people just arent looking at minivans, SUVs, trucks. 52
Petro-Nationalism
s prices spiraled upwards, a trend that had begun decades earlier suddenly took on new importance for oil-watchers. In the 1970s, publicly owned firms all in the West owned roughly three-quarters of global petroleum; today, state-owned oil companies own three-quarters of the oil. 53 That poses a potential problem for the U.S because governments that control oil supplies may have economic and/or political reasons to limit their foreign sales. The 1973 OPEC oil embargo serves as a reminder of the potency of oil as a political weapon against the United States. And some
14
taking 82.5 million cars off the in research and development road. Our results show that money from the DepartPHEVs recharged from lowment of Energy. Electric and and non-emitting electricity hybrid-electric car research sources can decrease the caris getting $50.8 million. 5 bon footprint in the nations Technical arguments transportation sector, said David aside, the PHEV is far closer Hawkins, director of the NRDC to dealer showrooms. Climate Center. 7 There are no truly viable Toyota and Frances state-owned energy company plan to develop recharging stations for plug-in hybrid cars hydrogen fuel cells on the Those numbers might be perin major European cities. market today, acknowlsuasive, even in Texas. edged Bud DeFlaviis, gov1 Hard Truths: Facing the Hard Truths ernment-affairs director of the U.S. Fuel Cell Council, a trade About Energy, National Petroleum Council, July 2007, p. 46, www.npchardtruth6 group. sreport.org. The argument that plug-in hybrids dont reduce energy con- 2 See Kenneth B. Medlock III and Amy Myers Jaffe, Gas FAQ: U.S. Gasosumption overall has been persuasive, because non-nuclear power line Markets and U.S. Oil Import Dependence, James A. Baker III Institute plants burn fossil fuels. That issue is especially important on the for Public Policy, Rice University, July 27, 2007, pp. 3, 13, www.rice.edu/energy/publications/FAQs/WWT_FAQ_gas.pdf. environmental-protection side of the alternative-energy debate. 3 See Take This Car and Plug It, IEEE Spectrum, July 2005, http://ieeexBut a July 2007 report gives ammunition to the PHEV ad- plore.ieee.org/iel5/6/31432/01460339.pdf?arnumber=1460339. vocates. After an 18-month study, the Electric Power Research 4 Quoted in Ken Bensinger, The Garage: Focus on autos; 2 green techInstitute and the Natural Resources Defense Council (NRDC), nologies race for drivers seat, Los Angeles Times, Dec. 8, 2007, p. C1. 5 Ibid. an environmental group, concluded that widespread use of 6 plug-in hybrids would, in 2050, reduce oil consumption by 3- 7 Ibid. See EPRI-NRDC Report Finds Environmental Benefits of Deploying 4 million barrels a day. It would also cut greenhouse gas emis- PHEVs, July 19, 2007, www.nrdc.org/media/2007/070719.asp. Report acsions by 450 million metric tons a year the equivalent of cessible at www.calcars.org/calcars-news/797.html.
producing countries may decide to increase the amount of oil they use at home. (See Current Situation, p. 18.) To be sure, the No. 1 international oil supplier, Saudi Arabia, still cooperates closely with the United States and other consuming countries. And Nigeria and Brazil invite foreign companies to help develop national petroleum resources. But Venezuela is headed by an antiAmerican president who has threatened more than once to cut off sales to the United States by its state-owned oil firm. President Hugo Chvez also plans to sell less oil to the United States and more to China. In fact, in 2006 the pugnacious Chvez vowed to sell 1 million barrels a day to China by 2012. 54 And then there is Russia. A major buildup of production capacities in the countrys Far East region has turned Russia into an oil behemoth. As such,
it once again sees itself as a great power. And some of Russias neighbors say it uses petroleum as a weapon. In winter 2006, vitally needed natural gas stopped flowing from Russia to the Republic of Georgia, headed by a president who tried to defy Russian supremacy in the region. Russia blamed a technical problem an explanation Georgians rejected. 55 But the major concern for private oil companies and oil-consuming countries such as the United States is not a cutoff in service by a state-owned oil firm. The big issues are access to oil fields and participation in production ventures. Access really is a consideration, said oil historian and consultant Yergin. Where can you go to invest money, apply technology and develop resources and bring them to market? Terms get very tough. 56
In an ironic twist, some state-owned oil companies that have grown enormously wealthy recently have ridden to the rescue of some ailing U.S. companies. Notably, the Abu Dhabi Investment Authority spent $7.5 billion on a stake in Citigroup, bailing the big bank out of trouble. (A Saudi prince is also a major stockholder.) 57 Abu Dhabi already owned shares in Advanced Micro Devices, a computer chip manufacturer, and bought a major American private-equity firm, the Carlyle Group. A sovereign wealth fund owned by Dubai, another Persian Gulf city-state, was forced to back out of a deal to manage some major U.S. ports. (See sidebar, p. 12.) The fund bought fashion retailer Barneys of New York in 2006, as well as a $1.2 billion stake in a U.S. hedge fund, the Och-Ziff Capital Management Group. These purchases are only the tip
AFP/Getty Images/Stephane de Sakutin
Jan. 4, 2008
15
OIL JITTERS
of the iceberg, and of the Big 3 U.S. auhave prompted pubtomakers and some of lic worrying by Treathe biggest foreignsury Secretary Henry owned firms, including M. Paulson Jr. and fiToyota, Volkswagen and nance ministers from Mitsubishi. the industrial countries Another endorsement about a lack of transcame from the Associaparency in high-stakes tion of International Auglobal investing by tomobile Manufacturers. petrostates. 58 Its not perfect, but I In fact, geopolitics think were going to be experts including pleased, said Mike former Central IntelStanton, president and ligence Director R. CEO of that trade group, James Woolsey say which represents Honda, President George W. Bush celebrates with House Speaker Nancy Pelosi, profits from these inNissan, Hyundai and othD-Calif., Secretary of Energy Samuel Bodman, left, and other vestments could find ers, including Toyota. 60 lawmakers after signing the 2007 Energy Act on Dec. 19. The legislation their way into the cofraises vehicle fuel economy standards for the first time in 32 years. EPA Blocks States fers of terrorists, The era of good feelings between enputting the United States in the ironic for cars and light trucks. The latter position of financing both sides in the category includes SUVs a favorite vironmentalists and the Bush administarget of environmentalists who call tration that opened with the Dec. 18 paswar against terrorism. them gas-guzzlers. sage of the energy bill proved short-lived. Under the new system, the 35- The very next day, the Environmental miles-per-gallon standard applies to Protection Agency (EPA) prohibited Calthe entire fleet of new cars and light ifornia and 16 other states from setting trucks, by all makers, sold in the Unit- their own carbon dioxide emission staned States. Then, each manufacturer dards for cars and trucks. Tougher state would have to meet an individual standards were designed to step up acstandard one for each company tion against global warming. based on each of its models footBut the new energy bill makes such print, a size measurement based on moves by states unnecessary because a vehicles wheel base and track width. cars will be polluting less because theyll The legislation does demand that burn less fuel, EPA Administrator Stephen separate sets of standards be devised L. Johnson told reporters. The Bush adt years end, environmentalists and the auto industry finally de- for cars and light trucks. That wasnt ministration is moving forward with a veloped a fuel-efficiency standard they our favorite provision, Hobson of the clear national solution, not a confusing could agree on. The agreement Union of Concerned Scientists says, patchwork of state rules, he said. I beopened the way for enactment on but since the overall target the 35- lieve this is a better approach than if inDec. 18 of the first major petroleum- miles-per-gallon standard has to dividual states were to act alone. 61 conservation law in decades. In ad- apply across both of those fleets, it California Gov. Arnold Schwarzenegdition to the new gasoline mileage was a compromise we accepted. ger, a Republican sometimes out of Industry leaders expressed support step with the Bush administration, imrequirements for cars and light trucks as well. This tough, national fuel econ- mediately vowed to challenge the de(including SUVs), the law demands a major increase in production of omy bill will be good for both consumers cision in court. It is disappointing that ethanol, the alcohol substitute made and energy security, Dave McCurdy, pres- the federal government is standing in ident of the Alliance of Automobile our way and ignoring the will of tens from corn or other plants. Environmentalists and automakers Manufacturers, said in a statement. of millions of people across the naalike say the new mileage standard We support its passage. 59 McCurdy tion, Schwarzenegger said. We will is a breakthrough that ends a long is a Democratic ex-House member from continue to fight this battle. 62 standoff over different requirements Oklahoma. The alliance is made up Continued on p. 18
CURRENT SITUATION
A
New Conservation Law
16
Getty Images/Shawn Thew (Pool)
At Issue:
Are higher vehicle fuel-economy standards good energy policy?
MICHELLE ROBINSON
DIRECTOR, CLEAN VEHICLES PROGRAM, UNION OF CONCERNED SCIENTISTS
WRITTEN FOR CQ RESEARCHER, DECEMBER 2007
ROBERT W. CRANDALL
SENIOR FELLOW, THE BROOKINGS INSTITUTION
WRITTEN FOR CQ RESEARCHER, DECEMBER 2007
equiring automakers to build more fuel-efficient cars and trucks is the patriotic, common-sense thing to do. Strengthened corporate average fuel economy (CAFE) standards will reduce our dependence on oil, save consumers billions of dollars, create hundreds of thousands of domestic jobs and dramatically cut global warming pollution. And it can be done using existing technology. How could anyone argue with that? The fuel-economy standards instituted in 1975, albeit outdated, worked. If our cars and light trucks still had the same fuel economy they did in the early 1970s, we would have burned through an additional 80 billion gallons of gasoline on top of the 140 billion gallons we will consume this year. That would have amounted to an extra 5.2 million barrels of oil per day. At an average price for regular gasoline of about $2.50 per gallon, we would have forked over an extra $200 billion to the oil companies. After decades of inaction, Congress has strengthened the standard. Cars, trucks and sport utility vehicles (SUVs) will be required to average at least 35 miles per gallon (mpg) by 2020, a 10-mpg increase over todays levels. A Union of Concerned Scientists (UCS) analysis found this would save 1.1 million barrels of oil per day in 2020, about half of what the United States currently imports from the Persian Gulf. Consumers would save $22 billion in 2020 even after paying the cost of the improved fuel-economy technology. It would prevent more than 190 million metric tons of global warming emissions in 2020, the equivalent of taking 28 million of todays average cars and trucks off the road. And the new fuel-economy standard would create jobs. According to a UCS study, the standard would generate some 149,300 new domestic jobs in 2020. Clearly, requiring cars and trucks to average at least 35 mpg by 2020 is smart energy policy. However, a better standard by itself would not ensure that we would avoid the worst consequences of global warming or conquer our national addiction to oil. To tackle these problems, the federal government also must require utilities to generate more of their electricity from clean, renewable energy sources; enact a lowcarbon fuel standard to ensure that alternatives to oil are produced in an environmentally friendly way and adopt an economy-wide cap-and-trade program. That said, improving fuel-economy standards is a big step in the right direction.
yes no
roponents of increases in mandated corporate average fuel economy (CAFE) standards often claim that they would be good for consumers, promote job formation and solve various environmental and energy-security problems. It is important, therefore, to disentangle these claims and to ask if there are not better options available. First, any claim that raising fuel economy would be good for consumers and create additional jobs is surely incorrect. A highly competitive new-vehicles market delivers cars and trucks that are responsive to consumer demand. Any attempt to mandate greater fuel economy will lead to smaller, less powerful vehicles with more expensive fuel-saving technology than demanded by consumers. Inevitably, this will lead some consumers to hold their vehicles a little longer before trading them in. The result: lower consumer satisfaction, lower vehicle output and fewer auto industry jobs. Is it any wonder that auto producers oppose these proposals? Second, any proposal to raise CAFE standards must be based on offsetting, non-market externalities associated with new-vehicle use. The current proposals are motivated in part by the desire to reduce carbon emissions, the precursors to potential global warming. But new U.S. vehicles generate a very small share of these greenhouse gases. To reduce carbon emissions efficiently, everyone on the globe should face a similar marginal cost of emitting a gram of carbon into the atmosphere. Surely, it makes little sense to legislate mandatory reductions in carbon emissions (through CAFE) for new U.S. passenger cars while letting older cars, buses and trucks off the hook and indeed even encouraging the continued use of these older cars. More important, it is sheer folly to try to reduce global warming by setting high fuel-economy standards in California, Massachusetts or Hawaii while ignoring the much-lower-cost opportunities available in constraining emissions from coal-fired power plants or coke ovens in China, India, Europe or the U.S. Raising U.S. fuel-economy standards is a very high-cost approach, even by Washington standards, to reducing the threat of global warming. Third, if the goal is to reduce oil imports for national-security purposes, increased fuel-economy standards are still an inefficient, blunt instrument. We burn oil in power plants, home furnaces, industrial boilers and about 250 million cars, trucks and buses already on the road. Any attempt to reduce oil consumption and, therefore, imports, should impose equal per-gallon costs on all of these alternatives. Higher CAFE standards will not do this and will even exacerbate the problem by encouraging Americans to use older gas-guzzlers more intensively.
17
OIL JITTERS
Twelve other states New York, New Jersey, Connecticut, Maine, Maryland, Massachusetts, New Mexico, Oregon, Pennsylvania, Rhode Island, Vermont and Washington had proposed the same standards as California. And the governors of Arizona, Colorado, Florida and Utah had pledged to follow suit. Had the EPA decision gone their way, an estimated onehalf of the new vehicles sold in the United States would have had to meet the higher-than-federal air-pollution standards. McCurdy saluted the EPA decision, tacitly referring to the potential widespread effect of the state-proposed standards. We commend EPA for protecting a national, 50-state program, he said. A patchwork quilt of inconsistent and competing . . . programs at the state level would only have created confusion, inefficiency and uncertainty for automakers and consumers. 63 Environmentalists say they are confident the states will win out in the end. The EPA decision is a short-term roadblock, says Eli Hobson, Washington representative of the Union of Concerned Scientists, which is active in energy-conservation issues. The states will move forward. Meanwhile, some lawmakers launched their own response to the EPA decision. Rep. Henry A. Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform, as well as Sen. Boxer, announced they had begun investigating the action. Waxman warned the EPA staff to preserve all documents relating to the decision. 64
New Paradigm
C
18
hina and India arent the only countries that have some oilwatchers worrying about global oil sup-
plies. Traditional oil-exporting countries are now using more of their petroleum for their own needs, shipping less to foreign buyers. Saudi Arabia, for example, consumed 2 million barrels a day more in 2006 than in 2005, a one-year increase of 6.2 percent. Some projections have Saudi Arabia burning more than onethird of its oil by 2020. 65 The Middle East isnt alone in putting its own oil to work in newly expanded fleets of cars, as well as homes and factories. Even countries such as Mexico, whose oil fields are said to be nearly played out, are consuming more and shipping less. Production is declining in Mexico, says West of PFC Energy, in part because the national oil company has been lax in exploration and maintenance. One country thats making a huge investment is Saudi Arabia, West says. Theyre going to raise production capacity to about 12.5 million barrels a day, with surge capacity to 15 million barrels a day. My people are skeptical they can do more. Saudi Arabia also has an aggressive and ambitious industrial expansion program on the drawing boards or already under way, including aluminum smelters, petrochemical plants, copper refineries and new power plants. But Saudi industrialist Abdallah Dabbagh, director of the Saudi Arabian Mining Co., which is building a smelter, confessed some doubt to The Wall Street Journal. I think the Saudi government will have to stop and think at some point if this is the best utilization of Saudis crude. 66 At street level, new cars are clogging the streets and highways of most of the worlds oil giants, in large part because government subsidies keep gasoline prices low. Saudi Arabians, whose home electricity costs are also subsidized, typically leave their air conditioners running when they go on vacation. Air conditioning accounts for nearly two-
thirds of Saudi Arabias electricity production. 67 In Venezuela, motorists pay 7 cents a gallon. As a result, Hummers perhaps the ultimate in gas-guzzling SUVs are much in demand. The seeming disconnect between Venezuelas growing fleet of massive vehicles and President Chvez plans for a socialist society prompted an outburst from the president. What kind of a revolution is this one of Hummers? Chvez asked on his television show in October. 68 And in Iran, where gasoline costs only slightly more, a government attempt in 2007 to cut back on consumption by rationing instead of cutting or lessening the subsidy caused violent street protests. Venezuelans predict the same thing would happen if their gasoline subsidy disappeared or shrank. 69 Concern about consumption is an issue that also applies to China and India can they be persuaded to moderate their taste for the same amenities that people in developed countries have been enjoying for decades? The International Energy Agency says the issue isnt one of fairness but of numbers. A level of per-capita income in China and India comparable with that of the industrialized countries would, on todays model, require a level of energy use beyond the worlds energy resource endowment. 70 By comparison, the question of whether Saudi Arabia should be building more power plants to fuel more air conditioners seems like an easier question at least for non-Saudis.
OUTLOOK
Production Crunch?
ire predictions invariably swirl around the question of Earths energy resources. Oil historian and con-
sultant Yergin counts present-day forecasts of imminent decline as the fifth set of such predictions since the petroleum industry began. Cycles of shortage and surplus characterize the entire history of the oil industry, he wrote in 2005, dismissing the idea that this phase is inherently different. 71 Still, even some oil-watchers who agree with Yergin on the fundamentals argue that the global panorama has changed enough to cause serious problems in the near term. If world economic growth stays on track, says West of PFC Energy, We believe in the likelihood of a production crunch coming between 2012 and 2014. The economic impact will be severe and the geopolitical impact will be severe. The end result could be heightened competition for resources and massive transfer of wealth to oil-producing countries, West says. To avoid such an outcome, research needs to focus quickly on finding technology that provides an alternative to petroleum as an energy source, West says. What energy research should do is prioritize limited numbers of areas, whether its battery efficiency, or light materials with which to build automobiles. Up to now, he says, research has been unfocused. The Brookings Institutions Sandalow argues that research has already developed a solution thats ready to go plug-in hybrids hybrid cars that are converted to recharge their electric motors on household current. Sandalow drives one himself. In 10 years, all Americans will be aware of the option of buying a car that plugs into the power grid, he says. We have a vast infrastructure for generating electricity in this country that does us almost no good for getting off oil. This is the breakthrough. As he envisions it, the president could order all government vehicles to use plug-in technology. Overloads of the electricity system would be avoided by
Saudi Arabia, Canada Have Biggest Reserves

Saudi Arabia and Canada lead the world in oil reserves, with nearly 450 billion barrels more than half as much as the next 10 nations combined. Oil Reserves*
Rank Country Barrels
(in billions)
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
Saudi Arabia Canada Iran Iraq Kuwait United Arab Emirates Venezuela Russia Libya Nigeria Kazakhstan United States
262.3 179.2 136.3 115.0 101.5 97.8 80.0 60.0 41.5 36.2 30.0 21.8
* As of Jan. 1, 2007 Source: World Proved Reserves of Oil and Natural Gas, Most Recent Estimates, Energy Information Administration, Jan. 9, 2007
drivers plugging in at night, using reserve capacity that utilities build into their systems. But some energy experts sound a note of caution. Hirsch, who directed the peak-oil study for the Department of Energy, supports plug-ins but says they can create as many problems as they solve. Imagine you have a lot of plug-in hybrids, enough to make a difference in U.S. oil consumption. Recharging them in off-peak hours you can do that for a while. But if youre going to have a big impact, then youre going to have to build a lot of power plants.
In general, Hirsch sees an unhappy energy future not very far down the road. Oil supplies will shrink, he says. I think theres not much question we will be in serious, long-term recession, deepening recession, he says. With oil shortages, youll have much higher prices and shortages meaning you just simply wont be able to get it. The world economy will adjust, Hirsch says, but until then, Its not a pretty picture. Companies will be cutting back on employment; a lot of people will lose their homes because they cant afford to meet mortgages. International trade will go down. Energy analyst Medlock at the Baker Institute is far less pessimistic. I see conservation forces coming to bear over the next decade, which will tend to trim the growth of demand. I do see new supplies coming on line, and a major interest in developing unconventional oil. Such developments would avoid the continued price spikes that some predict. I think its well within the range of possibility to see oil prices in the range of $60 to $70 a barrel, Medlock says. Simmons, widely seen as the leading voice of the peak oil thesis, sees no grounds for such optimism. Oil producers can indeed use natural gas liquids and other unconventional sources of energy to make up a shortfall in crude oil supplies, but that will only hasten the day when the real crunch begins, he says. We are basically living on borrowed time, he says. The gap between demand and supply creates social chaos and war by 2020. Or, in the best of all possible worlds, Simmons says, a governmentdirected effort will come up with alternatives to petroleum. But if we spend three more years arguing if its time to get into a program like that, he says, the future is grim. Gheit, the veteran oilman now on Wall Street, dismisses all such talk.
Jan. 4, 2008
19
OIL JITTERS
Oil-exploration and production technology isnt standing still and will enable oil companies to keep producing petroleum, he says. I can assure people we are not going to run out of oil any time soon.
11 Fact Sheet Prudhoe Bay, BP, updated August 2006, www.bp.com/liveassets/ bp_internet/us/bp_us_english/STAGING/local _assets/downloads/a/A03_prudhoe_bay_fact_ sheet.pdf. 12 Heather Timmons, Oil Majors Agree to Develop a Big Kazakh Field, The New York Times, Feb. 26, 2004, p. W1; Chevron Reports Oil Find in Gulf of Mexico, The New York Times [Bloomberg News], Dec. 21, 2004, p. C5; Alexei Barrionuevo, Brazil Discovers an Oil Field Can Be a Political Tool, The New York Times, Nov. 19, 2007, p. A3. 13 Quoted in Steven Mufson, U.S. Oil Reserves Get a Big Boost, The Washington Post, Sept. 6, 2006, p. D1. 14 Crude Oil Production by Selected Country, Energy Information Administration, U.S. Department of Energy, November 2007, www.eia.doe.gov/emeu/mer/pdf/pages/sec11 _5.pdf. For historical reserves figure, see Yergin, op. cit., pp. 499-500. For Saudi Arabia reserve estimate, see Crude Oil Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production, Government Accountability Office, February 2007, p. 62, www.gao.gov/new.items/d07283.pdf. 15 Government Accountability Office, ibid., p. 20. 16 Peter Jackson, Why the Peak Oil Theory Falls Down, Cambridge Energy Resource Associates, November 2006, pp. 2, 10. 17 World Energy Outlook 2007, op. cit., p. 64. 18 Quoted in Transcript: Interview with IEA chief economist, op. cit. 19 Testimony on Peak Oil, Dr. Robert L. Hirsch, Senior Energy Program Advisor, SAIC, House Subcommittee on Energy and Air Quality, Dec. 7, 2005, http://energycommerce.house.gov/reparchives/108/Hearings/12072005hearing1733/Hirsch.pdf. 20 Peak Oil Theory World Running Out of Oil Soon Is Faulty; Could Distort Policy and Energy Debate, Cambridge Energy Research Associates, (press release), Nov. 14, 2006, www.cera.com/aspx/cda/public1/news/ pressReleases/pressReleaseDetails.aspx?CID=8444. 21 Crude Oil Uncertainty about Future Oil Supply . . ., op. cit., p. 4. 22 Ibid. 23 See Tim Reiterman, Canadas black gold glitters but tarnishes, Los Angeles Times, July 8, 2007, p. A1. 24 Jackson, op. cit., p. 6. 25 Matthew R. Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (2005). 26 Quoted in Thomas Catan, UK prepares for the day the oil runs out, Financial Times (London), May 27, 2005, p. A20. 27 World Energy Outlook, op. cit., p. 122. 28 USA Statistics in Brief Population by Age, Sex, and Region, U.S. Census Bureau, updated Nov. 6, 2007, www.census.gov/compendia/statab/files/pop.html. 29 World Energy Outlook, op. cit., pp. 122, 77. 30 Olympic Trials: Chinas bout with $90 oil, Lehman Brothers, Fixed Income Research, Nov. 16, 2007, p. 3 (not publicly available). 31 President Bush Delivers State of the Union Address, The White House, Jan. 31, 2006, www.whitehouse.gov/news/releases/2006/01/ 20060131-10.html. 32 John M. Broder, House, 314-100, Passes Broad Energy Bill, The New York Times, Sept. 19, 2007, p. A16; Steven Mufson, House Sends President an Energy Bill to Sign, The Washington Post, Sept. 19, 2007, p. A1. 33 Quoted in Broder, op. cit. 34 House Select Committee on Energy Independence and Global Warming Holds Hearing on State Efforts Towards Low-Carbon Energy, Congressional Transcripts, Nov. 14, 2007. 35 Robert L. Hirsch, et al., Peaking of World Oil Production: Impacts, Mitigation & Risk Management, Science Applications International Corp., February 2005, p. 5, www.projectcensored.org/newsflash/the_hirsch_report.pdf. 36 Kenneth S. Deffeyes, Hubberts Peak (2001), pp. 1-5. 37 See Crude Oil, op. cit., Government Accountability Office. 38 Deffeyes, op. cit., p. 134. 39 For background, see Behr, op. cit. Material in this sub-section is also drawn from Yergin, op. cit. 40 Quoted in ibid., p. 615.
Notes
1 David Sandalow, Freedom From Oil: How the next President can End the United States Oil Addiction (2007). 2 Quoted in Transcript: Interview with IEA chief economist, FT.com, Nov. 7, 2007, www.ft.com/cms/s/0/3c8940ca-8d46-11dca398-0000779fd2ac.html?nclick_check=1. 3 Ibid. 4 World Energy Outlook 2007 China and India Insights, International Energy Association, p. 41, www.worldenergyoutlook.org (only executive summary available to public). 5 Quoted in Jad Mouawad, Record Price of Oil Raises New Fears, The New York Times, Oct. 17, 2007, p. C1. 6 For background, see Peter Behr, Energy Nationalism, CQ Global Researcher, July 2007, pp. 151-180. 7 For oil demand statistics, see World Petroleum (Oil) Demand 2003-2007, Energy Information Administration, U.S. Department of Energy, updated Nov. 5, 2007, www.eia.doe. gov/ipm/demand.html. 8 Daniel Yergin, The Prize: The Epic Quest for Oil, Money and Power (1992), p. 15. 9 Gretchen Morgenson, Dangers of a World Without Rules, The New York Times, Sept. 24, 2006, Sect. 3, p. 1. 10 Robert J. Samuelson, Is There an Oil Bubble, The Washington Post, July 26, 2006, p. A17.
About the Author

Peter Katel is a CQ Researcher staff writer who previously reported on Haiti and Latin America for Time and Newsweek and covered the Southwest for newspapers in New Mexico. He has received several journalism awards, including the Bartolom Mitre Award for coverage of drug trafficking from the Inter-American Press Association. He holds an A.B. in university studies from the University of New Mexico. His recent reports include Prison Reform, Cubas Future and Wounded Veterans.
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41 Current SPR Inventory As Of Nov. 29, 2007, Strategic Petroleum Reserve, Department of Energy, www.spr.doe.gov/dir/dir.html. 42 Speeches by President J. Carter Outlining the Critical Nature of the Energy Crisis and Recommendations for Legislation to Deal with Issue, April 18, 1977, CQ Public Affairs Collection. 43 Yergin, op. cit., p. 702; Imported Crude Oil Prices: Nominal and Real, Energy Information Administration, Department of Energy, undated, www.eia.doe.gov/emeu/steo/pub/ fsheets/real_prices.html. 44 Yergin, op. cit., pp. 699-703. 45 Ibid., p. 718. 46 Doron P. Levin, How Ford Finally Found the Road to Wellville, Los Angeles Times Magazine, March 10, 1996, p. 16. 47 See The 9/11 Commission Report: Final Report of the National Commission on Terrroist Attacks Upon the United States, 2004, p. 48. 48 Neela Banerjee, After the Attacks: The Energy Market, The New York Times, Sept. 13, 2001, p. A7; Brad Foss, Gas Prices Shoot Up, The Washington Post (The Associated Press), Sept. 12, 2001, p. E4. 49 Gail Makinen, The Economic Effects of 9/11: A Retrospective Assessment, Congressional Research Service, Sept. 27, 2002, p. 16, www.fas.org/irp/crs/RL31617.pdf. 50 Simon Romero, Laissez-Faire My Gas-Guzzler, Already, The New York Times, Sept. 7, 2004, p. C1. 51 Quoted in Jeremy W. Peters, On AutoDealer Lots, a Shift Away from Gas-Guzzling Vehicles, The New York Times, Sept. 1, 2006, C6. 52 Ibid. 53 Unless otherwise indicated, material in this sub-section is drawn from Behr, op. cit. 54 China seals oil deal with China, BBC News, Aug. 25, 2006, http://news.bbc.co. uk/1/hi/business/5286766.stm. 55 Millions in Georgia Without Heat, CNN, Jan. 24, 2006, www.cnn.com/2006/WORLD/europe/01/24/russia.gas/index.html. See also Top World Oil Producers, Energy Information Administration, U.S. Department of Energy, www.eia.doe.gov/emeu/cabs/topworldtables1_2.htm. 56 Quoted in Behr, op. cit. 57 Steven R. Weisman, Oil Producers See the World and Buy It Up, The New York Times, Nov. 28, 2007, www.nytimes.com/ 2007/11/28/business/worldbusiness/28petro dollars.html.

American Petroleum Institute, 1220 L St., N.W., Washington, DC 20005; (202) 682-8000; www.api.org. Lobbies for the U.S. oil industry; supports loosening restrictions on oil exploration on public lands. Cambridge Energy Research Associates, 55 Cambridge Parkway, Cambridge, MA 02142; (617) 866 5000; http://cera.com. A widely cited consulting firm that provides public summaries of studies performed for clients. Energy Information Administration, U.S. Department of Energy, 1000 Independence Ave., S.W., Washington, DC 20585; (202) 586-8800; http://eia.doe.gov. The governments energy statistics division provides access to a wide range of data on all aspects of oil and gas production and use. International Energy Agency, 9, rue de la Fdration, 75739 Paris Cedex 15, France, (011-33 1) 40.57.65.00/01; www.iea.org. An organization of industrialized countries, almost all in Europe, that studies energy trends and recommends policies on conservation and related topics. James A. Baker III Institute for Public Policy, Energy Forum, Rice University, 6100 Main St., Baker Hall, Suite 120, Houston, TX 77005; (713) 348-4683; www.rice.edu/energy/index.html. Nonpartisan think tank that sponsors research and forums on oil-related topics. The Oil Drum; www.theoildrum.com. A collective blog (with separate editions for the United States, Canada, Europe and Australia/New Zealand). Part of the peak oil community; provides a discussion forum on issues of conservation and alternative energy sources. Organization of Petroleum Exporting Countries, Obere Donaustrasse 93, A1020, Vienna, Austria; (011-43-1) 21112-279; www.opec.org. The cartel publishes statistics, forecasts and policy documents on global oil supplies.
Sovereign Wealth Funds: A Shopping List, DealBook, The New York Times, Nov. 27, 2007, http://dealbook.blogs.nytimes.com/ 2007/11/27/sovereign-wealth-funds-a-shopping-list/. 59 Quoted in John M. Broder and Felicity Barringer, E.P.A. Says 17 States Cant Set Greenhouse Gas Rules for Cars, The New York Times, Dec. 20, 2007, p. A1. 60 Ibid. 61 Ibid. 62 Waxman letter to Johnson, Dec. 20, 2007, http://oversight.house.gov/documents/200712 20111155.pdf; and Janet Wilson, EPA chief is said to have ignored staff, Los Angeles Times, Dec. 21, 2007, p. A30. 63 See Statement of President and CEO Dave McCurdy on National Fuel Economy Agreement, Alliance of American Automobile Manufacturers, Dec. 1, 2007, www.autoalliance.org/archives/archive.php?id=427&cat=Pr ess%20Releases. 64 Quoted in Dave Shepardson, Auto in58
dustry backs CAFE deal, Detroit News, www.detnews.com/apps/pbcs.dll/article?AID= 2007712010414. 65 Neil King Jr., Saudi Industrial Drive Strains Oil-Export Role, The Wall Street Journal, Dec. 12, 2007, p. A1. 66 Quoted in ibid. 67 Ibid. 68 Quoted in Simon Romero, Venezuelas Gas Prices Remain Low, But the Political Costs May Be Rising, The New York Times, Oct. 30, 2007, www.nytimes.com/2007/10/30/world/americas/30venezuela.html?n=Top/Reference/Times%2 0Topics/People/C/Chavez,%20Hugo. 69 Ramin Mostaghim and Borzou Daragahi, Gas rationing in Iran ignites anger, unrest, Los Angeles Times, June 28, 2007, p. A5; Najmeh Bozorgmehr, Iran pushes on with fuel rationing in face of riots, Financial Times (London), June 28, 2007, p. A7. Also see Romero, op. cit. 70 World Energy Outlook, op. cit., p. 215. 71 Daniel Yergin, Its Not the End of the Oil Age, The Washington Post, July 31, 2005, p. B7.
Jan. 4, 2008
21
Bibliography
Selected Sources
Books
Huber, Peter W., and Mark P. Mills, The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy, Basic Books, 2005. A lawyer and a physicist argue that energy in all its forms is plentiful. Sandalow, David, Freedom From Oil: How the Next President Can End the United States Oil Addiction, McGrawHill, 2007. A former Clinton administration official lays out a plan for reducing U.S. oil usage. Simmons, Matthew R., Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, John Wiley & Sons, 2005. A leading peak oil proponent cites evidence that Saudi Arabia has vastly exaggerated the amount of its oil reserves. Yergin, Daniel, The Prize: The Epic Quest for Oil, Money and Power, Simon & Schuster, 1992. An American oil expert provides a classic history of the global oil industry and its role in contemporary geopolitics. Murphy, Kim, et al., Oils Winners and Losers, Los Angeles Times, Nov. 24, 2007, p. A1. High oil prices spell progress for some and disaster for others as new petroleum-market dynamics play out globally. Rosenberg, Tina, The Perils of Petrocracy, The New York Times Magazine, Nov. 4 2007, p. 42. Focusing on Venezuela, a veteran writer reports that stateowned oil companies tend not to be models of efficient performance, nor reliable explorers for new energy deposits. Weisman, Steven R., Oil Producers See the World and Buy It Up, The New York Times, Nov. 28, 2007, p. A1. Wall Street and Washington try to grasp the implications of oil-producing countries buying big chunks of major U.S. and European companies.
Reports and Studies

Crude Oil: Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production, Government Accountability Office, February 2007, www.gao.gov/new.items/d07283.pdf. The government should begin planning now for world oil supplies to peak, even if that moment is several decades away. Hard Truths: Facing the Hard Truths About Energy, National Petroleum Council, July 2007, http://downloadcenter.connectlive.com/events/npc071807/pdf-downloads/NPC_Facing_Hard_Truths.pdf. The United States needs to rapidly prepare for a world in which oil is more difficult and more expensive to obtain, according to top energy experts and executives. Medlock, Kenneth B. III, and Amy Myers Jaffe, Gas FAQ: U.S. Gasoline Markets and U.S. Oil Import Dependence, James A. Baker III Institute for Public Policy, Rice University, http://bakerinstitute.org/Pubs/WWT_FAQ_Gas2.pdf. Two experts from a think tank in the U.S. oil capital explain the basics of energy use in the United States. Rosen, Daniel H., and Trevor Houser, China Energy: A Guide for the Perplexed, Center for International and Strategic Studies, Peterson Institute for International Economics, May 2007, www.iie.com/publications/papers/rosen0507.pdf. Chinas manufacturing expansion, not automobile fleet growth, accounts for most of the countrys rising oil demand.
Articles
Bradsher, Keith, Trucks Propel Chinas Economy, and Foul Its Air, The New York Times, Dec. 8, 2007, p. A1. Chinas reliance on trucking is growing by leaps and bounds, far ahead of the governments ability to regulate the industry. Hagenbaugh, Barbara, Gas pump gulps more of family pay, USA Today, May 17, 2007, p. A1. Average American consumers suddenly are shelling out appreciably more to fill their tanks. Hoyos, Carola, and Demetri Sevastopulo, Saudi Aramco dismisses claims over problems meeting rising global demand for oil, Financial Times (London), Feb. 27, 2004. The Saudi oil company responds to the first major stirrings of the peak oil movement. King, Neil Jr., Saudi Industrial Drive Strains Oil-Export Role, The Wall Street Journal, Dec. 12, 2007, p. A1. Saudi Arabias rapidly expanding consumption of its major product is making even some Saudi industrialists nervous. Morse, Edward L., and James Richard, The Battle for Energy Dominance, Foreign Affairs, March-April 2002, p. 16. Two Wall Street energy specialists presciently examine the geopolitical effects of Russias sudden emergence as a major player in world energy markets.
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The Next Step:

China and India
Klare, Michael T., Kicking the Habit, All Over the World, Los Angeles Times, Feb. 11, 2006, p. B17. China and India are pursuing oil and other energy deals with countries whose policies threaten global stability. Mouawad, Jad, Cuts Urged in Chinas and Indias Energy Growth, The New York Times, Nov. 7, 2007, p. C3. The International Energy Agency has urged advanced economies to work with India and China to reduce overall growth in energy consumption. Timmons, Heather, Citing Oil Prices, Asia Starts Reducing Fuel Subsidies, The New York Times, Nov. 2, 2007, p. C5. Asian governments have begun to roll back subsidies that have kept costs for gasoline and other fuels artificially low. Popely, Rick, Hybrid Effort: Trio Takes on Toyota, Chicago Tribune, Sept. 1, 2006, p. C1. General Motors, Chrysler and BMW have formed an alliance that will accelerate the development of hybrid systems that work on a variety of vehicles. Wilson, Jon, Hybrid Buses May Roll By Mid 2008, St. Petersburg Times, March 7, 2007, p. 1. Floridas Pinellas County may introduce hybrid buses by summer 2008 if the countys bus agency approves the plan.
Peak Oil
Steady As She Goes, The Economist, April 22, 2006, p. 65. The U.S. Geological Survey concluded the world has 3 trillion barrels of recoverable oil in the ground and that global oil supplies wont peak until after 2025. Carroll, Joe, Firm: Peak-Oil Theory Is Bogus, The Philadelphia Inquirer, Nov. 15, 2006, p. C8. Global oil production will increase for at least 25 more years as new drilling and refining techniques tap previously inaccessible reserves, according to Cambridge Energy Research Associates. Fox, Justin, Peak Possibilities, Time, Dec. 3, 2007, p. 52. The world isnt running out of oil, but much of it is difficult to extract and even harder to refine. Francis, David R., Why Peak Oil May Soon Pique Your Interest, The Christian Science Monitor, Aug. 6, 2007, p. 15. The decreasing world output of oil may soon put peakoil concerns ahead of those of global warming.
Government Intervention
Adams, Rebecca, Gas Prices Rise Along With Ethanol Use, CQ Weekly, April 24, 2006, p. 1070. The Bush administration is touting fuel-grade alcohol as a way to wean the United States from its dependence on foreign oil and is handing out millions of dollars in loans and grants to producers. Block, Sandra, Tax Credits Can Reduce Premium You Pay for Hybrid Vehicle, USA Today, May 9, 2006, p. 3B. The Energy Tax Incentives Act allows taxpayers to claim a credit up to $3,400 for purchasing hybrid vehicles. Blum, Justin, No Way Found to Cut Need for Foreign Oil, The Washington Post, Dec. 22, 2005, p. A10. The Senates refusal to allow oil drilling in Alaskas Arctic National Wildlife Refuge marks the latest failure in forming a strategy to reduce U.S. dependence on foreign oil. Hebert, H. Josef, Congress Approves Auto Fuel Economy Increase, More Ethanol Use, The Associated Press, Dec. 18, 2007. President Bush has signed an energy bill requiring a 40 percent increase in fuel efficiency for cars, SUVs and small trucks within the next 12 years.
MLA STYLE
APA STYLE
Hybrid Vehicles
Pender, Kathleen, Sale and Manufacture of Hybrids Hit Some Potholes, The San Francisco Chronicle, May 25, 2006, p. C1. Many second-generation hybrid vehicles such as the Honda Accord Hybrid and Toyota Highlander Hybrid provide minimal improvements in fuel economy.
CHICAGO STYLE
Jan. 4, 2008
23
Updated April 22, 2011
Oil Jitters
Here are key events, legislation and court rulings since publication of the CQ Researcher report by Peter Katel, Oil Jitters, Jan. 4, 2008.
olitical turmoil in the oil-rich Middle East and North Africa is causing an increase in petroleum prices, which oil traders bid up in times of uncertainty. Continuing price hikes could have a disastrous effect on the world economy, including the United States, where consumers are slowly climbing out of the recession. The most recent spur to increases is the air campaign by the United States and NATO allies against the forces of Muammar el-Qaddafi of Libya. That country was producing 1.4 million barrels of crude oil before rebels began attacking government forces in mid-March. 72 The [air] attacks create further uncertainty of Libya as an oil producer, Thina Saltvedt, a senior oil analyst from Nordea Bank Norge, in Oslo, Norway, told The Wall Street Journal. Worries are increasing with the attacks, and there are expectations of destruction of oil infrastructure. 73 Libyan oil is sold mainly in Europe. And as the conflict in Libya escalated, effectively shutting down its oil production, the price in Europe for benchmark Brent crude jumped by $2.02 to $122.52 a barrel in mid-April. 74
But the oil-price changes have not been limited to the European market. The United States, which imported 2.3 million barrels a day from the Middle East and North Africa last year, is feeling the effects of the fighting in Libya. West Texas Intermediate crude, a benchmark for the U.S. market, rose to $107.63 a barrel in mid-March The U.S. Energy Information Administration projects an average price this year of $101.77 a barrel, in contrast to $79.40 in 2010 a 28 percent increase. 75 We are no longer immune from chaos that happens down the road, Rajan Gupta, a physicist and member of the Energy Security Center at Los Alamos National Laboratory, said during a March 18 talk on rising energy demand from China and India. That need puts constant upward pressure on oil prices, apart from the latest developments in the Middle East. 76 But the latest increases stem directly from political unrest. On average, U.S. gasoline prices have increased from a 2010 price of $2.78 for regular gas to $3.83 by mid-April a 37 percent rise. In five states, the pump price
Gasoline prices are rising worldwide in the wake of political unrest and fighting in the Middle East and North Africa and could have a disastrous impact on the world economy.
had already passed the $4-per-gallon threshold by mid-April. 77 The Libyan war is only the latest episode in a succession of events affecting oil sales. Prices on the world market began an upward climb last Dec. 17, when a popular rebellion began in Tunisia. By early January, the countrys authoritarian government had been toppled, setting off a sociopolitical chain reaction throughout the Middle East and North Africa, as long-simmering discontent with political, economic and social conditions turned to protest or outright rebellion in at least a halfdozen countries.
WWW.CQPRESS.COM
CQ Press/Olu Davis
OIL JITTERS
As the Tunisian revolt unfolded, the so-called Arab Spring or Jasmine Revolution had already spread to Egypt. Authoritarian President Hosni Mubarak was forced out on Feb. 11, after more than 30 years in office. Egypt isnt an oil country, but it controls the Suez Canal, which is vital to global oil shipments. 78 the kingdom had increased production by a reported 400,000 barrels a day over its normal output of about 9 million barrels. 80 However, the beginning of the popular revolts coincided with renewed skepticism about the extent of Saudi Arabias actual reserves. In a 2007 cable from the U.S. Embassy in Saudi Arabia to avoid a price collapse, wrote Michael C. Lynch, an energy consultant and former director for Asian energy and security at the Massachusetts Institute of Technologys Center for International Studies. 82 A continuing series of oil-price increases, meanwhile, could have widespread effects on American consumers, some economists argue, as prices of all goods rise along with transportation costs. We had every reason to believe the U.S. economy will do extremely well this year, Bernard Baumohl, chief global economist for the Economic Outlook Group, in Princeton, N.J., told The Washington Post. Now we have to go back to the drawing boards. 83 Other experts argue that fears of widespread repercussions are overblown. Zachary Karabell, an economic analyst, argued that even a crude-oil price hike to $150 a barrel which he calculated would cost American gasoline-buyers about $1,000 more a year wouldnt affect the prosperous companies and individuals who are driving the U.S. economy. The ones who will suffer the most from rising oil prices are the ones who have the least impact on the economy as it is and the ones doing badly already, Karabell wrote in The Daily Beast, an online publication. Thats a harsh truth, and cold comfort to be sure, but there it is. 84 The catastrophic earthquake, tsunami and nuclear disaster in Japan, meanwhile, brought a slight temporary decline in oil prices as Japans oil-importing economy slowed. But some experts had said the dip wouldnt be sustained. If Japans nuclear power stations are knocked out permanently, it will need to import more oil, not less, wrote John Cassidy, a business and economics journalist for The New Yorker. 85 The subsequent price rise following the start of the Libya airstrikes seemed to validate that view. Hypothetically, the Japanese catastrophe could slow the pace of nuclearenergy development, thereby increas-
Fighting in Libya between NATO-aided rebels and forces loyal to Muammar el-Qaddafi has effectively shut down production of Libyan oil, which is sold mainly in Europe. Above, a rebel takes a break during fighting for the oil-rich city of Ajdabiya.
In addition to the uprising in Libya, Mubaraks departure helped spur uprisings in two other major oil producers, Oman and Bahrain, as well as Yemen and Syria. Meanwhile, the worlds second-biggest producer after Russia Saudi Arabia is feeling rumblings of discontent as well. In response to protests in the oil-rich Eastern Province, a center for the countrys minority Shiite population, King Abdullah announced a total of $130 billion in pay increases and unemployment benefits. 79 Saudi Arabias critical oil-market role stems from its policy of stepping up production to make up shortfalls elsewhere, in an effort to keep prices as stable as possible. By early March,
that surfaced in early February through Wikileaks, an American envoy reported that a former top official of Saudi Arabian Oil Co. (Saudi Aramco) had questioned the size of the countrys reserves. It is possible that Saudi reserves are not as bountiful as sometimes described, the diplomat wrote, paraphrasing the Saudi oilmans account. 81 The cable seemed to confirm the peak oil thesis that global petroleum supplies are closer to depletion than many believe. But a U.S. oil expert, writing in February, rejected the cables conclusions, arguing for calm about Saudi reserves. Saudi Aramco has discovered about 70 major oil fields but is holding off drilling in order
AFP/Getty Images/Aris Messinis
Chronology
2008
Organization of Petroleum Exporting Countries (OPEC) announces 2.2 million barrel-per-day oil production cut in an effort to prop up falling prices as global recession reduces energy demand.
2010
Massive explosion and oil spill in March at BPs Deepwater Horizon drilling platform in the Gulf of Mexico leads some industry experts to predict that stepped-up regulation of offshore oil production could lead to crude-oil price increases.
Feb. 11 After failing to quell a large and determined popular movement to oust him, Egyptian President Hosni Mubarak resigns after 30 years in power. Feb. 25 Growing political turmoil in Libya sends price of Brent crude oil to nearly $120 a barrel. March 16 Chinas suspension of new nuclearplant approvals in wake of Japanese nuclear disaster raises questions about potential for rising oil demand. March 19 Airstrikes begin against Libyan military targets by U.S. and allied warplanes, and political unrest continues in Bahrain, Yemen and Syria, intensifying concern over global oil supply and price.
2009
After global recession restrains oil demand for most of the year, Somali pirates seizure of a Saudi Arabian oil tanker gives rise to fears of more piracy and forces slight crude-oil price increase.
2011
Jan. 14 Under pressure from escalating protests, Tunisian President Zine el-Abidine Ben Ali in power since 1987 flees his country, energizing opposition movements in other Middle Eastern and North African countries.
ing global demand for oil. In China, the government has held up authorizing construction of new nuclear plants pending new safety rules. The German government closed seven plants built before 1980 until they could be inspected. Switzerland and Austria announced similar measures. 86 Whether these steps will permanently slow nuclear development, especially in Asian countries with booming energy demands, remains to be seen. Ours is a very power-hungry country, Srikumar Banerjee, chairman of Indias Atomic Energy Commission, told reporters in Mumbai on March 14, making a case that nuclear power is indispensable to expanding the countrys power grid. It is essential for us to have further electricity generation. 87
In any event, the Japan catastrophe, even as it continues, is expected to have only a marginal effect on the oil market. From a global standpoint, Marcus Noland, deputy director of the Washington-based Peterson Institute for International Economics, told NPR, the events in the Middle East . . . dwarf what is happening in Japan. 88
Peter Katel
73 Quoted in Eklavya Gupte, Libyan Air Strikes
Notes
72
The price of fear, The Economist, March 3, 2011, www.economist.com/research/articlesby subject/displaystory.cfm?subjectid=381586&story_ id=18285768.
Drive Up Oil Prices, The Wall Street Journal, March 21, 2011, http://online.wsj.com/article/ SB10001424052748703858404576214304244367 400.html. 74 Ibid.; Guy Chazan and Summer Said, Saudis Stand Ready to Fill Oil Gap, The Wall Street Journal, Feb. 25, 2011, http://online.wsj. com/article/SB100014240527487039054045761 64402346732090.html. 75 Energy & Oil Prices, Bloomberg, March 21, 2011, www.bloomberg.com/energy; Short-Term Energy Outlook, U.S. Energy Information Administration, updated March 8, 2011, www.eia. doe.gov/steo/. 76 China, India, and Energy in South and Central Asia, Rajan Gupta, New America Foundation (Web audio), Feb. 18, 2011, www. newamerica.net/events/2011/china_india_and_ energy. 77 National Average Prices, American Automobile Association, (AAA), updated March 17,
CHAPTER
11
FIXING URBAN SCHOOLS

BY MARCIA CLEMMITT
Excerpted from Marcia Clemmitt, CQ Researcher (April 27, 2007), pp. 361-384.
Fixing Urban Schools

BY MARCIA CLEMMITT
THE ISSUES
Kennedy and other congressional Democrats to enact the No Child Left Behind Act didnt go to school (NCLB) in 2002, a key aim much in elementary, was requiring states to report and they saw me as achievement scores for all a bad girl who skipped class, student groups. That ensured says Jeanette, a Houston highthat lagging scores of lowschool student who dropped income and minority students out several times but is strugwouldnt be masked by havgling to get a diploma. After ing only state or district overher parents divorced when all average scores reported. 3 she was in grade school, she This year, Congress is exfell into a pattern typical of pected to provide funding to urban students, repeatedly keep the law in operation, switching schools, somebut theres considerable distimes living with her mothagreement about where feder, sometimes her father and eral education law should go sometimes with an aunt who next, and lawmakers may wait didnt make us go to school until next year to consider Philadelphia police officers guard West Philadelphia High School on March 12, 2007, where a teacher was at all. 1 revisions (see p. 379). attacked by three students three days earlier. Experts In middle school, Jeanette NCLBs test-score reporting suggest that a behavior gap between black and white began taking drugs but later requirements make it more students parallels the academic achievement gap got involved in sports, which possible to look at whether between high- and low-performing students. motivated her to try, someschools are doing well just times successfully, to keep up her measured by eligibility for free and for more affluent students or for poor grades and stay off drugs. Some teach- reduced-price lunch, according to the students as well, and thats valuable, ers have tried hard to help her, but Center for Civil Rights at the University says Jeffrey Henig, professor of political like many troubled urban kids, she of North Carolina. Only 5 percent of science and education at Columbia pulls back. If I need help . . . I dont white students attend such high-poverty Universitys Teachers College. say anything. . . . They have to ask schools. 2 (See graph, p. 368.) But some supporters, including PresThese schools, mostly urban, arent ident Bush, say the NCLB has done me. Still, Jeanette is determined to avoid the fate of her parents, who making the grade, even in the context more than just improve data-gathering, dropped out of school when they had of lagging achievement in American arguing that the law itself has pushed her. At the time, her mother was only schools overall. achievement upward. Fourth-graders Although states show significant vari- are reading better. Theyve made more 13. I dont want to live like them. I want to have a better life, she says. ations, nationwide 71 percent of eighth- progress in five years than in the preJeanette typifies the daunting chal- graders are not reading at grade level, vious 28 years combined, he said on lenge that urban schools face in pro- and the percentage shoots up to be- March 2. 4 moting academic achievement among tween 80 and 90 percent for students Many education analysts disagree children whose lives have been disor- of color, says former Gov. Bob Wise, with that rosy assessment. The small D-W.Va., now president of the Alliance improvement in fourth-grade reading dered and impoverished. Most middle-class families with chil- for Excellent Education, a broad-based and mathematics scores is part of a dren have moved to the suburbs, leav- coalition that advocates for academi- long-term trend, which began years ing urban schools today overwhelm- cally stronger high schools. before NCLB was even enacted, said Furthermore, of the approximately Harvard University Professor of Eduingly populated by low-income, African-American and Hispanic stu- 15,000 U.S. high schools, 2,000 cation Daniel M. Koretz. Theres not dents. Nationally, about 50 percent of mostly in cities account for half of any evidence that shows anything has all black and Latino students attend the nations school dropouts, says Wise. changed since NCLB, he said. 5 When President George W. Bush schools in which 75 percent or more And for urban schools, the postof the students are low-income, as joined Massachusetts Sen. Edward M. NCLB picture is especially grim.
AP Photo/Matt Rourke
April 27, 2007
363

Minority Districts Often Get Less Funding
In 28 states, school districts with high-minority enrollments received less per-pupil funding (shown as a negative number, top map) than districts with low-minority levels. For example, in Illinois, the highestminority districts received an average of $1,223 less per student than the lowest-minority districts. In 21 states, the highest-minority districts received more per pupil (shown as a positive number, bottom map), than the districts with the lowest-minority enrollments. For example, in Georgia, the highest-poverty districts received $566 per student more than the lowest-poverty districts.
Of the non-achieving schools in New York state, for example, 90 percent are in cities and 80 percent in the states five biggest cities, says David Hursh, an associate professor of teaching and curriculum at the University of Rochesters Margaret Warner Graduate School of Education. The gap between average reading scores of black and white fourth-graders narrowed by only one point on the 500-point National Assessment of Educational Progress test (NAEP) between 2002 and 2005, and the narrowing appears to be part of a long-term trend, since it narrowed by three points between 1998 and 2005. Between 2002 and 2005, the reading-score gap between white and black eighth-graders actually widened, from 25 points to 28 points. 6 The continuing severe achievement gap, newly highlighted by NCLBs datareporting requirements, leaves lawmakers and educators scratching their heads about what to do next. Some analysts say lagging achievement in urban schools demonstrates that poor families in poor communities require much more intense interventions than middle-class students, including better teachers and longer school days as well as improved health care, nutrition and parenting education. A public school enrolling mainly middle-class white students has a onein-four chance of producing good test scores, across years and in different subject matter, according to Douglas N. Harris, assistant professor of education policy at the University of Wisconsin, Madison. A school with a predominantly low-income minority population has a 1-in-300 chance of doing so. 7 Experts blame the poor outcome on the fact that urban schools, like all schools, are staffed and organized to provide substantial extra help to only 15 percent of students and curriculum enrichment to another 15, while the students in the
Minority Funding Gaps by State, 2004

States where high-minority districts received less funding than low-minority districts
Wash. Mont. N.D. S.D. Wyo. Neb. Nev. Calif. Okla. Ariz. N.M. Ark. La. Texas Alaska Fla.
Miss.
Minn. Wis. Mich. Iowa Ill. Ind. Ohio W.Va. Ky. Va. Tenn. Ala. Ga. N.C. S.C. Pa.
Vt.
N.H. Maine
Ore.
Idaho
N.Y. Conn. N.J. Del. Md. D.C.
Mass. R.I.
Utah
Colo.
Kan.
Mo.
-$2,000+ -$1,001 to -$2,000 -$500 to -$1,000 -$1 to -$500
States where high-minority districts received more funding than low-minority districts
Wash. Idaho Wyo. Neb. Nev. Calif. Okla. Ariz. N.M. Ark. La. Texas Alaska Fla.
Miss. Ala.
Mont.
N.D. S.D.
Minn. Wis. Mich. Iowa Ill. Ind. Ohio W.Va. Ky. Va. Tenn. N.C. S.C. Ga. Pa.
Vt.
N.H. Maine
Ore.
N.Y. Conn. N.J. Del. Md. D.C.
Mass. R.I.
Utah
Colo.
Kan.
Mo.
$0 to $500 $500 to $1,000 $1,001 to $2,000 $2,000+
Note: Hawaii is not shown because data are not available. Source: Funding Gaps 2006, The Education Trust, 2006
364
middle are supposed to take care of themselves, says Robert Balfanz, associate research scientist at the Johns Hopkins University Center on the Social Organization of Schools and associate director of the Talent Development High School program, a reform initiative in 33 schools nationwide. The formula for extra help fits most suburban schools, but in urban schools 50 to 60 percent, and sometimes up to 80 percent, of the kids are high-needs, defined as English-as-a-second-language students, special-education students or students below grade level or with severe attendance problems. Were not set up to respond when that many kids need one-on-one tutoring, monitoring of their attendance on a daily basis, [or] people calling up to say, Glad you came today, Balfanz says. One of the biggest problems is the kind of student mobility experienced by Jeanette, the Houston dropout. Homelessness is much underreported, says James F. Lytle, a professor at the University of Pennsylvania and former school superintendent in Trenton, N.J. Statistics are based on whos in shelters and on the streets. But 20 to 30 percent of our kids were living in serial households on a day-to-day basis, or moving about from parents to grandparents to relatives to friends not living in the same house all the time. Inner-city schools have a 40 to 50 percent student-mobility rate, which means up to half the students change schools at least once a year because of parents losing or changing jobs, evictions and other factors, says Columbia Universitys Henig. That disrupts students ability to keep up with work and build relationships with the adults in a school. In addition, city students miss school for a wide range of reasons, including high asthma rates; lack of school buses, forcing kids to get to school on their own, often through unsafe neighborhoods; and family responsibilities, like caring for younger siblings.
All Racial/Ethnic Groups Improved on Test

Fourth-graders in all racial and ethnic groups began modestly improving in math on the National Assessment for Educational Progress several years before passage of the No Child Left Behind Act. Average Fourth-Grade Scores in Math, 1996-2005 (by race, ethnicity)
Passage of No Child Left Behind Act
(Score)
300 250 200 150
* *
1996
White
2000
2003
2005
Hispanic Black
Asian/Pacific Islander
American Indian/ Alaska Native
* Some data for 1996 and 2000 not available Source: U.S. Department of Education, National Center for Education Statistics
Imagine the teachers dilemma in a classroom where the population is different every day, says Balfanz. But some conservative analysts argue that a large proportion of high-needs students is still no reason for schools to fail. Schools frequently cite social problems like poverty . . . and bad parenting as excuses for their own poor performance, said Jay P. Greene, a senior fellow at the Manhattan Institute, a conservative think tank. This argument that schools are helpless in the face of social problems is not supported by hard evidence. . . . The truth is that certain schools do a strikingly better job than others, including public, private and charter schools. 8 Some educators say one solution for low-quality urban schools is establishing publicly funded charter schools and awarding vouchers for private-school tuition. 9 When choice is expanded, urban public schools that once had a captive clientele must im-
prove the education they provide or else students . . . will go elsewhere, said Greene. 10 But others argue that lessons from successful urban schools, including charters, demonstrate that raising lowincome students achievement requires resources and staff commitment that may be tough for the nation to muster. Teachers in high-poverty urban schools are as much as 50 percent more likely to . . . leave than those in low-poverty schools, in part because of the intensity of the work, according to researchers at the University of California, Santa Cruz. 11 A second-grade teacher fluent in Spanish who reported working 10 hours a day, six days a week said shed probably stop teaching when she had children: Its too time-consuming and energy-draining, she said. 12 None of the teachers in our sample could conceive of being a successful urban teacher without an extraordinary perhaps unsustainable
April 27, 2007
365

commitment to the work, the researchers commented. 13 Not just schools but communities must help in the effort to improve students performance. There ought to be a parade through the heart of town every time a student achieves an academic goal, says Hugh B. Price, a fellow at the Brookings Institution, a liberal think tank. We need to wrap and cloak kids in this message of achievement. Thats how the military successfully trains soldiers, Price says. They will praise anything thats good. Schools and communities also have a role in helping parents better equip their children for school, says Mayor Douglas H Palmer of Trenton, N.J., president of the National Conference of Democratic Mayors. You dont have to be rich to talk to your child, help her build vocabulary and learn to reason and negotiate, as psychologists recommend, he says. We can help parents with these skills. As educators and lawmakers debate the next steps to improving urban schools, here are some of the questions being asked: Has the No Child Left Behind law helped urban students? NCLB was intended to improve overall academic achievement and raise achievement for minority and low-income students, in particular, mainly by requiring more student testing, getting schools to report test data separately for student groups including minorities and the poor and requiring schools to employ betterqualified teachers. The law, scheduled for reauthorization this year, gets praise for focusing attention on the so-called achievement gap between minority and low-income students and their middleclass counterparts. But critics say the legislation doesnt do enough to assure that low-performing urban schools get the excellent teachers they need. Student achievement also has improved slightly under the law, some advocates point out. Is NCLB really paying off? The answer is yes, U.S. Chamber of Commerce Senior Vice President Arthur J. Rothkopf told a joint House-Senate committee hearing on March 13. While current testing data is still abysmal, it nevertheless represents improvement from where this nation was before the law. The law has benefited urban schools by raising reading scores for AfricanAmerican and Hispanic fourth- and eighth-graders and math scores for African-American and Hispanic fourthgraders to all-time highs. Achievement gaps in reading and math between white fourth-graders and African-American and Hispanic fourthgraders also have diminished since NCLB, he noted. 14 NCLBs data-reporting requirements have lifted the carpet to reveal two previously unrecognized facts about American education the continuing under-performance of the whole system and the achievement gap for lowincome and minority students, says Daniel A. Domenech, senior vice president and top urban-education adviser for publisher McGraw-Hill Education and former superintendent of Virginias vast Fairfax County Public Schools. 15 And while some critics complain that NCLB gave the federal government too much say over education traditionally a state and local matter there needs to be a strong federal role for these kids in low-income urban schools because they have been left behind, says Gary Ratner, a public-interest lawyer who is founding executive director of the advocacy group Citizens for Effective Schools. States and localities have not stepped up. Now NCLB has got the countrys attention, and when Congress reauthorizes the law, the federal role can be redirected to focus on Title I schools those serving a large proportion of disadvantaged students and do more of the things that professional educators support, Ratner says. NCLBs requirement that every school have very qualified teachers is good, says Gary Orfield, a professor of social policy at the Harvard Graduate School of Education and director of The Civil Rights Project. But critics argue that NCLB doesnt put muscle behind the high-quality teacher requirement and sets unrealistic goals and timetables for school progress. NCLB actually incentivizes teachers to leave failing schools, the last thing lawmakers intended, says Jennifer King-Rice, an economist who is associate professor of education policy at the University of Maryland, College Park. Teachers say, I cant produce the AYP [average yearly progress] results the law calls for in low-performing schools with few resources and, frustrated, go elsewhere, she says. Nevertheless, its still unclear whether and how the government can enforce the qualified-teacher rule. (See graphs, p. 367.) The law provides no additional funding to help schools meet the teacherquality goal, said Richard J. Murnane, professor of education and society at the Harvard Graduate School of Education. Teaching in these schools is extremely difficult work, and very few school districts provide extra pay or other inducements to attract talented teachers to these schools. 16 As a result, all too often these schools are left with the teachers other schools dont want, he continued. And the teachers who do have options exercise seniority rights to leave . . . as soon as they can. 17 The achievement targets set by NCLB are panned by many. The main goal schools must meet is moving kids over a standardized-testing threshold from basic or below basic understanding of reading and math to a proficient level or above. But focusing on that narrow goal as the key measure by which schools are judged created bad incentives to game the system, many analysts say.
366
Rather than concentrating on raising overall achievement or trying to give the most help to students who score lowest, many schools concentrate on students who are on the bubble those who need to raise their scores by only a few points to move into the proficient range and forget the others, says Patrick McQuillan, an associate professor of education at Boston Colleges Lynch School of Education. Schools that succeed at pushing the scores of bubble students up by a few points are deemed successful, according to current NCLB standards, even if they leave the neediest students even farther behind, he says. The laws pronouncement that 100 percent of U.S. students will test at the proficient level is simply unrealistic, some critics say. Weve never fully funded education in the United States, and achievement continues to lag far below the proficient level, especially for lowincome students, says Domenech. So lets not kid around and say that by 2014 all students will be academically proficient, he says. Thats like saying, Im going to push you out the window, and I know you can fly. Furthermore, NCLBs focus on a handful of standardized tests as the sole measures of childrens progress puts teachers in an ethical bind that definitely lowers their morale, says Marshalita Sims Peterson, an associate professor of education at Atlantas Spelman College, an historically black school for women. Teachers in training are taught that students are individuals with a wide variety of learning styles, and that no single assessment can define a student, says Peterson. The NCLBs excessive focus on a single measurement of achievement leaves the teacher in an awful position she says. You need to keep the job, but when you are actually completing that form stating the single score for a third-grader, youre asking, Is that all there is to this child?
Minority Enrollment and Teacher Quality

In Illinois, 88 percent of the schools that were virtually 100 percent minority ranked in the lowest quartile of the states Teacher Quality Index (graph at left). By comparison, only 1 percent of the all-minority schools ranked in the highest quartile (right). High-quality teachers have more experience, better educations and stronger academic skills. Similar patterns are found in most other states. Percentage of Illinois Schools in Lowest Quartile of Teacher Quality Index, 2002-2003
Percentage of schools
Percentage of Illinois Schools in Highest Quartile of Teacher Quality Index, 2002-2003

Percentage of schools
100% 80 60 40 20 0 <50%
88% 70%
100% 80 60
34% 11%
50-89% 90-98% 99-100%
40 20 0
32% 13% 4%
<50%
1%
50-89% 90-98% 99-100%
Minority Percentage in School
Minority Percentage in School
Source: Teaching Inequality: How Poor and Minority Students Are Shortchanged on Teacher Quality, The Education Trust, June 2006
Should governments make schools more racially and economically diverse? Today, most African-American and Latino students attend urban schools with a high concentration of lowincome students and very few white classmates. Some advocates argue that the country has backtracked to an era of separate but unequal schools and say government programs aimed at creating more racially and socioeconomically diverse schools are good tools for narrowing the achievement gap. Opponents of government interference with childrens attendance at neighborhood schools argue that with residential neighborhoods increasingly segregated by race and income, school integration is unrealistic, and that governments
should focus instead on improving achievement in urban schools. 18 The effort to get the right racial balance is misguided and represents a kind of liberal racism a belief that black children need to be in school with white children to learn, says Stephan Thernstrom, a history professor at Harvard University and a fellow at the conservative Manhattan Institute. If integration can be managed naturally, thats fine, but there is no clear correlation that can be drawn from data showing its important for closing the achievement gap, Thernstrom says. He rejects as incomplete and flawed studies that suggest integration does make a big difference. Furthermore, if you need a white majority to learn, learning will soon be impossible in America, since Hispanic,
April 27, 2007
367

Blacks, Hispanics Attend High-Poverty Schools
Black and Hispanic students are more likely to be concentrated in high-poverty schools than white students. Forty-seven percent of black and 51 percent of Hispanic fourth-graders were in the highestpoverty schools in 2003 vs. 5 percent of white fourth-graders. By contrast, only 6 percent of black and Hispanic fourth-graders were in the lowest-poverty schools compared with 29 percent of the whites. Percentage of Fourth-graders in High-poverty Schools
(Based on proportion eligible for free or reduced-price lunch)
60% 50 40 30 20 10 0
Total
Poverty Level:
10% or less
Black
11-25%
White
26-50% 51-75%
Hispanic
More than 75%
Source: The Condition of Education 2004 in Brief National Center for Education, June 2004
Asian and African-American populations are growing faster than the current white majority, he notes. Racial concentration is not the same as segregation and doesnt stand in the way of achievement, said his wife, Manhattan Institute Senior Fellow Abigail Thernstrom. School districts are powerless to change housing demographics, making it highly unlikely that racial concentration of students ever could be ended, she said. 19 Some school districts are attempting to integrate lower-income and higher-income students, rather than integrating schools based on race. But Abigail Thernstrom argued that giving children a longer commute to schools outside their neighborhoods, for any reason, simply wastes time better spent in the classroom. Busing doesnt raise the level of achievement, she told C-SPAN. Now theyre going to start busing on the basis of social class.
And I have a very simple view of that. Stop moving the kids around and teach them. 20 Meanwhile, some charter schools such as the Knowledge Is Power Program (KIPP), begun in Houston are making great strides in reducing the urban achievement gap, and for the most part those schools are not racially integrated, wrote New York Times Magazine features editor Paul Tough last year. Most of the 70 schools that make up the three charter networks he observed have only one or two white children enrolled, or none at all, he noted. Leaders of the networks, all of them white, actually intend to educate their students separately from middleclass students, according to Tough. However, unlike those whove argued that schools can be separate but equal, the successful high-intensity charter schools aim for separate but better.
Their founders argue that students who enter middle school significantly behind grade level dont need the same good education that most American middle-class students receive; they need a better education, he said. 21 But many advocates argue that data show a proven way to improve education for thousands of low-income students rather than for the handful that attend the highly successful charter schools is integration of minority and poor students with middle-class children. School desegregation by race has clear academic benefits, wrote R. Scott Baker, an associate professor of education at Wake Forest University. Data from Charlotte, N.C., show that the longer both black and white students spent in desegregated elementary schools, the higher their standardized test scores in middle and high school. Research also suggests that where school desegregation plans are fully and completely implemented, local housing also becomes more integrated. 22 In the 1960s and 70s some federal courts mandated programs to help urban minority families move to middle-class white suburbs. Long-term data from those cases show that children who moved did better than those who stayed behind, according to Howell S. Baum, a professor of urban studies and planning at the University of Maryland. In St. Louis, 50 percent of the black students who moved to the suburbs graduated from high school, compared to 26 percent of those who remained in the high-minority, low-income urban schools. 23 Many policy analysts agree that segregating low-income children in some public schools perpetuates failure, wrote the Century Foundations Task Force on the Common School. Nevertheless, there is an equally durable political consensus that nothing much can be done about it. The panel argued that this must change: Eliminating the
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harmful effects of concentrated school poverty is the single most important step that can be taken for improving education in the United States. 24 Dozens of studies dating back to the 1960s find that low-income children have . . . larger achievement gains over time when they attend middleclass schools, said the panel. 25 The tragedy right now is that places that were once forced to [integrate their schools] now arent allowed to, says Orfield of The Civil Rights Project. That will be seen as a cosmic blunder for white Americans as well, he said. Were not preparing ourselves for the multiracial society and world of the 21st century. Are teachers prepared to teach successfully in urban classrooms? Urban schools have high teacher turnover, low test scores and many reported discipline problems. Furthermore, most of Americas teaching force still consists of white, middleclass women, while urban schoolchildren are low-income minorities, creating a culture gap that may be hard to bridge. Consequently, some analysts argue that todays teachers arent prepared to teach successfully in urban classrooms for a variety of reasons, from discipline to second-language issues. Others, however, point to sterling examples of teachers and schools that do succeed and argue that the real problem is teachers not following good examples. Fifth-grade teacher Rafe Esquith, at the Hobart Elementary School in central Los Angeles, routinely coaches his urban Korean and Central Americanimmigrant students to top standardizedtest scores. Furthermore, his classes produce Shakespearean plays so impressive theyve been invited to perform with Britains Royal Shakespeare Company, said Abigail Thernstrom. 26 But despite Esquiths success, nobody copies him, even in his own school,
said Thernstrom. I went to the fifthgrade [classroom] next door [to Esquiths] one day, and it was perfectly clear nothing was going on. When Thernstrom suggested the teacher might copy Esquiths methods which include beginning class as early as 6 a.m. and working with students at his home on weekends he remarked that its an enormous amount of work. 27 Today, around the country, we do have shining examples of schools that succeed at urban education, says Timothy Knowles, executive director of the University of Chicagos Center for Urban School Improvement and a former deputy school superintendent in Boston. Ratner, of Citizens for Effective Schools, agrees. I spent time in an elementary school in Chicago a few years ago where all the teachers were teaching reading, even at the upper grades, equipping students with the vocabulary and comprehension skills needed for future academic work, he says. They had a good principal, and they were showing that it can be done. But while successful urban schools and classrooms are out there, many education analysts say the know-how and resources needed to spread that success to millions of students are sorely lacking. Some individual schools are closing the achievement gap for needy students, but very few, if any entire school districts have had equivalent success, says Knowles. Charter schools also havent seen their successes spread as widely as many hoped. Out of Ohios 300-plus charter schools, for example, some . . . are indeed excellent, but too many are appalling, wrote analysts Terry Ryan and Quentin Suffran of the conservative Thomas B. Fordham Foundation in a recent report. 28 There are reasons for that, said Mark Simon, director of the Center for Teacher Leadership at Johns Hopkins
University, in Baltimore. Teaching lower-class kids well is tougher than teaching middle-class kids. Furthermore, it is surprising how little we know about teaching practices that cause students to succeed, particularly in high-poverty schools. 29 You have poverty in many districts, but in urban schools you have a concentration of it that makes teaching successfully there much harder than in middle-class suburbs, says Timothy Shanahan, professor of urban education at the University of Illinois at Chicago and president of the International Reading Association. Schools are traditionally set up to deal with 15 to 20 percent of a student body having very high needs, says Shanahan. But urban schools usually have 50 percent or more of their students needing special attention of some kind, and thats a huge burden on the teachers, he says. Literally, we have 5-year-olds who come into the Chicago school system not knowing their own names, he says. I know local neighborhoods with gang problems, where the kids are up all night. Their mothers are hiding them under the bed to protect them from shootings in the street. Then teachers cant keep them awake in class. The nations rapidly growing Hispanic population is heavily concentrated in urban schools. That new phenomenon presents another tough obstacle for the urban teaching force, because older teachers know nothing about working with non-native English speakers, says McQuillan of Boston College. Not just language but race complicates urban-school teaching. As many as 81 percent of all teacher-education students are white women. 30 Those most often entering teaching continue to be white, monolingual, middle-class women, wrote Jocelyn A. Glazier, assistant professor of education at the University of North Carolina at Chapel Hill. 31
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Many teachers, especially white women, shy away from making tough demands on African-American students, according to a survey of urban community leaders by Wanda J. Blanchett, associate professor of urban special education at the University of Wisconsin, Milwaukee. Especially with African-American males, you hear the teachers say, Oh, he is such a nice kid. But . . . this irks me when teachers baby their students to death instead of pushing. . . . I get that a lot when you have white teachers who have never worked with black students from the urban environment. 32 Many entering education students at Indiana University-Purdue University, in Indianapolis, balked at the schools fieldwork and student-teaching venues, which were in urban schools, wrote Professor Christine H. Leland and Professor Emeritus Jerome C. Harste. They saw our programs urban focus as an obstacle to their career goals of teaching in schools like the suburban ones most had attended. 33 Some viewed urban students as an alien race they didnt want to learn to know. Students rarely felt the need to interrogate their underlying assumption that poor people deserve the problems they have or spent any time talking or thinking about issues such as poverty or racism, Leland and Harste wrote. After student teaching, however, some students changed their plans and applied to become urban teachers. 34 Race is a taboo subject in America, which some analysts say compounds urban teachers difficulties. Many teacher-preparation programs center on an effort not to see or at least not to acknowledge race differences, according to Glazier. But by claiming not to notice [race], the teacher is saying that she is dismissing one of the most salient features of a childs identity. 35 Many teachers believe that if they recognize a students race or discuss issues of ethnicity in their classroom, they might be labeled as insensitive and racist, wrote Central Michigan University graduate student in education Dreyon Wynn and Associate Dean Dianne L. H. Mark. But white teachers deliberate color-blindness ignores students unique culture, beliefs, perceptions, [and] values, blocking both learning and helpful student-teacher relationships, Mark and Wynn argue. 36 But as all states began establishing public education systems between the late 18th and the mid-19th century questions over equality in education arose, first for black students and later for immigrants. When public schools opened in Boston in the late 18th century, black children were neither barred nor segregated, wrote Derrick Bell, a visiting professor at the New York University School of Law. But by 1790, racial insults and mistreatment had driven out all but three or four black children. 39 Later, some black families joined with white liberals to form black-only schools in Massachusetts and in other states. But complaints about poor conditions and poor teaching in those schools led others to sue for integrated education. Even in the early 19th century, some courts were bothered by race-based inequities in education, said Bell. A federal court struck down a Kentucky law directing that school taxes collected from white people would maintain white schools, and taxes from blacks would operate black schools. Given the great disparities in taxable resources this would result in an inferior education for black children, the court said. 40 Around the 1820s, waves of nonEnglish immigration began, raising new controversies over educating poor children of sometimes-despised ethnicities. Before 1820, most U.S. immigrants were English, and a few were Dutch. But between 1820 and 1840 Irish immigrants became the first in a long parade of newcomers judged inferior by the predominantly English population. A rising tide of immigration in the late 19th and early 20th centuries included many non-Englishspeakers Italians, Germans, Chinese, Russians, Poles and many others who posed new challenges for schools and were looked down on by many citizens.
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BACKGROUND
Educating the Poor
merican education has long struggled with providing equal education for the poor, racial minorities and non-English-speaking immigrants. Until recently, however, even people who never made it through high school could usually find a good job. A new, global, technical economy may be changing that. In the earliest years in the United States, schooling wasnt widespread. A farm-based economy made extensive education unnecessary for most people. In 1805, more than 90 percent of Americans had completed a fifth-grade education or less, and education for richer people was often conducted by private tutors. 37 State legislatures were just beginning to debate whether to establish free taxfunded schools for all children. 38 Nevertheless, even in those early days, some religious and other charitable groups considered it a moral duty to educate the poor. In New York City, for example, the Association of Women Friends for the Relief of the Poor opened a charity school in 1801. By 1823 the group was providing free elementary education for 750 children, with some public assistance. Similar charity schools sprang up in most other major cities.
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Chronology
1950s-1960s 1990s-2000s
Concerns grow over student achievement and racially segregated schools. 1954 Supreme Court rules in Brown v. Board of Education that separate schools are inherently unequal. 1965 Title I of the new Elementary and Secondary Education Act (ESEA) targets the largest pool of federal education assistance to help schools serving disadvantaged students. 1966 Sociologist James S. Colemans Equality of Educational Opportunity report concludes that disadvantaged African-American students do better in integrated classrooms. 1969 National Assessment of Educational Progress (NAEP) tests launched but report statewide average scores only, allowing states to mask lagging achievement among poor and minority students.
Steady gains in African-American students test scores over the past two decades begin to taper off by decades end. . . . Poverty concentrates in cities. . . . Governors lead efforts to raise education standards.
masking the failing scores of some groups. . . . U.S. Supreme Court rules in favor of Ohios school-voucher program, which allows public funding for tuition at Cleveland parochial schools. . . . State takes over Philadelphias bankrupt school system, allows private companies to run some schools. 2005 Hoping to halt isolation of the lowest-income students in innercity schools, Omaha, Neb., tries but fails to annex neighboring suburban districts. 2006 Department of Education admits that few students in failing city schools receive the free tutoring NCLB promised and that no states have met the 2006 deadline for having qualified teachers in all classrooms. . . . Government Accountability Office finds that nearly one-third of public schools, most in low-income and minority communities, need major repairs. 2007 Gov. Deval L. Patrick, D-Mass., puts up $6.5 million to help schools lengthen their hours. . . . Democratic Mayor Adrian Fenty, of Washington, D.C., is the latest of several mayors to take control of schools. . . . New York City Schools Chancellor Joel Klein says he will fire principals of schools with lagging test scores. . . . Teachers unions slam report calling for all high-school seniors to be proficient in reading and math by 2014. . . . Houston school district calls for state to replace NCLB-related standardized periodic testing on math and reading with traditional end-of-course subjectmatter exams.
1990 New Jersey Supreme Court rules in Abbott v. Burke the state must provide more funding for poor schools than for richer ones. 1991 Minnesota enacts first charter-school law. 1994 In reauthorizing ESEA, Congress requires states receiving Title I funding for disadvantaged students to hold them to the same academic standards as all students. 1995 Knowledge Is Power Program charter schools launched in Houston and New York City. . . . Boston creates Pilot School program to research ideas for urban-school improvement. 1999 Florida establishes first statewide school-voucher program. 2000 Countywide, income-based school integration launched in Raleigh, N.C. 2002 Cambridge, Mass., schools begin integration based on income. 2002 No Child Left Behind Act (NCLB) requires states to report student test scores disaggregated by race, income and gender to avoid
1970s-1980s
Latinos are becoming most segregated minority in U.S. schools. Magnet schools are established. School integration efforts gradually end. 1973 Supreme Court rules in San Antonio Independent School District v. Rodriguez the Constitution does not guarantee equal education for all children. . . . In Keyes v. School District No. 1, the court bans city policies that segregate Denver schools.
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Dropouts Problems Often Begin Early

Clear warning signs appear, such as skipping class
ith the baby-boom generation on the verge of retirement, sustaining the American workforce and economy depends on having a cadre of new young workers to replace them, says former Gov. Bob Wise, D-W.Va., now president of the Alliance for Excellent Education. But with jobs in the fastest-growing economic sectors now requiring at least a high-school diploma and, often, two years or more of post-high-school training, coming up with an adequately trained new workforce wont be easy, Wise says. The annual graduation rate has risen from a little over 50 percent per year in the late 1960s to 73.9 percent in 2003. If its to rise higher, however, the improvement must come among poor and minority students, mostly in urban schools, who are far less likely than others to earn diplomas. 1 For example, while about two-thirds of all students who enter ninth grade graduate four years later, on-time graduation rates for minority and low-income students, especially males, are much lower. In 2001, for example, only about 50 percent of African-American students and 51 percent of Latino students graduated on time, compared to 75 percent of white students and 77 percent of Asian and Pacific Islanders. 2 Students with family incomes in the lowest 20 percent dropped out of school at six times the average rate of wealthier students. 3 In about a sixth of American high schools, the freshman class routinely shrinks by 40 percent or more by the time students reach senior year. For the most part, those schools serve lowincome and minority students. Nearly half of African-American students, 40 percent of Latino students and 11 percent of white students attend high schools where graduation is not the norm.
A high school with a majority of students who are racial or ethnic minorities is five times more likely to promote only 50 percent or fewer freshmen to senior status within four years than a school with a white majority. 4 Meanwhile, the earning power of dropouts has been dropping for three decades. For example, the earnings of male dropouts fell by 35 percent between 1971 and 2002, measured in 2002 dollars. Three-quarters of state prison inmates and 59 percent of federal inmates are dropouts. In 2001, only 55 percent of young adult dropouts were employed. Even the death rate is 2.5 times higher for people without a high-school education than for people with 13 years or more of schooling. 5 But if the consequences are known, the cures may be harder to pinpoint. Many educators say dropping out starts early. Disengagement doesnt start in the ninth grade. It starts in fifth, says James F. Lytle, a University of Pennsylvania professor and former superintendent of the Trenton, N.J., public schools. For on-track students in middle-class schools, middle school has the most interesting, exciting stuff in class science experiments, readings about interesting people in history and studies of how the world works he says. But once students are judged to be reading behind grade level, as happens with many urban fifth-graders, middle schools turn to dumbed-down remedial work thats below students real intellectual level and leaves them bored and dispirited, Lytle says. It doesnt have to be that way, he says. But I wish that educational courseware was farther down the road of providing ways to combine skills teaching with subject matter that is
The new immigrants generally clustered in cities, the economic engines of the time, and overcrowded city schools were charged with integrating them into American life. Critics charged that the urban schools used rigid instruction and harsh discipline to control classrooms bursting with 60 or more children, many of whom spoke no English.
Two Tracks
n the economy of the early 20th century, however, there remained little need for most students to learn more than basic reading and writing,
so the failure of poor urban schools to produce many graduates wasnt seen as a problem. In current debates over U.S. education, people arent looking at education historically and therefore expect American schools to do things they were never designed to do, says Ratner of Citizens for Effective Schools. We consciously decided to have a two-track system, he says. In the early 20th century, education experts generally agreed that in the industrial age there are lots of immigrants and poor people, and most are going to work on the assembly line, so how about if we create an academic track and a general/ vocational track mostly for the poor?
The school system that we have was never set up to educate all students to the levels of proficiency now being asked for, Ratner says. I graduated exactly 40 years ago, and then about half the kids 52 percent were graduating, says Wise of the Alliance for Excellent Education. And the non-graduates could still get good jobs. But today the fastest-growing sectors of the economy require two years of post high-school training, says Daniel J. Cardinali, president of Communities In Schools, a dropout-prevention group that helps school districts bring services like tutoring and health care to needy students.
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Majority of Dropouts Are Hispanic, Black

More than 50 percent of 20-year-old male high-school dropouts are Hispanic or African-American (graph at left). By comparison, 55 percent of the females are black or Hispanic (graph at right).
at students actual age level. Lytle says cities could also Kids disengage early, says establish post-dropout acadePercent of 20-Year-Olds Who Are High-School Dropouts, 2005 Lalitha Vasudevan, an assistant mies, like the Dropout Recovprofessor at Columbia Univerery High School he started in Among 2.2 million 20-year-old males Among 1.9 million 20-year-old females (by percentage) (by percentage) sitys Teachers College who Trenton, which helped increase 60% 35% works in an education program that citys graduation numbers. 58% 30 50 31% for young African-American Rather than defining the whole 25 40 24% males whove been diverted problem as stopping dropouts, 20 30 15 from jail and are mostly we can also reach out to those 16% 15% 25% 20 23% 10 dropouts. Often, early on, who already have, he says. There 16% 9% 10 5 9% theyve had teachers say things are a slew of people around 0 0 All White Black Hispanic Other All White Black Hispanic Other to them that they interpret as, who are out of school and would males females You dont really care that Im like to go back, from teenage Source: The Costs and Benefits of an Excellent Education for All of here, she says. mothers caring for their children Americas Children, Teachers College, Columbia University, Dropping out is not a deto 60-year-olds, he says. They January 2007 cision that is made on a single need a school that is built around morning, says a report from their lives. I simply dont underthe Bill & Melinda Gates Foundation. In an extensive survey stand why urban districts havent been more imaginative about this. of dropouts, researchers found that there are clear warning signs for at least one-to-three years before students drop out, 1 Nancy Martin and Samuel Halperin, Whatever It Takes: How Twelve Comsuch as frequently missing school, skipping class, being held munities are Reconnecting Out-of-School Youth, American Youth Policy Forum, www.aypf.org/publications/WhateverItTakes/WITfull.pdf. back a grade or frequently transferring among schools. 6 2 Ibid. Some key factors cited by the dropouts in the Gates study: 3 Ibid. Schools dont respond actively when students skip class and 4 Robert Balfanz and Nettie Legters, Locating the Dropout Crisis, Center dont provide an orderly and safe environment. In middle for Social Organization of Schools, Johns Hopkins University, June 2004. school, you have to go to your next class or they are going 5 Martin and Halperin, op. cit. 6 John M. Bridgeland, John J. DiIulio, Jr. and Karen Burke Morison, The to get you, said a young male dropout from Philadelphia. In Silent Epidemic: Perspectives of High School Dropouts, Bill & Melinda Gates high school, if you dont go to class, there isnt anybody who Foundation, March 2006. 7 Quoted in ibid. is going to get you. You just do your own thing. 7
Calls in the 1990s for higher academic standards by groups like The Business Roundtable brought widespread attention to the problems of low student achievement, especially in low-income schools. Today few question the premise that all students should attain higher levels of literacy, mathematical problemsolving and critical thinking. Many who work in schools argue that simply setting higher standards isnt nearly enough, however, especially for urban schools where most students already are behind grade level. As standards rise, for example, ninthgraders are increasingly placed in introductory algebra classes . . . despite
skill gaps in fundamental arithmetic, wrote Balfanz and Ruth Curran Neild, research scientists at the Johns Hopkins University Center on the Social Organization of Schools. But few resources exist to help kids catch up, nor are there many curriculum materials that specifically target the spotty skills of urban ninthgraders, the Johns Hopkins researchers said. And when students reading behind grade level enter middle and high school, their secondary-certified English teachers educated to teach high-school-level literature and composition are generally unprepared to diagnose reading problems or to teach the comprehension strategies and
background vocabulary they need. Science and history teachers are even less prepared to help, Balfanz and Neild said. 41 Retooling the school system to support higher standards may seem daunting, but a quick walk through history shows that it wouldnt be the first time the United States has made heroic efforts on education, says Wise. For example, after World War II, you had soldiers coming home in need of better skills, and you had the GI Bill to help them continue their educations. Then in the civil rights era we said, We believe that every child should be able to enter school, and that happened,
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The Behavior Gap Between Black and White Students

Many educators blame a system thats middle-class and white-centered
ata from around the country indicate that black students, especially males, are cited much more often for disciplinary infractions than whites. The resulting behavior gap parallels the much-talked-about academic achievement gap. Many analysts blame the phenomenon in part on a culture clash between black students, many poor, and an education system thats white-centered and middle-class. But theres little agreement about exactly what the gap means and what to do about it. You find the gap in all schools, including wealthy ones, says Clara G. Muschkin, a researcher at the Duke University Center for Child and Family Policy. Nevertheless, some evidence suggests there may also be a behavior gap between richer and poorer students, which accounts for just under a third of the black-white gap, Muschkin says. In North Carolina schools, the racial gap is persistent at all the grades but is widest in seventh grade, says Muschkin. About 30 percent of black seventh-graders and 14 percent of whites have at least one disciplinary infraction reported during the school year. African-American male students have the highest rates of suspensions and expulsions in most metropolitan areas around the country, according to Denise L. Collier, a doctoral candidate in education at California State University, Los Angeles. In New York, for example, where African-American males are 18 percent of the student population, they account for 39 percent of school suspensions and 50 percent of expulsions. In Los Angeles, black males make up 6 percent of the population but account for 18 percent of suspensions and 15 percent of expulsions. 1 Some educators say that many urban African-American students dont learn at home the kinds of communication be-
haviors that are the norm for the middle class, and that this lack of background accounts for much of the gap. Americans of a certain background learn . . . early on and employ . . . instinctively techniques like sitting up straight, asking questions and tracking a speaker with their eyes in order to take in information, said David Levin, a founder of the Knowledge Is Power Program (KIPP) charter schools, which serve mainly black and Hispanic students in several cities. 2 When students in one Levin class were asked to give us the normal school look, they responded by staring off into space and slouching, recounted New York Times Magazine editor Paul Tough in an article last year on successful urban charter schools. Middle-class Americans know intuitively that good behavior is mostly a game with established rules; the KIPP students seemed to be experiencing the pleasure of being let in on a joke, Tough observed. 3 Behavior like a proper in-school work ethic has to be taught in the same way we have to teach adding fractions with unlike denominators, said Dacia Toll, founder of the Amistad Academy charter school in New Haven, Conn. But once children have got the work ethic and the commitment to others and to education down, its actually pretty easy to teach them. The academic gap that puts many black students in remedial instruction as they move through school may worsen the problem, says Robert Balfanz, associate research scientist at the Johns Hopkins University Center on the Social Organization of Schools. In traditional remedial instruction, I assume you know nothing, so I teach the times table and basic reading skills like letter sounds, he says. But the majority of kids behind can actually read at a basic level. What theyre missing is comprehension skill, vocabulary. So they get bored and frustrated.
Wise says. Now were saying that every child should graduate. For a time, the civil rights era seemed to be accelerating growing academic parity in learning, at least between black and white students. Following World War II, standardized test scores for black students began moving closer to white students scores. The years from the 1960s to the 80s saw fully half of the black-white academic achievement gap eliminated, says The Civil Rights Projects Orfield. In the late 80s, however, the progress of African-American students
in closing the gap stalled, and between 1988 and 1994, average test scores for black students actually began falling. 42
Minority Schools
.S. schools briefly became more integrated after the civil rights battles of the 1950s and 60s, but shifting housing patterns have caused the concentration of poor, minority and nonEnglish-speaking students in urban schools to rise for the past 25 years.
One thing thats not fully understood is that, through a long historical process, weve concentrated our most needy students in a small subset of schools and districts in rural and, mostly, urban areas, vastly increasing the burden those schools face in raising academic achievement, says Balfanz. In its landmark 1954 Brown v. Board of Education ruling, the Supreme Court declared it illegal to intentionally segregate schools by race. 43 In 1964, Congress passed the Civil Rights Act, outlawing discrimination in any
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Middle-class education majors student-teaching in urban schools found that using books about topics their students personally had encountered including homelessness, racism and poverty decreased discipline problems, even though the teachers initially resisted the books as inappropriate for children, according to Professor Christine H. Leland and Professor Emeritus Jerome C. Harste of Indiana University-Purdue University, Indianapolis. Once the student teachers broached the tough subject matter, they began reporting fewer discipline problems . . . the children listened carefully and engaged in thoughtful discussions when they perceived that the issues being discussed were worth their attention. 4 Many African-American student discipline problems involve defiance issues such as acting threatening or making excessive noise rather than activities like drug use or leaving the classroom without permission, according to University of Virginia Assistant Professor Anne Gregory. 5 Seventy-five percent of African-American disciplinary referrals were for defiance behaviors in a study Gregory cites, many more than for other ethnic groups. That may suggest that teachers judge African-American students behavior more subjectively than that of other students, Gregory says. Based on their past feelings of being restricted and excluded, some AfricanAmerican students may be more likely to act out when they perceive that teachers are being unfair, Gregory suggests. If I was this little Caucasian boy or this preppy girl, she wouldnt talk with me that way. I am like the opposite. I am this little thug . . . I mean, she dont know, one student in Gregorys study said of a teacher perceived to be unfair. 6 Avoiding excessive discipline battles in urban schools requires a seemingly contradictory set of characteristics that not everyone can muster, said Franita Ware, a professor of educa-
tion at Spelman College, a historically black school for women in Atlanta. Teachers who succeed tend to be warm demanders, those whom students believed . . . did not lower their standards but also were willing to help them. 7 Sometimes I mean-talk them in varying degrees of severity, one teacher told Ware. But sometimes you have to go back and say, What was really going on with you when I yelled at you? Im just so sorry. 8 Often the adult is the provocateur in the behavior situation, even if they dont realize it, such as when a student finds the nurses office door locked at 3:02 and starts pounding on it, says James F. Lytle, a professor at the University of Pennsylvania and former school superintendent in Trenton, N.J. A lot of it is just the way you talk to people respect, Lytle says. Many are so accustomed to being denigrated. The kids have so little that the protection of ones ego is very important.
1 Denise L. Collier, Sally Can Skip But Jerome Cant Stomp: Perceptions, Practice, and School Punishment (Preliminary Results), paper presented at the American Educational Research Association annual meeting, San Francisco, Calif., April 2006. 2 Quoted in Paul Tough, What It Takes To Make a Student, New York Times Magazine, Nov. 26, 2006, p. 51. 3 Ibid. 4 Christine H. Leland and Jerome C. Harste, Doing What We Want to Become: Preparing New Urban Teachers, Urban Education, January 2005, p. 67. 5 Anne Gregory, Justice and Care: Teacher Practices To Narrow the Racial Discipline Gap, paper presented at the American Educational Research Association annual conference, San Francisco, Calif., April 2006. 6 Quoted in ibid. 7 Franita Ware, Warm Demander Pedagogy: Culturally Responsive Teaching that Supports A Culture of Achievement for African-American Students, Urban Education, July 2006, p. 427. 8 Quoted in ibid.
institution that received federal funds, including schools. 44 As a result, more schools accommodated lower-income students along with middle-class students, white students and students from other ethnic groups. The civil rights era lasted a scant 20 years, however, and housing patterns and new waves of immigration soon led to concentrations of poor and minority students in many urban school districts again. As early as 1974, the Supreme Court effectively set limits on how far racial integration of students could go.
The court ruled in Milliken v. Bradley that the remedy to racial segregation in Detroit could not include moving children to schools in the surrounding suburbs. 45 Then, in the 1980s, federal efforts to desegregate schools effectively ended. During the presidency of Ronald Reagan (1981-1988), the U.S. Justice Department backed off forcing states to comply with desegregation mandates. Two Supreme Court decisions in the early 1990s effectively declared the goal of black-white school integration had been addressed, as the
court ruled that school districts could be excused from court-ordered busing if they had made good-faith efforts to integrate, even if they had not fully complied with court orders. 46 At the same time, however, Hispanic students were becoming a new minority that concentrated in schools with bigger academic challenges than others, such as teaching Englishlanguage learners. The segregation of Latino students soared during the civil rights era. In 1973, in Keyes v. School District No. 1, the Supreme Court outlawed policies
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in Denver that had the effect of segrega t i n g H i s p a n i c and African-American children into separate schools. In ensuing years, however, this somewhat complex ruling was only spottily enforced, according to civil rights advocates. 47 Today Latinos are Americas most segregated minority group, said Orfield. The average Latino student goes to a school that is less than 30 percent white, has a majority of poor children and an increasing concentration of students who dont speak English. 48 The nations student population is two-thirds middle class (not eligible for federally subsidized lunches), yet onequarter of American schools have a majority of students from lowincome households, according to The Century Foundation. 52 Among the burdens urban schools bear are poverty-related learning deficiencies children bring to school with them, regulations and economic barriers that limit urban-school resources, and a historical Edwin Bradley listens to his fifth-grade daughter Antoinette read at the role as job providers in South Street School library in Newark, N.J. One of the poorest in the inner cities. state, the school district has been encouraged under a new A large body of reprogram to support parental involvement in an attempt to improve student performance. search shows that many low-income parFurthermore, minority children are ents interact with their children in more concentrated in urban areas ways that hinder them in school, than the general population, largely wrote Tough last year in The New because white families with children York Times Magazine. For example, move to suburbs while childless professional parents speak to their whites are more likely to remain in young children about two-and-a-half ntil around the 1970s, children the city, said Baum. Nationally, in more times in an hour than poor of all races and classes attended nearly all school districts with more parents do and encourage them verurban schools, and their average than 25,000 students, interracial con- bally about six times more often than they discourage them; low-income achievement levels didnt draw the tact has declined since 1986. 50 Even more than ethnic minorities, parents discourage their children same alarmed attention as today. Urban sprawl and white flight from poor people have concentrated in cities, about three times as often as they cities over the past three decades says Balfanz. Over the past 20 years, encourage them, he said. Unlike poor parents, middle-class have not only increased the num- even in periods when overall poverty ber of urban schools with high mi- has dropped, the cities have gotten parents also encourage their children nority populations but also in- poorer and the concentration of to question, challenge and negotiate. creased the concentration of urban poverty there deeper. In short, in countless ways, the manBetween 1960 and 1987, the na- ner in which [poor children] are raised poverty as well, increasing the burtional poverty rate for people in puts them at a disadvantage in a den on urban schools. Sprawl is a product of suburban central cities rose from 13.4 percent school culture, Tough noted. 53 pulls and urban pushes, said the Uni- to 15.7 percent. At the same time, For a variety of reasons, urban versity of Marylands Baum. Families the poverty rate for rural residents schools also have a much harder time move to the suburbs for good hous- fell by one-half and for suburban keeping good teachers. Many thouing, open space. They leave cities to residents by one-third. By 1991, 43 sands perhaps millions of urban avoid bad schools, threats to safety percent of people with incomes students dont have permanent, highly qual. . . contact with other races and poor below the federal poverty line lived ified teachers, ones with the skill to Continued on p. 378 in central cities. 51 public services. 49
Poor in School
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AP Photo/Mike Derer
At Issue:
Would raising teacher pay help struggling schools?
Yes
PATTY MYERS
TECHNOLOGY COORDINATOR, GREAT FALLS (MONTANA) PUBLIC SCHOOLS
FROM TESTIMONY ON BEHALF OF THE NATIONAL EDUCATION ASSOCIATION BEFORE U.S. SENATE COMMITTEE ON FINANCE, MARCH 20, 2007
JAY P. GREENE
SENIOR FELLOW, MANHATTAN INSTITUTE
POSTED ON THE WEB, 2006
nsuring a highly qualified teacher in every classroom is critical to closing achievement gaps and maximizing student learning. No single factor will make a bigger difference in helping students reach high academic standards. . . . Unfortunately, difficulty in attracting quality teachers and high turnover rates severely hamper the ability to maintain a high-quality learning environment. Approximately one-third of the nations new teachers leave the profession during their first three years, and almost one-half leave during their first five years. And turnover in low-income schools is almost onethird higher than the rate in all schools. The teaching profession has an average national starting salary of $30,377. Meanwhile, computer programmers start at an average of $43,635, public accounting professionals at $44,668 and registered nurses at $45,570. Annual pay for teachers has fallen sharply over the past 60 years in relation to the annual pay of other workers with college degrees. The average earnings of workers with at least four years of college are now over 50 percent higher than the average earnings of a teacher. Congress should reward states that set a reasonable minimum starting salary for teachers and a living wage for support professionals working in school districts. NEA recommends that all teachers in America enter the classroom earning at least $40,000 annually. NEA also supports advancing teacher quality at the highestpoverty schools by providing $10,000 federal salary supplements to National Board Certified Teachers. Congress also should fund grants to help teachers in high-poverty schools pay the fees and access professional supports to become certified. Often schools with the greatest needs and, consequently, the most challenging working conditions have the most difficulty retaining talented teachers. . . . Many hard-to-staff schools are high-poverty inner-city school or rural schools that, as a consequence of their location in economically depressed or isolated districts, offer comparatively low salaries and lack [the] amenities with which other districts attract teachers. NEA strongly supports federal legislation with financial incentives for teaching in high-poverty schools, such as the Teacher Tax Credit Act introduced in the 109th Congress. The bill would provide a non-refundable tax credit to educators who work at schools that are fully eligible for federal Title I funds for disadvantaged students and would help hard-to-staff schools retain the quality teachers they need to succeed.
No
yes no
he common assertion that teachers are severely underpaid is so omnipresent that many Americans simply accept it as gospel. But the facts tell a different story. The average teachers salary does seem modest at first glance: about $44,600 in 2002 for all teachers. But when we compare it to what workers of similar skill levels in similar professions are paid, we find that teachers are not shortchanged. People often fail to account for the relatively low number of hours that teachers work. Teachers work only about nine months per year. During the summer they can either work at other jobs or use the time off however else they wish. Either way, its as much a form of compensation as a paycheck. The most recent data indicate that teachers average 7.3 working hours per day, and that they work 180 days per year, or about 1,314 hours. Americans in normal 9-to-5 professions who take two weeks of vacation and another 10 paid holidays put in 1,928 hours. This means the average teachers base salary is equivalent to a full-time salary of $65,440. In 2002, elementary-school teachers averaged $30.75 per hour and high-school teachers $31.01 about the same as architects, civil engineers and computer-systems analysts. Even demanding, education-intensive professions like dentistry and nuclear engineering didnt make much more per hour. Some argue that its unfair to calculate teacher pay on an hourly basis because teachers perform a large amount of work at home grading papers on the weekend, for instance. But people in other professions also do off-site work. Many assume that teachers spend almost all of the school day teaching. But in reality, the average subject-matter teacher taught fewer than 3.9 hours per day in 2000. This leaves plenty of time for grading and planning lessons. It is well documented that the people drawn into teaching these days tend to be those who have performed least well in college. If teachers are paid about as well as employees in many other good professions, why arent more high performers taking it up? One suspects that high-performing graduates tend to stay away because the rigid seniority-based structure doesnt allow them to rise faster and earn more money through better performance or by voluntarily putting in longer hours. In any case, its clear that the primary obstacle to attracting better teachers isnt simply raising pay.
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eral years, a few districts, including communicate important stuff to kids, Raleigh, N.C., and Cambridge, Mass., says Kitty Kelly-Epstein, a professor have experimented with integrating of education at the Fielding Graduate students by socioeconomic status. In University in Santa Barbara, Calif. In 2000, for example, the school board California, at least, state rules force in Wake County, N.C., which includes some urban school districts to rely on Raleigh and its suburbs, replaced its temporary teachers because not enough racial integration system with the goal applicants have required certifications, that no school should have 40 pershe says. There never has been a cent of students eligible for free or he No Child Left Behind Act (NCLB), time when low-income schools were reduced-price lunch. 56 Raleighs effort was simpler politienacted in 2002, is intended to fully staffed, she says. With joblessness high in cities, es- cally than most, because the school push American schools to raise achievepecially for minority applicants, its district contains both the areas lowment for all students, including low-inalso not uncommon for school dis- poverty and high-poverty schools. If come and minority children. As such, tricts to be the major job source in the higher-income suburbs had been it represents one more step down a the area, according to Johns Hopkins outside the district, political push-back road that Congress embarked on in its University Associate Professor of Edu- would have made the program a 1994 reauthorization of the Elementary and Secondary Education Act exertcation Elaine M. Stotko and colleagues. tougher sell. ing federal influence to enIn a tradition that sure that all students meet dates back to pahigher academic standards. tronage systems in With NCLB up for reauthe early 20th centhorization, Congress is tury, urban politistruggling to figure out its cians often interfere next steps, with little apwith schools hiring parent agreement on the the best managerial horizon. With the press of and teaching candiother business, and strong dates by pressuring disagreements in Congress them to hand out about the education law, jobs as political its not clear that it will be favors. 54 reauthorized this year. The The Supreme new congressional DemoCourt is due to rule cratic majority has already by the end of June begun to hold hearings, in two race-based however. integration cases. The Knowledge Is Power Program (KIPP) charter school in the Bronx, N.Y., boasts the highest test scores in the area. Although most U.S. businesses have With a new conKIPP schools are not racially integrated, they are reducing become increasingly inservative majority, achievement gaps between black and white students. volved in education polthe court is widely icy, and many business expected to rule in Some early Raleigh results look leaders are urging Congress to confavor of the white parents who are seeking to end race-based school in- promising. On the states 2005 High tinue and strengthen federal efforts to tegration in Seattle and Louisville, Ky. School End of Course exams, 63.8 raise academic standards and provide Decisions against the school districts percent of the low-income students incentives for states and localities to could end many similar programs passed, as did 64.3 percent of its extensively retool their school systems around the country, many of which African-American seniors, compared to improve student achievement. to pass rates in the high-40 and low Unless we transform the American were court-ordered in the past. 55 But some school districts still worry 50-percent range for the states other high school, we will limit economic opportunities for millions of Americans, that schools with high concentra- urban districts. 57 declared Microsoft Chairman Bill Gates tions of minority and poor students at a Senate Health, Education, Labor harm achievement. Over the past sevContinued from p. 376
CURRENT SITUATION
T
Congress Divided
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Newsmakers/Getty Images/Chris Hondros
and Pensions Committee hearing on March 7. 58 Meanwhile, a group of conservative congressional Republicans has introduced legislation that would replace most of the NCLB achievement and reporting requirements that determine funding with block-grant funding that states could get whether they met NCLB standards or not. The measure would restore states and localities to their traditional role as prime overseers of schools, said Rep. Peter Hoekstra, R-Mich., who sponsored the legislation. President Bush and I just see education fundamentally differently, he said. The president believes in empowering bureaucrats in Washington, and I dont. 59 But many congressional Democrats argue that a strengthened federal hand in education is warranted, partly because NCLB data now clearly reveals that the state-run systems of old have left so many poor and minority children disastrously behind. Rep. George Miller, D-Calif., and Sen. Kennedy, key supporters of NCLB and chairs of the House and Senate committees that govern it, have both held pre-authorization hearings this year. Both say theyre committed to increasing resources for struggling schools in a new bill, especially by supporting the hiring and training of more and better teachers. We know the law has flaws, but we also know that with commonsense changes and adequate resources, we can improve it by building on what weve learned, said Kennedy in a statement.
Retooling NCLB?
ducation analysts have no shortage of changes to suggest. President Bush is looking at tinkering with NCLB in a reauthorization, but Democrats are interested in something broader, says Cardinali of Com-
munities in Schools. The [current] law is too fixated on academics, he says. After 30 years of experience helping students get additional services they need like tutoring and health care, weve learned that student services are a critical component, he says. The brutal truth is that there is only one institution in America where you can get to kids in a thoughtful way the school, he says. Lets make that the center where parents and children can get needs met that are critical for learning readiness. Are we trying to make public education something its not? No. Its a holistic view of what it takes to educate a child. One gap the University of Chicagos Knowles would like to see rectified: In NCLBs reporting requirements the unit of analysis is the kid, the school and the district, and theres a stunning absence there if we really believe that instruction is at the heart of learning. Research indicates, he says, that individual classroom teachers may be the strongest in-school influence on student achievement. However, Democrats strong ties to labor helped keep teacher accountability out of the bill, he says. In addition, higher ed has been given pretty much a free pass, Knowles says. A future bill should focus attention on which education schools are producing the best-quality teachers. Low-achieving schools shouldnt be punished, but given the tools to do better, says Knowles. Supports like teacher development and well-integrated extra services like social worker, closely targeted on high-need schools, are a precondition for improvement, he says. Another key: additional flexibility for leaders of low-achieving schools to hire and fire and set policy and schedules. Principals say, Yeah, you give me the hiring and firing of teachers and Ill give you the better results, and theyre correct, says Knowles. Reporting data for accountability isnt the problem. Its the very narrowly fo-
cused reporting requirement, many analysts say. Replace the overreliance on standardized testing with multiple measures, such as attendance figures and accurate dropout rates, says the University of Rochesters Hursh. The federal government should also support strong, unbiased research on what improves instruction, especially in the middle- and high-school years, which are federally funded at a tiny fraction of the level of elementary schools and colleges, says Wise of the Alliance for Excellent Education. No state or local district has the money for this, he says.
OUTLOOK
Agreeing to Disagree
heres growing agreement that schools should be educating all students to a higher standard. However, theres still disagreement about how much and what kind of help schools would need to do it. An ideal outcome would be for institutions that are the most lasting presence in cities, such as business groups like the Chamber of Commerce, local hospitals and colleges to take ownership of urban education to drive change, says Balfanz of Johns Hopkins. A movement in that direction may be beginning, he says. For awhile, there were mainly rhetorical reports, but today groups like the Chamber of Commerce are producing more potentially useful policy work, he says. The climate is shifting toward the conclusion that everyone needs a diploma, says Balfanz. You cant even find an employer who says, Ill hire people who arent high-school graduates. So when students drop
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out, it just feeds the next generation of poverty, he says. Theres currently an opportunity to revise NCLB in a way that helps lowachieving schools, says the University of Chicagos Knowles. Nevertheless, people have already formed hard opinions, and debate could turn solely partisan, he says. Lawmakers must aim for a delicate balance on federal initiatives, says Columbias Henig. Federal interventions must aim at making local processes work, since local on-the-ground actions are ultimately what make or break schools, he says. The University of Pennsylvanias Lytle fears that privatization may be on the verge of overwhelming education, with potentially disastrous consequences for low-income families. I think the K-12 education business is in the process of deconstructing, he says. The middle class is looking outside the schools to private tutoring companies and Internet learning for academics. More and more, for them, schools are amounting to expensive child care. Some states are aggressively pioneering virtual online charter schools and charters granted to home-schoolers, he says. The cost side and the efficacy side of education are on a collision course, and I think Congress will end up endorsing fairly radical experimentation with vouchers, for example, Lytle says. Theyll say, Theres no evidence that reducing class size or other expensive measures helps, so lets let American ingenuity work. Where does that leave urban kids? Out of luck, Lytle says. Youve got to be pretty sophisticated to make market forces work for you. But theres been progress in the last decade with whole-school reform, says Balfanz. The big question now is how we [change] whole school districts. Its a big job but within human capacity, he says.
8 Jay P. Greene, Education Myths, The American Enterprise Online, American Enterprise Institute, August 2006. 9 For background, see Charles S. Clark, Charter Schools, CQ Researcher, Dec. 20, 2002, pp. 1033-1056; Kenneth Jost, School Vouchers Showdown, CQ Researcher, Feb. 15, 2002, pp. 121-144. 10 Greene, op. cit. 11 Brad Olsen and Lauren Anderson, Courses of Action: A Qualitative Investigation Into Urban Teacher Retention and Career Development, Urban Education, January 2007, p. 5. 12 Quoted in ibid., p. 14. 13 Ibid. 14 Arthur J. Rothkopf, Elementary and Secondary Education Act Reauthorization: Improving NCLB To Close the Achievement Gap, testimony before the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Education and Labor, March 13, 2007. 15 For background, see Kenneth Jost, Testing in Schools, CQ Researcher, April 20, 2001, pp. 321-344. 16 Richard J. Murnane, Improving the Education of Children Living in Poverty, unpublished paper, Jan. 25, 2007. 17 Ibid. 18 For background, see Kenneth Jost, School Desegregation, CQ Researcher, April 23, 2004, pp. 345-372. 19 Quoted in Center on Race and Social Problems Commemorates Brown v. Board of Education, University of Pittsburgh School of Social Work, May 7, 2004. 20 Quoted in Brian Lamb, No Excuses: Closing the Racial Gap in Learning, transcript, Booknotes, C-SPAN, Feb. 1, 2004. 21 Paul Tough, What It Takes To Make a Student, The New York Times Magazine, Nov. 26, 2006, p. 70. 22 R. Scott Baker, School Resegregation: Must the South Turn Back? Journal of Southern History, November 2006, p. 993. 23 Howell S. Baum, Smart Growth and School Reform: What If We Talked About Race and Took Community Seriously? Journal of the American Planning Association, winter 2004, p. 14. 24 Divided We Fail: Coming Together Through Public School Choice, Task Force on the Common School, The Century Foundation Press, 2002, p. 3. 25 Ibid., p. 13. 26 Quoted in Lamb, op. cit. 27 Ibid.
Notes
Quoted in Judy Radigan, Reframing Dropouts: The Complexity of Urban Life Intersects with Current School Policy, paper presented at the Texas Dropout Conference, Houston, Oct. 6, 2006. 2 The Socioeconomic Composition of the Public Schools: A Crucial Consideration in Student Assignment Policy, University of North Carolina Center for Civil Rights, Jan. 7, 2005, www.law.unc.edu/PDFs/charlottereport.pdf. 3 For background, see Barbara Mantel, No Child Left Behind, CQ Researcher, May 7, 2005, pp. 469-492. 4 Quoted in David J. Hoff and Kathleen Kennedy Manzo, Bush Claims About NCLB Questioned, Education Week, March 9, 2007, www.edweek.org. 5 Quoted in ibid. 6 The Nations Report Card: Reading 2005, U.S. Department of Education Institute of Education Sciences, www.nationsreportcard.gov. 7 Douglas N. Harris, Ending the Blame Game on Educational Inequity: A Study of HighFlying Schools and NCLB, Education Policy Studies Laboratory, Arizona State University, March 2006.
1
About the Author

Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high-school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Climate Change, Health Care Costs, Cyber Socializing and Prison Health Care.
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Terry Ryan and Quentin Suffren, Charter School Lessons from Ohio, The Education Gadfly, Thomas B. Fordham Foundation, March 15, 2007, www.edexcellence.net. 29 Mark Simon, What Teachers Know, Poverty & Race, September/October 2004, www.prrac.org. 30 Dreyon Wynn and Dianne L. H. Mark, Book Review: Educating Teachers for Diversity: Seeing With a Cultural Eye, Urban Education, May 2005, p. 350. 31 Jocelyn A. Glazier, Moving Closer to Speaking the Unspeakable: White Teachers Talking About Race, Teacher Education Quarterly, winter 2003. 32 Wanda J. Blanchett, Urban School Failure and Disproportionality in a Post-Brown Era, Remedial and Special Education, April 2005, p. 70. 33 Christine H. Leland and Jerome C. Harste, Doing What We Want to Become: Preparing New Urban Teachers, Urban Education, January 2005, p. 60. 34 Ibid., p. 62. 35 Glazier, op. cit. 36 Wynn and Mark, op. cit. 37 For background, see Wayne J. Urban and Jennings L. Wagoner, American Education: A History (2003); Stanley William Rothstein, Schooling the Poor: A Social Inquiry Into the American Educational Experience (1994). 38 For background, see Kathy Koch, Reforming School Funding, CQ Researcher, Dec. 10, 1999, pp. 1041-1064. 39 Derrick Bell, Silent Covenants: Brown v. Board of Education and the Unfulfilled Hopes for Racial Reform (2004), p. 88. 40 Ibid., p. 91. 41 Ruth Curran Neild and Robert Balfanz, An Extreme Degree of Difficulty: The Educational Demographics of Urban Neighborhood High Schools, Journal of Education for Students Placed at Risk, spring 2006, p. 135. 42 V. W. Ipka, At Risk Children in Resegregated Schools; An Analysis of the Achievement Gap, Journal of Instructional Psychology, December 2003, p. 294. 43 The case is Brown v. Board of Education of Topeka, 347 U.S. 483 (1954). 44 For background, see Jost, School Desegregation, op. cit.; Gary Orfield and John T. Yun, Resegregation in American Schools, The Civil Rights Project, Harvard University, June 1999, www.civilrightsproject.harvard.edu/ research/deseg/reseg_schools99.php. 45 The case is Milliken v. Bradley, 418 U.S. 717 (1974).
28

Achieve, Inc., 1775 I St., N.W., Suite 410, Washington, DC 20006; (202) 419-1540; www.achieve.org. An independent bipartisan group formed by governors and business leaders to promote higher academic standards. Alliance for Excellent Education, 1201 Connecticut Ave., N.W., Suite 901, Washington, DC 20036; (202) 828-0828; www.all4ed.org. A nonprofit research and advocacy group seeking policies to help at-risk high-school students. The Center for Education Reform, 1001 Connecticut Ave., N.W., Suite. 204, Washington, DC 20036; (202) 822-9000; www.edreform.com. A nonprofit advocacy group that promotes school choice in cities. The Century Foundation, 41 E. 70th St., New York, NY 10021; (212) 535-4441; www.tcf.org. Supports research on income inequality and urban policy. Citizens for Effective Schools, 8209 Hamilton Spring Ct., Bethesda, MD 20817; (301) 469-8000; www.citizenseffectiveschools.org. An advocacy group that seeks policy changes to minimize the achievement gap for low-income and minority students. Council of the Great City Schools, 1301 Pennsylvania Ave., N.W., Suite 702, Washington, DC 20004; (202) 393-2427; www.cgcs.org. A coalition of 67 urban school systems dedicated to improving urban schools. Education Next, Hoover Institution, Stanford University; www.educationnext.org. A quarterly journal on education reform published by a conservative think tank. The Education Trust, 1250 H St., N.W., Suite 700, Washington, DC 20005; (202) 293-1217; www2.edtrust.org. Dedicated to closing the achievement gap in learning and college preparation for low-income and minority students. National Center for Education Statistics, 1990 K St., N.W., Washington, DC 20006; (202) 502-7300; http://nces.ed.gov. A Department of Education agency that provides statistics and analysis on U.S. schools, student attendance and achievement.
Ipka, op. cit. The cases are Board of Education of Oklahoma City v. Dowell, 498 U.S. 237 (1991) and Freeman v. Pitts, 498 U.S. 1081 (1992). 47 Gary Orfield and Chungmei Lee, Racial Transformation and the Changing Nature of Segregation, The Civil Rights Project, Harvard University, January 2006, www.civilrightsproject.harvard.edu.; Keyes v. School District No. 1, Denver, Colorado, 413 U.S. 189 (1973). 48 Gary Orfield and Susan E. Eaton, Back to Segregation, The Nation, March 3, 2003, p. 5. 49 Baum, op. cit. 50 Ibid. 51 Neild and Balfanz, op. cit., p. 126. 52 Divided We Fail, op. cit., p. 17. 53 Tough, op. cit. 54 Elaine M. Stotko, Rochelle Ingram and Mary Ellen Beaty-OFerrall, Promising Strategies for Attracting and Retaining Successful Urban
46
Teachers, Urban Education, January 2007, p. 36. 55 Patrick Mattimore, Will Court Put Integration on Hold? San Francisco Examiner, Dec. 8, 2006, www.exaaminer.com. The cases argued on Dec. 4, 2006 are Meredith v. Jefferson County Board of Education, 05-915; and Parents Involved in Community Schools v. Seattle School District No. 1, 05-908. 56 Richard Kahlenberg, Helping Children Move from Bad Schools to Good Ones, The Century Foundation, 2006, www.tcf.org/list. asp?type=PB&pubid=565. 57 Ibid. 58 Quoted in Michael Sandler, Minding Their Business, CQ Weekly, April 2, 2007, p. 952. 59 Quoted in Jonathan Weisman and Amit R. Paley, Dozens in GOP Turn Against Bushs Prized No Child Act, The Washington Post, March 15, 2007, p. A1.
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Bibliography
Selected Sources
Books
Kozol, Jonathan, The Shame of the Nation: The Restoration of Apartheid Schooling in America, Three Rivers Press, 2006. A longtime education writer and activist reports on his five-year journey to closely observe 60 schools in 11 states. He describes almost entirely resegregated urban schools with dilapidated buildings, dirty classrooms and a dearth of up-to-date textbooks. Rothstein, Richard, Class and Schools: Using Social, Economic, and Education Reform to Close the Black-White Achievement Gap, Economic Policy Institute, 2004. A research associate at a think tank concerned with lowand middle-income workers and families argues that raising the achievement of urban students requires public policies that address students multiple social and economic needs. Thernstrom, Abigail, and Stephan Thernstrom, No Excuses: Closing the Racial Gap in Learning, Simon & Schuster, 2004. A husband and wife who are senior fellows at the conservative Manhattan Institute for Public Policy Research argue that charter schools and the No Child Left Behind Acts focus on holding schools accountable for poor student achievement can close the achievement gap for urban students. Tough, Paul, What It Takes To Make a Student, The New York Times Magazine, Nov. 26, 2006, p. 44. A handful of charter schools are making strides against the achievement gap. But largely because low-income and minority students arrive at school with smaller vocabularies and far less knowledge about how to communicate with adults and behave in a learning situation, the work requires extra-long school hours and intense teacher commitment.
Reports and Studies

Beating the Odds: An Analysis of Student Performance and Achievement Gaps on State Assessments: Results from the 2005-2006 School Year, Council of the Great City Schools, April 2007. A group representing 67 of the countrys largest urban school districts examines in detail the recent performance of urban students on state tests. Divided We Fail: Coming Together Through Public School Choice, Task Force on the Common School, The Century Foundation, 2002. Basing its discussion on the idea that race- and class-segregated schools have proven a failure, a nonpartisan think tank explores the possibility of encouraging cross-district integration of lowincome and middle-income students by methods like establishing high-quality magnet schools in cities. Engaging Schools: Fostering High School Students Motivation to Learn, Committee on Increasing High School Students Engagement and Motivation to Learn, National Research Council, 2003. A national expert panel examines methods for re-engaging urban high-school students who have lost their motivation to learn, a problem they say is widespread but solvable. Bridgeland, John M., John J. DiIulio, Jr., and Karen Burke Morison, The Silent Epidemic: Perspectives of High School Dropouts, Bill & Melinda Gates Foundation, March 2006. Nearly half of high-school dropouts say they left school partly because they were bored. A third of the students left because they needed to work, and more than a fifth said they left to care for a family member. Levin, Henry, Clive Belfield, Peter Muennig and Cecilia Rouse, The Costs and Benefits of an Excellent Education for All of Americas Children, Teachers College, Columbia University, January 2007; www.cbcse.org/media/download_gallery/Leeds_Report_Final_Jan2007.pdf. A team of economists concludes that measures to cut the number of school dropouts would pay for themselves with higher tax revenues and lower government spending.
Articles
Boo, Katherine, Expectations, The New Yorker, Jan. 15, 2007, p. 44. A reform-minded superintendent closes Denvers lowestachieving high school, hoping its students will accept the offer to enroll in any other city school, including some with mainly online classes. Mostly Latinos from the citys poorest families, the displaced students struggle with losing their old school, which has provided many with a sense of community, and with new choices that confront them, as well as the ever-present choice of dropping out. Moore, Martha T., More Mayors Are Moving To Take Over School System, USA Today, March 21, 2007, p. A1. Albuquerques mayor is among those who believe they could run schools better than their local school boards. Saulny, Susan, Few Students Seek Free Tutoring or Transfers From Failing Schools, The New York Times, April 6, 2006, p. 20. The No Child Left Behind Act promises free tutoring for many students in low-achieving schools, but few of those students families know about the option or have been able to enroll their children in good-quality tutoring programs.
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The Next Step:

Dropouts and Graduation Rates
The Graduation Rate Crisis, St. Petersburg Times, June 20, 2005, p. 6A. Black males are half as likely to graduate in four years as white high school students in Florida, and only 38 percent of black males actually finish in that time. Mendell, David, City Dropouts Target of Grant, Chicago Tribune, April 18, 2006, p. B1. With many Chicago high-school students dropping out due to feeling unchallenged in the classroom, the Gates Foundation has donated $21 million to the citys public school system to establish a more rigorous curriculum. Rubin, Joel, Mayor Cites Dropout Data to Push Plan, Los Angeles Times, June 21, 2006, p. B9. In an attempt to take control of Los Angeles public schools, Mayor Antonio Villaraigosa told state lawmakers that only 44 percent of district students graduate on time. Toppo, Greg, Big-City Schools Struggle, USA Today, June 21, 2006, p. 1A. Students in large urban school districts have a less than 50 percent chance of graduating from high school with their peers, a new study finds. Rivera, Carla, Learning to Diversify, Los Angeles Times, Dec. 11, 2006, p. A1. An increasing number of private schools in the Los Angeles area are reaching out to minorities and poorer students. Will, George F., Clueless in Seattle, The Washington Post, Dec. 3, 2006, p. B7. The Seattle School District has decided to strike a racial balance in its better-performing high schools, which are chosen by more students than can be accommodated.
Urban Teachers
Coates, Ta-Nehisi Paul, Looking Abroad for a Few Good Teachers, Time, Nov. 28, 2005, p. 64. Many school districts have begun looking abroad for educators capable of working in urban schools. Feller, Ben, Union Rules Force City Schools to Hire Unwanted Teachers, Study Says, The Associated Press, Nov. 16, 2005. As many as 40 percent of teachers in urban school systems are hired with little or no choice on the part of principals, according to a new study. Greene, Jay P., Try Altering Incentives for Teachers, The Philadelphia Inquirer, May 4, 2006, p. A19. Philadelphia could improve upon its miserable graduation rate by rethinking the rewards and consequences for good and bad teaching. Nather, David, A Good Teacher: No Substitute, CQ Weekly, April 2, 2007, p. 956. Matching good teachers with struggling students will help achieve the No Child Lef Behind laws underlying goals.
No Child Left Behind

Herszenhorn, David M., Citys Schools Cut Racial Gap in Test Scores, The New York Times, Dec. 2, 2005, p. A1. New York City has narrowed the gap in test scores between Hispanic and black students and their white counterparts, outpacing 10 other large urban school districts. Weiss Green, Elizabeth, Local Success, Federal Failure, U.S. News & World Report, March 5, 2007. Critics of No Child Left Behind say that states have varying educational standards for students, and few standards match national ideas about what children should learn. Zuckerbrod, Nancy, Urban Students Do Worse than Nation in Science, The Associated Press, Nov. 15, 2006. New data released by the government indicate that children in major cities perform worse than other students on science tests given in elementary and middle school.
MLA STYLE
School Diversity
Biskupic, Joan, Diversity Programs May Face Ax, USA Today, Dec. 5, 2006, p. 3A. The Supreme Court appears ready to abolish public school diversity programs that use ethnicity as a factor in deciding where students receive their education.
APA STYLE
CHICAGO STYLE
April 27, 2007
383
Updated Aug. 5, 2010
Fixing Urban Schools

Here are key events and developments since the publication of the CQ Researcher report by Marcia Clemmitt, Fixing Urban Schools, April 27, 2007.
n array of forces has slowed long-sought progress in narrowing the minority-student achievement gap among urban schools. Those forces include mixed results in nationwide test scores, three years of delay in reauthorizing the federal No Child Left Behind Act and a pivotal 2007 Supreme Court ruling on school desegregation that, combined with a severe recession, has steered the education debate toward favoring economic considerations over racial equity. As a nation we decided long ago against separate but equal, but the reality is were moving fast to becoming a majority-minority population, former West Virginia Gov. Bob Wise, president of the Alliance for Excellent Education, said in a recent interview. So we need to focus on each child having a quality school no matter where they live. Because the modern economy now requires success by poor children as well as by those bound for higher-paying jobs, Wise said, education reform must link both economic performance and social justice. The economic pressure on schools continues. A recent study by labor economist Anthony Carnevale of Georgetown University found that twoGetty Images/Joe Raedle A teacher protests on Feb. 11, 2009, before the Miami Dade School Board votes on a plan to cut $56 million from the budget.
thirds of the 47 million new jobs he expects the U.S. economy to create between 2008 and 2018 will require workers who have at least some college education. 60 That is a sea change from a half-century ago when nearly two-thirds of jobs were filled by those with only a high school diploma. The latest student test scores from the nations urban K-12 schools show some noteworthy but unspectacular improvements. According to a new experimental index of urban student performance in the reading portion of the National Assessment of Educational Progress (NAEP), average reading scores for students in large-city school districts in grades four and eight rose by several points on the proficiency scale between 2003 and 2009, a change that narrowed the achievement gap to 10 points when compared with the national sampling. 61 Lagging in Math In math, according to a March analysis of NAEP scores and state tests by the Council of the Great City Schools, 79 percent of districts increased the percentage of fourth-graders who scored at or above proficient between
2006 and 2009, with a fourth of the districts raising scores by more than 10 percent. 62 Yet despite significant gains in performance and faster rates of improvement than their states, the assessment said, the majority of urban school districts continue to score below state averages on fourth- and eighthgrade mathematics assessments. The decades-old assumption that school districts should actively pursue racial integration was challenged by a June 2007 U.S. Supreme Court ruling that invalidated school-attendancezone plans used in Seattle and metropolitan Louisville to achieve greater diversity. In a 5-4 ruling in Parents Involved in Community Schools v. Seattle
WWW.CQPRESS.COM

Dist. No. 1, the majority, in an opinion written by Chief Justice John G. Roberts Jr., said, The way to stop discrimination on the basis of race is to stop discriminating on the basis of race. 63 Roberts deplored what he saw as an ends justify the means approach to achieving integration. [R]acial classifications, he argued, are simply too pernicious to permit any but the most exact connection between justification and classification. The courts ruling was hardly the last word, however. In a June 2010 review of school integration efforts since the Supreme Court decision, the Civil Rights Project at UCLA said the divided decision confused many educators and it was somewhat unclear what did remain legal. 64 It noted that economic pressure is forcing school districts to make deep cuts in services, which is another potential constraint for integration efforts, and tems bureaucracy and sweeping away incompetent teachers she appeared on the Nov. 26, 2008, cover of Time holding a broom had put her at odds with the local branch of the American Federation of Teachers. Her reputation for tough management has attracted private foundation money to help the D.C. schools, and her future in the job became an issue in the current mayoral race. Further roiling the waters was Rhees firing of 241 teachers this summer, including 165 who received poor appraisals under a new evaluation system based in part on students standardized test scores. 65 Paying for Success But in June 2010, school officials and the teachers union finalized a contract that, in addition to granting a retroactive pay increase, requires all teachers in the system to be evaluated in part on whether their students test scores improve, and it offers sizable pay increases to teachers who opt for and succeed in a special new pay-for-performance arrangement. 66 D.C.s special constitutional status that gives Congress a major say in its education policies continued to play a role in the districts efforts to improve results. Since 2004, Congress has funded the D.C. Opportunity Scholarship Program, a unique, federally funded voucher option favored by many conservatives that has given some 3,700 students $7,500 per year to attend any accredited private school that will accept them. 67 But the Democratic takeover of Congress and the election of President Obama brought a change in priorities. Education Secretary Arne Duncan in 2009 rescinded the pending scholarships, and Congress declined to reauthorize them. An Education Department report found that the voucher program had not demonstrated much impact on test scores, though graduation rates for students in the program
Davis Guggenheim, director of Waiting for Superman, a documentary about the public school system in America, and Michelle Rhee, D.C. Public Schools Chancellor, attend the Silverdocs Festival in Silver Spring, Md.
The dissent by the courts liberal justices argued that Roberts opinion undermined the promise of integrated schools the court set down in its 1954 landmark decision in Brown v. Board of Education, a change that Justice John Paul Stevens called a cruel irony. Justice Anthony Kennedy, in a concurring opinion, left open the possibility of a more modest consideration of race in drawing school boundaries.
it called on the Obama administration to issue new guidance on how race can be considered. One of the nations most troubled urban districts, the District of Columbia, in spring 2010 became the scene for ratification of a highly innovative teachers contract. For nearly three years, national attention had focused on the controversial tenure of D.C. Public Schools Chancellor Michelle Rhee. Her efforts at reforming the sys-
AFP/Getty Images/Virginie Montet
Chronology
2007
June 2007 U.S. Supreme Court invalidates schoolattendance-zone plans used in Seattle and Louisville to achieve greater racial diversity. The 5-4 ruling in Parents Involved in Community Schools v. Seattle Dist. No. 1 said the Seattle School Districts plan to use race as a consideration in student assignments was unconstitutional.
Michelle Rhee appears on the cover of Time.
2009-2010
Educational reforms have been made by 28 states under the administrations $4 billion state grant education initiative, Race to the Top. The number of reforms is triple that of the previous two years. 2009 Education Secretary Arne Duncan rescinds pending scholarships under the D.C. Opportunity Scholarship Program, and Congress declines to reauthorize.
2008
Nov. 26, 2008 Washington, D.C., School Chancellor
topped those of other students in D.C. Public Schools. 68 Virtually every tool in the school reform grab bag from charter schools to new teacher-accountability rules to dropout-prevention efforts will be affected by the long-delayed reauthorization of the Elementary and Secondary Education Act (ESEA), known since 2002 as No Child Left Behind. The law has long been the center of disputes over reliance on student test scores. Its deadlines for improving student proficiency are seen by many as unrealistic, and critics have considered its funding levels inadequate. The bill has run into a new set of obstacles in the Obama era. A Call for Flexibility In a March 15, 2010, blueprint to overhaul No Child Left Behind, the Obama team argued that the law had
2010 Obama administration unveils its blueprint to overhaul No Child Left Behind Act. . . . In the District of Columbia in June, school officials and the teachers union finalize a contract that, in addition to granting a retroactive pay increase, requires all teachers in the system to be evaluated in part on whether their students test scores improve, and offers sizable pay increases to teachers who opt for and succeed in a special new pay-for-performance arrangement. . . . Civil Rights Project at UCLA reviews school integration efforts and calls on the Obama administration to issue guidance on how race can be considered in public education. . . . Washington, D.C., School Chancellor Rhee dismisses 241 teachers.
made reforms in 2009 and 2010, or triple the number during the previous two years, according to Education Week. 69 Yet in a surprise twist, the ravages to state and local budgets wrought by the current recession prompted the House to pass an emergency jobs bill that would shift funds from Race to the Top to preserve current teacher salaries. In another division among education reformers, the teachers unions want to make the rewrite of the law less punitive toward teachers and more cognizant of family income disparities. Today, students success in school depends in large part on the zip code where they live, National Education Association president Dennis Van Roekel told Congress. Students who struggle the most in impoverished communities too often dont attend safe schools with reliable heat
created incentives for states to lower their standards; emphasized punishing failure over rewarding success; focused on absolute scores, rather than recognizing growth and progress; and prescribed a pass-fail, one-size-fits-all series of interventions for schools that miss their goals. It called for greater flexibility in methodology to turn around some 5,000 schools labeled as underperforming. But the reauthorization, though the subject of a dozen or more hearings this year in the House and Senate, has continued to divide Congress. One reason is the attention devoted to Obamas competitive $4 billion state grant education initiative, called Race to the Top. It is viewed by some as highly successful in providing incentives to states to enact reforms. Though only Delaware and Tennessee have won grants so far, 28 states have
CHAPTER
12
FINANCIAL INDUSTRY OVERHAUL

BY MARCIA CLEMMITT
Excerpted from Marcia Clemmitt, CQ Researcher (July 30, 2010), pp. 629-652.
Financial Industry Overhaul

BY MARCIA CLEMMITT
they were gaining as house prices rose and encouraging investors to buy packages of hen 30-year-old mortgage loans rather than Chris Fargis applied stock in companies that could for a job on Wall have been long-term job creStreet a couple of years ago, ators, he says. he didnt have a business deBased on such concerns, gree or experience in finance. when Democrats took conHis ace in the hole was poker. trol of the White House and Fargis had played online both houses of Congress in since about 2001 playing 2009, debate began on legup to eight hands at a time islation to tighten banking and Toro Trading sought rules to limit the possibility his gambling skills when it that risky investing with borhired him as a trader. rowed funds would again sink If someones been sucthe financial system. The yearcessful at poker, then theres and-a-half struggle to enact a good chance they could the legislation is a testament be successful in this busito both the issues complexness, said company founder ity and banks political power Danon Robinson. and intense struggle to fight Robinson isnt the only fioff new rules. Three Repubnancial executive who thinks lican senators, Scott Brown so. Theres a certain maturity of Massachusetts and Maines and ability to deal with risk that Susan Collins and Olympia is hard to get any other way Snowe finally crossed the aisle unless you put the money to give supporters of the overon the table at some point in haul the 60 Senate votes they An independent consumer protection bureau created by your life, said hedge fund exneeded to overcome a final the financial system overhaul has the power to regulate ecutive Aaron Brown. 1 Republican filibuster of the consumer loans, credit cards and mortgage-lending Nevertheless, ever since plan on July 15, and President practices. However, lawmakers bowed to pressure from several big Wall Street firms Obama signed the measure into the auto industry and exempted automobile dealers from oversight by the agency. tumbled to the verge of collaw on July 21. lapse in 2008, helping preIn the wake of the debate, cipitate a worldwide recesquestions persist about whether Banks increasingly single-minded increased bank regulation is a good idea sion, economists, lawmakers and the pursuit of fast profits rather than longer- and whether current proposals would public have grown skeptical of Wall Streets casino culture and obsession term value investments and the grow- be effective. ing use of large amounts of leverage, with risky bets. 2 Most conservative analysts assert a Huge financial supermarkets like or debt, to make trades has harmed strong No to both. Citigroup and JP Morgan Chase engage the whole economy, says Dean Baker, Government regulation actually enin investing that resembles gambling chief economist at the Center for Eco- courages carelessness, said Peter J. Walmore closely than banking, even as nomic and Policy Research, a liberal lison, a fellow at the free-market think they ask depositors to trust them with Washington think tank. tank American Enterprise Institute. MarThe reason why were sitting here ket participants believe that if the govtheir personal savings, complained Nouriel Roubini, a professor of eco- with 10 percent unemployment is that ernment is looking over the shoulder of nomics at New York Universitys Stern we had a housing bubble that was dri- the regulated industry, it is able to conSchool of Business, and Stephen ving the economy down the wrong trol risk-taking, so customers stop tryMihm, a professor of history at the path, focusing homeowners on the il- ing to determine for themselves whether lusory housing wealth they believed a financial firm is behaving responsibly. University of Georgia. 3
THE ISSUES
Getty Images/Scott Olson
July 30, 2010
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to be large, said Richard W. Fisher, president of the Federal Reserve Bank of Dallas. That being the case, there is only one way to get serious about [TBTF] . . . shrink em, he said. Banks that are TBTF are simply TB too big. We must cap their size or break them up. 5 Todays biggest banks have attained a scale thats impossible to run prudently, says James K. Galbraith, a professor of economics at the Lyndon B. Johnson School of Public Affairs at the University of Texas, Austin. But while the desire to break up super-big institutions is understandable, its ultimately futile, said Mark Zandi, chief economist for Moodys Economy.com, a West Chester, Pa.based financial research company. Breaking up banks would be too wrenching and would put U.S. institutions at a distinct competitive disadvantage vis--vis their large global competitors, he said. 6 Also hotly debated is how big a role unethical conduct played in the crisis. In April, the Securities and Exchange Commission (SEC) filed a civil lawsuit charging the big New York investment bank Goldman Sachs with fraud for selling investors mortgagebacked securities the bank knew were intended to fail. Some analysts say the systems future soundness depends on whether the government will continue to crack down. Many of todays financial-industry practices amount to fraud or outright criminal negligence, charges Galbraith. When it comes to selling investments made up of packaged mortgage loans so-called mortgagebacked securities for example, fraudulent behavior was evident throughout the system, he says. First, you had a massive issuance of mortgages to people who couldnt pay them. The guy who made those loans committed fraud because he knew they couldnt pay but made the loans anyway to generate a fee for himself,
Regulation also impairs innovation and raises prices, Wallison said. 4 But while the new legislation wont forestall the next economic crash, rules are valuable, and current proposals are a definite improvement over the status quo, says Baker. For example, there will be closer scrutiny of complex investments known as derivatives, whose value is derived by a formula based on the shifting values of some asset or assets, such as the value of the Japanese yen compared to the U.S. dollar. Under the legislation, most derivatives now will be traded in some regulated way rather than in unsupervised trader-totrader deals, says Baker. Supervised trading will pose fewer risks to investors, Baker says. Also a clear plus is the Consumer Products Financial Services Agency, says Baker. People get burned on financial
products all the time so having a government office to look out for consumers interests will be a help, he says. In the 2008 crash, the federal government stepped in with taxpayer funds the Troubled Asset Relief Program (TARP) to prevent some of the biggest financial firms from collapsing. Policymakers figured the biggest firms were so deeply entwined with the rest of the economy that their demise would take other firms down with them. In short, the mega-firms were too big to fail, or TBTF. As a result, many expected legislative efforts to limit banks size or the scope of activities a single firm could pursue. The Obama administration and many in Congress steadfastly opposed this approach, however. The trickiest banks the ones good at figuring out ways to circumvent rules to maximize profits tend
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Galbraith says. Then the ratings agencies companies such as Fitch, Moodys and Standard & Poors that assess investments according to relative risk extended the fraud by labeling these things triple A, or very low-risk securities. Thats the same thing as money laundering. It takes something dirty and makes it clean, Galbraith argues. Finally, investment firms that marketed mortgage-backed securities to pension funds and other traditionally lowrisk investors misled buyers by passing off bad goods to suckers, he says. Charging companies who commit such frauds is the only hope we have of cleaning up the industry, he says. But most bankers deny unethical conduct. I am saddened and hurt by what happened in the market, said Fabrice Tourre, the 31-year-old Goldman Sachs vice president whom the SEC has charged with helping the bank engineer a fraudulent deal in which two European banks lost $1 billion. I believe my actions were proper. 7 As lawmakers, economists and the public wonder whether financial reforms will prevent the next financialmarket meltdown, here are some of the questions that are being asked: Are tougher rules for financial firms needed? Over the past three decades, many rules governing financial firms have been rescinded as policymakers embraced the philosophy that markets function best when left alone. Following the 2008 crash, however, some economists have called for reinstating stricter curbs on banking. I hope its no longer controversial to say that a hard-line free-market philosophy has been thoroughly discredited, says Texas Galbraith. When people say this today, theyre just covering for the fact that theyre backing what special interests want. Taxpayers are providing a substantial benefit to the shareholders and creditors of institutions considered too
Derivatives Market Dwarfs Global GDP

The value of the worldwide trade in derivatives nancial instruments that represent bets on shifting prices, not real assets exceeds $1 quadrillion, or more than 20 times the value of the worlds gross domestic product. Value of Worldwide Derivatives Market and GDP
$1.2 quadrillion
$50 trillion
Derivatives Gross domestic product
Source: Peter Cohan, Big Risk: $1.2 Quadrillion Derivatives Market Dwarfs World GDP, Daily Finance, June 2010
big to fail by putting up bailout funds, said Zandi of Moodys Economy.com. In return, big financial firms should be subject to greater disclosure requirements, required to hold more capital, satisfy stiffer liquidity requirements, and pay deposit and other insurance premiums commensurate with . . . the risks they pose to the system. 8 The financial reform bill goes in the right direction . . . but it doesnt go far enough, however, said New York Universitys Roubini. An effective law would have to restructure the industry by limiting bank size and the number of different financial businesses one institution could pursue, he said. 9 Baker of the Center for Economic and Policy Research would like to see a pro-
vision with teeth requiring commercial banks, which take deposits and lend to individuals and businesses, to be separate entities from investment banks, which issue, price and trade stocks and bonds. The legislation is probably better than nothing, says Galbraith. Nevertheless, Im disappointed in it, and if I were a member of Congress, Im not sure whether Id vote yes or no. Behind-the-scenes deals between lawmakers and financial firms turned the legislative process into a victory lap for Wall Street, charged Simon Johnson, a professor of entrepreneurship at the Massachusetts Institute of Technologys Sloan School of Management. After the 2008 bailout, administration officials promised they would be back later to fix the underlying problems. This they and Congress manifestly have failed to do. Our banking structure remains unchanged . . . and the incentives and belief system that lie behind reckless risk-taking has only become more dangerous. 10 Regulatory changes in most cases represent a too-late attempt to catch up with the tricks of the regulated, who will quickly find ways to circumvent new rules, said Dallas Fed chief Fisher. 11 In addition, many financial regulators come from the banking industry, and that fact will always compromise enforcement, says Baker. Imagine if we had a Labor Department where most people were from the United Auto Workers. It would be very hard for them to take an independent view of labor issues and crack down on former colleagues, he says. But many conservative commentators challenge the notion that the financial industry needs more rules. As it stands, the legislation is worse than nothing, says Mark A. Calabria, director of financial regulation studies at the libertarian Cato Institute. Theres no need to re-regulate banks because they were never actually deregulated, and any claim that deregulation
Continued on p. 635
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Lawmakers Reject Rainy Day Fund for Banks

Global finance ministers rejected creation of a similar fund.
hile deliberating new banking rules that might mitigate future financial crises, U.S. lawmakers and banking officials considered and rejected a plan to have banks put funds upfront into a fund that would pay creditors and depositors should a large bank fail. Some financial-industry analysts say that such advance preparation for the likely inevitable failure of more big financial firms down the line is a plan well worth pursuing. An advance-payment bailout fund was a House proposal that didnt get nearly enough attention, says Dean Baker, chief economist at the Center for Economic and Policy Research, a liberal think tank. The final congressional bill instead included what Baker calls a misguided proposal to have banks ante up such funding only after financial firms actually crash. Having such a fund available before a crisis would allow the regulators to shut down ailing institutions in a quick, orderly fashion before problems worsened and spread, Baker says, Without it, regulators wont have the tools to shut down ailing big banks. Furthermore, the plan is a proven idea that we already have in place in the Federal Deposit Insurance Corporation (FDIC) and use routinely for smaller banks, Baker says. Without an advance fund, if a big bank fails, government regulators can go to Congress and ask for money to address that specific emergency, but Congress might say they dont want to provide the money or ask the financial industry for it, or the request might get tangled up in a legislative logjam of some kind, he says. The provision might not be needed if the only problems in the system came from a handful of rogue institutions, says Baker. But what we got in 2008 was not rogue. You didnt so much have rogue players as a system that was totally out of whack, he says. A fund thats ready and waiting would be a backstop for the day when a large firm was suddenly insolvent. When failing banks are closed, the money to pay creditors shouldnt take the form of a post-crisis tax, says Amy Sepinwall, an assistant professor of legal studies and business ethics at the University of Pennsylvanias Wharton School. I think there should be a perpetual tax on the players in recognition of the fact that, no matter what laws and regulations are in place, there will always be the possibility of some financial institution taking too many risks and failing. People on Wall Street are incredibly intelligent and may develop strategies to circumvent whatever rules Congress puts in place to rein them in, says Sepinwall. Maybe thats the way its supposed to be, since the circumvention often leads to innovation, some of which is very valuable. At the same time, however, its obvious that some financial-market innovations will be extremely risky, she says. For that reason, requiring regular payments from the whole industry into a fund that could serve as a backstop for firms
whose innovative financing arrangements go south is probably a good idea, she says. One could key the tax to the size of the bank, she says. Such an upfront fund would constitute a recognition of the principle of moral luck the idea that, while many people may drink and drive, for example, only some will have an accident, but that everyone who engages in the risky behavior, not just those who crash, actually bears some degree of responsibility, Sepinwall explains. Like Congress, finance ministers and central-bank chiefs of the G20 19 nations and the European Union considered but rejected an international version of the bank shutdown fund in deliberations this summer. Given the increasingly international nature of the financial system, the European Union and some others want each country to tax its banks to create a pool to be used to resolve failed banks, to avoid delaying the process or sticking taxpayers with the bill. Some countries that impose limits on how much risk banking institutions may take on, such as Canada, object to the idea. 1 They argue that since their regulatory systems are strong, their local institutions shouldnt have to pay for what happens in riskier countries without the foresight to ban risky practices up front, says Sepinwall. In the U.S. debate over financial reform, key congressional Republicans persistently demanded that the fund be removed from the bill on the grounds that it might actually be used to keep faltering institutions alive. The bill reported out of committee sets up a $50 billion fund that, while intended for resolving failing firms, is available for virtually any purpose that the Treasury secretary sees fit, wrote Alabamas Sen. Richard Shelby, the top-ranking Republican member of the Senate Banking Committee. The mere existence of this fund will make it all too easy to choose bailout over bankruptcy. This can only reinforce the expectation that the government stands ready to intervene on behalf of large and politically connected financial institutions. 2 The fact-checking website PolitiFact notes, however, that Shelbys statement which was widely echoed by other Republican and conservative commentators ignores specific bill language that bans use of the funds for any purpose except those connected with closing large firms that falter. The legislative language is pretty clear that the money must be used to dissolve meaning completely shut down failing firms, said PolitiFact. The fund cannot be used to keep faltering institutions alive. 3 Marcia Clemmitt
1 For background, see Canada Urges G20 to Stop Bank Tax Talk, CTV television online, June 1, 2010, www.ctv.ca. 2 Quoted in Sen. Richard Shelby Overlooks Safeguards in Financial Regulation Bill, PolitiFact.com, http://politifact.com/truth-o-meter/statements/ 2010/apr/16/richard-shelby/sen-richard-shelby-overlooks-safeguards-financial-/. 3 Ibid.
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helped trigger the 2008 crisis ignores history, he says. As evidence, Calabria points to studies showing that government outlays for banking and financial regulation increased from only $190 million in 1960 to $1.9 billion in 2000 and to more than $2.3 billion in 2008 (in constant 2000 dollars.) The annual average of new financial-industry rules proposed by the Treasury Department grew from around 400 in the 1990s to more than 500 in the 2000s. 12 Misguided regulation has actually been the key driver of the financial meltdown, not actions financial firms took on their own, Calabria argues. For example, federal rules micromanage the relationship between capital and assets, specifying, for example, that banks must hold more capital in reserve to back their lending to corporations than for their lending to national governments, he says. But the recent financial meltdown of Greece demonstrates that governments so-called sovereign debt can be far riskier than corporate debt, Calabria argues. Furthermore, when the Federal Reserve lowered interest rates after the Sept. 11, 2001, terrorist attacks, to jumpstart business expansion and consumer spending, Fed Chair Alan Greenspan left the low rates in place too long, fueling the over-borrowing spree that led to the current troubles, Calabria says. The lowered rate was needed for six months, not three years, he says. Did the Fed just not get that they were setting up bad incentives that encouraged too many people to take out mortgages? The call for more regulation is a new culture war launched by progovernment liberals, said American Enterprise Institute president Arthur C. Brooks. The panic the economic downturn engendered among Americans is allowing liberals to attack free enterprise openly and remake America in [their] own image by expand[ing] the powers of government to rigorously control an
industry that was not at fault, Brooks said. In truth . . . government housing policy, which encouraged too many Americans to take out mortgages to buy homes, was at the root of the crisis. 13 Was unethical behavior by bankers a major factor in the economic crash? Some observers are convinced that financial markets are hotbeds of unethical conduct, but others point out that seeking profit is not only legal but is what the public demands that financial firms do. Goldman Sachs is a great vampire squid wrapped around the face of humanity . . . little better than a criminal enterprise that earns its billions by bilking the market, the government, and even its own clients in a bewildering variety of complex financial scams, fumed financial reporter Matt Taibbi. 14 In 2006, Goldman sold $76.5 billion in mortgage-backed investments, of which about $59.1 billion more than three-quarters consisted of hundreds of home loans that either were made to people with very bad credit or had other serious problems, such as risky terms like a no down-payment requirement, Taibbi said. Then, some Dutch teachers union that a year before was buying ultra-safe U.S. Treasury bonds . . . runs into a Goldman salesman who offers them a different, just as safe AAA-rated investment that, at the moment anyway, just happens to be earning a much higher return than Treasuries. Next thing you know, a bunch of teachers in Holland are betting their retirement nest eggs on a bunch of meth-addicted homeowners in Texas and Arizona. . . . This isnt really commerce, but much more like organized crime . . . a gigantic fraud perpetrated on the economy that wouldnt have been possible without accomplices in the ratings agencies and regulators willing to turn a blind eye, said Taibbi. 15 It is unacceptable to continue allowing Wall Street to put their short-
term gambles ahead of the long-term prosperity of Main Street America, said Sen. Jeff Merkley, D-Ore., who sought to ban so-called proprietary trading banks trading securities for their own profits rather than on behalf of customers but secured only minor limitations on such trades. Weve seen how proprietary trading can cause conflicts of interest when firms bet against securities they help put together for their clients, Merkeley said. 16 Sen. Carl Levin, D-Mich., who cosponsored Merkeleys proposal, labeled many bankers primary motivation extreme greed. 17 In many cases, both sellers and buyers of the complex investments called derivatives are cheaters, charged Frank Partnoy, a professor of law and finance at the University of California, San Diego, and a former associate at the New York City-based financial services firm Morgan Stanley. Some derivatives allow people to avoid taxes by making their investment portfolios appear to have a different mix of risks and assets than they actually do, he said. In a so-called equity swap, a bank that sells the swap makes money, and the purchaser . . . makes money because they effectively get to liquidate a portion of their stock position without paying tax. They both win, but the public loses a legitimate part of the tax base, Partnoy said. 18 Ethical rot and perverse incentives . . . caused the ongoing financial crisis, said William K. Black, an associate professor of economics and law at the University of Missouri who was a federal bank regulator during the savings and loan meltdown of the late 1980s. For example, executive compensation and the compensation systems used for appraisers, accountants and rating agencies were designed to create a business climate in which fraudulent and abusive lending and accounting practices drove good practices out of the marketplace. 19 I dont think those who went into finance are greedier or more deficient
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Whats in the New Financial Regulation Law

ere are key provisions of the sweeping 2,300-page financial reform law signed by President Obama on July 21, 2010: Overseeing the systems financial health: A new 10member council of financial regulators, drawn from several different agencies, will monitor not just individual financial firms but their interactions, to help head off emerging risks for an economic crash. 1 Breaking up big banks: Regulators get new authority to seize and break up troubled financial firms whose large size means their troubles could damage the economy. The Treasury would fund the initial costs of winding down the bank, but regulators could recoup those funds from the failed bank and from special fees imposed on all big financial firms. Curbing financial-market speculation: A watered-down version of part of the so-called Volcker Rule limiting but not entirely banning banks from using depositors money to speculate in financial markets. Limiting banks derivative trading: Phased in over several years, banks are required to spin off some derivatives trading into separate, affiliated companies. For the first time, many derivatives must be traded through clearinghouses or public exchanges, rather than over the counter. Overseeing insurers, hedge funds, and private equity funds: A new Federal Insurance Office in the Treasury Department will monitor, but not regulate, the insurance industry, which previously has been overseen only by states. Hedge funds and private equity funds must register with the SEC as investment advisers and provide information on trades to help
regulators monitor financial-system risk. Improving how securities are rated: The SEC will conduct a two-year study on whether to create a federal board to assign ratings agencies to each security deal. Some lawmakers had pushed for immediate random assignment of rating agencies as a way to end banks shopping for securities they trade. Overseeing the Federal Reserve: The Fed faces a onetime audit of the emergency loans and other actions it took to help financial firms weather the 2008 crisis, but the central banks decision-making about monetary policy how it sets interest rates will not be audited. Protecting consumers: An independent consumer financial protection bureau will regulate and police consumer-loan, credit-card and mortgage-lending practices. This provision was enacted despite strong objections from the financial industry and from congressional Republicans. Automobile dealers won an exemption from oversight by the agency. Cleaning up mortgage lending: Lenders must verify borrowers income and determine in advance whether they can meet the loan payments before originating a mortgage, thus ending the risky liar loans implicated in some home foreclosures. Curbing executive pay: Shareholders of all publicly traded companies, not just financial firms, get a nonbinding advisory vote on how executives are compensated.
1 See Open Congress website, www.opencongress.org/bill/111-h4173/text; Alison Vekshin and Phil Mattingly, Overhaul of Financial Regulation on Path to Obamas Desk, Bloomberg/Business Week, June 26, 2010, www.business week.com.
in moral scruples than others, but the incentives in the way financial markets currently operate led them to behave as if they were, said Joseph E. Stiglitz, co-winner of the 2001 Nobel Prize for economics and a professor of economics at Columbia University. The idea that you have to pay me more if I succeed in increasing profits became conventional wisdom, leading bankers to neglect the fact that banks are a means to an end in the economy, not an end in themselves. 20 A good financial system manages risk, allocates capital and runs the economys payment system at low transaction costs, said Stiglitz. Our financial system created risk and mismanaged capital, all the while generating huge transaction costs financial firms out-
sized profits compared to other industries. While bankers claim that products like derivatives created real value in the economy, it is hard to find evidence of any real growth associated with these so-called innovations, Stiglitz said. 21 So deceptive were the systems of creative accounting employed in pursuit of large returns that bankers didnt even know their own balance sheets, and so they knew that they couldnt know that of any other bank, Stiglitz said. No wonder then that lending between banks which allows bankers quick access to cash they can then loan to businesses froze up in a crisis of trust that helped topple the worlds economy, he said. 22 Financial-industry executives mostly reject such charges.
Far from ignoring obligations to society, most bankers embrace their social purpose, said Goldman Sachs Chairman Lloyd Blankfein. I know I could slit my wrists and people would cheer, but accusers dont realize that the bank does Gods work, Blankfein said. We help companies to grow by helping them to raise capital. . . . This, in turn, allows people to have jobs that create more growth and more wealth. Its a virtuous cycle. 23 Some bankers have exhibited a failed moral compass by hiring people and promoting people based simply . . . on commercial productivity rather than the many other criteria that could be used, acknowledged Brian Griffiths, vice chairman of Goldman Sachs International. Nevertheless, my reading of [Scottish
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philosopher and economist] Adam Smith is that self-interested actions, though they may sometimes be selfish, produce social good, he said. (Smiths 1776 treatise An Inquiry into the Nature and Causes of the Wealth of Nations theorizes that an invisible hand guides the free market to produce and price things correctly, despite seeming chaos.) I think that the injunction of Jesus to love our neighbors as ourselves is a recognition of self-interest as a positive social force, said Griffiths. 24 Banks do only what society asks of them, says Amy Sepinwall, an assistant professor of legal studies and business ethics at the University of Pennsylvanias Wharton School. We live in a getrich-quick culture, and we ask people [in the financial industry] on our behalf to make as much money as possible in as little time as possible, so in a way were sort of licensing this. Individuals prefer to spend rather than save, and, as a result, demand the kind of financial alchemy that can transform ones house into a virtual ATM or ones exceedingly modest savings into a fiscal cushion that can sustain a long, comfortable retirement, Sepinwall said. Thus, the risk that crashed the system is the inevitable price of our preferences for leisure over toil and consumption over savings. 25 Should big banks be broken up? Proponents of limiting the size and scope of each individual bank argue that todays biggest firms are too large to be effectively managed. But other analysts say that the real problem is not overlarge banks but misguided government policies, such as bailing out institutions the government deems too big to fail. No matter how large the company, if it fails financially, it should go bankrupt, rather than being rescued, these commentators say. The best way to prevent a bank from becoming too big to fail is preventing it from becoming too big in the first place, said Robert Reich, sec-
retary of Labor in the Clinton administration and a professor of public policy at the University of California, Berkeley. Lawmakers should cap the deposits any one bank can hold, reinstate the so-called Glass-Steagall ban on combining an investment bank and a commercial deposit-holding bank in one company and force banks to spin off their derivatives-trading operations into separate companies, Reich said. (Only a limited form of the last of these provisions survives in the current legislation.) 26 If theyre too big to fail, theyre also becoming too big to be saved, too big to be bailed out and too big to be managed, said New York Universitys Roubini. No CEO can monitor the activities of thousands of separate profit and loss statements 27 Where within one institution you have commercial banking, investment banking, underwriting of securities, marketmaking and dealing, proprietary trading, hedge fund activity, private equity activity, asset management, insurance, it creates massive conflicts of interest, said Roubini. These institutions are always on every side of every deal. Thats an inherent conflict of interest that cannot be addressed by simply setting up internal barriers within the company. 28 Bank swaps desks that trade in certain risky derivatives should be spun off into separate enterprises that do not have access to government backstops, said Dallas Fed chief Fisher and Federal Reserve Bank of Kansas City President Thomas M. Hoenig. 29 Some commentators argue that the biggest banks generally became big through sweetheart deals with the government, and since that makes them both tools and symbols of dangerously consolidated government power, they should be broken up. Big banks are bad for free markets because they are conducive to what might be called crony capitalism, said Arnold Kling, an adjunct scholar at the Cato Institute. Thus, there
is a free-market case for breaking up large financial institutions: that our big banks are the product, not of economics, but of politics. The key example cited by Kling and many other conservative and libertarian commentators is Fannie Mae and Freddie Mac two huge stockholderowned but government-sponsored institutions that buy and securitize mortgages. Created by the government, these two institutions always benefited from the perception that Washington would not permit them to fail, a fact that gave them important advantages in credit markets and allowed them to grow bigger than they otherwise would have, he said. 30 Some of the biggest private banks also have pursued public purposes imposed on them by Congress such as increasing mortgage lending to expand home ownership in an attempt to woo lawmakers into regulating them more lightly over the years, said Kling. At the governments instigation, big banks, along with Fannie Mae and Freddie Mac, created a market in which high-risk mortgages were securitized packaged to be sold as investments driving house prices sky high, and the bursting of this price bubble caused the financial crash, he said. The root cause, however, was banks being big enough to achieve real political power. To expand free enterprise, shrink the banks. 31 But shrinking banks wouldnt really solve our problems, because its perfectly possible to have a financial crisis that mainly takes the form of a run on smaller institutions, said Paul Krugman, a professor of economics and international affairs at Princeton University and winner of the 2008 Nobel Prize for economics. In the Great Depression of the 1930s, the Federal Reserve believed that it was OK to let [the small banks] fail, but as it turned out, the Fed was dead wrong: the wave of small-bank failures was a catastrophe for the wider economy, he said. Regulators should limit risky lending
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and the use of borrowed funds to buy investments, rather than trying to cap banks size, Krugman said. 32 Unilaterally limiting the size of U.S.based banks would put the country at a competitive disadvantage because big U.S. companies with international operations would end up using the bigger banks that were based elsewhere, said Rob Nichols, president of the Financial Services Forum, a banking industry trade group. 33 Rebuilding the Glass-Steagall wall between depository banks and investment banks is completely beside the point because, in fact, very few financial holding companies decided to combine investment and commercial banking activities, even after Congress allowed them to do so in 1999, says Catos Calabria. Bear Stearns and Lehman Brothers, the two investment banks whose failures have come to symbolize the financial crisis, . . . were not affiliated with any depository institutions, and, in fact, if they had had a large source of insured deposits, they would likely have survived their short-term liquidity problems rather than going under and precipitating a wider crisis, he said. 34 Backers of the idea, like Treasury Secretary Alexander Hamilton, pointed out the value of having a bank large enough to offer credit to government, issue paper money currency that could be used nationwide, and facilitate payments among businesses in multiple states. 36 Skeptics, like Thomas Jefferson, worried about centralizing economic power. A large bank might easily become a kingmaker and make unilateral decisions about how much currency to issue, for example, Jefferson and others said. I sincerely believe . . . that banking establishments are more dangerous than standing armies, the future third president wrote. 37 Hamilton won the day, and in 1791 President George Washington signed a law chartering the First Bank of the United States, with 80 percent private and 20 percent government ownership. During its 20-year charter as the sole federally affiliated bank, the firm collected tax revenues on behalf of the government and issued the only currency accepted as payment of federal tax bills. State-chartered banks issued the lions share of paper money in circulation. But the First Banks role in clearing state-tostate payments meant that it held large amounts of state currency and could demand that states fork over gold or silver reserves to redeem those notes. This gave the bank enormous power to determine the countrys money and credit supplies decisions that affect prices and whether businesses can get loans. By and large, the bank was a boon rather than a bane to the young republic, helping businesses to thrive. By 1825, when the young United States and the old United Kingdom had roughly the same population . . . the United States had nearly 2.5 times the amount of bank capital as the UK, as well as a stock market able to attract capital from around the world, wrote MITs Johnson and business consultant James Kwak in their 2010 book 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. 38
The Federal Reserve

n the 1830s, President Andrew Jackson who believed that only gold and silver rather than paper currency should be used as money railed against what he called a dangerous monopoly held by the Second Bank, chartered in 1816. The battle marked the seventh president as somewhat oldfashioned in an age when industrialization and urbanization created a need for centralized banking, but the behavior of Second Bank president Nicholas Biddle also provided evidence that there was reason to fear big banks power. An ally of Jackson rival Kentucky Sen. Henry Clay, Biddle expanded the banks lending to win support for Clay and the bank. Jackson nevertheless defeated Clay in the 1832 presidential election, but afterwards Biddle drastically cut lending and demanded that states pay gold and silver to redeem their currencies, contracting the money supply and causing loan interest rates to double. The bank is trying to kill me, Jackson fumed. 39 Jackson vetoed renewal of the Second Banks charter. But, at least partly as a result of having no big bank to manage the money and credit supply, the U.S. economy . . . suffered through severe business cycles booms and depression-level busts through the rest of the 19th century, Johnson and Kwak write. 40 Nevertheless, American industry thrived, as railroad, oil and chemical companies launched new products. Then, near the end of the 19th century, many companies in industries like steel merged into huge corporate entities, dubbed trusts monopoly or near-monopoly enterprises that executives argued cut costs. But Presidents William McKinley, Theodore Roosevelt and William Howard Taft tried to break up the trusts, saying they had power to raise prices and lower wages without restraint.
BACKGROUND
Early Bank Battles
oney is power, and even in the earliest days of the republic, lawmakers debated the benefits and dangers of having a large central bank. They worried that big financiers might join with politicians or the wealthy to turn the democratic republic into an oligarchy a state run for the benefit of a powerful few. 35 The first such debate centered on whether to establish a single bank with close ties to the federal government.
Continued on p. 640
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Chronology
1900s-1920s Federal Reserve system is
launched to curb the cycle of steep economic booms and busts, but stock market crashes, triggering economic collapse.
1980 Congress allows banks to compete for deposits by offering higher interest, expands loans savings & loans (S&Ls) may make, and bans state caps on first-mortgage interest rates. 1984 Congress eases rules to allow investment banks to package and sell mortgages as securities with varying risk levels. 1989 Resolution Trust Corp. created to take over insolvent S&Ls. 1994 Congress lifts restrictions on interstate banking. 1995 Nearly a third of S&Ls have failed and been shut down. 1998 Losses on derivatives bought with borrowed funds sink big hedge fund Long-Term Capital Management. 1999 Gramm-Leach-Bliley Act repeals 1933 ban on combining investment and commercial banking in one company.
1930s-1970s Banking rules are tightened.
2007 Two hedge funds run by investment firm Bear Stearns go bankrupt. . . . German bank IDK suffers heavy losses on subprime investments. . . . May foreclosure filings up 90 percent from May 2006. . . . Government takes over Fannie Mae and Freddie Mac, the two big government-sponsored institutions that buy and securitize mortgages. 2008 Federal Reserve lends JP Morgan Chase $29 billion to buy Bear Stearns. . . . Lehman Brothers investment firm goes bankrupt. . . . Fed creates $85 billion loan fund to rescue insurer AIG. . . . Congress passes $700 billion bailout plan the Troubled Asset Relief Program (TARP) devised by Bush Treasury Secretary Henry Paulson to buy up risky investments held by too big to fail financial firms. 2009 Congress restricts compensation for highly paid workers at firms bailed out with TARP funds. . . . Congressional Oversight Panel for TARP says the Treasury paid more than market value for bank assets. . . . Bank of America and Citigroup return their TARP funds to the government. 2010 SEC charges Goldman Sachs bank with fraud in derivative-trading case; in July Goldman settles the case for $550 million. . . . On July 15, Congress passes sweeping legislation tightening rules for the financial industry. . . . A White House report says that many banks overpaid their executives during the financial crisis. . . . Federal Financial Crisis Inquiry Commission threatens to audit Goldmans derivativestrading business.
Following the Great Depression, the economic boom-and-bust cycle stabilizes. 1933 Glass-Steagall Banking Act separates investment banks from commercial deposit-holding banks and establishes federal deposit insurance. 1934 Securities and Exchange Commission established to regulate stock trading. 1935 Feds regulatory powers expanded. 1936 Commodity Exchange Act requires commodity futures to be traded on public exchanges. 1938 Federal National Mortgage Association (Fannie Mae) established. 1974 Congress creates Commodity Futures Trading Commission (CFTC).
2000s-2010s Housing price bubble swells
then pops, triggering worldwide recession. 2000 Commodity Futures Modernization Act deregulates derivatives trading. 2006 High-risk loans, such as interest-only and no-documentation loans, account for 13 percent of new mortgages, up from 2 percent in 2003.
1980s-1990s Banking regulations ease, and
new products like adjustable-rate mortgages and mortgage-backed securities are introduced.
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Did Weakened Regulations Fuel the Economic Crisis?

Critics of regulation say constant vigilance by bank customers is the only answer.
he weakening or elimination of many banking and investing regulations over the past three decades contributed to the financial crisis, many analysts say. Conservative commentators, on the other hand, argue that most regulation fails to address the real problems behind troubled financial markets and only hinders financial firms in finding creative solutions. Even small rules can make a big difference, some analysts say. In June 2007, for example, the Securities and Exchange Commission eliminated a Depression-era rule intended to keep traders from driving down a companys stock to the point of ruin when market prices were falling. The so-called uptick rule imposed limits on short selling borrowing, rather than buying, stocks whose price was dropping; selling them; and then buying them back at a lower price and pocketing the difference between the two prices before giving the stocks back to their real owner. The uptick rule had banned short selling unless a stocks price had recently ticked up, thus eliminating some of the profit motive in quick sales rather than longer-term investments. In the 1930s, the SEC determined that short selling by people who were not really investing in a company but merely trading borrowed stock in search of quick profits had worsened the stock-market crash and ruined some companies. 1 The rules repeal is partly responsible for recent financialmarket plunges, said Muriel Siebert, former state banking superintendent of New York state and the first woman member of the New York Stock Exchange. 2 The SEC took away the shortsale rule and when the markets were falling . . . investors just pounded some companies stocks. Reinstating the rule might have had some benefit in mitigating the 2008 crash, said Federal Reserve Chairman Ben S. Bernanke. 3 To have their full effect, the new rules Congress created should cover all kinds of financial traders, but mostly wont, many industry critics say.
Current reforms wont deter the reckless financial engineering, investing, and inflation of values that create speculative financial bubbles whose collapse can bring down the system, said Nomi Prins, a senior fellow at Demos, a New York City-based liberal research and advocacy group. 4 For example, drafters of current legislation largely have ignored the shadow-banking system, a group of financial players who take big risks but because most regulation doesnt apply to them never will have to pay for problems they exacerbate, said Prins. Investment groups called private-equity funds, for example, are financial-pyramid bottom-feeders. . . . They buy distressed companies or assets, load them up with debt, extract near-term profit, and are gone before any collapse occurs, she said. Such actions increase the risk of a system collapse because they usually buy complex, poorly understood assets that may be very risky and use borrowed money to do so, just as happened in the mortgage meltdown, said Prins. Instead of ignoring some financial enterprises, lawmakers should require leveraged funds of all kinds that is, any organizations that borrow money to invest to register with the SEC, report their borrowing and trading activities to regulators in detail, and have limits on how much they can borrow, she said. 5 The Federal Reserve system the public-private banking network that not only regulates banks but also makes key decisions about the countrys credit and money supply also got too little attention from lawmakers this year, some analysts say. Although Congress approved some additional auditing for the Fed, lawmakers left too many of its activities in darkness, says Robert D. Auerbach, a professor of public affairs at the University of Texas, Austin. The Fed has done a lot of devilish things over many decades, such as secretly lending money to foreign governments at the
The rise of the trusts ushered in a new era of big banking, this time allied with big industry, rather than government. The banking empire of Connecticut-born J.P. Morgan had become financier of choice for fastconsolidating industries, lending money to buy stock and helping arrange mergers. By 1900, Morgans banks were raising 40 percent of all industrial capital in the United States. In 1907, however, a failed scheme by some investors to manipulate the price of copper stocks panicked Wall Street,
triggering a run on New York banks and a market crash that saw stocks lose nearly 50 percent of their value. The socalled Bankers Panic demonstrated that while a large corporation-allied bank like J.P. Morgans may help industries grow, it does not promote economic stability the way a federal bank could, by managing money and credit supplies. Although Morgan used his own cash to help keep the banks afloat, the federal government ultimately had to deposit $25 million into banks in New York to bail out the banks and prevent economic meltdown.
After the panic, bankers pushed for a government-affiliated bank to act as lender of last resort to head off crashes. Rep. Charles A. Lindbergh, Sr., R-Minn., father of famed aviator Charles A. Lindbergh, Jr., grumbled that it was a wonderfully devised plan specifically fitted for Wall Street securing control of the world, using taxpayer cash. 41 Democratic President Woodrow Wilson engineered a compromise proposal to create a central banking system that would be privately owned but receive some government input.
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positors, stockholders, and investors, behest of the White House, and there among others who discipline firms should be checks and balances. They by their vigilant search for value, Goodshould tell Congress of their activifriend says. ties because in many ways, they run On that basis, rather than rules per the country, as unelected officials se, he would like to see more stanwith no accountability, Auerbach says. dardization of financial products. StanWhats required is not full public disdardization is a public good because it closure but merely disclosure to the leads to more informed customers who members of Congress with oversight can keep banks honest. I want to be authority. If the CIA can make disable to compare investments. closures to congressional oversight Goodfriend says that hed start an efpanels, then the Fed can do so withfort to standardize financial-product deout damage also, he says. scriptions by examining how more transBut many conservative commentaparent labeling was achieved for other tors argue that regulation simply cant Federal Reserve Chairman Ben S. products, such as nutritional labeling on be the answer to creating a sounder Bernanke said a rule regulating food. Because of that history, were not banking system. short selling might have softened the flying blind in trying to accomplish stanRegulation as protection is a false 2008 economic crash. dardized labeling for investments, he says. promise, and to the extent that any Transparency might extend to all types new regulation is presented to the public as a protection against future harms, people are being of investments, including initial public offerings IPOs of misled, says Marvin Goodfriend, a professor of economics at company stock, he says. the Carnegie-Mellon Tepper School of Business in Pittsburgh. Marcia Clemmitt History has plenty of examples showing that financial regulation often does not work, Goodfriend says. There were plenty of regulations in the mortgage markets, for example, but they didnt pro- 1 For background, see Robert Holmes, Uptick Rule: Meaningful or Meantect people. There is a role for regulation, but it should not be over- ingless, The Street.com, Feb. 27, 2009, www.thestreet.com. 2 Quoted in Gretchen Morgenson, Why the Roller Coaster Seems Wilder, sold. For example, a too big to fail rule should one be enacted The New York Times, Aug. 26, 2007. could be gotten around by the industry, and they would get 3 Quoted in Jesse Westbrook, Bernanke Says There May Be Benefit to around it, he says. Uptick Rule, Bloomberg.com, Feb. 25, 2009, www.bloomberg.com. Instead, to create a well-functioning market in which frauds 4 Nomi Prins, Shadow Banking, The American Prospect, May 4, 2010, and risk are at a minimum, there is no solution except con- www.prospect.org 5 Ibid. stant vigilance by informed customers, borrowers, de-
The Federal Reserve Act of 1913 established a network of private regional banks empowered to use public funds to shore up troubled banks, loosely overseen by the presidentially appointed Federal Reserve Board. The system exists today in much the same form in which it was created. To get some idea of its power, one need only observe that every dollar bill in the country says Federal Reserve Note on it, says Robert D. Auerbach, a professor of public affairs at the University of Texas, Austin.
Getty Images/Win McNamee
Regulation, Deregulation
t soon became clear, however, that the system was no panacea for financial busts. In the 1920s, good times rolled, industry grew and stock prices soared, tempting more stock investors into the game, with a growing number buying securities with leverage, or using borrowed cash. The young Federal Reserve had considerable power to affect the money and credit supply and thus slow an econo-
my where debt was growing excessive. But slowing a boom is never popular with politicians concerned about the next election, banks making large profits . . . or ordinary people benefiting from a burgeoning economy, so the Fed kept interest rates low, said Johnson and Kwak. In October 1929, an increasingly unstable stock market began experiencing unnerving one-day price drops. At the same time, housing prices were dropping around the country. Panic about financial firms stability led to bank runs that helped trigger the Great Depression of the 1930s.
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Mystery of the May Mini-crash

Did big banks use ultra-high-speed trading to spook Congress?
y April 2010, the Dow Jones Industrial Average had climbed to 11,205 nearly 70 percent over its March 2009 level and Wall Street seemed to have put the 2008 financial-market crash behind it. Then, on May 6, a socalled flash crash sent the Dow plummeting 998 points nearly a tenth of its value in just a few minutes, before regaining about 600 of those points by days end. 1 High-frequency trades (HFT) instantaneous stock trades generated by computers were widely blamed for the dizzying drop. Only a handful of big firms, such as the investment bank Goldman Sachs, use HFTs, but the trades represent about 75 percent of overall trading volume and have enormous power to push the market sharply up or down, usually without fundamental or technical reason, charged financial blogger Tyler Durden. High-frequency traders can make lightning-quick trades and thus turn a profit based on market shifts that are actually created by HFT itself, he said. 2 As a result, based on a few lines of code in a big banks HFT computers, retail investors, who dont understand that the market is being driven by computerized buying rather than real-world events, get suckered into a rising market that has nothing to do with factors that might legitimately raise stock prices, such as some Chinese firms buying a few hundred extra Intel servers, Durden said. 3 Some in Washington are sounding alarms. Im afraid that
were sowing the seeds of the next financial crash, said Sen. Ted Kaufman, D-Del., who holds an MBA from the University of Pennsylvanias Wharton School and was a longtime aide to Vice President Joseph Biden. Were dealing with something highly complex and completely unregulated. The last time we had that mix, with the practitioners telling us, Dont worry about it, things didnt end well. 4 Moreover, some high-frequency traders use their speed advantage to profit in ways that are, if not illegal, at least highly unfair, said David Weild, a former vice chairman of the NASDAQ stock exchange. Some HFT firms use their high speed and the slower trading algorithms used by investors like pension funds to buy the next stock those investors will want, and then sell it back at a higher price. It is increasingly clear that there are quite a number of [such] high-frequency bandits in the high-frequency-trading community, said Weild. 5 Some commentators even suspect that big-bank, highfrequency traders deliberately created the May 6 market tumble to warn Congress of what havoc bankers could cause if lawmakers passed a tough banking law. On the day of the 998-point drop, Congress was deliberating two provisions that were anathema to the financial industry a forced breakup of the nations six largest banks and a requirement for an independent audit of the Federal Reserves
President Franklin D. Roosevelt, inaugurated in March 1933, sought a law to stop banks from making risky Wall Street investment bets with Main Street depositors money. The Banking Act of 1933 dubbed the Glass-Steagall Act after cosponsors Sen. Carter Glass, D-Va., and Rep. Henry B. Steagall, D-Ala. required traditional commercial banks which take deposits and make loans to be separate entities from investment banks, which help raise corporate capital and issue and trade securities. It also created the Federal Deposit Insurance Corporation to insure bank deposits and facilitate an orderly shutdown of commercial banks that got into trouble. Decades of moderate business cycles, without steep booms and busts, followed, although historians disagree
about whether stricter banking laws were largely responsible. By the late 1970s, however, a new school of freemarket economists joined with banks to press for loosening the restraints. Beginning with the Reagan administration, in 1981, banking rules were relaxed, and financial firms got larger and took on a more varied and riskier mix of investments, loans and deposits. At the same time, Americans became more comfortable with borrowing; and workers whose companies once offered pensions now had to invest retirement money in stocks and bonds. Wages stagnated, leading to increased borrowing as Americans sought the higher standard of living that by now was considered an American birthright. A new era of steeper booms and busts was about to begin.
In the 1980s, savings and loan associations (S&Ls) local institutions that took deposits and made mortgage loans were among the first financial firms to be deregulated. Initially, profits soared. Between 1986 and 1995, however, regulators closed 1,043 failing S&Ls about a third of the total mainly because theyd lent to risky borrowers who defaulted. By 1999, around $124 billion in taxpayer money had shielded S&L depositors from losing their savings. 42 The advent of fast computers allowed financiers to design new investment instruments derivatives whose values, often based on complex formulas, could make them effective hedges against failing bets on traditional investments, like a company stock. Mostly traded over-the-counter rather
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2008 bailout of the banks. That the flash crash occurred during discussion of these proposals suggests it could have been an act of financial terrorism, wrote liberal blogger David DeGraw. 6 The amalgamation of events is eerily similar to what took place on Sept. 29, 2008, when the House of Representatives voted to reject the federal bailout plan for banks, the Troubled Asset Relief Program (TARP), said DeGraw. Immediately after the vote, big banks made the market plunge a record 778 points, sparking widespread . . . panic that helped convince Congress to eventually pass the measure. 7 Many in the HFT community dismiss such claims as nonsense, however, and argue that HFT did not cause the May 6 crash. This crisis was precipitated by panic selling by humans, not HFT, because we just had had a huge run-up in the equities markets, we were in the midst of a 10 percent correction before the mayhem unfolded, and on top of that you had very vexing news about the financial collapse of the Greek government, said Manoj Narang, founder of the New York Citybased HFT information firm Tradeworx. 8 Meanwhile, the Securities and Exchange Commission is proposing additional circuit-breaker mechanisms that would halt securities trading briefly if any stock price declined by a large amount within a five-minute period, to forestall panic selloffs that turn into market crashes. 9
But some analysts say that ever-rising trading speeds simply make the market too difficult to control by such mechanisms. Theres a speed thats too fast, and right now were at it, said Michael Goldstein, a professor of finance at Babson College, a business school in Wellesley, Mass. Like our highways have a minimum speed and a maximum speed, maybe its time for our highways in trading to have a minimum speed and a maximum speed as well. 10 Marcia Clemmitt
1 For background, see Matthew Philips, Fast, Loose, and Out of Control, Newsweek, June 1, 2010, p. 42. 2 Tyler Durden, Goldmans $4 Billion High Frequency Trading Wildcard, Zero Hedge blog, July 2009, http://zerohedge.blogspot.com. 3 Ibid. 4 Quoted in Philips, op. cit. 5 Quoted in Timothy Lavin, Monsters in the Market, The Atlantic, July/August 2010. 6 David DeGraw, Was Last Weeks Market Crash a Direct Attack by Financial Terrorists? AlterNet web site, May 10, 2010, www.alternet.org. 7 Ibid. 8 Quoted in Flash Crash, the Untold Story by Tradeworxs Manoj Narang, at High-Frequency Trading Leaders Forum, press release, Golden Networking web site, June 2, 2010, www.prlog.org. 9 Jim Puzzanghera, New Circuit Breakers Will Likely Prevent Flash Crash, Experts Say, Los Angeles Times, June 3, 2010, p. B3. 10 Quoted in ibid.
than in managed exchanges as stocks are, derivatives are essentially bets on how some shifting quantity or quantities will change. A derivatives value can derive from literally any changing quantity, such as stock prices, the value of one nations currency in terms of another, or even how many sunny days a region will experience. Derivatives can theoretically be designed to hedge against any risk. Derivatives markets boomed in the 1990s, with many individual and institutional investors borrowing millions or even billions of dollars to buy them. Nevertheless, as the investments grew more complex, their risks became harder to discern, triggering huge losses for some. In the late 1990s, Brooksley Born then chair of the Commodities Futures
Trading Commission (CFTC), which oversees the futures contracts that help farmers lock in favorable prices for wheat and other crops sought to have her agency designated to oversee derivatives trading. Born made her pitch after the spectacular demise of Long-Term Capital Management (LTCM), a huge hedge investment fund that collapsed because it had $1.25 trillion worth of derivative contracts at the same time as it had less than $4 billion in capital to support them and thus was utterly unable to make good on its losing bets. 43 But financial firms and policymakers, including Federal Reserve Board chairman Alan Greenspan, shot down Borns proposal, arguing that the LTCM crash was an aberration. In 2000, President Bill Clinton signed the Commodity Futures Modernization
Act, eliminating a longstanding legal rule that over-the-counter derivatives contracts were valid only if one of the trading parties actually owned the security that they were betting against, explained Lynn A. Stout, a professor of corporate and securities law at the University of California, Los Angeles. 44 Under the new law, even a person who does not own a particular security may invest in an over-the-counter derivative that will pay off if that security fails. Supporters argued the change would keep American investment firms competitive with those in countries that do not restrict derivatives trades. But Stout compares it to permitting the unscrupulous to buy fire insurance on other peoples houses. In that case, the incidence of arson would rise dramatically, she notes dryly. Similarly, under
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the 2000 law, some derivatives dealers certainly design some securities to fail, just so they can make surefire bets against those failures, she said. 45 Nevertheless, as regulations loosened, the financial industry increased its profitability and thus its importance to the countrys overall financial picture. Between 1980 and 2005, financial-sector profits grew by 800 percent, compared to 250 percent in other industries. 46 ple complex paper assets can produce is enormous. Currently, the worldwide derivatives market alone is said to have a value of about $1.2 quadrillion, or about 24 times the value of the entire worlds annual gross domestic product (GDP). Such a wealth bubble may quickly deflate, however, if the value of underlying assets wanes or grows suspect, as happened with high-risk mortgage loans in the 2000s and with sketchy start-up companies in the 1990s Internet stock bubble. 48 Most banks knew they had risky securities on their books and, suspecting that other banks did too, refused to offer them the short-term credit they needed to make business loans. The supply of home buyers dried up, and house prices dropped, wiping out the paper wealth against which many consumers had borrowed their spending money. The economy ground to a halt, and some financial institutions that were believed rightly or wrongly to have the riskiest investment portfolios stumbled. Beginning in 2008, the Treasury Department and the Federal Reserve worked together to save some too big to fail financial institutions, while allowing others, like the financial-services firm Lehman Brothers, to go under. In March, the Federal Reserve lent $29 billion to help the JP Morgan Chase bank acquire the failing investment firm Bear Stearns. In September, the Federal Reserve put up $85 billion later increased to over $180 billion to save AIG, Inc., an insurance firm that had helped investors hedge bets with a risky derivative called a credit default swap. When investments tumbled in value in the general slump, AIG was unable to pay off its many CDS obligations. Also in September, the government seized the government-sponsored mortgage giants Fannie Mae and Freddie Mac, as mortgage defaults swelled. Despite the taxpayer-funded bailout of big financial companies, however, a deep economic recession spread worldwide and persists.
CURRENT SITUATION
Reform Legislation
fter a long and intense battle on Capitol Hill, financial reform legislation is now in place. The fierce 2010 congressional battle to enact the legislation was Washingtons response to widespread anger over the Wall Street bailout and public distaste for companies many believe handed out huge bonuses to the very executives who put profits ahead of customers interest and helped precipitate the economic crash. Passing the legislation has not been easy, however. The year-and-a-half struggle to get a majority of House members, 60 senators and the White House to agree on just what new rules are needed reveals both the issues complexity and banks enormous political clout. In the early morning hours of Friday, June 25, a House-Senate conference committee agreed on final details to merge separate versions of financial-reform legislation passed earlier this year by the two chambers. No conference-committee Republican voted to approve the bill, arguing that it would cripple the financial industry and the economy, although it contains far less stringent curbs on banks than many economists, and even some bankers, recommend. In the full Senate, however, three Republicans, Scott Brown, (Mass.) and Maines Susan Collins and Olympia Snowe, crossed the aisle on July 15 to give supporters the 60 votes they needed to overcome a final Republican filibuster of the plan, and President Obama signed the measure into law on July 21.
Crash of 2008
he economy enjoyed a wealth boom as the 21st century began. Home ownership soared as borrowers took advantage of low interest rates set by the Federal Reserve to keep the economy moving after the 9/11 terrorist attacks. New kinds of mortgages with ultralow introductory interest or requiring no downpayment enticed many to take out second mortgages to get cash to spend. Speculators buying houses today so they could flip them at higher prices to other buyers tomorrow helped drive real-estate prices skyward and, along with them, Americans perception that their personal wealth was soaring. Another computer-based banking innovation, securitization, increased mortgage availability by allowing banks to package hundreds of mortgages and sell them to investors, thus getting the loans off banks own books and freeing them to make new loans. 47 In 2007 the wheels came off the wealth machine. Some of the riskiest mortgage holders were defaulting. And since not local banks but investors owned the securitized debt as well as derivatives based on the mortgage-backed securities, which many had taken on large amounts of additional debt to buy financial losses from the unpaid mortgages quickly spread around the globe. The amount of apparent wealth that a highly leveraged system with multi-
Continued on p. 646
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At Issue:
Do Fannie Mae and Freddie Mac bear primary responsibility for the financial crisis?
yes
DIRECTOR OF FINANCIAL-REGULATION STUDIES, CATO INSTITUTE
MARK A. CALABRIA
SENIOR POLICY COUNSEL, CENTER FOR RESPONSIBLE LENDING
JULIA GORDON
erhaps it should come as no surprise that Sen. Christopher Dodd, D-Conn., and Rep. Barney Frank, D-Mass, the 2010 financial-reform bills primary authors, would fail to end the numerous government distortions of our financial and mortgage markets that led to the crisis. Both have been either architects or supporters of those distortions. Nowhere in the bill will you see even a pretense of rolling back the endless federal incentives and mandates to extend credit, particularly mortgages, to those who cannot afford to pay their loans back. After all, the popular narrative insists that Wall Street fat cats must be to blame for the credit crisis. Despite the recognition that mortgages were offered to unqualified individuals and families, banks will still be required under the Dodd-Frank bill to meet government-imposed lending quotas. Apologists for government-mandated lending are correct in pointing out that much of the worst lending was originated by state-chartered lenders, such as Countrywide, and not federally chartered banks. However, they either miss or purposely ignore the truth that these non-bank lenders were selling the bulk of their loans to Fannie Mae, Freddie Mac or the government corporation Ginnie Mae. About 90 percent of loans originated by Countrywide, the largest subprime lender, were either sold to Fannie Mae or backed by Ginnie Mae. Subprime lenders were so intertwined with Fannie and Freddie that Countrywide alone constituted over 25 percent of Fannies purchases. While one can debate the motivations behind Fannie and Freddies support for the subprime market, one thing should be clear: Had Fannie and Freddie not been there to buy these loans, most of them would never have been made. And had the taxpayer not been standing behind Fannie and Freddie, they would have been unable to fund such large purchases of subprime mortgages. Yet Congress believes it is more important to expand federal regulation and litigation to lenders that had nothing to do with the crisis rather than fix the endless bailout that Fannie and Freddie have become. Nor has there been any discussion in Congress about removing the tax preferences for debt. Washington subsidizes debt, taxes equity and then acts surprised when everyone becomes extremely leveraged. Until Washington takes a long, deep look at its own role in causing the financial crisis, we will have little hope for avoiding another one.
no
yes no
FROM CATO INSTITUTE WEBSITE, JUNE 25, 2010, WWW.CATO.ORG.
FROM TESTIMONY BEFORE FINANCIAL CRISIS INQUIRY COMMISSION, JAN. 13, 2010
ince the problems in the subprime market became evident in early 2007, many in the mortgage industry evaded responsibility by blaming the borrowers. However, the stereotypes of the risky borrower or the borrower overreaching to purchase a McMansion turn out to be false. Research shows that an elevated risk of foreclosure was an inherent feature of the defective, exotic loan products that produced this crisis. Loan originators frequently specialized in steering customers to higher-rate loans than those for which they qualified, which are loaded with risky features. In addition, given the long-standing political dispute over the very existence of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), it is not surprising that these governmentsponsored enterprises (GSEs) are often blamed for the crisis. Those blaming the GSEs point to their decision to purchase subprime securities from Wall Street. The fact is, while we agree that Fannie Mae and Freddie Mac should not have purchased subprime mortgage-backed securities (MBS), their role in purchasing and securitizing problem loans was small in comparison with that of private industry. All subprime mortgage-backed securities were created by Wall Street. Fannie Mae and Freddie Mac did not securitize any of these loans because the loans did not meet their standards. When they finally began to purchase the MBS, they were relative late-comers to a market that had been created by private-sector firms and they purchased the least risky and most easily sellable of the securities. In fact, the GSEs role in the overall mortgage market diminished substantially as subprime lending rose. As of 2001, Fannie Mae and Freddie Mac funded almost two-thirds of home mortgage loans across the United States. These were loans that Fannie Mae and Freddie Mac purchased directly from originators who met the GSE guidelines and either held on their balance sheets or securitized and sold to investors. Subprime loans accounted for just 7 percent of the market. Around 2003, private issuers began to introduce new, riskier loan products into the market and began to displace the GSEs. In early 2004, private-issue MBS surpassed the GSE issuances of all loans and by early 2006, Fannie and Freddies market share of new issuances had dropped to one-third of the total. As the role of the GSEs was declining, the percentage of subprime loans in the mortgage market almost tripled.
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Republican opposition to the measure remains strong, however. I think it ought to be repealed, said House Minority Leader John Boehner, R-Ohio. I think it is going to make credit harder for the American people to get. 49 The new law: Gives regulators authority to assess whether a bank poses a risk to the economy and to break apart or close such banks; Limits some derivatives trading; Tightens capital standards; Sets up a consumer-credit watchdog agency in the Federal Reserve; and Allows Congress to seek audits of the Federal Reserve. (See sidebar, p. 634.) We shouldnt put in place a regulatory regime that overly reacts and, as a result, significantly dampens our capacity to have the most vibrant capital and credit markets in the world, said Sen. Judd Gregg, R-N.H. 50 Some Republicans did seek tough rules, however. In May, for example, the Senate approved an amendment from Collins requiring banks with more than $250 billion in assets to meet slightly stricter capital requirements than in the past, and the plan made it into the final package. Collins amendment would prevent the biggest banks, which make many high-risk trades, from trading with too much borrowed money. 51 Democrats including the Obama administration are all over the map in their views, hotly debating nearly every proposed provision. The Obama administration actually opposed Collins amendment, for example. 52 In both the current and recent administrations, Treasury Department leaders mainly come from the financial industry and the Federal Reserve, a fact that likely drives White House wariness of some rule tightening, many observers say. Isnt it interesting that the White House is opposing an amendment to require the Federal Reserve to undergo stringent independent auditing, given that
Treasury Secretary Timothy Geithner is a former head of the New York Fed, says Texas Auerbach. Some Democrats have fought for very strict regulation. Sens. Sherrod Brown (Ohio) and Ted Kaufman (Delaware) proposed forbidding any single bank from holding more than 10 percent of the countrys deposits, and Sen. Al Franken (Minnesota) wanted an independent board to assign financial firms a credit ratings agency for each project, rather than letting banks shop for agencies as they do now. Neither measure made it into the law. 53 But many Democrats also have fought to soften bill provisions. For example, Sen. Tom Harkin (Iowa) and Rep. Greg Meeks (New York) successfully pushed to keep the SEC from regulating so-called equity-indexed annuities products often fraudulently sold to seniors as ultra-safe, fixed-income investments, even though their value depends on stock prices, and both the SEC and the courts have ruled that the SEC should regulate them. 54 Its architects praise the law. This is going to be a very strong bill, and stronger than almost everybody predicted it could be, said House Financial Services Committee Chairman Barney Frank, D-Mass. 55 But many analysts say the legislation will do little to limit banking risk. Lobbying in the gazillions predictably stopped the needed major structural reforms . . . revealed by the scope and scale of the financial crisis, said Robert Johnson, director for global finance at the Roosevelt Institute, a liberal think tank in New York City. We still have many practices that are not transparent and many off-balance-sheet problems that disguise the conditions of our financial firms. 56
Fraud Enforcement
n the end, laws make no difference unless theyre enforced, and
financial-sector enforcement has been chancy at best over the years, partly because of the industrys vast influence, many observers say. Nevertheless, no matter how lightly an industry is regulated, the ability to crack down on at least the most abusive behavior always exists, says Texas Galbraith. You cant decriminalize fraud. Good accounting, good auditing and appropriate criminal referrals are what we need from regulators, he says. My sense is that once the wheels [of civil and criminal investigations] start turning, the effects are pretty powerful, including making other industry players think twice about their behavior. At present its hard to judge how much enforcement activity is bubbling, but there are encouraging signs, Galbraith says. On April 16, for example, the SEC filed a civil lawsuit charging Goldman Sachs with fraud for selling mortgagebacked securities the bank knew were intended to fail. The so-called Abacus securities were designed by a hedge-fund manager, John Paulson, who did not buy any of the securities but designed them to fail so that he could profit by betting against them using derivatives, under the legal permission granted by the 2000 Commodity Futures Exchange Act. 57 In mid-July, Goldman agreed to pay $550 million to settle the case, an amount the SEC notes is the largest-ever penalty paid by a Wall Street firm. In the settlement, the bank neither admitted nor denied the SECs allegation that it had committed fraud, however. 58 Some analysts say that the fine is far too small to deter bad behavior by the high-rolling financial industry. For one thing, the fine amounts to only about two weeks worth of profits for Goldman Sachs, according to the independent, foundation-funded investigative journalism organization ProPublica. 59 Its the largest fine in SEC history, and thats the bad news . . . because it shows how ineffective the SEC has been for decades now, said the University of Missouris Black. While losses caused
646
by securities fraud have grown into the multibillion dollars over the past few decades, the SEC not only didnt bite, but it forgot that it had teeth. The Goldman Sachs fine is very, very weak; its not going to have any significant deterrent effect, said Black. Furthermore, civil lawsuits against the bank will be extremely difficult to pursue, since the SEC did not exact an admission of intentional deception from the bank, he said. 60 Goldman, in fact, reportedly expected to have to pay a $1 billion fine. 61 Meanwhile, states, especially in the West, are said to be pursuing numerous fraud cases involving the mortgage industry, and some in Congress also have shown interest, Galbraith notes. Last November, for example, Rep. Marcy Kaptur, D-Ohio, introduced legislation to hire up to 1,000 new FBI agents to pursue cases of suspected corporate, securities, and mortgage fraud. 62 White-collar enforcement, especially in finance, has always faced severe challenges, at least partly because regulators mostly come from the regulated industries, says Baker of the Center for Economic and Policy Research. Its as if [big pharmaceutical manufacturers] Pfizer and Merck appointed members to the Food and Drug Administration, Baker says. This remains an enormous problem not addressed by legislation. In the Federal Reserve system, for example, which is charged with overseeing banks, youve got the New York banks electing the very officials who will oversee them, says Texas Auerbach, author of the 2008 book Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspans Bank. There was massively too much leverage the use of large amounts of debt, rather than actual assets or capital, to purchase investments in the financial system before the last crash, noted Richard Breeden, who chaired the Securities and Exchange Commission from 1989 to 1993. Regulators had the authority to control that and eliminate it but didnt. We can keep passing laws, but if the
regulators dont have the backbone to enforce the rules and to be realistic, then thats a different problem. 63 Currently, for example, pro-regulation, liberal advocates are pressing the administration to appoint Elizabeth Warren, a Harvard Law professor and head of Congress oversight committee for the financial-industry bailout, as chief of the new consumer-protection agency created by the reform law. Professor Warren has a proven track record as a smart and tough consumer advocate and in fact was the first person to propose that there be such an office, said Sen. Bernie Sanders, I-Vt., in a letter to President Obama urging Warrens appointment. 64 However, with the banking industry believed to strongly oppose Warrens nomination, Senate Republicans would likely filibuster it, and even with all Democrats and Independents voting yes, Senate Democratic leaders would still have to win over at least one Republican vote to get the 60 votes needed to end a filibuster and approve her nomination. 65 If Obama nominates a zealot or an activist, I think it will bring to life our greatest fears about this consumer protection agency, said Sen. Bob Corker, R-Tenn. 66 Meanwhile, Wall Street activities continue much as they did pre-crash, observers say. For example, many big banks have not modified their [employee compensation] practices from what they were before the crisis, paying executives in ways that incentivize excessive risk-taking, said Federal Reserve Chairman Ben S. Bernanke in June. 67 Despite all those dramatic congressional hearings, average compensation of Wall Street bankers rose by 27 percent in 2009, said Nomi Prins, a senior fellow at the liberal New York City-based think tank Demos. Meanwhile, banks posted their lowest lending rates since 1942, despite all the subsidies and cheap money they received from, well, us as a supposed incentive to help the economy by making business loans, she said. 68
OUTLOOK
New Crash Ahead?
ost analysts dont see an end to extreme boom-and-bust cycles in financial markets. The new financial industry overhaul legislation will have relatively little impact on slowing growth of speculative bubbles, like the vastly inflated stock prices for fledgling Internet companies in the so-called dot.com bubble of the 1990s and the soaring house prices of the early 2000s, says Baker of the Center for Economic and Policy Research. I believe that nothing in the [new legislation] will prevent another crisis, said Richard Marston, a professor of finance at the University of Pennsylvanias Wharton School. The basic problem is that securitization conversion of pools of loans, like mortgages and credit-card debt, into packages to be sold as investments has changed banking in a fundamental way, he says. It ties all financial institutions and investors together, so that risky investment activities cant easily be walled off from the rest of the system, and risk spreads easily throughout the economy. 69 Congress didnt even pretend to address the real causes of the crash, some analysts say. No legislation to reform the financial industry could address the underlying problems that really triggered the economic meltdown, said Wharton finance professor Franklin Allen. Low interest rates and global imbalances of wealth, such as large reserves of currency in Asia, led to over-borrowing, visible in the proliferation of high-risk mortgages, and the laws provisions do nothing to address these. 70 A number of . . . provisions in the bill . . . run far afield from Wall Street reform and will ultimately harm Main
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Street, said American Bankers Association President Edward L. Yingling. This bill will, in the end, add well over a thousand pages of new regulations for even the smallest bank, with the result that the capability of traditional banks to provide the credit needed to move the economy forward has been undermined. 71 Some analysts say its unlikely lawmakers can ever effectively address the problem of wealth bubbles, whose rapid deflation triggers financial and economic meltdowns. I dont think the problem of bubbles is an economic problem. Its a political problem, says Catos Calabria. The public loves a bubble because people rejoice when their house values or stock portfolios make them feel wealthy, he says. That being the case, neither lawmakers nor regulators nor banks will ever get much support for deliberately trying to pop wealth bubbles or slow their development, he suggests. Based on whats in the bills, in 10 to 15 years there will be another crash, Calabria predicts.
5 Remarks at the SW Graduate School of Banking 53rd Annual Keynote Banquet, Federal Reserve Bank of Texas website, June 3, 2010, http://dallasfed.org. 6 Testimony before House Financial Services Committee, Sept. 24, 2009, www.house.gov/ apps/list/hearing/financialsvcs_dem/zandi_testi mony.pdf. 7 Quoted in Chris Adams and Greg Gordon, Goldman Executives: No Regrets for Deals that Accelerated Crisis, McClatchy Newspapers, April 27, 2010, www.mcclatchydc.com. 8 Testimony before House Financial Services Committee, Sept. 24, 2009, www.house.gov/ apps/list/hearing/financialsvcs_dem/zandi_testi mony.pdf. 9 Zach Carter and Nouriel Roubini, How to Break Up the Banks, Stop Massive Bonuses, and Rein in Wall Street Greed, Alternet blog, May 18, 2010, www.alternet.org. 10 Simon Johnson, Wall Streets Victory Lap, Huffington Post blog, May 26, 2010, www. huffingtonpost.com. 11 Remarks at the SW Graduate School of Banking, op. cit. 12 Mark A. Calabria, Did Deregulation Cause the Financial Crisis, Cato Policy Report, July/ August 2009, www.cato.org. 13 Arthur C. Brooks, The New Culture War, The Washington Post, May 23, 2010, p. B1. 14 Matt Taibbi, Will Goldman Sachs Prove Greed is God? The Guardian [UK], April 24, 2010, www.guardian.co.uk/business/2010/apr/ 24/will-goldman-prove-greed-is-god. 15 Matt Taibbi, The Greatest Non-Apology of All Time, The Smirking Chimp blog, June 19, 2009, www.smirkingchimp.com. 16 Merkley-Levin Amendment to Crack Down on High-Risk Proprietary Trading, press release, Office of Sen. Jeff Merkley, May 10, 2010, http://merkley.senate.gov. 17 Ibid. 18 Joe Kolman, The World According to Frank
Notes
1 For background, see Nathaniel Popper, Trading Firms Put Their Money on Poker Experts, Los Angeles Times, May 1, 2010. 2 For background, see Kenneth Jost, Financial Crisis, CQ Researcher, May 9, 2008, pp. 409432, and Thomas J. Billitteri, Financial Bailout, CQ Researcher, Oct. 24, 2008, pp. 865-888. 3 Nouriel Roubini and Stephen Mihm, Bust Up the Banks, Newsweek, May 17, 2010, p. 42. 4 Ibid.
About the Author

Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Gridlock in Washington and Health-Care Reform.
Partnoy, DerivativesStrategy.com, October 1997, www.derivativesstrategy.com. 19 William K. Black, The Audacity of Dopes, Huffington Post blog, May 28, 2010, www. huffingtonpost.com. 20 Testimony before House Committee on Financial Services, Jan. 22, 2010. 21 Ibid. 22 Ibid. 23 Quoted in John Arlidge, Im Doing Gods Work. Meet Mr. Goldman Sachs, London Times online, Nov. 8, 2009, www.timesonline. co.uk. 24 Regulation, Freedom and Human Welfare, St. Pauls Institute panel discussion, transcript, Oct. 20, 2009, www.stpauls.co.uk/documents/ st%20paul%27s%20institute/regulation%20free dom%20and%20human%20welfare%20transcript. pdf. 25 Quoted in A Race to the Bottom: Assigning Responsibility for the Financial Crisis, Knowledge at Wharton newsletter, Dec. 9, 2009, http://knowledge.wharton.upenn.edu. 26 Robert Reich, Why the Finance Bill Wont Save Us, Huffington Post blog, May 24, 2010, www.huffingtonpost.com. 27 Carter and Roubini, op. cit. 28 Ibid. 29 Shahien Nasiripour, Regional Fed Chiefs Lining Up to Support Tough Derivatives Provision, Obama Administration Still Opposed, Huffington Post blog, June 11, 2010, www.huff ingtonpost.com. 30 Arnold Kling, Break Up the Banks, Cato Institute, March 26, 2010, www.cato.org. 31 Ibid. 32 Paul Krugman, Financial Reform 101, The New York Times, April 2, 2010, p. A23. 33 Quoted in Martha C. White, Should We Break Up Big Banks? Walletpop.com, Dec. 5, 2009, www.walletpop.com. 34 Calabria, op. cit. 35 For background, see Simon Johnson and James Kwak, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (2010). 36 For background, see The First Bank of the United States: A Chapter in the History of Central Banking, Philadelphia Federal Reserve, www.philadelphiafed.org/publications/economiceducation/first-bank.pdf. 37 Private Banks, Thomas Jefferson Encyclopedia online, wiki.monticello.org/mediawiki/ index.php/Private_Banks_%28Quotation%29. 38 Johnson and Kwak, op. cit., p. 17. 39 Quoted in ibid., p. 20. 40 Ibid. 41 Quoted in ibid., p. 28.
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Timothy Curry and Lynn Shibut, The Cost of the Savings and Loan Crisis: Truth and Consequences, FDIC Banking Review, December 2000, p. 26, www.fdic.gov/bank/ana lytical/banking/2000dec/brv13n2_2.pdf. 43 Quoted in Les Leopold, The Looting of America: How Wall Streets Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity (2009), p. 68. 44 Lynn A. Stout, The Natural Result of Deregulation, The New York Times online blogs, April 16, 2010. 45 Ibid. 46 Johnson and Kwak, op. cit., p. 60. 47 For background, see Marcia Clemmitt, Mortgage Crisis, CQ Researcher, Nov. 2, 2007, pp. 913-936. 48 Peter Cohan, Big Risk: $1.2 Quadrillion Derivatives Market Dwarfs World GDP, Daily Finance, AOL, June 9, 2010, www.dailyfinance.com. 49 Boehner Wants Reg Reform Repealed, Politico, July 15, 2010, www.politico.com/blogs/ glennthrush/0710/Boehner_sees_Democratic_ civil_war.html?showall. 50 Quoted in Herszenhorn and Wyatt, op. cit. 51 Pat Garofalo, Fed and Treasury Work to Nix Collins Amendment Mandating More Capital for Risky Banks, Think Progress blog, May 20, 2010, http://wonkroom.thinkprogress.org. 52 Ibid. 53 Ryan Grim, Wall Street Reform: Progressive Dems Glimpse Victory, Huffington Post, May 6, 2010, www.huffingtonpost.com. 54 Shahien Nasiripour, Dem-sponsored Loophole in Financial Reform Bill Could Hurt Seniors, Huffington Post, June 24, 2010, www.huff ingtonpost.com. 55 Quoted in Lawmakers Agree on Wall Streets Biggest Overhaul Since 1930s, Bloomberg/Business Week, June 25, 2010, www. businessweek.com. 56 Quoted in Lynn Parramore, Disappointing and Inspiring: Roosevelt Fellows and Colleagues React to FinReg, Huffington Post, June 25, 2010, www.huffingtonpost.com. 57 For background, see What Goldmans Conduct Reveals, The New York Times online blogs, April 16, 2010, http://roomfordebate.blogs. nytimes.com. 58 Marian Wang, Goldmans SEC Settlement by the Numbers: We Do the Math, ProPublica blog, July 15, 2010, www.propublica.org. 59 Ibid. 60 Quoted in Goldman Too Big to Prosecute, The Real News website, July 17, 2010, http://therealnews.com. 61 Susan Pulliam and Susanne Craig, Goldman
42

Cato Institute, 1000 Massachusetts Ave., N.W., Washington DC 20001-5403; (202) 842-0200; www.cato.org. Libertarian think tank analyzes financial-reform and other public policies. Center for American Progress, 1333 H St., N.W., 10th Floor, Washington DC 20005; (202) 682-1611; www.americanprogress.org. Progressive policy analysis and advocacy group on issues including banking reform and the economy. Center for Capital Markets Competitiveness, U.S. Chamber of Commerce, 1615 H St., N.W., Washington, DC 20062; (202) 463-3162; www.uschamber.com. Business group opposed to tightening regulation of financial industry offers information and commentary. Congressional Oversight Panel, 732 North Capitol St., N.W., Rooms C-320 and C-617, Washington, DC 20401; (202) 224-9925; http://cop.senate.gov/index.cfm. Web site of the congressionally appointed panel overseeing the TARP bailout program includes testimony and reports on how the TARP bailout of firms like insurer AIG is affecting financial markets and the economy. Financial Crisis Inquiry Commission, 1717 Pennsylvania Ave., N.W., Suite 800, Washington, DC 20006-4614; (202) 292-2799; www.fcic.gov. Web site of the governmentappointed panel researching causes of the 2008 financial-market crash includes reports on how financial markets operate. Pew Financial Reform Project, 901 E St., N.W., Washington, DC 20004-2008; (202) 552-2000; www.pewfr.org. Foundation-funded group provides nonpartisan analysis of financial reform and the 2008 financial crisis. Roosevelt Institute, 570 Lexington Ave., 18th Floor, New York, NY 10022; (212) 444-9130; www.rooseveltinstitute.org. Nonprofit group studies and promotes policies related to the progressive legacy of President Franklin D. Roosevelt and first lady Eleanor Roosevelt. Zero Hedge blog, www.zerohedge.com. Financial analysts blog on market and economic news.
Talks Settlement with SEC, The Wall Street Journal, May 7, 2010, http://online.wsj.com/article/ SB1000142405274870437070457522823248780454 8.html?mod=WSJ_business_LeadStoryRotator. 62 For background, see Kaptur Introduces Legislation to Beef Up FBI Anti-fraud Efforts, press release, office of Rep. Marcy Kaptur, Nov. 3, 2009, www.kaptur.house.gov/index.php? option=com_content&task=view&id=502&Item id=86. 63 Jesse Westbrook and Otis Bilodeau, Regulatory Overhaul Wont Stop Next Crisis, Say Levitt, Breeden, Bloomberg, June 16, 2010, www.bloomberg.com. 64 Quoted in Will President Obama Appoint Elizabeth Warren to Head the Consumer Financial Protection Bureau, ABC News Political Punch blog, July 20, 2010, http://blogs.abcnews.com. 65 For background, see Marcia Clemmitt, Gridlock in Washington, CQ Researcher, April 30, 2010, pp. 385-408. Quoted in Brian Beutler, Signs Point to Tough Haul for a Potential Elizabeth Warren Nomination, Talking Points Memo blog, July 21, 2010, http://tpmdc.talkingpointsmemo.com. 67 Quoted in Eric Dash, Fed Finding Status Quo in Bank Pay, The New York Times, June 8, 2010, p. B1. 68 Nomi Prins, Speculating Banks Still Rule Ten Ways Dems and Dodd Are Failing on Financial Reform, AlterNet website, April 14, 2010, www.alternet.org. 69 Quoted in Regulating the Unknown: Can Financial Reform Prevent Another Crisis, Knowledge at Wharton newsletter, June 9, 2010, http://knowledge.wharton.upenn.edu. 70 Quoted in Banking Reform Proposals: Why They Miss the Mark, Knowledge at Wharton newsletter, Feb. 17, 2010, http:// knowledge.wharton.upenn.edu. 71 Edward L. Yingling, press statement, American Bankers Association, June 25, 2010, www.aba.com.
66
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Bibliography
Selected Sources
Books
Black, William K., The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry, University of Texas Press, 2005. An associate professor of economics and law at the University of Missouri-Kansas City and former bank regulator describes how savings and loan executives, abetted by many government regulators and lawmakers, committed accounting fraud and looted their banks. Johnson, Simon, and James Kwak, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, Random House, 2010. Johnson, a professor of entrepreneurship at the Massachusetts Institute of Technology and former International Monetary Fund chief economist, and business journalist Kwak argue that banks have repeatedly fought the U.S. government for political power and generally won the battle. Ritholtz, Barry, Bill Fleckenstein and Aaron Task, Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy, Wiley, 2009. Money manager Ritholtz, hedge fund manager Fleckenstein and business reporter Task trace the history of U.S. business bailouts, arguing that financial firms political power has gradually allowed corporations to police themselves in economic booms and rely on docile government bailouts when times are bad. Woods, Thomas E., Jr., Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, Regnery Press, 2009. A senior fellow at the libertarian Mises Institute argues that Federal Reserve attempts to manage the money supply are a root cause of financial collapses. Ornstein, Charles, and Tracy Weber, Texas Mortgage Firm Survives and Thrives Despite Repeat Sanctions, Pro Publica web site, July 2, 2010, www.propublica.org. Despite piles of customer complaints, a mortgage company escapes regulatory consequences. Philips, Matthew, Fast, Loose, and Out of Control, Newsweek, June 1, 2010, www.newsweek.com/2010/06/ 01/fast-loose-and-out-of-control.html, p. 42. Is new ultra-fast stock-trading technology a boon or a bane to financial markets? Roubini, Nouriel, and Stephen Mihm, Bust Up Banks, Newsweek, May 17, 2010, p. 42. Roubini, a New York University professor of business, Mihm, a University of Georgia history professor, argue the biggest banks are too big to be properly managed should be broken up. the and that and
Taibbi, Matt, The Great American Bubble Machine, Rolling Stone online, April 5, 2010, www.rollingstone.com/ politics/news/12697/64796. A business reporter argues that the growing number of Goldman Sachs veterans serving as government officials in both parties has given the bank unfair opportunities to manipulate financial markets and public policy. What Goldmans Conduct Reveals, The New York Times blogs, April 16, 2010, http://roomfordebate.blogs.nytimes. com/2010/04/16/what-goldmans-conduct-reveals. Experts representing numerous points of view on financialindustry practices comment on the meaning and probable outcome of the Securities and Exchange Commissions April civil lawsuit filed against investment bank Goldman Sachs.
Reports and Studies

Gokhale, Jagadeesh, Financial Crisis and Public Policy, Cato Institute, March 23, 2009, www.cato.org/pubs/pas/ pa634.pdf. A senior fellow at a libertarian think tank argues that government policies encouraging home ownership including loose regulation of risky mortgage lending were the real root of the financial crash. Miller, Rena S., Key Issues in Derivatives Reform, Congressional Research Service, Dec. 1, 2009, www.fas.org/ sgp/crs/misc/R40965.pdf. An analyst at Congress nonpartisan research office describes how derivatives work and what regulatory safeguards have been proposed to guard against their risks.
Articles
Dorgan, Byron L., Very Risky Business: Derivatives, Washington Monthly, October 1994, http://findarticles.com/ p/articles/mi_m1316/is_n10_v26/ai_15818783/?tag=con tent;col1, p. 7. In the early years of the now gigantic derivatives-trading market, a U.S. senator discusses his qualms about the complex investments in light of the recent S&L collapse. Lavin, Timothy, Monsters in the Market, The Atlantic, July/August 2010, www.theatlantic.com/magazine/archive/ 2010/07/monsters-in-the-market/8122. The Securities and Exchange Commission is trying to monitor how computer-driven high-frequency trading at ever faster speeds affects financial markets.
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CHAPTER
13
CARING FOR VETERANS

BY PETER KATEL
Excerpted from Peter Katel, CQ Researcher (April 23, 2010), pp. 361-384.
Caring for Veterans

BY PETER KATEL
Soldiers wounded while serving their country are waiting and waiting for the help he car bomb explodthey have been promised, said ed at dusk. Its target Rep. Bob Filner, D-Calif., chair a seven-ton U.S. man of the House Veterans AfArmy personnel carrier fairs Committee, after meeting was blown about six feet with agency officials and vetby the force of the blast. erans organizations in March. Infantryman John Lamie came Frankly, its an insult to our out alive, thanks to armor veterans and their service. 1 plating around his machineAbout 1 million claims of gunners cupola, but three all kinds are backlogged at of his buddies died in the the VA, according to veterAug. 3, 2005, attack in ans organizations, some of Baghdad. Lamie went to Iraq which help veterans on bea second time in 2007-2008, half of the VA, which says before the cumulative effects the backlog of initial claims of combat eventually pushed alone totals 500,000, using a him out of the Army. different calculation method. Now hes fighting anothWhile VA medical care, deer kind of battle with the livered through the Veterans Department of Veterans AfHealth Administration, tends fairs (VA). I did two tours to earn high marks from vets, in Iraq and half my squad the VBA presents a different died, he says from his picture. In 2007-2008, staff at Eric Johnson, a scout from the 10th Mountain Division stationed at Fort Drum, near Watertown, N.Y., shares home in Cecil, Ga., only to VBA regional offices compiled painful wartime experiences with friends at a coffeehouse come home and get treatan overall accuracy record catering to vets on April 16, 2008. Soldiers in Johnsons ed like a piece of crap in on initial claims decisions of division have been deployed in Iraq and Afghanistan my own state. only 77 percent, Belinda J. multiple times. Repeated deployments are creating an Because of a series of Finn, VA deputy inspector unprecedented number of cases of post-traumatic stress disorder, traumatic brain injury and associated mentalcomplications over the validgeneral, told the House Vethealth conditions overwhelming mental-health ity of disability exams Lamie erans Disability Assistance professionals in veterans health care facilities. took for post-traumatic stress and Memorial Affairs Subdisorder (PTSD), traumatic committee in early March. However, by late April, Lamie had This equates to approximately . . . brain injury (TBI) and other conditions, Lamies most recent disability check found a VA staffer who was trying to 203,000 total claims where veterans amounted to $83.19. He and his wife straighten out bureaucratic confusion monthly benefits may be incorrect, have three children, and hes paying involving multiple files shipped among Finn told the subcommittee. 2 child support for a fourth child with multiple offices. Fingers crossed, Lamie The VAs scramble to meet mountsays. Within another two months some- ing demand for its services is occurhis ex-wife. Lamie says that when he tried to thing might work itself out. He em- ring amid continuing warfare on two straighten out his case with staff of phasizes might. fronts: Since U.S. forces entered Veterans advocates, the Government Afghanistan in 2001, at least 5,190 serthe VAs Veterans Benefits Administration (VBA), he ran into a wall of in- Accountability Office (GAO) and the vice members have been wounded, difference. The vet has no power, you VAs own inspector general have all re- 425 of them this year. Since the 2003 are left to the wind, Lamie says. You ported similar communications break- U.S. invasion of Iraq, 31,176 service have to call and beg I dont mean downs and wildly varying standards for members have been wounded there. 3 ask nicely, I mean beg and I dont evaluating disability claims among VBA Yet the VAs difficulties providing feel any vet should have to beg some- regional offices, even as a steady stream adequate care for veterans got only of new claims pours into the VA. body to do their damn job. sporadic attention until 2007, when a
THE ISSUES
Reuters/Mark Dye
April 23, 2010
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CARING FOR VETERANS

Brain Injuries Put Strain on VA Benets
Nearly 91,000 U.S. soldiers have either died, been wounded or medically evacuated for noncombat-related reasons thus far in the Iraq and Afghanistan wars (top). The 760,000 veterans who suffer from either post-traumatic stress disorder (PTSD) or traumatic brain injury (TBI), or both, have put the Veterans Benets Administration under increasing pressure to meet the needs of the countrys injured veterans.
100,000 80,000 60,000 40,000 20,000 4,871 1,026 5,404 0 Deaths 5,570 Wounded in action
Iraq
Afghanistan Both wars
Service Member Casualties in Iraq and Afghanistan (as of April 13 2010)

48,271 31,770 37,280 38,845
90,955 74,993
15,962 9,426 Medically evacuated Total
Estimated Number of Veterans Suffering from PTSD, TBI or Depression (as of April 2010)
Vets with at least one of the conditions Vets with PTSD, TBI and depression 0
660,000 100,000
100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000
Sources: Veterans for Common Sense; RAND Center for Military Health Policy Research, 2008, www.rand.org/pubs/monographs/MG720
prize-winning Washington Post series pushed them to the top of the national agenda. (See Background, p. 375.) With the issue in the spotlight, Congress in 2008 authorized free medical care for all Iraq and Afghanistan veterans for five years after leaving the military. And GI Bill educational benefits were expanded for veterans who entered the service after the Sept. 11, 2001, terrorist attacks. Vets welcomed the new benefits, but questioned the VBAs ability to process all the new claims. The VAs new boss, retired Gen. Eric K. Shinseki, is vowing to shake up the agency. 2010 is
my year to focus on finding and breaking the obstacles that deny us faster and better processing and higher quality outcomes, he told the Veterans of Foreign Wars in early March. To break the backlog while dealing with a rush of expected new claims, he proposes adding 4,000 claims examiners in the 2010-2011 fiscal year. 4 His appointees arent mincing words about what they found when they took over. In my judgment, it cannot be fixed, Peter Levin, the VAs chief technology officer, said of the benefits claims system during a March meeting on Capitol Hill with veterans organizations.
(See sidebar, p. 372.) We need to build a new system, and that is exactly what we are going to do. 5 Veterans advocates cheered Levins comments and praise Shinsekis vision, but some wonder if he can put his stamp on the VA. A West Point graduate who lost most of a foot in Vietnam combat, Shinseki has earned a reputation for speaking out regardless of consequences. As Army chief of staff, he told the Senate Armed Services Committee in 2003 that securing Iraq after invading it would require something on the order of several hundred thousand soldiers. Shinsekis civilian boss, Defense Secretary Donald Rumsfeld, contemptuously brushed that assessment aside and marginalized its author. But time proved Shinseki more accurate than Rumsfeld, who endorsed a forecast of 30,000-50,000 troops in Iraq after the invasion. By fiscal year 2008, U.S. troop strength had reached nearly 160,000. 6 Now, Shinsekis leading an agency trying to adjust to the special demands created by 21st-century warfare. Vast advances in battlefield care are enabling thousands of vets to survive injuries that would have been fatal in the past. But those injuries, often caused by homemade bombs, or so-called improvised explosive devices (IEDs), can be crippling. IED blasts alone often cause multiple wounds, usually with severe injuries to extremities, and traumatic brain and other blast injuries, and they leave many . . . with serious physical, psychological and cognitive injuries, the government-funded Institute of Medicine (IOM) reported to Congress in a lengthy study published in March. 7 Todays all-volunteer military is far smaller than past draftee-fed forces, requiring troops to be repeatedly recycled through combat zones. About a third of those who have been deployed to combat more than once have suffered from PTSD, TBI or major depression, and about 5 percent suffered from all
364
three, according to the RAND Corp, a California think tank. Multiple deployments can double the risk of PTSD and other psychological problems, the Army surgeon general concluded in a 2008 report, which found mental health problems in 12 percent with one deployment and 27 percent with three or more deployments. 8 Retired Army Capt. Anthony Kennedy, who attempted suicide after two tours in Iraq, described the nature of the fighting there and the psychological effects of the constant threat of being blown up by an IED. One of my friends . . . had a friend whose arms and legs were blown off, Kennedy says. All of us combat guys are thinking, Why do I want to go through life with no arms and no legs? Our consensus: Can my battle buddy just put a bullet in me? We talk about that. Kennedy has had problems with the VA benefits system as well, but obtained a volunteer lawyers help in pushing his PTSD rating from 30 percent to 70 percent disability. He says his 17 years in the service taught him how to deal with military-style bureaucracy. I have the maturity and the knowledge to know that theres 100,000 applications out there, and Im just one cog in the wheel, he says. But I can imagine that if someone is completely disabled, and their father or mother comes in, the system can be a shock. Even military reservists, accustomed to part-time service, can be taken aback by the VA system they encounter after active duty. Naval reservist Richard Sanchez of New York, a former paralegal for a Wall Street law firm, was discharged after his second deployment, which took him to Kuwait, where he was injured when an ammunition and weapons container fell on him in 2005. After discharge, Sanchez began to suffer intense back pain, failing memory and depression. In his confused state, the VA system overcame him, he says. Eventually, he en-
Appeals Take Longer Than Claims

The average processing time to complete a veterans compensation claim in 2008 was nearly 200 days, more or less the same since 2003. Finalizing appeals, however, took nearly four times longer a constant trend since 2000. Average Days to Complete Compensation Claims, FY 2000-2008
250
Average Days to Process Compensation Appeals, FY 2000-2008

1,000
200
800
150
2000 2001 2002 2003 2004 2005 2006 2007 2008
600
2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: Veterans Disability Benets, Government Accountability Ofce, January 2010
countered a VA counselor who helped him straighten out a long series of bureaucratic complications, and in March received a letter from the VA apologizing for erroneous ratings and promising to reevaluate claims for PTSD, TBI and depression. I dont hate the VA, says Sanchez, who is attending college thanks to VA education benefits. There are some faults there, but you cant blame the whole system. That system is about to be tested even more forcefully. The VA is predicting that its claims workload will rise 30 percent next fiscal year, to about 1.3 million, in part because the department added three new ailments to the list of illnesses presumed to result from exposure to the Vietnam-era defoliant known as Agent Orange. And more presumptive illnesses associated with exposure to other battleground chemicals in more recent wars may be added later this year. (See Current Situation, p. 376.) 9 Still, it wont be easy to convince veterans that the VA has turned a new page. In Georgia, Iraq vet Lamie is
trying to keep his family fed, his lights on and his car running on the small checks he receives now. Ive still got no faith in VA for now, he says. As veterans disablity claims mount, here are some of the questions being debated: Is the VA benefits system broken beyond repair? Vietnam vet Elmer A. Hawkins filed a claim for disability benefits in 1990. Repeated errors by Regional Office (RO) staffers kept his case based on exposure to Agent Orange decades earlier while serving in Vietnam bouncing between them and VA appeals boards. Last year Hawkins tried to inject some urgency into the proceedings. He asked the Court of Appeals for the Federal Circuit to order the VA to finally decide his case. But the court rejected the request. After all, wrote Judge Haldane Robert Mayer, a decorated Vietnam combat veteran, The RO may yet grant Hawkins VA benefits. 10 However, the fact that the case has been pending for 20 years shocked U.S.
April 23, 2010
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CARING FOR VETERANS

sary program improveDistrict Judge Claudia Wilken of Oakland, Calif. ments and ensure veterans a stranger to the VA receive accurate and conbenefits system and its sistent ratings. 14 slow-moving clock. Getting a disability ratServing temporarily on ing is the key to the process. the federal circuit, Veterans like Hawkins Judge Wilken wrote in who claim their illnesses a dissenting opinion that or conditions were serthe VA had made revice-connected must prove peated errors which that connection. The VBAs have prolonged the destaff then state their concision-making process. clusions in the form of ratThese errors cannot be ings such as that a vetexcused as products of eran is 50 percent disabled a burdened system. 11 because of an event that ocHawkins wait was curred while in the military. unusually long. But A vet fills out a 23years-long battles over page claim form, then VHA claims arent at all unsends it to the VBA office usual, say experts on and it takes six months to the system. Barton Stichget an answer, says Paul man, joint executive diSullivan, executive direcrector of the nonprofit tor of Veterans for ComNational Veterans Legal mon Sense, which has Services Program, testisued the VA over the workfied last year that the ings of the benefit system. first step alone in the And the appeals process appeal process took an takes four-five years. Thats average of 563 days in unconscionable. VBA leadfiscal 2007-2008. Frusers failed, and they crashed trated veterans have to the agency. It has suffered wait many years before catastrophic meltdown. Double amputee Bradley Walker practices walking on his new prosthetic legs, using a moving sidewalk at Walter Reed Army receiving a final deciA Gulf War veteran who Medical Center in Washington, D.C., on April 4, 2007. Wounded sion on their claims, worked at VBA in the veterans benefit claims are projected to rise 30 percent next fiscal Stichman told the House 1990s, Sullivan praises the year, to about 1.3 million, in part because additional illnesses are Veterans Disability AsVAs new leaders but says being classified as caused by military service, including ailments sistance and Memorial even they cannot save linked to the Agent Orange defoliant used during the Vietnam War. Affairs Subcommittee. 12 the VBA without replacMeanwhile, claims pile up in the in regional office disability assessing it with an entirely new agency. system. This massive backlog has re- ments when she testified that even VA With a war ongoing in Afghanistan, sulted in a six-month average wait for staffers assigned to identify mistakes 98,000 troops still deployed in Iraq, an initial rating decision, and a two- compiled an imperfect record. They the recent expansion of benefits for year average wait for an appeal deci- either did not thoroughly review avail- victims of Agent Orange and the prosion, Thomas J. Tradwell, comman- able medical and non-medical evidence posed addition of other chemical exder in chief of Veterans of Foreign or identify the absence of necessary posures to the presumptives list, he Wars, testified in March to a joint hear- medical information, Finn told the Dis- says, VBA is overwhelmed. Its broing of the Senate and House Veter- ability Assistance and Memorial Affairs ken beyond repair. 15 ans Affairs committees. That is com- Subcommittee. Without an effective Other veterans advocates agree but pletely unacceptable. 13 and reliable quality assurance program, not on Sullivans proposed solution. I Finn of the VA inspector generals VBA leadership cannot adequately got an e-mail yesterday from a vet whos office cited the 22 percent error rate monitor performance to make neces- been fighting with the VA for six years,
AP Photo/Timothy Jacobsen
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says Tom Tarantino, legislative associate for Iraq and Afghanistan Veterans of America (IAVA). The organization is pressing for greater efficiency and accuracy in the benefits process. But Tarantino says the current VA leadership is making great strides. The VA has in the last year been incredibly aggressive in trying to address this issue of claims processing, he says. They have put in place a very solid, ambitious plan to upgrade the workflow, management, technology and customer service. Our challenge in the veterans community is making sure that what we push and what Congress introduces do not interfere with actual progress at VA. That big-picture perspective may not reassure veterans who are dealing with the current system. When you contact people at these ROs [regional offices], they dont want to hear they did something wrong, says injured Iraq veteran Lamie, who has been disputing his 50 percent disability rating since shortly after retiring from the Army late last year. Instead of coming together with the vet and going through it page by page and seeing what went wrong, they blow you off, because you did something wrong not them. You are left to the wind. David E. Autry, deputy national communications director of Disabled American Veterans (DAV), agrees that some veterans encounter a lack of cooperation from some VA staffers. Its clearly in the law that the VA has a duty to assist the veteran, he says. But in many cases we find that the VA is throwing up unnecessary roadblocks: You need to provide me with a documentary statement, and you turn it in, and the VA loses it. The VA benefits system, Autry says, has been approaching critical mass for some time. Still, he says, The good news is that the VA seems to be committed to making things work differently.
Is the VA adjusting to the needs of 21st-century combat and technology? The wars in Afghanistan (Operation Enduring Freedom) and Iraq (Operation Iraqi Freedom) have already lasted longer than World War II, which for the United States ran from 1941 to 1945. The wars also are presenting the VA with a new constellation of disabilities, along with heightened veteran expectations of government efficiency and attention. Todays veterans grew up with the Web and with speedy online shopping. These experiences dont prepare them for dealing with the VA. FedEx can track where your package is, Rep. Phil Roe, R-Tenn., ranking Republican on the House Veterans Affairs Oversight and Investigations Subcommittee, told VA technology officials last February. You can order your coat from L.L. Bean and you know exactly where it is before it gets to you. Will it be possible when a veteran puts in for their benefits to track where their claim is with this current system that were setting up? 16 Absolutely, said Roger Baker, the VAs assistant secretary for information and technology, citing work on a system for tracking education benefits planned for release this fiscal year. The VA will eventually have a Web site to which veterans can come and see the exact status of their claim from the point where its received by the VA . . . to the point where the check is cut and sent to the veteran, and it will tell them everywhere along the process where they sit. 17 But the technology gap is only part of the problem. The nature and severity of todays injuries also complicate the VAs job. Most casualties are caused by IEDs, the favorite enemy weapon in both conflicts. Victims of these powerful bombs may lose limbs, which typically arent protected by torso-covering body armor. And even troops who avoid penetrating wounds may suffer harder-to-detect brain injuries.
Thanks to recent advances in battlefield care, more service members survive to return home with severe combat-related injuries that require additional care, the Institute of Medicine concludes in a new research report. 18 And repeated deployments are causing a growing incidence of PTSD and associated mental-health conditions, including depression. Veterans demand for psychological services is outpacing the availability of mental-health professionals in areas with large vet populations, according to the IOM. 19 Furthermore, family members increasingly must care full time for the growing number of vets who survive injuries that would have killed soldiers in earlier wars. The Wounded Warrior Project, a Jacksonville, Fla.-based nonprofit, estimates that the families of 2,000 severely disabled Iraq and Afghanistan veterans are now caring for them full time. 20 But the department has no systematic Family Caregiver Program, Anna Frese, sister of a severely brain-injured survivor of an IED attack in Iraq, told the House Veterans Affairs Health Subcommittee last year. (See sidebar, p. 374.) It has mounted some pilot programs. But overall, our experience is that very little institutional attention is being paid to family caregivers even though they are a vital link in the veterans lifelong rehabilitation process. Families are coping largely on their own. 21 The VA doesnt support the comprehensive caregiver support program that Frese, the Wounded Warrior Project and other nonprofits advocate, which would provide financial support and health coverage for caregivers. One point of dispute is the agencys insistence that family care be overseen by a VA staff member or contractor, who, an official implied, would be more objective in dealing with the disabled patient. Health-care providers maintain their relationships on a professional level, Dr. Madhulika Agarwal, chief of patient care services for the
April 23, 2010
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Backlog Claims Increase After Afghanistan, Iraq
After the war in Afghanistan began in 2001, compensation claims to the Veterans Administration nearly doubled. The pace picked up again after the start of the war in Iraq. Claims pending for more than six months have remained relatively constant. Pending Compensation Claims, FY 2000-2008 (in thousands)
We need to have partnerships, said Antoinette Zeiss, associate chief consultant for mental health. We cant do it alone. If there is a level of care that VA is not able to provide in rural or in urban or suburban settings we should look for . . . well-tested programs. 28 Before declaring that policy, Zeiss conceded that suicide-prevention programs have only recently been strengthened. For vets in danger of suicide, We have instituted throughout the system far more intensive outpatient programs, so that instead of one, one-hour-a-week session, Zeiss said, there are at least three hours a day, three days a week with an interdisciplinary team trying to deliver very complex and intensive services. 29 Is the VA improving rapidly enough? Debates about the quality of veterans services are taking place amid a notable change in climate from the days of the Bush administration. Widespread agreement prevails that the VAs new leadership genuinely wants to make deep improvements and has the organizational competence to do so. Under the Bush administration, even those who defended the VA against steadily increasing criticism from Iraq and Afghanistan vets didnt deliver more than pro-forma praise of top VA leaders. In October, 2007, under the pressure of months of revelations of substandard and inadequate care from the VA, VA Secretary James Nicholson, who had headed the agency since 2005, resigned. 30 Shinsekis experience with the Bushera Defense Department and his Vietnam service gave him considerable credibility in the veteran community. And he named as one of his assistant secretaries L. Tammy Duckworth, a former Illinois Veterans Affairs director and Illinois National Guard helicopter pilot who lost both legs in Iraq in 2004. Measured by the size of his proposed new budget an important gauge of intentions and administration support Shinseki is planning to follow through
(in thousands)
400 370 352 343 335 350 309 309 288 300 227 250 188 200 159 150 114 96 78 78 100 68 64 52 44 50 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Veterans Disability Benets, Government Accountability Ofce, January 2010
Total pending Pending at least 6 months
VAs Veterans Health Administration, told the Health subcommittee. 22 More recently, the VA has said it needs more information before proposing any policies and programs. VA does not have adequate information on the number of caregivers, the number of family caregivers and the number of veterans receiving . . . services from family caregivers, says the agencys budget proposal for fiscal 2010-2011. 23 The effects of intense combat during repeated deployments are showing up in another disturbing pattern. According to the most recent statistics available, suicides among young Iraq and Afghanistan veterans jumped 26 percent from 2005 to 2007, the VA reported early this year. 24 Though the VA has strengthened its suicide-prevention programs, the agencys image among veterans lessens its effectiveness, according to M. David Rudd, dean of the University of Utahs College of Social and Behavioral Science. It is important for the VA to recognize that they fight a longstanding image as an
inflexible and unresponsive bureaucracy, Rudd told the Senate Veterans Affairs Committee in March. 25 Seventy percent of veterans shun VA help, said Rudd, a specialist in military suicide. He urged the agency to establish partnerships with other mentalhealth providers. Expansion of the existing VA system may not be the most effective expenditure of available funds, he testified. 26 But, a top VA official countered at the same hearing, Young veterans receiving VA care are significantly less likely to commit suicide than those not receiving VA care. Gerald M. Cross, acting principal deputy undersecretary for health, cited U.S. Centers for Disease Control and Prevention statistics showing a drop from 39 suicides per 100,000 in 2001 to 35 per 100,000 in 2007 among patients of VA health services, a decline equivalent to about 250 lives saved. 27 Nevertheless, another VA mental health specialist said the VA is open to joining forces with other organizations, by contract or other arrangements.
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on his modernization vows. Hes asking for an increase of $9.4 billion in discretionary spending in fiscal 2011 a 20 percent hike at a time of spending cutbacks and only modest increases elsewhere in government. 31 Shinseki faced an early test in September, 2009, when the VA failed to send out scheduled checks to about 277,000 college-bound vets who had qualified for GI Bill education benefits. As the VA showed itself incapable of processing the payments on time, some vets were forced to borrow money or take other emergency measures. 32 Shinseki ordered the agency to issue emergency checks of up to $3,000 and to distribute them to veterans at VA offices around the country. The fast action and acknowledgement of error struck many veterans affairs specialists as a new approach. Shinseki explicitly endorsed that view. We will change the [VA] culture, Shinseki told the House Veterans Affairs Committee three weeks later. I assure you of that. 33 Nevertheless, debate is still running strong on whether the agencys new leaders can transform the 300,000-employee department quickly enough to make a difference to the steadily growing ranks of veterans who depend on the VA. Where benefits decision appeals are concerned, The quality of decisionmaking hasnt improved, says Stichman of the National Veterans Legal Services Program. Its in the same bad state. Shinseki, he says, does sound like hes intelligent and really wants to do something. But, the veterans-law expert says, Its very difficult for a secretary to shake the bureaucracy. Can he get the lieutenants to follow orders? Autry of Disabled American Veterans acknowledges that giant institutions dont adapt to change easily or quickly. But the new leaders determination is making a difference, he says. The VA seems to be committed to making things work differently, he says. To be sure, Autry, a Navy veteran of the Vietnam War, is also dissatis-
IED Aftermath
Flames engulf a U.S. Army tank in Baghdad, Iraq, after it was struck by a homemade roadside bomb known as an improvised explosive device (IED) (top). Its crew escaped unharmed from the March 10, 2006, explosion, but Marine Sgt. Merlin German (bottom left), being promoted by Lt. Gen. James F. Amos (right) on May 21, 2007, suffered burns on 97 percent of his body after his vehicle struck an IED in Iraq. Blasts from IEDs widely used by insurgents in both Iraq and Afghanistan often cause multiple wounds, usually with severe injuries to extremities. fied with the pace of transformation. But this is an aircraft carrier, he says of the VA. You dont just spin the wheel and turn it around. But Sullivan of Veterans for Common Sense urges against accepting sluggishness as a given. Were generally opposed to more layers of bureaucracy,
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AP Photo/Eric Gay
AP Photo/Hadi Mizban
CARING FOR VETERANS

he says. But the agency has grown, and in order for Mr. Shinseki to leave his mark he is going to have to bring in new leaders. Furthermore, growing pressures on the VA demand accelerated response, Sullivan says. The military is discharging a steady stream of combat veterans, at the same time as new data emerge that point to wartime conditions as causes of ailments suffered by Gulf War and Vietnam vets. Right now is the pivotal moment, he says. Will we repeat the mistakes of how horribly mistreated Vietnam and Gulf War veterans were when they came home? At least some of those veterans are still inclined to trust that Shinseki is moving as fast as possible, based on improvements already in place. From my experience with the VA, from 2005 to now, there has been great change, says retired Capt. Kennedy, who served two tours in Iraq. Kennedy won his fight to increase his PTSD disability rating to 70 percent, though he is still dealing with what he calls a VA error that cost him $13,000 in retirement pay which he expects to recoup. He attributes part of his success to the free legal representation he received though the National Veterans Legal Services program. However, he adds, By hiring Gen. Shinseki as secretary, the Obama administration made a statement that they are committed to disabled veterans. People like me can see light at the end of the tunnel, but I know Ill never be part of it. tory, brought a monumental shift in veterans care and compensation. For the first time, they were given a major opportunity to improve their lives, not just tend to their injuries or subsist on tiny pensions. The new doctrine may have been inevitable. To achieve victory, the United States had mobilized more than 16 million men (and accepted 210,000 female volunteers) for military service many of them for the entire four-year span of the war. More than 405,000 were killed, and more than 671,000 wounded. 34 To be sure, veterans hadnt been ignored before World War II. Long before, Congress and the executive branch had established a series of institutions and systems designed to provide care and compensation. These included the Asylum for Disabled Volunteer Soldiers, created (under another name) in 1865, at the end of the Civil War, and the Consolidation Act of 1873, which set up a pension system based on the degree of disability, replacing a scale based on rank. Of the 4.7 million men mobilized during World War I, 204,000 were wounded (and 116,000 were killed). But the veterans system wasnt up to the challenge. In 1924, Congress made matters worse. Lawmakers created a bonus designed to make up the difference between military pay and the high wages earned by civilians whod spent the war working in essential industries. But the money was granted in the form of a bond that would mature in 1945, and after the Great Depression began in 1929, vets needed their bonus immediately. Up to 40,000 veterans and their families called the Bonus Marchers set up an encampment in Washington in 1932, only to see it destroyed by Army troops, an event that shocked the nation. 35 Fourteen years later, as World War II drew to a close, the Franklin D. Roosevelt administration and Congress were determined to prevent a repeat of the Bonus March disaster. Instead, the Servicemens Readjustment Act of 1944 known forever after as the GI Bill of Rights created a broad range of opportunities for veterans. 36 Under the bill, the Veterans Administration paid all or most of the costs of college or vocational training, provided guarantees for no-down-payment mortgages or business loans and granted unemployment compensation for up to a year. When the GI Bill expired in 1956, 7.8 million vets had received education or training, and the VA had guaranteed 5.9 million home mortgages worth a total of $50.1 billion. The GI Bill, widely considered one of the most far-reaching pieces of social legislation ever enacted, gave veterans from less-advantaged backgrounds chances they had never dreamed possible and a route toward the middle class, wrote Suzanne Metler, a political science professor at Syracuse University, author of a book about the law. 37 In 1952, Congress passed a second version of the bill for veterans of the Korean War, which had begun in 1950. The new law was slightly less generous: For example, it covered only three years of college expenses instead of all four, and provided a smaller tuition subsidy. Meanwhile, the magnitude of the veteran population created by World War II and the Korean conflict led to a vast expansion of the VA medical system, which by the early 1950s was caring for about 2.5 million vets.
BACKGROUND
The Big Change
Vietnams Neglected Vets

he Vietnam War influenced veteran law and policy every bit as deeply as World War II, even though the conflict was much smaller than World War II. 38 By the time the fighting ended with victory for the communist government
V
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ictory in World War II, the biggest armed conflict by far in U.S. his-
Continued on p. 372
Chronology
1944-1950s
GI Bill of Rights, enacted in final days of World War I, becomes the standard for all subsequent veteran care policy. 1944 As World War II nears an end, Congress passes GI Bill to provide for education, home mortgages and business loans; allows millions of vets to move into the middle class. 1952 Korean War vets get their own, slightly downsized version of GI Bill. 1958 Veterans unemployment insurance extended to peacetime draftees.
logical troubles among Vietnam vets leads Congress to authorize opening of 92 Vet Centers for counseling and other assistance. . . . Years-long debate among psychiatrists leads to inclusion of newly named posttraumatic stress disorder (PTSD) in Diagnostic and Statistical Manual of Mental Disorders. 1981 U.S. District Court in Washington throws out VA regulation that effectively excludes 400,000 radiationexposed World War II and postwar vets from claiming benefits for cancer and other disabilities. 1982 General Accounting Office reports that VA offices give short shrift to vets reporting physical symptoms from Agent Orange defoliant exposure. 1988 President Ronald Reagan signs law granting disability benefits to atomic veterans suffering from 13 (later 16) specific cancers.
1997 Medical researchers hypothesize that exposure to combinations of pesticide and nerve gas gave rise to Gulf War syndrome. . . . VA begins providing benefits for Vietnam vets children born with spina bifida. 2002 U.S. troops in Afghanistan report first enemy use of improvised explosive devices (IEDs). 2007 IEDs found to have caused twothirds of 3,100 U.S. combat deaths in Iraq since U.S. invasion of 2003. . . . Washington Post publishes series on substandard conditions for outpatients at Walter Reed Army Medical Center in Washington. 2008 Congress authorizes free medical care for Iraq/Afghanistan veterans for five years after leaving military. . . . RAND Corp. reports that about onethird of service members deployed to combat suffered from PTSD, traumatic brain injury or major depression. . . . Delay in considering appeals of VA ratings rises to 563 days. 2009 VA issues emergency checks after agency fails to send education benefits to 277,000 college-bound vets. . . . IEDs reported to cause 55 percent of amputations among combat casualties. 2010 VA technology chief calls claimsmanagement system broken beyond repair. . . . Compromise reached on legislation to aid families caring for severely disabled vets. . . . Institute of Medicine reports shortage of mental health services for vets and evidence of association between Persian Gulf War service and multisymptom illness.
1967-1980s
Vietnam War gives rise to complaints of shoddy VA medical care; scientists begin evaluating evidence of psychological trauma from combat and physical damage from radiation and chemical exposure. 1967 Six Vietnam veterans form Vietnam Veterans Against the War (VVAW), which grows into the thousands and directs much anger at VA. 1970 Life magazine reports on rat-infested VA hospital in the Bronx, N.Y. 1973 Paraplegic vet Ron Kovic leads takeover of Democratic Sen. Alan Cranstons office to call attention to deplorable conditions at VA hospitals. 1979 Accumulating evidence of psycho-
1990s-2000s VA benefits system begins to
buckle under strain of disability claims arising from wars in the Persian Gulf and Afghanistan, as well as recognition of disabilities arising from Vietnam War. 1991 VA recognizes two cancers are linked to Agent Orange. 1992 Persian Gulf War ends; reports emerge of physical and psychological symptoms among up to 100,000 veterans of the conflict.
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VA Benefits to Get High-Tech Overhaul

Current system is hopelessly broken.
embers of todays tech-savvy military have grown up being able to buy virtually any product online and have it shipped overnight. Instantaneous communication by text, voice and video has been part of their everyday lives. And its now part of their military service as well. I was battle captain for a unit that oversaw all the transportation into Iraq, says retired Army Capt. Anthony Kennedy about his second deployment there in 2007-2008. Each night we had 3,000 trucks on the road. I needed to know where every truck was at every second. Shortly thereafter, however, Kennedy retired from the military and encountered the VA benefits system. Suddenly, he was back in the mid-20th century, dealing with paper forms filled out by hand and sent by mail. His reaction: Lets let Amazon run it, referring to the huge online retailer Amazon.com. The VA recognizes the problem. We have a manual, paperbounded system; what we want is an automated electronic system, says Peter L. Levin, the VAs new chief technology officer. He has initiated several pilot projects designed to become the new systems backbone. Levin became a rock star among veterans organizations, says Tom Tarantino, legislative associate for Iraq and Afghanistan Veterans of America, by acknowledging at a March meeting organized by the House Veterans Services Committee that the present system is hopelessly broken and must be replaced. He said some of the gutsiest things Ive ever heard a VA person say in front of Congress, Tarantino adds. 1
But Levin makes clear that he isnt promising the new system will be up and running tomorrow, or even next year. The deadline, set by VA Secretary Eric K. Shinseki, is 2015 (though parts of the system are scheduled to be online before then). I come from the private sector, and I think I got this job based on a good reputation for on-time, on-budget deliveries, he says. That is a reputation I intend to keep. I dont want to give unrealistic dates. The instructions are clear that if it is going to move in any direction it is going to be earlier, not later. Levin was hired last year away from DAFCA Inc., which he cofounded and where he was CEO. The Framingham, Mass.based firm designs software to test the reliability of computer chips and block malicious circuitry. Levin, who has a doctorate in electrical and computer engineering from Carnegie Mellon University in Pittsburgh, served as a White House fellow and as expert consultant in the Office of Science and Technology Policy in the Clinton administration. 2 Paper wont entirely disappear from the redesigned system. Some records, Levin says, are too important to exist in purely digital form birth and marriage certificates in the civilian world, for example. But medical scans and lists of medications should be digitized, he says. Still, the planned improvements wont make dealing with the benefits system like dealing with Amazon. Kennedy notes that Amazons customers get invited to buy specific books, music and other merchandise based on their records of past purchases. A VA version, he says, could tell a user, Your ac-
of North Vietnam in 1975, 3.4 million service members had been deployed to Southeast Asia. 39 U.S. society divided sharply over the war; so did the veterans community. In 1967, six returnees founded Vietnam Veterans Against the War, which grew over the years and held a series of high-profile demonstrations, including one in 1971 in which several thousand veterans threw their service decorations over a fence at the U.S. Capitol. 40 Debate over the rights and wrongs of the Vietnam War faded somewhat with its end, but anger and bitterness among veterans over shoddy VA services and treatment grew steadily. The discontent eventually transcended po-
litical views on the war itself, but challenges to the VA came at first from antiwar vets. In 1973, paraplegic vet Ron Kovic (later portrayed by Tom Cruise in the 1989 film, Born on the Fourth of July) 41 led other severely disabled vets in a 17-day hunger strike and occupation of the Los Angeles office of Sen. Alan Cranston, D-Calif. They were publicizing appalling conditions at VA hospitals in Southern California. A Senate hearing produced testimony about neglect of patients, brutal retaliation against those who complained and violations of basic hygiene. The testimony mirrored a 1970 Life magazine expos about a VA hospital in the Bronx, N.Y., which was plagued by rats, filth and deficient medical care.
Meanwhile, with far less public attention, a group of psychiatrists with ties to antiwar veterans had started trying to describe and define a condition that theyd noticed in many Vietnam returnees. Symptoms included sleep disturbance, anxiety and depression. Eventually, the psychiatrists proposed that the American Psychiatric Association add the condition which colleagues were also seeing in disaster survivors to a new edition of the Diagnostic and Statistical Manual of Mental Disorders, the bible of the mental-health profession. The fight to include what eventually became known as post-traumatic stress disorder went on for more than four years. Like the military and the VA, much of the psychiatric establishment initially dismissed the idea that intense
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turning off the system for six months and count shows youve been treated for building a new one really quickly. this, this and this you should apply For vets, the bottom line is that paper for this disability. documents are still indispensable to dealBut Levin, while acknowledging ing with the VA. Indeed, Richard Sanchez, the appeal of the Amazon model, a U.S. Navy veteran, says hes on his way argues that its not a precise fit. to resolving four years of miscommuniAmazon sells mass-produced goods, cations with the VA, partly because he with one copy of a book or CD, heeded an old sailors advice. for instance, indistinguishable from He said, Make copies of everything; another. It turns out that every vet doesnt matter if its not important, it is a little different, he says. Nevermight be important later, it might have theless, a VA variant could produce a date on it. And then make a copy, and data that allow a records examiner to then another copy. I did that, says see how vets with similar characterPeter L. Levin, the Department of Veterans Sanchez, and it was true. I have an istics were treated. Affairs new chief technology officer, archive at home, another with relatives For a veteran with a given list of became an instant rock star among and another one in a safe-deposit box. claims, I want to know what guys some veterans organizations when he who are about your age and who told Congress the VA benefits system is Peter Katel served about where you served, and hopelessly broken and must be replaced. did things like you did while serving I want to know what theyre talking about that maybe 1 Rick Maze, VA official: Disability claims system cannot be fixed, Federal you forgot, Levin says. And at some point, an examiner might Times, March 18, 2010, www.federaltimes.com/article/20100318/DEPARTMENTS be able to instantly access information on specific health and 04/3180302/1055/AGENCY. 2 Executive Biographies, U.S. Department of Veterans Affairs, undated, environmental conditions in given areas of operation. www1.va.gov/opa/bios; Carnegie-Mellon Engineering Alumnus Peter L. Levin Meanwhile, even the basic system is complicated enough to Named as Chief Technology Officer at U.S. Veterans Affairs, Carnegie Mellon design and install that Levin is trying to improve the present University, press release, Aug. 3, 2009; John Markoff, F.B.I. Says the Military system pending its replacement. We do not have the option of Had Bogus Computer Gear, The New York Times, May 9, 2008, p. C4.
combat or other wartime experiences could produce serious disturbances in a well-adjusted individual. Troubled veterans suffered from conditions that afflicted them before they joined the military, the skeptics argued. But mounting evidence weakened their position. In 1979, PTSD was added to the manual. The move marked the beginning of a change in outlook, eventually of global dimensions, about the deep effects of war and disaster. In a more immediate sense, the PTSD debate influenced Congress to pass in 1979 (shortly before the definition was formally added to the manual) a bill to create 92 Vet Centers, where Vietnam returnees could obtain psychological counseling. In 1991, the centers were opened to all combat veterans of any conflict.
U.S. Department of Veterans Affairs
Chemicals and Radiation

eanwhile, a major issue affecting Vietnam vets physical health and that of their children was also emerging. In 1970, journalist Thomas Whiteside reported in The New Yorker that dioxin the main ingredient of a defoliant nicknamed Agent Orange used in large quantities by U.S. forces to strip jungle cover in Vietnam was a carcinogen. 42 The article led the Pentagon to ban Agent Orange (the nickname came from the orange-banded barrels in which it was stored). But by then hundreds of thousands of vets already had been exposed. As the decade wore on, many developed diseases, includ-
ing leukemia and other cancers, and were also reporting an unusual number of birth defects in their children. Initially, the VA resisted vets claims that Agent Orange was the cause of their symptoms. In 1982, a congressionally commissioned study by the General Accounting Office, now the Government Accountability Office (GAO), concluded that the VA had neglected the issue, for instance, taking medical histories from only 10 percent of the 90,000 vets who had filed Agent Orange-based claims. Not until 1991 did the VA recognize links between two cancers soft-tissue sarcoma and non-Hodgkins lymphoma and Agent Orange exposure. Several more were added in 1993, and still more in later years. And in 1997 22 years after the war
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Full-time Caregiving Challenges Families

Families make huge sacrifices to deal with soldiers catastrophic injuries.
or the Edmundsons of New Bern, N.C., veteran care is a family mission. On Oct. 2, 2005, Eric Edmundson, then a 25-year-old sergeant in the 172nd Stryker Brigade, took the impact of a roadside bomb, which sent shrapnel shooting into his brain and elsewhere in his body. After emergency surgeries in Baghdad, the young soldiers heart stopped, depriving his brain of oxygen for a full 30 minutes. Eric cant walk, talk; he has cognitive memory issues, says his father, Ed, from the family home, which used to house Eric, his wife Stephanie and their daughter, Gracie Rose, 5. Now Ed and his wife Beth live there as well. We downsized our lives to be here for Eric and Stephanie, says Ed, 52, who had worked as a warehouse supervisor at ConAgra Foods. I took my retirement, burned down our debt load, basically got rid of all our possessions. We live in a bedroom in my sons house. Eric returned to North Carolina after six months of intensive care and training at the Rehabilitation Institute of Chicago. His parents quickly realized that Eric would need full-time care, and that the load was too much for Stephanie to handle alone. 1 Theres a high rate of divorce among the injured, Erics father says. We dont want to allow that to happen. Eric has a beautiful family. What my wife and I do is take care of Eric, dealing with rehabilitation and his doctor visits. That allows Eric and Stephanie and Gracie to have as much of a life as possible. Eric has been able to function more fully than initially expected. He is working as a greeter two days a week in a sporting-goods store. In January he attended the opening of a photo exhibit
at the University of North Carolina, Wilmington, of images he took in Iraq before being wounded. He addressed the crowd using a computer voice-generating device. 2 The young family is expecting a second child. As Eric napped on a recent afternoon, his father spoke by phone, recounting in a matter-of-fact tone the realities of life as a full-time caregiver. For one thing, Edmundson says, We dont have any retirement or financial future. Last year, after two bouts of pneumonia, he was able to see a doctor only because of financial help from Wounded Warriors Project, a Jacksonville, Fla.-based nonprofit. Another nonprofit, Homes For Our Troops, built a fully accessible house for the family. 3 I cant imagine what we would be going through if we didnt have nonprofits, he says. The Edmundsons daughter, Anna Frese, has testified in support of legislation to provide financial support and health care to family caregivers (see Current Situation), and Edmundson too would welcome some help. Some small compensation would allow us to get a change of clothes or service our vehicle, he says, and health care insurance would keep me moving forward. Under the pending legislation, health care would be available only for him or his wife, not both of them. Meanwhile, the Edmundsons are aware that they may represent only the first wave of families dealing with the aftereffects of catastrophic wounds The war wasnt supposed to last this long, he says. The system hadnt been tested. But if theyre going to take these young men and women and send
ended the VA began a program to provide medical benefits, vocational training and a monthly allowance for veterans children born with spina bifida, one of the birth defects associated with exposure to the chemical. But the long-running Agent Orange dispute was only one of several controversies surrounding service members exposure to dangerous substances and atomic radiation. World War II veterans, including thousands who had been assigned to clear rubble in Hiroshima and Nagasaki, Japan, after atomic bombs were dropped there, had filed about 1,500 claims for benefits, claiming adverse health consequences from the intense radiation theyd absorbed. Some survivors of de-
ceased veterans also filed for death benefits. But the federal government long resisted paying for the claims; in 1979 the VA adopted a rule effectively rejecting 98 percent of claims by atomic veterans. The group was substantial 200,000 personnel who had been exposed to radiation in postwar Japan, and another 200,000 who had participated in atmospheric testing of atomic weapons. 43 In 1981, U.S. District Judge June L. Green of Washington threw out that rule. Eventually, President Ronald W. Reagan signed a bill in 1988 establishing that atomic veterans suffering from 13 (later 16) specific kinds of cancers were automatically entitled to benefits. 44 The Persian Gulf War of 1990-1991
prompted another wave of veteran medical concerns. About 100,000 of the 694,000 Gulf War veterans reported symptoms including fatigue, skin rash, headache, muscle and joint pain, memory loss, difficulty concentrating, shortness of breath, sleep disturbance, gastrointestinal problems and chest pain. Over the years, the number of vets reporting symptoms rose to 250,000. Scientists and others advanced various hypotheses, including exposure to destroyed Iraqi stocks of sarin nerve gas, smoke from oil well fires or pesticides. Government-sponsored and private medical and environmental studies offered contradictory conclusions on whether an identifiable Gulf War Syndrome existed.
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perior to the VA hospital where them to war, theyd better Edmundson had been previbe able to take care of them. ously. The VA did, however, fiThey need to ramp up nance the cost of the private post-trauma care and reharehab program. bilitation. The deeper issue, EdThough the family is remundson says hes come to lying on Erics VA benefit believe, is that the VA and payments and on his VAthe government in general financed health care, the are only now starting to adentire care mission otherU.S. Army Specialist Eric Edmondson (center), who suffered just to advances in rehabilitawise has been indepena severe traumatic brain injury in Iraq in 2005, and his tive medicine. For years, the dent of the VA. Edmundfather Ed (top) appear at a Nov. 10, 2009, news conference answer was to institutionalize son says hes found the in Washington, D.C., to discuss legislation to provide the soldier, he says. But the agency peopled with dedfinancial support and health care for family members soldiers of today dont want to icated staff but somewhat caring for wounded vets full time. The Edmondsons, who be taken care of, they want to snarled in its own procesold their house and moved in with their son and his family in order to care for him, may represent the first wave of be rehabilitated, they want to dures. families dealing with the after-effects of catastrophic go home. For the first three years wounds. Senate Majority Whip Dick Durbin (D-Ill.) (left) I spent almost 100 percent Peter Katel thanks Edmondson for his sacrifice. of my time dealing with VA red tape, Edmundson says. We did a lot of self-education. 1 For a detailed account of Erics stay at the Rehabilitation Institute, see Wed get up in the morning, take care of Eric and get on Eric Edmundsons Patient Story, Rehabilitation Institute of Chicago, undated, the computer and research and talk to people: Why were www.ric.org/aboutus/stories/EricEdmundson.aspx. 2 Ashley White, Photo collection at UNCW illustrates life as a soldier, you able to do this or that? Why are we not able? Dealing with the VA isnt for the passive, Edmundson has News14 Carolina, Jan. 10, 2010, http://news14.com/triad-news-94-content/ military/620344/photo-collection-at-uncw-illustrates-life-as-a-soldier. concluded. If you dont plead your case, you fall through 3 Severely Wounded Army SGT Eric Edmundson Receives Specially Adapted the cracks. The Edmundsons located the Chicago Rehabili- Home from Homes for Our Troops, Homes for Our Troops, Nov. 5, 2007, tation Institute on their own, for instance, and found it su- www.homesforourtroops.org/site/News2?page=NewsArticle&id=5743.
Nevertheless, Gulf War veterans continued to report ailments, some of them serious. And after President George W. Bush ordered troops into Afghanistan in 2001, and into Iraq, in 2003, veterans of both wars began reporting similar ailments, leading the VA and Defense Department to focus more closely on the possible effects of chemical exposure from burn pits on military bases, where plastics, electronics, lubricants and medical waste were incinerated, among other things. (See Current Situation, p. 376.) 45
21st-Century Wounds
he nature of the wars in Afghanistan and Iraq, coupled with tremen-
dous advances in battlefield medicine, produced significant increases in the numbers of severely disabled veterans. But some six years into the fighting, many began to question whether the military and VA were prepared for the consequences of the centurys first two wars. Initially, the focus was on the military. In 2007, The Washington Post published a devastating series of articles about conditions for injured service members recovering at Walter Reed Army Medical Center outpatient facilities in Washington, D.C. The expos led to the firings of Army Secretary Francis Harvey and of the Walter Reed commander, Lt. Gen. George W. Weightman. Lt. Gen. Kevin Kiley, Army sur-
geon general and a former Walter Reed commander who initially had minimized The Posts accounts, was also forced to resign. 46 The Walter Reed scandal focused media and political attention on the treatment of veterans in general. President George W. Bush appointed former Sen. Robert Dole, R-Kan., a disabled World War II vet, and former Health and Human Services Secretary Donna Shalala to co-chair a commission to examine the entire veterans health care system. The commission recommended simplifying the ratings system and improving care for TBI and PTSD, among other steps. The commission blamed much of the problem on the kind of war U.S.
Getty Images/Chip Somodevilla
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CARING FOR VETERANS

troops were fighting. Enemies in Iraq and Afghanistan were using IEDs as their major weapon. The bombs produce devastating effects without exposing the anti-American guerrillas to battlefield confrontations, in which U.S. forces held the advantage. Deployed as mines, packed into cars and trucks as well as bicycles and motorcycles, the bombs first appeared in Afghanistan in 2002 as radio-controlled roadside devices. But military officials planning the following years invasion of Iraq didnt foresee the use of IEDs there, despite plentiful supplies of explosives. By late 2007, IEDs were causing two-thirds of the 3,100 U.S. combat deaths registered through September of that year in Iraq. By then, IEDs had killed or wounded more than 21,000 Americans in Iraq. And by late 2009, the Pentagon calculated that the bombs accounted for up to 80 percent of U.S. and NATO casualties in Afghanistan. 47 Aside from their appalling efficiency as killing machines, IEDs wrought damages on survivors that would have ended their lives in any previous war. Dramatic advancements in both the protective gear worn by soldiers and in military urgent care made the difference. This is the first war in which troops are very unlikely to die if theyre still alive when a medic arrives, Dr. Ronald Glasser, who had treated troops wounded in Vietnam in 1968-1970, pointed out in The Washington Post in 2007. 48 At that point, about 1,800 troops had survived brain injuries caused by penetrating wounds. But nearly a third of military personnel involved in heavy combat in Iraq or Afghanistan for at least four months were at risk of brain disorders from IED and mortar blasts. Symptoms of such shock-wave neurological disorders include memory loss, confusion, anxiety and depression, Glasser wrote. 49 But the IEDs produced other types of injuries as well: As of mid-January, 2009, 1,184 U.S. personnel had suffered amputations, 55 percent of them the result of IED injuries. 50 nearly two decades, open the door to a lifetime of free VA medical care for tens of thousands or more sick Gulf War veterans, he told Military Times. 52 On the heels of the VA announcement, the Institute of Medicine issued the latest volume in its long study of Gulf War symptoms, finding that sufficient evidence of association exists between deployment to the Persian Gulf operations area and multisymptom illness. That conclusion falls one step short of establishing a causal relationship between the illness and Gulf War service. There is some doubt as to the influence of chance, bias and confounding, the report said, using a statistical term for an element of an issue that mistakenly leads to associating exposure with outcome. 53 Still, given the long and contentious history of Gulf War veterans attempts to obtain scientific confirmation that they were suffering from something other than random, imagined or exaggerated symptoms, the institutes report marked an important milestone. The multisymptom illness that affects so many Gulf War veterans is a terrible, distinct illness, James E. Finn, chairman of a VA-appointed advisory committee on Gulf War illnesses, told The Washington Post, and . . . this nation can and should launch a Manhattan Project-style research program to identify treatments and prevent this from happening again. 54 Meanwhile, the VA is trying to pinpoint specific causes of Gulf War illness, including exposure to substances including smoke and particles from military installation burn-pit fires that incinerated a wide range of toxic-waste materials, Bradley Mayes, director of the VBA Compensation and Pension Service, wrote in a February letter to VA medical personnel and claims examiners. The Military Times, which has no ties to the Defense Department, had reported on growing suspicions of burnpit exposure as a cause of disease. 55
Continued on p. 378
CURRENT SITUATION
Presumptive Diseases
n veterans jargon, theyre presumptives certain diseases or conditions presumed by the VA to arise from military service in a certain time or place. In addition to having recently added to the list of ailments associated with exposure to Agent Orange in Vietnam, the agency is proposing to add nine new conditions that have developed among veterans of the 1990-91 Gulf War and the Afghan and Iraq conflicts. Vets suffering from the following diseases or their after-effects would be presumed to have contracted them while serving: brucellosis, campylobacter jejuni, coxiella burnetii (Q fever), malaria, mycobacterium, tuberculosis, nontyphoid salmonella, shigella, visceral leishmaniasis and West Nile virus. We recognize the frustrations that many Gulf War and Afghanistan veterans and their families experience on a daily basis as they look for answers to health questions and seek benefits from VA, Shinseki said in announcing the proposed rule. 51 In addition, the VA is proposing to add a presumption of service connection for Gulf-Iraq-Afghanistan vets suffering from medically unexplained chronic multisymptom illness. Characteristics include fatigue, pain and inconsistent laboratory reports. That definition would cover Gulf War Syndrome, noted Sullivan of Veterans for Common Sense. The proposed new VA rules may finally, after
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At Issue:
Should the VAs Veterans Benefits Administration be scrapped and rebuilt?
yes
EXECUTIVE DIRECTOR, VETERANS FOR COMMON SENSE

PAUL SULLIVAN
NATIONAL EXECUTIVE DIRECTOR, AMVETS; MARINE CORPS VETERAN OF VIETNAM

JAMES B. KING
As top leaders and auditors have confirmed that benefit claim processing at the Veterans Benefits Administration (VBA) cannot be fixed, as it represents an obsolete and unsustainable model. VBA leaders have no permanent solution for the 60-year-old system, and VBA should eventually be replaced using a careful plan. This year, VA Secretary Eric Shinseki has a rare window of opportunity to build a new, high-tech, veteran-friendly VBA when he names a new under secretary for benefits. Fixing VBA is vital because an approved disability claim usually opens the door for both disability payments and health care. VBAs current woes include: 500,000 veterans now waiting an average of six months for a disability claim decision, plus 200,000 more veterans waiting five more years for an appealed decision. 70,000 new pages of paper clog up VBA every day. VBA makes an error in nearly one-in-four decisions. VBA improperly shredded claims, lost claims and backdated records. VBA leaders paid themselves millions in cash bonuses while rank-and-file employees struggled. Distraught veterans call VAs suicide prevention hotline out of frustration with endless VBA delays. We urge the VA to begin a series of public meetings with Congress, veteran advocates and academic experts to pass new laws to design, build and deploy a new VBA with the shortest path possible between the veteran and VA benefits, including health care. Here are practical solutions for a new, high-quality VBA: Use a one-page claim form, a single, automated computer system and decide each claim within 30 days. Use easy-to-understand rules that presume more medical conditions are linked to military service. Use the new, robust lifetime military medical record. Move claims staff, currently isolated in a single office in each state, into medical facilities to help veterans set up claim exams as well as quickly and accurately decide claims. Allow veterans to hire an attorney before they file a claim, especially veterans with brain injuries or mental health conditions. When these common sense solutions are adopted, then more of our veterans are welcomed home with the VA benefits and health care they need and earned after defending our freedom. Learn more at: www.FixVA.org.
no
yes no
s
ince 2001, the Department of Veterans Affairs disability claims backlog has grown precipitously because of the ongoing conflicts in Iraq and Afghanistan and the establishment of new presumptive health conditions. Thankfully, through constructive dialogue with the nations top veterans service organizations, the VA has implemented significant changes over the last few months that should help to alleviate strains on the system. AMVETS is encouraged by the VAs recent steps to streamline the process, making a proposed scrapping of the current Veterans Benefits Administration (VBA) system duplicative and unnecessary. Today, VA has launched pilot programs at regional offices around the country, investigating ways to modernize the claims process, building on opinions and suggestions from leading veterans groups. These pilot programs include the paperless claims process in Providence, the virtual regional office in Baltimore, team-based workload management in Little Rock and tiered case-management teams in Pittsburgh. AMVETS and other groups have had access to each of these programs, offering opinions and recommendations where necessary, based on decades of experience in the VA claims process. VA also recently implemented eight system-wide solutions to transform the mindset of all involved in the claims process from the individual veteran to the VA adjudicator. AMVETS will continue to monitor the progress of these initiatives to help find the best solutions to the daunting backlog. We encourage Congress to do the same before taking hasty legislative action. In AMVETS opinion, plans to scrap the VBA would only exacerbate current benefits-delivery issues. Today, millions of veterans are entitled to care and compensation through their VBA ratings. By scrapping VBA, VA would need to develop a new corollary to deliver care and benefits to the millions of veterans already enrolled, dating back to World War II. Plus, would veterans rated under the old system be entitled to reopen their claims? AMVETS believes that they must, which only creates more roadblocks to benefits. Forget the current 400,000-claim backlog VA would be facing more than 3 million reopened claims and appeals. AMVETS believes we are on the cusp of developing a modern VA claims process through constructive collaboration among VA and the veterans groups that have helped our heroes navigate the system for decades. The proposed solutions could finally provide veterans with the timely and accurate claims processing they deserve. Thus, its critical that the VBA be preserved.
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Legal Benefits
he VA pipeline may be clogged for health and education claims, but vets facing criminal charges are getting a new form of assistance from federal and state court systems around the country. At least 21 states, cities and counties have set up veterans courts. Modeled on drug courts, which provide a chance at supervised addiction treatment and in some cases a clean record instead of jail time, the veterans versions are designed to take into account the repercussions of military service, especially combat tours in Iraq and Afghanistan. PTSD, TBI and other after-effects have become widely acknowledged and, in the view of many in the criminal-justice system, deserve to be weighed when a vet is being prosecuted or sentenced. In Buffalo, N.Y., where Judge Robert T. Russell Jr. pioneered the concept in 2008, the vets court takes only those accused of nonviolent felonies and misdemeanors. But the Santa Ana, Calif., court is open to those charged with any offense. Judge Wendy Lindley, who established the program, told the National Law Journal that California criminal law specifically allows treatment instead of incarceration for a convicted veteran who has served in a combat zone and developed psychological or substance-abuse problems. Veterans courts are also in session in Anchorage, Chicago, Pittsburgh and Tulsa. 56 The VA started a program last year to work with veterans courts, and VA Secretary Shinseki visited the Buffalo court in April to underline his support. The secretarys purpose was to receive first-hand knowledge about how the program works in order to integrate and develop similar endeavors in other communities, the Erie County Veterans Service Agency said on its Web site. 57
The VA formed its own Veterans Justice Outreach Initiative last year. The program is designed in part to provide detailed reports to judges on a vets medical history and on VA benefits and programs that might help him if he were sentenced to probation instead of jail. Staffers are also trained to work with vets serving jail time. 58 As support grows, dissenters are making themselves heard. In Nevada, which along with Illinois and New York enacted statewide veterans courts last year, the general counsel for the American Civil Liberties Union of Nevada argued that they represent a dangerous trend of creating different avenues of justice for certain kinds of people. Veterans courts amount to establishing special courts for police officers, teachers or politicians, Allen Lichtenstein told the Stateline.org news service. 59 He also rejected the analogy to drug courts, which are open to defendants suffering from a condition. But all veterans are eligible for veterans court, Lichtenstein pointed out. 60 Nevertheless, federal judges are starting to take veterans wartime experiences into account in sentencing. In Denver, Senior U.S. District Judge John Kane sentenced a federal prison guard to five years probation, with mentalhealth treatment required, because of his Air Force service in Afghanistan and Iraq, where he dealt with seriously injured and dead service members and civilians. John Brownfield Jr. had pleaded guilty to accepting at least $3,000 in bribes for smuggling contraband to inmates. 61 It would be a grave injustice, Kane said in a written decision, to turn a blind eye to the potential effects of multiple deployments to war zones on Brownfields subsequent behavior. 62 Sentencing guidelines aside, Kanes move seemed consistent with a U.S. Supreme Court decision in November, 2009, to throw out a death sentence
for a Korean War veteran convicted of murdering his ex-girlfriend and her boyfriend. Ordering a new sentencing hearing, the justices cited the intense stress and emotional toll that combat took on George Porter Jr. 63
Aiding Caregivers
egislation is pending in Congress to channel aid to families and others who have become full time caregivers for catastrophically disabled Iraq and Afghanistan veterans. In a unanimous vote in November, the Senate passed the Caregivers and Veterans Omnibus Health Services Act, sponsored by Senate Veterans Chairman Daniel Akaka, D-Hawaii. House action was held up while Akakas staff negotiated changes with his counterparts. The resulting compromise is ready for action, which is expected some time in April or May. The legislation represents the first comprehensive attempt to assist those suddenly thrust into the 24-hour-a-day caregiver role. Approximately $3.7 billion would be spent on stipends amount unspecified for caregivers, on temporary alternative care (respite care) arrangements to give caregivers a breather, on training caregivers and on other forms of support, including expense reimbursement to accompany disabled vets to distant hospitals. 64 Only those caring for veterans from Operation Enduring Freedom (OEF) the Afghanistan war and Operation Iraqi Freedom (OIF) would be covered by the bill. Yet, as veterans of other wars age, issues of roundthe-clock care for them are beginning to weigh on families. Veterans service organizations would like to see the legislation open to all, says Barbara Cohoon, deputy director of government relations for the National Military Families Association. But we recognize that OIF and OEF caregivers are experiencing the biggest hardship
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right now and that resources are limited. But this needs to be done for all at some point.
OUTLOOK
National Priority?
esearchers have been trying for the past several years to forecast the medium-term effects of the Iraq and Afghanistan wars on veterans and, by extension, on the government agency that deals with them most closely. Trend lines are exceptionally difficult to forecast, in part because fighting is still under way and may be for some time. Meanwhile, the VA does not have the personnel, the funding, or the mandate from Congress to produce broad forecasts of service needs, the Institute of Medicine concluded in its recent report. 65 The after-effects of past wars are of only limited usefulness, the institute noted, because so many more severely wounded service members are surviving combat now. The entire picture of the wounded veteran population has changed. These survivors of very severe injuries need more intensive care than the most severely wounded service members from prior wars, the report said. Extrapolating from past conflicts might result in an underestimation of the overall burden of need for persons impacted by OEF and OIF. 66 What is clear, the institute reported, is that the needs of these veterans will be extensive. The burden borne by wounded service members and their families, and thus the public responsibility to treat or compensate them, is large and probably will persist for the rest of their lives. 67 Moreover, peak demand for compensation is likely to increase as vet-
erans age, the institute said. So the maximum stress on support systems for OEF and OIF veterans and their families might not be felt until 2040 or later. 68 In the veterans community, some express confidence in the VAs ability to keep up with an already growing demand for its services. It has the potential to be as great as it needs to be, says Autry of Disabled American Veterans. There are an awful lot of very dedicated people in the VA. Their dedication is already being tested, and is certain to be tested even further, by the high incidence of PTSD, TBI and depression among Afghanistan and Iraq vets. The prevalence of those injuries is relatively high and may grow as the conflicts continue, RAND has reported. Yet, both the Defense Department and the VA have had difficulty in recruiting and retaining appropriately trained mental health professionals to fill existing or new slots. 69 The RAND report urges that dealing with the trio of conditions be elevated to a national priority. But even some relatively optimistic veterans say raising public concern to that level requires some heavy lifting. Were less than 1 percent of the population, says Kennedy, the retired Army captain. For his own part, Kennedy is still pretty sure the VA will be a lot better than it is now, but hes not sure how it will have improved. Sullivan of Veterans for Common Sense is a bit more skeptical. The VA is still trying to protect its reputation, he says, similar to shipping company officials who were saying everything was fine while the Titanic was sinking. But the potential exists to transform VAs benefits service into a smoothrunning operation in which veterans have confidence. A tremendous amount of effort must be invested in this moment of opportunity, Sullivan says. We have a new administration, a Congress eager to help, veterans groups who
want to help and public understanding of an urgent need. We have a golden moment of opportunity now. Sullivans outlook is considerably sunnier than that of Lamie, the IED attack survivor. In 10 years, he says, I think the situation will be worse. In 10 years, everybody is going to forget all about the Iraq war. If theres a war in 2020, those guys will probably be treated great. But if theres nobody dying on the TV screen nobody will care. An outsider might say that Lamies combat scars are still raw; his brother Gene, an Army sergeant, died in an IED attack in Iraq in 2007. 70 But dismissing his bleak outlook could be a mistake. The searing experiences that inform his forecast are shared by a growing number of young veterans.
Notes
Radical Change Needed for Veterans Disability Claims Process, House Committee on Veterans Affairs, press statement, March 18, 2010, http://veterans.house.gov/news/PRArticle. aspx?NewsID=559. 2 Statement of Belinda J. Finn, Assistant Inspector General for Audits and Evaluations, Office of Inspector General, Department of Veterans Affairs, VA Office of Inspector General, March 24, 2010, www4.va.gov/OIG/pubs/ VAOIG-statement-20100324-Finn.pdf. 3 Icasualties.org, updated regularly, http://icasu alties.org/OEF/Index.aspx. 4 Remarks by Secretary Eric K. Shinseki, Veterans of Foreign Wars National Legislative Conference, March 8, 2010, www1.va.gov/opa/ speeches/2010/10_0308.asp; Fiscal 2011 Budget: VA, Committee Testimony, Senate Veterans Affairs Committee, Feb. 26, 2010; FY 2011 Budget Submission, Department of Veterans Affairs, pp. 2B-4, 2C-2, www4.va.gov/ budget/docs/summary/Fy2011_Volume_1-Sum mary_Volume.pdf. 5 Quoted in Rick Maze, VA official: Disability claims system cannot be fixed, Federal Times, March 18, 2010, www.federaltimes.com/article/ 20100318/DEPARTMENTS04/3180302/1055/ AGENCY. 6 Quoted in Philip Rucker, Obama Picks Shinseki to Lead Veterans Affairs, The Washington
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Post, Dec. 7, 2008, www.washingtonpost.com/ wp-dyn/content/article/2008/12/07/AR200812 0701487.html; Bernard Weinraub and Thom Shanker, Rumsfelds Design for War Criticized on the Battlefield, The New York Times, April 1, 2003, p. A1; Amy Belaso, Troop Levels in the Afghan and Iraq Wars, Congressional Research Service, July 2, 2009, Summary page, www.fas.org/sgp/crs/natsec/ R40682.pdf; US Forces Order of Battle, GlobalSecurity.org, undated, www.globalsecu rity.org/military/ops/iraq_orbat.htm. 7 Returning Home from Iraq and Afghanistan: Preliminary Assessment of Readjustment Needs of Veterans, Service Members, and Their Families, Institute of Medicine of the National Academies (2010), p. 52, http://books.nap.edu/ openbook.php?record_id=12812&page=R1. 8 Terri Tanielian and Lisa H. Jaycox, eds., Invisible Wounds of War: Psychological and Cognitive Injuries, Their Consequences, and Services to Assist Recovery, RAND Center for Military Health Policy Research, 2008, p. xxi, www.rand.org/pubs/monographs/MG720; U.S. Army Surgeon General study cited in Kline, Anna, et al., Effects of Repeated Deployment to Iraq and Afghanistan on the Health of New Jersey Army National Guard Troops: Implications for Military Readiness, American Journal of Public Health, February 2010, http://ajph.aphapublications.org/cgi/content/ abstract/100/2/276. 9 The three are Parkinsons Disease, ischemic heart disease and B-cell leukemias. FY 2011 Budget Submission, op. cit., p. 1A-3; Gregg Zoroya, VA to automate its Agent Orange claims process, USA Today, March 9, 2010, p. 4A. 10 Hawkins v. Shinseki, U.S. Court of Appeals for the Federal Circuit, 2009-7068, Dec. 7, 2009, www.cafc.uscourts.gov/opinions/09-7068.pdf. 11 Ibid. 12 VA Appellate Processes, Committee Testimony, House Veterans Affairs Committee, Subcommittee on Disability Assistance and Memorial Affairs, May 24, 2009. 13 Legislative Presentations of Veterans Organizations, House Veterans Affairs Committee, Senate Veterans Affairs Committee, March 9, 2010. For VA backlog figure, see 2010 Monday Morning Workload Reports, Department of Veterans Affairs, March 29, 2010, www.vba.va.gov/ REPORTS/mmwr/index.asp. 14 Finn, op. cit. 15 Iraq Index: Tracking Variables of Reconstruction and Security in Post-Saddam Iraq, Brookings Institution, updated March 30, 2010, p. 19, www.brookings.edu/~/media/Files/ Centers/Saban/Iraq Index/index.pdf. 16 The House Veterans Affairs Subcommittee on Oversight and Investigations, op. cit. 17 Ibid. 18 Returning Home from Iraq and Afghanistan . . . , op. cit., pp. 29, 69. 19 Ibid., p. 69. 20 Ibid., p. 32. 21 Needs of Family Caregivers, House Veterans Affairs Committee, June 4, 2009. 22 Ibid. 23 FY 2011 Budget Submission, Department of Veterans Affairs, p. 3A-7, www4.va.gov/bud get/docs/summary/Fy2011_Volume_1-Summary_ Volume.pdf. 24 Kimberly Hefling, Increase in suicide rate of veterans noted, The Associated Press (Army Times), Jan. 12, 2010, www.armytimes.com/ news/2010/01/ap_vet_suicide_011110. 25 Veterans Suicide Prevention, Senate Veterans Affairs Committee, March 3, 2010. 26 Ibid. 27 Ibid. 28 Veterans Suicide Prevention, Senate Veterans Affairs Committee, March 3, 2010, (Web video), http://veterans.senate.gov/hearings. cfm?action=release.display&release_id=d1a8548 c-de2c-49a8-b7f9-d0855265d435. 29 Ibid.
30 Walter F. Roche Jr., and James Gerstenzang, Doctor picked to head VA, Los Angeles Times, Oct. 31, 2007, p. A11. 31 FY 2011 Budget Submission, op. cit., p. 1A-1; Jackie Calmes, In $3.8 Trillion Budget, Obama Pivots to Trim Future Deficits, The New York Times, Feb. 1, 2010, www.nytimes. com/2010/02/02/us/politics/02budget.html?page wanted=all. 32 James Dao, Late Benefit Checks Causing Problems for Veterans Attending College On New G.I. Bill, The New York Times, Sept. 25, 2009, p. A16. 33 House Veterans Affairs Committee Holds Hearing on the State of the Department of Veterans Affairs, CQ Congressional Transcripts, Oct. 14, 2009. 34 Except where otherwise indicated, this subsection is drawn from VA History in Brief, Department of Veterans Affairs, undated, www1.va.gov/opa/publications/archives/docs/ history_in_brief.pdf. For number serving in the World War II military, male and female, Facts for Features, U.S. Census Bureau, April 29, 2004, www.census.gov/Press-Release/www/2004/cb 04-ffse07.pdf. 35 For background, see P. Webbink, Veteranaid Policies of the United States, Editorial Research Reports, Vol. IV, Oct. 6, 1930; and B. W. Patch, The Bonus and Veterans Pensions, Editorial Research Reports, Vol. I, Jan. 10, 1936, both available at CQ Researcher Plus Archive, www.library.cqpress.com. 36 For background, see R. McNickle, Service Pensions for War Veterans, Editorial Research Reports, May 4, 1949, available at CQ Researcher Plus Archive, www.library.cqpress.com. 37 Suzanne Metler, Why Skimp on GI Bill? Military.com, Nov. 18, 2005, www.military.com/ opinion/0,15202,80830,00.html. The book is Suzanne Metler, Soldiers and Citizens: The GI Bill and the Making of the Greatest Generation (2005). 38 Except where otherwise indicated, this subsection is drawn from Gerald Nicosia, Home to War: A History of the Vietnam Veterans Movement (2001), and VA History in Brief, op. cit. 39 Neil Sheehan, A Bright Shining Lie: John Paul Vann and America in Vietnam (1988), p. 39; Vietnam War, GlobalSecurity.org, undated, www.globalsecurity.org/military/ops/viet nam.htm; Americas Wars, Department of Veterans Affairs, updated November, 2009, www1. va.gov/opa/publications/factsheets/fs_americas_ wars.pdf. 40 VVAW: Where We Came From, Who We Are, Vietnam Veterans Against the War, un-
About the Author

Peter Katel is a CQ Researcher staff writer who previously reported on Haiti and Latin America for Time and Newsweek and covered the Southwest for newspapers in New Mexico. He has received several journalism awards, including the Bartolom Mitre Award for coverage of drug trafficking, from the Inter-American Press Association. He holds an A.B. in university studies from the University of New Mexico. His recent reports include New Strategy in Iraq, Rise in Counterinsurgency and Wounded Veterans.
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dated, www.vvaw.org/about/; Jason Zengerle, The Vet Wars, The New York Times Magazine, May 23, 2004, p. 30. 41 Born on the Fourth of July, Internet Movie Database, www.imdb.com/title/tt0096969/. 42 Except as otherwise indicated, material in this section is drawn from VA History in Brief, op. cit. For background, see Peter Katel, Wounded Veterans, CQ Researcher, Aug. 31, 2007, pp. 697-720. 43 Independent Review Could Improve Credibility of Radiation Exposure Estimates, GAO, January, 2000, p. 2, www.gao.gov/archive/2000/ he00032.pdf; Rules for Veterans Radiation Benefits Voided, The Associated Press (The New York Times), Oct. 8, 1981, www.nytimes.com/ 1981/10/08/us/rules-for-veterans-radiation-bene fits-voided.html. 44 House Votes Bill Giving Benefits to Veterans Exposed to Radiation, The Associated Press (The New York Times), May 3, 1988, p. A26; Independent Review . . . , op. cit., p. 6; Statement on Signing the Radiation-Exposed Veterans Compensation Act of 1988, Ronald Reagan, May 20, 1988 the American Presidency Project, www.presidency.ucsb.edu/ws/index. php?pid=35855. 45 David Zucchino, Veterans speak out against burn pits, Los Angeles Times, Feb. 18, 2010, http://articles.latimes.com/2010/feb/18/nation/ la-na-burn-pits18-2010feb18. 46 Thom Shanker and David Stout, Chief Army Medical Officer Ousted in Walter Reed Furor, The New York Times, March 13, 2007, p. A5. 47 Rick Atkinson, The single most effective weapon against our deployed forces, The Washington Post, Sept. 30, 2008, p. A1; Ann Scott Tyson, U.S. combat injuries rise sharply, The Washington Post, Oct. 31, 2009, p. A1. 48 Ronald Glasser, A Shock Wave of Brain Injuries, The Washington Post, April 8, 2007, Outlook, p. B1. 49 Ibid. 50 Returning Home from Iraq and Afghanistan . . . , op. cit. 51 Quoted in VA recognizes presumptive illnesses in Iraq, Afghanistan, Veterans Administration, March 24, 2010, www.army.mil/news/2010/03/24/36272-va-recognizes-presump tive-illnesses-in-iraq-afghanistan. 52 Quoted in Kelly Kennedy, VA may designate 9 infectious diseases as service-connected, Military Times, April 5, 2010, p. A12; Proposed Rule, Department of Veterans Affairs, Federal Register, Vol. 75, No. 52, March 18, 2010, www1.va.gov/ORPM/docs/20100318_

Amvets, 4647 Forbes Blvd., Lanham, MD 20706; (301) 459-9600; www.amvets.org. Originally formed for World War II vets; specializes in public policy and legislative work and aids vets with claims to the U.S. Department of Veterans Affairs (VA). Disabled American Veterans, P.O. Box 14301, Cincinnati, OH 45250; (859) 4417300; www.dav.org. Specializes in VA claims work and other services for severely wounded vets. Lawyers Serving Warriors, P.O. Box 65762, Washington, DC 20035; (202) 265-8305; www.lawyersservingwarriors.com. Provides free lawyers to veterans in disability and other cases, but is not accepting new clients; Web site remains a valuable source of information. U.S. Department of Veterans Affairs, 810 Vermont Ave., N.W., Washington, DC 20420; (800) 827-1000; www.va.gov. Maintains a Web site that is a rich source of information on benefits and policy. Veterans for Common Sense, 900 2nd St., S.E., Suite 216, Washington, DC 20003; (202) 558-4553; www.veteransforcommonsense.org. Advocacy organization focuses on VA reform. Wounded Warriors Project, 7020 AC Skinner Pkwy., Suite 100, Jacksonville, FL 32256; (877) 832-6997; www.woundedwarriorproject.org. Provides aid to severely disabled veterans and their families.
AN24_PresumptionsPersianGulfService.pdf. Gulf War and Health, Vol. 8: Update of Health Effects of Serving in the Gulf War, Institute of Medicine, April 9, 2010, pp. 5-7, 25, www.iom.edu/Reports/2010/Gulf-War-andHealth-Volume-8-Health-Effects-of-Serving-inthe-Gulf-War.aspx. 54 David Brown, Up to 250,000 Gulf War veterans have unexplained medical symptoms, The Washington Post, April 10, 2010, www.wash ingtonpost.com/wp-dyn/content/article/2010/ 04/09/AR2010040904712.html. 55 Quoted in Kennedy, op. cit. 56 Lynne Marek, Courts for veterans spreading across U.S., National Law Journal, Dec. 22, 2008, www.law.com/jsp/nlj/PubArticlePrinter FriendlyNLJ.jsp?id=1202426915992&hbxlogin=1; Carolyn Thompson, Special court for veterans addresses more than crime, The Associated Press (Boston Globe), July 7, 2008, www.boston. com/news/nation/articles/2008/07/07/special_ court_for_veterans_addresses_more_than_crime; John Gramlich, New courts tailored to war veterans, Stateline.org, June, 18, 2009, www.state line.org/live/details/story?contentId=407573. 57 Sergio R. Rodriguez, VA Secretary Eric K. Shinseki visits the Buffalo Veterans Treatment Court, Veterans Service Agency, April 6, 2010, www.erie.gov/veterans/veterans_court.asp.
53
P. Solomon Banda, Troubled Veterans Get a Hand, The Associated Press (The Washington Post), Aug. 7, 2009, p. A19. 59 Quoted in John Gramlich, op. cit. 60 Ibid. 61 Robert Boczkiewicz, Veteran of Afghanistan, Iraq gets probation, Pueblo Chieftain, Dec. 19, 2009, www.chieftain.com/news/local/article_ d2d823fb-19ee-5eb4-ac54-dca372dd75d4.html. 62 Quoted in ibid. 63 Quoted in John Schwartz, Defendants Fresh From War Find Service Counts in Court, The New York Times, March 16, 2010, p. A14. 64 Leah Nylen and Jennifer Scholtes, Senate Passes Vets Package Despite Coburns Concerns, CQ Today, Nov. 19, 2009; S 1963 CRS Bill Digest Summary, March 10, 2010. 65 Returning Home from Iraq and Afghanistan, op. cit., p. 98. 66 Ibid., p. 97. 67 Ibid., p. 98. 68 Ibid. 69 Invisible Wounds of War, op. cit., pp. 452, 446. 70 Sgt. Gene L. Lamie, United States Army, KIA 06 July 2007, www.ourfallensoldier.com/ LamieGeneL_MemorialPage.html.
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Bibliography
Selected Sources
Books
Glantz, Aaron, The War Comes Home: Washingtons Battle Against Americas Veterans, University of California Press, 2009. A journalist who covered the Iraq war reports critically on the state of VA services. Nicosia, Gerald, Home to War: A History of the Vietnam Veterans Movement, Crown, 2001. The influence of the groundbreaking movement still resonates today, having helped to get post-traumatic stress disorder classified as a disability caused by military service. Schram, Martin, Vets Under Siege, St. Martins Press, 2008. A veteran Washington reporter examines the VAs efforts to meet the demands placed on it by the Iraq and Afghanistan wars. Marcus, Mary Brophy, Military families cry for help, USA Today, Jan. 27, 2010, p. 8B. Families taking care of catastrophically wounded veterans struggle financially and emotionally, a medical correspondent reports. Ungar, Laura, Suicide takes growing toll among military, veterans, The Courier-Journal (Ky.), Sept. 13, 2009. The health-affairs specialist for a newspaper situated near a big military base (Fort Knox) covers the rising tide of suicide. Whitlock, Craig, IED attacks soaring in Afghanistan, The Washington Post, March 18, 2010, p. A10. A war correspondent for The Post charts the Talibans growing use of the explosive devices. Zoroya, Gregg, Repeated deployments weigh heavily on troops, USA Today, Jan. 13, 2010, p. A1. As repeat deployments continue, the newspapers veteransbeat reporter covers the toll on service members.
Articles
Cave, Damien, A Combat Role, and Anguish, Too, The New York Times, Nov. 1, 2009, p. A1. Women vets suffering from PTSD are more isolated than their male counterparts, because they are fewer in number and are expected to immediately jump back into household duties. Chong, Jia-Rui, Veterans long-term ills linked to brain injuries, Los Angeles Times, Dec. 5, 2008, p. A25. The first comprehensive report links TBI to long-term conditions including seizures and aggression. Cullison, Alan, On Battlefields, Survival Odds Rise, The Wall Street Journal, April 3, 2010, online.wsj.com/article/ SB20001424052748704655004575114623837930294.html. A journalist experienced in covering warfare in Afghanistan provides a close-in look at advances in battlefield medicine. Dao, James, and Thom Shanker, No Longer a Soldier, Shinseki Has a New Mission, The New York Times, Nov. 11, 2009, p. A21. The VAs new boss as profiled by correspondents on the Pentagon and veterans affairs beats. Hefling, Kimberly, The veterans hall is growing online, The Associated Press, Dec. 7, 2008, p. A15. The newest veterans are taking their postwar bonding to the Internet. Kennedy, Kelly, DoD concedes rise in burn-pit ailments, Military Times, Feb. 8, 2010, p. 10. The Defense Department admits there are possible connections between waste-burning emissions and health problems.
Reports and Studies

Gulf War and Health: Vol. 8: Update of Health Effects of Serving in the Gulf War, Institute of Medicine, 2009, www.nap.edu/catalog/12835.html. The federally funded institute is finding evidence of a link between service in the Gulf and multisymptom illness. Returning Home from Iraq and Afghanistan: Preliminary Assessment of Readjustment Needs of Veterans, Service Members, and Their Families, Institute of Medicine, 2010, www.nap.edu/catalog/12812.html. A massive examination and analysis of research data that attempts to portray the effects of the present wars on service members and society at large. Veterans Disability Benefits: Further Evaluation of Ongoing Initiatives Could Help Identify Effective Approaches for Improving Claims Processing, Government Accountability Office, January 2010, www.gao.gov/new.items/ d10213.pdf. In the most recent of its reports on the VA claims system, Congress investigative arm concludes that the backlog problem remains serious. Mulhall, Erin, and Vanessa Williamson, Red Tape: Veterans Fight New Battles for Care and Benefits, Iraq and Afghanistan Veterans of America, February 2010, media.iava.org/reports/redtape_2010.pdf. The advocacy organization reports on delays and complicated procedures that still characterize the VAs disability claims system.
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CHAPTER
14
WIND POWER
BY DAVID HOSANSKY
Excerpted from David Hosansky, CQ Researcher (April 1, 2011), pp. 289-312.
Wind Power
BY DAVID HOSANSKY
Were seeing an exponential growth in wind energy, says Lena Hansen, an exike much of the rural pert on renewable energy and Midwest, Rock Port, Mo., biofuels at the Boulder, Colo.population 1,300, has based Rocky Mountain Instifaced its share of economic tute, which promotes the susstruggles: falling incomes, tainable use of resources. It boarded-up businesses and really can be quite a substantial an exodus of young people. part of our energy future. And yet the quiet farming In some respects, wind town is on the leading edge seems like a perfect fit for the of what could be Americas nation. The steady and pownext energy revolution. erful gusts that blow across On a spring day in 2008, the Great Plains, West Coast Rock Port became the nations and other regions have led to first community to get just the United States being dubbed about all its power from the the Saudi Arabia of wind enwind. Four massive threeergy. Some studies indicate bladed turbines on agriculturthat, at least in theory, the wind al land within the city limits that blows across the contiprovide an estimated 16 milnental United States could suplion kilowatt-hours of electricity ply as much as 16 times the each year enough to meet nations electricity needs. Offthe towns needs and provide shore areas alone, where depower for sale to other jurisvelopers are beginning to plan A massive wind farm planned in Nantucket Sound off dictions. And those turbines, massive wind farms, may be Cape Cod draws opponents and supporters to Woods plus nearby wind farms, are able to generate as much enHole, Mass., for a talk by Interior Secretary Ken Salazar on Feb. 2, 2010. Approved by Salazar that April, the generating not only electricity ergy as four times the nations 130-turbine project would be the nations first offshore but also money: higher real electricity needs. 4 wind farm. Opponents say it would harm wildlife and estate tax revenue for local But the obstacles are forscenic views. Supporters say clean energy and government and $3,000 to midable. Much of the nations hundreds of jobs would be generated. $5,000 per year for ranchers wind blows far from major popergy source in the nation, increasing ulation centers, which means that netwho lease their land for the towers. Were farming the wind, which is in generating capacity by as much as works of transmission lines would be something that we have up here, said 50 percent annually. Boosted in part by needed to deliver energy to consumers. Jim Crawford, a natural-resource engi- tax breaks and renewable-energy manAnd because wind blows intermitneer at the University of Missouri Ex- dates in a number of states, wind now tently, it often fails to generate power tension in Columbia. The payback on provides about 2 percent of electricity when consumers need it most. This a per-acre basis is generally quite good nationwide and more than 15 percent in was vividly demonstrated during a bitwhen compared to a lot of other crops, Iowa, which leads the nation in the per- ter cold snap last Christmas, when a and its as simple as getting a cup of centage of power derived from wind. 3 lack of wind left most of Britains 3,000 Wind far exceeds every other wind turbines becalmed just as power coffee and watching the blades spin. 1 Wind-energy advocates point to suc- renewable-energy source in amount of demands swelled. The British, who cess stories such as Rock Port as ex- electricity generated except hydropower. hope eventually to derive 30 percent amples of how the nation can tap wind Many analysts view wind power as a of their power from wind, were forced to satisfy much of its energy needs. 2 key component of any strategy to re- to ramp up coal-fired power stations As concerns about the environmental duce emissions of carbon dioxide, a that emit large amounts of pollutants. impacts of traditional energy sources gas released by burning of fossil fuels Until engineers develop a cost-effective have mounted, wind has emerged in that is blamed for contributing to cli- way to store excess power from wind recent years as the fastest-growing en- mate change. turbines, utilities will need to build
THE ISSUES
AP Photo/Julia Cumes
April 1, 2011
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WIND POWER
Thirty-Eight States Generate Wind Energy
Wind power in the United States exceeded 40,000 megawatts in 2010, a fourth of it in Texas. Generating capacity is also high along the coasts of California, Oregon and Washington state. Only 12 states mostly in the Southeast lack wind-power capacity. Wind Power by State, Through 2010
Wash. Mont. N.D. S.D. Idaho Wyo. Neb. Nev. Calif. Ariz. Okla. N.M. Texas Ark.
Miss.
Minn. Wis. Iowa

Ill. Mich.
N.H. Vt.
Maine
Ore.
N.Y. Pa.
Mass. R.I. Conn. N.J. Del. Md. D.C.
Utah
Ind. Ohio Ky.

Tenn. W.Va.
Colo.
Kan.
Mo.
Va. N.C. S.C.
La.
Ala. Ga.
Electricity in Megawatts
Fla.
Alaska
None 1-100 101-1,000 1,001-2,000 2,001-10,000
Hawaii
Source: U.S. Wind Industry Year-End 2010 Market Report, 10,000+ American Wind Energy Association, January 2011, www.awea. org/learnabout/publications/loader.cfm?csModule=security/getle&PageID=5083
conventional power plants to meet demand when winds fail. Rock Port draws energy from the regional power grid on non-windy days and sends excess energy to the grid when the winds return. People want to use electricity when they need it and not just when the wind blows, says Daniel Simmons, director of state and regulatory affairs at the Institute for Energy Research, a group in Washington that supports free-market energy solutions. To harvest large amounts of energy, wind developers construct towers that can exceed 400 feet in height, often with a trio of blades each half the length of a football field and designed to capture as much wind as possible. The towers are arrayed by the dozens, hundreds or even thousands in wind farms. Sometimes they are built on ridges where winds are optimal and where they can be seen for miles,
to the chagrin of people who enjoy unspoiled vistas. The turbines often fray the nerves of nearby residents bothered by their noise and flickering shadows. The revolving blades act as large reflectors that can interfere with radars by appearing as false targets or as clutter that obscures real targets a significant concern for the military, although new radar technology can help alleviate the problem. Even environmentalists, while favoring a pollution-free energy source, have raised concerns. They cite the potential impact of wind farms on otherwise undisturbed areas and the deaths of birds and bats that fly into turbine blades or are affected by shifts in air pressure caused by the blades. (See sidebar, p. 245.) Debates over wind energy have roiled policy makers on the national and state levels. Lawmakers have
clashed over such issues as tax breaks for the wind industry and limits on how close turbines can be to houses. President Barack Obama is pressing for legislation requiring that 80 percent of the nations energy come from lowor non-polluting sources, including wind, by 2035. Many in Congress worry, however, that such a requirement would hurt the oil, gas and coal industries and possibly lead to higher costs for taxpayers. Taxpayers get a double whammy in terms of subsidies: They have to pay for the subsidy and then they pay for higher rates as a result of having the renewables as part of the electricity system, says Simmons. Weve been subsidizing wind and other renewables for 30 years, and theyre still not cost-effective. Without sustained government support, the wind industry may not be able to continue competing with natural gas, which is plentiful and, at least for the moment, affordable. Despite its phenomenal growth in recent years, wind has faced something of a boom-and-bust cycle, with development of new wind farms dropping by 70 to 90 percent in years when Congress has allowed federal tax credits for turbines to expire. In contrast, wind development overseas is proceeding at a breezy pace. Thanks to significant financing incentives and sustained government support for renewable energy, Denmark now derives 24 percent of its electricity from wind. The European Union is adding more electricity capacity from wind than any other source, and several governments are setting goals of deriving a third or more of their electricity from wind and other renewable sources within a few decades. Still, many consumers are raising alarms over higher electricity rates and what they regard as a blight of turbines across the landscape. China is also revving up its windenergy capabilities. It aims to get 15 percent of its energy from non-fossil-fuel sources by 2020. 5 Last year, China became the largest provider of wind
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energy in the world, with 41,800 megawatts of electricity capacity. The United States, with about 40,000 megawatts, fell to second. 6 The rapid pace of wind-industry development abroad troubles U.S. turbine manufacturers, who say that Washingtons failure to better support the wind industry is making it difficult for them to compete with overseas turbine producers. It has put the U.S. at a disadvantage in competing in the global marketplace, says Bob Gates, chief commercial officer of Clipper Windpower Inc., a turbine maker in Carpinteria, Calif. In the long term, its helping to export jobs. As policy makers consider whether to provide more support for wind power, here are some key questions being debated: Can the United States derive a significant amount of its energy from wind? Those who believe wind may emerge as a top source of electricity in the United States point to a 2008 Department of Energy (DOE) report that laid out a road map for obtaining 20 percent of the nations energy or 300 gigawatts from wind by 2030. The report found that the goal could be feasible but would require improvements in turbine technology, large-scale investments and better planning so that far-flung regions could support one another as electricity supply and demand spiked and dipped across the grid. Reaching the goal by 2030 would cost nearly $200 billion for turbines, improved transmission capability and other infrastructure, the report estimated. However, those expenses would largely be offset by reduced costs for coal, natural gas and other fuel. The report also noted that wind energy could provide such benefits as increased diversity of the nations fuel sources and reductions in coal and natural-gas emissions associated with climate change and air pollution.
How Wind Turbines Work

Turbines convert kinetic energy generated by the winds motion into mechanical power. The wind turns the blades, which spin a shaft that connects to a generator to create electricity.
Wind Turbine Diagram and Parts
Anemometer: Measures wind speed and transmits the data to the controller. Brake: A disc brake that can stop the rotor in emergencies. Controller: Starts up the machine at wind speeds of about 8 to 16 mph and shuts off the machine at about 55 mph. Gear box: Gears connect the low-speed shaft to the high-speed shaft and increase speeds from between 30 and 60 rotations per minute to 1,000 to 1,800, the speed required by most generators to produce electricity. Generator: Produces 60-cycle AC electricity. High-speed shaft: Drives the generator. Low-speed shaft: The rotor turns the low-speed shaft at about 30 to 60 rotations per minute. Nacelle: Contains the gear box, low- and high-speed shafts, generator, controller and brake. Pitch: Blades are turned, or pitched, out of the wind to control rotor speed. Rotor: The blades and hub together are called the rotor. Tower: Made from tubular steel, concrete or steel lattice. Wind vane: Measures wind direction and works with the yaw drive to orient the turbine to the wind. Yaw drive: Keeps the rotor on upwind turbines facing into the wind as wind direction changes. Yaw motor: Powers the yaw drive. Source: Department of Energy, www1.eere.energy.gov/windandhydro/wind_how.html
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There are significant costs, challenges and impacts associated with the 20 percent wind scenario, concluded the report. There are also substantial positive impacts. . . . Achieving the 20 percent wind scenario would involve a major, national commitment to clean, domestic energy sources. 7 But some experts doubt that wind can grow from 2 percent to 20 percent of the nations energy supply in less than two decades. Theres been an incredible amount of money thrown at renewables and renewable-technology development, and things havent changed much, says Robert Michaels, a professor of economics at California State University at Fullerton and a consultant on wind issues. We keep hearing that, in five years, renewables are going to be economical. And five years pass, and theyre not. If there were not renewable-energy standards and the tax breaks, there would be very little development of wind. Indeed, the United States faces two fundamental obstacles: Wind often fails to blow when it is needed and where it is needed. Perhaps the single biggest challenge of wind energy is that winds often die down just as they are needed most. Because utilities lack efficient systems to store surplus wind energy and distribute it when demand peaks, they have to either build extra power plants to back up their turbines or buy electricity at a premium on the spot market. Both options can be costly. Peak demand for electricity generally occurs on very hot or very cold days, when consumers are switching on air conditioners or furnaces. But strong winds often blow at night, when demand is relatively low, and gusts rarely coincide with prolonged hot and cold spells. The mismatch between winds and consumer demand was illustrated on an unusually hot August afternoon in 2010, when Texas broke its record for energy consumption. Even though the state leads the nation in windturbine capacity, its winds tend to fade during August, and only about 5 percent of energy from its wind farms was available when consumers needed it most. The wind is free, but it also isnt dispatchable, says Simmons of the Institute for Energy Research. You cant just say youre going to produce wind tomorrow at 3 p.m. The intermittency also means that wind turbines are comparatively inefficient. They typically generate electricity at only about 25 to 40 percent of their capacity because their blades are often still. In contrast, a traditional coal plant operates at about 70 percent capacity. 8 The other fundamental challenge is that the strongest winds tend to blow in sparsely populated areas. Wind farms are proliferating in regions such as West Texas and the Dakotas, but utilities need to move that energy to cities where it is needed. The only way to do that is to build large networks of transmission lines. The 2008 DOE report estimated that to achieve the 20 percent wind-energy goal, the United States would need to build 12,000 miles of transmission lines at a cost of about $20 billion. Other analysts put the pricetag higher. 9 Ratepayers would likely bear the expense. The nation faces at least one more fundamental challenge in harnessing wind: local opposition. Polls show strong public support for wind energy at least in theory. Eighty-nine percent of respondents to a poll commissioned by the American Wind Energy Association, an industry trade group, said they favored wind power. But numerous communities are battling plans for local wind farms or networks of transmission lines. 10 The issue has come to the fore from quiet Maine islands to the Texas Hill Country. Is it really worth permanently industrializing and destroying a unique scenic area like the Hill Country? asks Robert Weatherford, a landowner in Texas Gillespie County who is battling plans to build turbines on prominent ridges and create a long-distance transmission network that would affect private properties. Despite these challenges, experts say that the goal of 20 percent wind energy or even more is achievable if national leaders establish it as a priority. To manage the intermittency of wind, utilities could rely on a mix of complementary energy sources for example, by switching between wind turbines during unsettled weather patterns and solar panels on hot days, while backing them up with gas-fired plants that can quickly ramp up and down. While new transmission lines will inevitably be controversial and costly, utilities could reduce the impact by working closely with local communities, avoiding sensitive areas or possibly tapping energy from offshore wind farms built near major cities. Its a willpower issue more than it is a cost issue, says Fort Felker, director of the National Wind Technology Center at the DOEs National Renewable Energy Laboratory in Golden, Colo. Experts say surpassing the 20 percent goal may be unrealistic without advances in technology because the challenges of intermittency and power transmission become increasingly difficult as more wind power is introduced into the grid. You could get up to 10 to 20 percent without too much stress on the system, says Robert Evans, a professor of mechanical engineering and inaugural director of the Clean Energy Research Centre at the University of British Columbia. If you get around the 20 percent mark or more, youll start to see real strains. Is wind energy good for the environment? The approximately 5,000 wind turbines in the Altamont Pass in central California, intended to produce
Continued on p. 296
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Vermont Wind Farms Pit Greens Against Greens

Does providing renewable energy lead to environmental damage?
The situation in Vermont is not unique. A proposal to expand pposition to new wind farms in ecologically minded Vermont has come from an unusual source: environ- a West Virginia wind farm sparked a green vs. green battle in mentalists. Conservationists in the Green Mountain the courts over whether the turbine blades could endanger State have split over the prospect of building turbines on ridges, bats. And plans to build a massive offshore wind farm in a pitting those who worry about destruction of wildlife habitat wildlife-rich section of Nantucket Sound, known as Cape Wind, and scenic views against others who believe that turbines are has faced stiff resistance from prominent environmentalists, including Robert Kennedy Jr., who worry about effects on local necessary to move the state toward renewable energy. You want to save the environment by building renewable en- communities, wildlife and the landscape. Interior Secretary Ken ergy, but in Vermont the only viable places for turbines are high- Salazar approved the project last year. On the other hand, Midwestern ranchers who are not orelevation ridges that have important habitat, says Lukas Snelling, director of communications for Energize Vermont, a nonprofit advocacy dinarily associated with environmental causes have frequently group that promotes sustainable energy. So if you build wind farms, embraced wind farms. Turbines are injecting money and jobs into economically depressed rural sections of the Plains, and youre actually destroying part of the environment. Snelling says the wide roads and massive amounts of concrete states such as Texas, Iowa and Kansas are emerging as leadneeded to install turbines would essentially industrialize sensitive ing producers of wind energy. The situation has created mountain regions. As an alsome unusual political alliances. ternative, Energize Vermont For example, Sen. Sam Brownbacks small-scale, communityback, R-Kansas, aligned himself energy developments, inwith liberal Democrats in supcluding solar panels and hyporting a national renewabledropower from existing dams. energy standard last year. 2 Such projects, it contends, are a better fit for Vermonts Snelling doesnt object to wind small-town nature than largeenergy as long as the turscale wind turbines. bines are put in such spots as On the other side of the Midwestern croplands where they debate, long-established enwont endanger sensitive wildlife vironmental groups such as habitats. But he has deep reserthe Vermont Natural Resources vations about plans for about 10 Council and the Vermont wind farms in his states picPublic Interest Research Group turesque Green Mountains. favor building turbines in seBuilding wind farms in the lected locations. If properly Midwest or in the West is a very Wind turbines and clouds sit atop a hill in Vermont. placed, they contend, the turdifferent thing than building Local conservationists are divided over bines could take advantage them in Vermont, he says. Verplans to erect more hilltop turbines. of reliable wind without sigmont is a unique microcosm nificant effects on the environment, providing a critical alternative where the desire to build renewable energy in the country is to fossil-fuel plants that emit carbon dioxide and other pollutants. hitting right up against the desire to protect natural resources. In a statement urging its members to support the proposed Its as though the need to combat climate change necessitates installation of a wind farm of about 20 turbines, the Vermont that we destroy part of the environment. Its just such a weird Public Interest Research Group declared: There is no free lunch catch-22 that I cant support it. when it comes to turning on our lights or running our refrig David Hosansky erators. When we consume energy, we produce an environmental impact, and the impacts of wind power pale in com1 Kingdom community wind comment period now closed, Vermont Public parison to those of fossil fuels and nuclear power. 1 Moreover, environmentalists who support bringing turbines Interest Research Group, Feb. 18, 2011, www.vpirg.org/node/409. 2 Katie Howe and Katherine Ling, Renewable Electricity Standard to Vermont point to agreements under which wind farms have Alone or Dies, Senate Sponsors Vow, The New York Times, Sept.Bill Stands 23, 2010, said they will protect hundreds of acres through conservation www.nytimes.com/gwire/2010/09/23/23greenwire-renewable-electricity-standardeasements and return the land to its natural state once the farm bill-stands-alo-16736.html. has been decommissioned.
Getty Images/Jake Wyman
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China Leads in New Wind Installations
China installed more than 16,000 megawatts of wind-power capacity in 2010 nearly half the global total and far more than any other country. The United States was a distant second, with 14 percent of the global total. China recently overtook the United States in cumulative wind-energy capacity. New Wind Energy Installed, by Country, 2010 Canada Italy
(948 Mw) (690 Mw)
Sweden
(603 Mw)
Rest of World
(4,750 Mw)
1.9%
1.7% 13.3%
China
2.6%
United Kingdom
(962 Mw)
2.7%
France
(1,086 Mw)
Germany
(1,493 Mw)
3.0% 4.2% 4.2% 6.0%

India
(2,139 Mw)
(16,500 Mw)
46.1%
Spain
(1,516 Mw)
United States
(5,115 Mw)
14.3%
Source: Global Wind Report: Annual Market Update 2010, Global Wind Energy Council, March 2011, www.gwec.net/leadmin/documents/Publications/Global_ Wind_2007_report/GWEC Global Wind Report 2010 low res.pdf
clean energy, have an environmental downside. The blades have killed thousands of birds, including rare raptors such as golden eagles and burrowing owls. Wind-farm power lines have electrocuted others. In West Virginia, a wind farm may have killed as many as 2,000 bats in one year. 11 Scientists believe turbines can be deadly to bats for two reasons: The nocturnal animals fly into turbine blades for reasons that are not clear, and their tiny lungs hemorrhage when they enter low-pressure zones created by the moving blades. Wind farms that are some distance from critical migratory paths or major populations of birds and bats do not
have such deadly effects, and environmentalists generally cheer the emergence of an energy source that does not emit carbon dioxide or other pollutants. Nevertheless, some are watching the spread of wind farms with concern. Renewable energy is not necessarily green energy, said Eric R. Glitzenstein, a lawyer involved in efforts to stop expansion of a West Virginia wind farm to protect the endangered Indiana bat. We should not be creating new ecological crises by addressing existing ones. All energy sources have potential benefits, but they also have potential risks. 12 Wind-energy advocates, however, contend that careful placement of wind
farms, away from migratory-bird routes and other sensitive areas, is significantly reducing the impact on wildlife. The Altamont Pass turbines were installed after the 1970s energy crisis, when such issues were not well known. The towers also are far shorter than modern turbines, allowing their blades to reach almost to the ground and kill raptors as they dive for prey. Supporters of wind energy also point out that far greater numbers of bird deaths millions to tens of millions yearly occur because of pesticides, attacks by domestic and feral cats and collisions with windows, according to Fish and Wildlife Service estimates. 13 The concerns about birds and bats around wind turbines were rooted in early turbines that were poorly sited, along migration corridors, says the Rocky Mountain Institutes Hansen. For all the reasons that birds and bats die, turbines are pretty low on the list. Still, a 2005 report by the General Accounting Office, the congressional watchdog agency now known as the Government Accountability Office, concluded that more research is needed on how wind farms affect birds and bats. It also warned that little is known about the potential impact of offshore wind farms on marine life. 14 Wildlife issues aside, critics point out that wind farms require far more land per kilowatt generated than traditional forms of electricity generation. Robert Bryce, an energy writer who has questioned the environmental benefits of renewable energy, estimates that wind power requires 45 times more land than nuclear power and several times more land than coal and natural gas plants. 15 Experts say this phenomenon, known as energy sprawl, could result in turbines covering an area the size of Texas or larger, with potential damage to sensitive ecosystems, if the United States continues to increase its use of wind.
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People dont want to see coast-toBut Evans and other energy ex- Should the U.S. government do coast windmills, says the University perts dismiss such arguments as mis- more to support wind energy? of British Columbias Evans. leading. While older coal-fired Texas may be known for oil fields, Wind-energy supporters, however, plants cannot easily cycle on and but its legislature was quick to emsay that the turbines take up rela- off, newer and more efficient gas- brace renewable energy. In 1999 the tively little space and that land around fired plants can with comparatively state required utilities to generate each tower remains available for farm- little impact on emissions, they argue. 2,000 new megawatts of power from ing, ranching or other purposes. The A kilowatt-hour of electricity prorenewable energy within a decade and issue of the footprint of wind farms duced by wind will not entirely off- later set an even more ambitious goal: is overblown, says Jeff Deyette, asset the emissions associated with a 10,000 megawatts by 2025. sistant director of energy research and kilowatt-hour produced by burning As a result, Texas installed more analysis at the Union of Concerned fossil fuels, but it will offset most than 10,000 megawatts of capacity from Scientists, a research group that proof it, they say. wind and other renewable sources by motes environmental protection. Adding wind significantly reduces 2010, some 15 years ahead of schedThere are a lot of other uses for the our carbon emissions because youre ule. The move toward wind has not land on wind been without controverfarms. And as we sy, though. Residents make improvehave sued to block ments in technoloplans for transmission gies, as wind turlines across the state, and bines get larger and utilities warn that wind there are fewer of energy is often too unthem, you need far reliable to meet peak less land. demands. Still, advoCritics also quescates believe Texas zest tion whether wind for wind power sets an farms reduce air example for the rest of pollution from trathe nation. ditional power The states goals are plants. Because incredibly effective at wind may not blow stimulating new techwhen electricity is nologies and economic Wind-turbine blades await delivery at a factory in Chinas northern needed, utilities growth, said Tom Smith, Hubei province on Sept. 30, 2010. China plans to generate 15 percent often have to build director of the Texas of its energy from non-fossil-fuel sources by 2020. Last year, China became the worlds largest provider of wind energy, additional plants to office of Public Citizen, overtaking the United States. supply back-up a consumer-advocacy p o w e r. C y c l i n g group. 17 such plants up and down is costly running fossil-fuel plants a lot less, Texas is one of more than two dozen and can emit excessive pollution, Hansen says. states that have adopted renewableShe and other renewable-energy energy standards, and wind-energy much as driving a car at different speeds can burn more fuel than advocates also say the environmental supporters want federal policy makharm caused by burning fossil fuels ers to follow suit. They say a national driving at a constant speed. Cycling causes coal units to oper- far exceeds the drawbacks of wind. renewable-energy or a broader cleanate less efficiently and reduces the ef- The extraction, transport and com- energy standard would strengthen the fectiveness of the environmental-control bustion of coal, natural gas or other economy by creating green jobs, reequipment, substantially increasing fossil fuels can affect water and air duce emissions from coal and naturemissions, stated a 2010 report by quality, wildlife habitats and global gas and ensure a balance of enerBentek Energy, an energy-market infor- al climate, they argue. When I gy sources. mation company, that was prepared for have a choice between looking at A renewable-energy standard the Independent Petroleum Association wind turbines and looking at smog, would save money and shield conof Mountain States, an oil-industry Id rather look at wind turbines, sumers from fuel-price volatility, says Hansen says. trade group. 16 Rob Gramlich, senior vice president
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for public policy at the American ergy advocates want a permanent If we want to move beyond peWind Energy Association. credit rather than one that expires every troleum energy and achieve some sort Critics, however, say the govern- few years an irregular and often of energy independence, as well as ment should not favor one energy unpredictable occurrence they say has maintain our technological lead in the source over another, arguing that can stunted the industrys growth. Critics world . . . , it does make sense in our drive up rates and make it harder for say the credit costs taxpayers and un- view to have government subsidies new energy technology to get a toe- fairly benefits the wind industry. until the wind industry can stand on hold in the market. In many respects, the debate over its own, says Gene Hunt, director of You dont want to force people to government support of wind energy corporate communications for Beacon use a certain technology, particularly comes down to two basic issues: Power Corp., in Tyngsboro, Mass., because a better technology may turn Whether the United States has a com- which makes flywheels for storing kiup, says California State Universitys pelling reason to promote renewable netic energy from wind and other Michaels. sources that is released Critics also point to the electrical grid out that California when needed. (See sideand some other states bar, p. 303.) Critics of are falling behind government intervenschedule to meet tion, however, maintain renewable-energy that the United States goals, partly behas vast stores of coal cause of outdated and natural gas that can transmission sysmeet the nations electems and a need for tricity needs for decades more renewable-enor even centuries to ergy facilities. A fedcome. If the goal is to eral standard may reduce carbon dioxide be even more diffiemissions, it would be cult to meet, espebetter to tackle that cially because states problem directly inhave widely differing stead of artificially Interior Secretary Ken Salazar visits the American Wind Energy amounts of wind and propping up the wind Associations annual wind-power convention in Chicago in May 2009. other potential industry, they say. Salazar and Energy Secretary Steven Chu unveiled a plan on sources of renewable We need to address Feb. 7, 2011, to accelerate the development of energy, such as sunthe carbon dioxide proboffshore wind energy in the United States. shine for solar power. lem in the most costThese policies mandate more ex- energy, and whether the government effective way, says Ross Baldick, a propensive forms of electricity generation, should support wind to counterbalance fessor of electrical and computer says the Institute for Energy Researchs policies that help other energy sources. engineering at the University of Texas. Simmons. State legislatures have tailored (See At Issue, p. 305.) An energy expert who favors a carbontheir laws to their situation, and still Wind advocates say it is crucial for consumption tax instead of tax credits theyre not meeting their standards. The the United States to reduce fossil-fuel for the wind industry, he adds, As a problem with the federal mandate is emissions, especially carbon dioxide that U.S. taxpayer, I dont want to spend it could be more of a one-size-fits-all is blamed for climate change. They also money on something that doesnt solve policy, which I believe will be even say the nation needs a stronger re- the problem. more difficult to meet. newable-energy industry to compete As for government help, windOther policies that benefit wind are globally in that sector. Wind is less ex- energy supporters say they need fedalso proving controversial, particularly pensive than other sources of renew- eral assistance if the industry is to the federal renewable-energy-production able energy, such as solar power and compete on equal terms with protax credit. It amounts to 2.1 cents per biofuels. It also appears to be safer than ducers of conventional energy. Oil kilowatt-hour for the production of nuclear power, which is likely to lose companies enjoy generous tax deelectricity from large-scale wind tur- public support after last months release ductions, natural gas companies have bines and geothermal plants. Wind en- of radiation from reactors in Japan. Continued on p. 300
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Chronology
5500 B.C.1400 A.D. 1900-1980s
Wind power first harnessed in the Middle East. 5500-5000 B.C. Egyptians and Sumerians use wind energy to sail their boats. 500-900 A.D. Persians build windmills to pump water and grind grain Middle Ages (400-1400 A.D.) Windmills spread throughout the world to grind grain, pump water and drain land.
Farmers use wind turbines for power but most of nation relies on nuclear energy and fossil fuels to generate electricity. 1930s-40s Farmers lacking electricity use small, multi-blade turbines to operate irrigation pumps. 1941 Worlds first megawatt turbine begins delivering electricity to a Vermont grid. 1950s-60s United States and other industrialized nations develop national electrical grids, relying primarily on oil, natural gas, coal and nuclear power. 1973-1974 Mideast oil embargo sparks widespread fuel shortages and spurs interest in alternative energy. 1980 Worlds first wind farm is installed in southern New Hampshire. 1983 Iowa requires utilities to invest in wind and biomass power. 1986 California establishes itself as the global leader in wind energy, with 1.2 gigawatts of capacity.
1999 Congress allows the production tax credit to expire, setting up a boombust cycle in the wind industry. 2000 Europe achieves more than 12 gigawatts of wind-energy capacity, by far the most of any region worldwide. 2003 Oil prices begin rising sharply and speculation grows that petroleum resources may be running low, spurring increased interest in alternative energy. 2005 United States reestablishes itself as the world leader in wind-energy capacity, despite rapid growth in Europe. 2008 Rock Port, Mo., becomes first U.S. community powered by wind energy. April 27, 2010 Interior Secretary Ken Salazar announces approval of nations first offshore wind farm, the controversial Cape Wind project in Nantucket Sound. December 2010 Efforts to establish a national renewable energy standard die in Congress despite passage of separate versions in the House and the Senate Energy and Natural Resources Committee. 2010 China, with nearly 42 gigawatts of wind-energy capacity, overtakes the United States (40 gigawatts) as the worlds wind-energy leader. Jan. 25, 2011 In his State of the Union address, President Obama sets goal of deriving 80 percent of nations power from clean-energy sources by 2035.
18th and 19th Centuries Steam supplants wind power during

Industrial Revolution. 1700s Windmills are well established as the primary power source in preindustrial Europe. Early 1800s New steam-powered engines begin to replace windmills. 1887 Professor James Blyth of Andersons College, Glasgow, builds first windmill for electricity production. 1887-88 Cleveland inventor Charles Brush builds first wind turbine to generate electricity in the United States. 1890s Danish scientist Poul la Cour begins testing wind turbines in effort to bring electricity to rural Denmark.
1990s-Present Rising oil prices spark renewed

interest in wind energy. 1992 As part of an omnibus energy measure, Congress passes the production tax credit, intended to spur wind-farm development.
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With Wind Turbines, Taller Is Better

Some turbines are 400 feet tall, with blades half as long as a football field.
wind turbine is a machine that converts the winds kinetic energy, or movement, into electricity. The rotor generally consists of three blades that face the oncoming wind, automatically swiveling when the wind direction changes. In a typical breeze, the blades turn a shaft that revolves about 20 to 30 times a minute not enough to produce much power. However, the shaft is attached to a gearbox with a series of interconnected cogs that magnify the spinning motion. This enables a second shaft to spin many times faster than the first. A set of copper-wire coils is attached to the high-speed shaft. The shaft and coils spin within a circle of magnets, generating electricity. The electricity flows through power cables to a transformer, which converts the electricity into the necessary voltage, and then into the electrical grid. Most turbines rotate on a horizontal shaft, with blades that turn in a vertical plane. However, there are also vertical-axis wind turbines. Blades on those machines move in a horizontal plane and can take advantage of wind from different directions. Vertical-axis wind turbines generate relatively little power and can become unstable as winds grow stronger. The larger the area that is swept by the blades, the more power that can be generated. Doubling the blade length generates four times as much power. In addition, tall turbines with horizontal shafts tend to produce more power because they reach higher in the atmosphere, where wind blows more strongly. As a result, turbines have become increasingly large. The largest blades are half the length of a football field or even longer; the tallest turbines generally reach more than 400 feet above the ground. Even a relatively small change in the wind can have a significant effect on the amount of electricity generated. Energy increases by the cube of the wind speed, which means that a doubling of wind produces eight times more power. However, at very high wind speeds typically between 45 and 80 miles per hour turbines have an automatic shutdown mechanism that prevents the blades from becoming damaged. Because the size of the turbine largely determines the amount of electricity that it can generate, small-scale turbines have lim-
ited applications. A turbine with a rotor assembly a central hub and blades spanning three feet from tip to tip can generate about one-half a kilowatt per hour, which is enough to charge batteries in boats, vans, and other low-power vehicles. Supplying the power needs of an average-size house can require a rotor assembly spanning about 10 to 15 feet, mounted 30 feet high or more to catch stronger winds. Residential wind turbines exist, but they are of limited practicality because of their size requirements. In theory, a wind turbine can convert a maximum of about 60 percent of the winds kinetic energy into electricity. The most efficient turbines are closing in on the 50 percent mark, which means there is a limited amount of additional energy that a turbine can produce unless it is built much larger. Engineers are focusing on capturing more energy from the wind by looking at how arrays of turbines are organized. As wind moves through a wind farm, the front row of turbines extract about half the kinetic energy, leaving relatively little energy for downwind turbines to capture a problem known as wind shade. For that reason, turbines need to be spaced far apart, which makes it difficult to capture large amounts of energy in a small space. Rather than arranging turbines in straight lines or rectangles, as is often the case with wind farms, researchers are studying whether other formations, such as triangles or beehive shapes, would be more productive. They are also looking into coordinating the movements of turbines to ensure that each turbine captures as much energy as possible. Perhaps there is a coordinated control system that can do better where upwind machines back off a little bit while the downwind ones collect more, instead of the simplistic approach where its every man for himself, explains Fort Felker, director of the National Wind Technology Center, part of the Department of Energys National Renewable Energy Laboratory in Golden, Colo. The way engineering works is [that] its often a succession of 1 percent improvements. You keep that up for 10 or 20 years, and youre looking at real changes. David Hosansky
eminent-domain power to build pipelines, and nuclear power plants enjoy partial immunity from lawsuits, they point out. Weve had decades of incentives that have skewed the market toward natural gas and other fossil fuels. Nuclear has also benefited, says Deyette of the Union of Concerned Scien-
tists. I see a renewable electricity standard as helping to level the playing field. Whether a renewable energy standard or a permanent production tax credit would put the various energy industries on equal footing is a complicated question to answer. Coal and natural gas companies say they are at a disadvantage because they are far
more regulated than wind- and other renewable-energy producers. Wind companies respond that decades of government support for traditional fuel sources have entrenched those industries, making it even more important for the government to help emerging technologies gain traction. Some analysts say the best policy would be to end all incentives and let
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competition work its will. It will give us the most robust energy market in the end when you have the various technologies competing on their attributes, says Simmons.
Growth in Wind Power Slow in 2010

Wind-power capacity of more than 5,000 megawatts was added in the U.S. in 2010, about half the amount in 2009. The decline in new installations ran counter to the past decades upward trend.
(in megawatts)
BACKGROUND
Sails and Windmills
umans have turned to the wind for power ever since they hoisted the first sails at least 7,500 years ago in Egypt and Sumer. The Greek engineer Heron of Alexandria designed a wind wheel in the first century A.D. the earliest known effort to use wind for powering a machine. Persians built a type of windmill known as a panemone sometime between 500 and 900 A.D. It comprised a vertical shaft attached to lightweight wooden blades that had sails made of reeds or cloth. These early windmills, which first came into use in a region between Iran and Afghanistan, were used initially to pump water and later to grind grain. Within a few centuries, windmills of various designs and with either vertical or horizontal shafts were built across the Middle East and Central Asia and eventually in India, China and Europe. They were used for grinding grain, draining land, pumping fresh water or saltwater to make salt, threshing, powering sawmills and other purposes. Windmills had several advantages over water-driven mills. They did not have to be located adjacent to fastmoving streams, and they could operate when water might freeze. Some windmills were built in a fixed position to take advantage of prevailing winds, such as on islands where wind direction was relatively predictable. Others were designed to swivel according to wind direction, a critical requirement in a region such as north-
12,000 10,000 8,000 6,000 4,000 2,000 0
Annual U.S. Wind-Power Growth, 2000-2010

10,010 8,366 5,258 1,691 5,115
67
412
1,670
2,385 2,462 397
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: U.S. Wind Industry Year-End 2010 Market Report, American Wind Energy Association, January 2011, www.awea.org/learnabout/publications/loader.cfm?cs DigitalStock Module=security/getle&PageID=5083
western Europe where winds are variable. Inventors gradually improved windmill designs, developing models with up to eight sails that generated more power than those with four sails and creating windmills that adjusted automatically to different wind speeds. During the Industrial Revolution, steam and internal-combustion engines largely supplanted traditional windmills, but society still found new uses for wind energy. For example, windmills pumped water for steam locomotives, a major factor in the expansion of rail systems. And as Americans plowed the Midwest and Great Plains, farmers used an estimated several million small windmills to operate irrigation pumps. Winds remarkable power in the atmosphere accounts for the enduring popularity of windmills. The ultimate driver of wind is energy from the sun, which heats the atmosphere unevenly depending on such factors as latitude, season, time of day and whether the air being warmed is over land or water. Air that grows hotter expands and rises, and heavier, cooler air rushes in to fill the space it occupied. This moving air is wind. Large-scale wind patterns are influenced by the Earths rotation, which
causes air to circulate around regions of high and low pressure. Daily wind movements, which can be extraordinarily difficult to predict, are determined by such factors as the movement of high- and low-pressure systems and local topography, with the strongest breezes tending to occur in mountainous regions, high, open land and coastal areas.
Harnessing Electricity
lthough modern wind turbines began to emerge in the 1970s, they have been used to generate electricity since the late 19th century. Ohio inventor Charles F. Brush built the first large windmill for electricity in the United States in 1887. Made from 144 cedar blades, it could generate 12 kilowatts for batteries or his mansions lights. Soon after, Danish meteorologist Poul la Cour found that fast-moving rotors with fewer blades could generate more power. By the 1930s, farmers who had no other access to electricity were using small multi-bladed turbines, which were relatively inexpensive and easy to build. On the eve of World War II, the worlds first megawatt turbine a
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large machine with 98-foot blades began delivering electricity to a local grid in Vermont. Turbine use declined in the postwar era as the United States and other countries began building national power grids, taking advantage of relatively low coal and natural gas prices and newly developed nuclear technology. With the electrification of rural areas, windmills largely fell into disuse. But in the mid-1970s, Arab nations imposed an oil embargo on the United States in retaliation for U.S. support of Israel, and oil supplies fell sharply while prices skyrocketed. 18 Concerns about access to traditional fuel sources spurred new interest in wind and other alternative power sources. California provided tax incentives for wind power, sparking the first major development of wind farms for electric utilities. These turbines, somewhat primitive by todays standards, were placed by the thousands in wind farms such as those in the Altamont Pass. By 1986, California had installed nearly 1.2 gigawatts of wind power, which at the time represented nearly 90 percent of global windenergy capacity. But the expiration in the mid-1980s of the states tax incentives (along with the expiration of a similar federal initiative in 1985) brought new installations to a halt.
Getty Images/Ethan Miller
Growth in Europe
Consider the Alternatives

The nations renewable-energy toolkit includes more than just wind power. About one-third of U.S. renewable energy comes from hydropower. Nevadas Hoover Dam provides electricity for Nevada, Arizona and several cities in Southern California, plus water for irrigation (top). A small amount of renewable energy comes from solar power. On Chicagos South Side, more than 32,000 solar panels generate enough electricity for 1,500 homes.
everal European countries, including Denmark and Germany, enacted ambitious renewable-energy policies and took the lead in wind-farm development. By 2000, Europe had more than 12 gigawatts of capacity, compared with 2.5 in the United States. Interest in wind energy spurred considerable technological development on both sides of the Atlantic. In the 1980s and 90s engineers developed many innovations currently used in multi-megawatt turbines, including
Continued on p. 304
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Storing Energy for a Rainy Day

Technology is providing new ways to deal with peaks in power demand.
Engineers are studying an alternative storage technology: speonsider the humble flywheel: Ever since the Bronze Age, wheels of one form or another, such as spinning cialized batteries that can hold large amounts of energy overnight wheels and potters wheels, have been used to keep and release it during the day. Conventional lead-acid batteries are motion constant during certain mechanical activities. Today the too expensive and dont last long enough, so research is focusheavy flywheel in a car engine helps keep the crankshaft turning on batteries with other chemical combinations. For example, giant sodium-sulfur batteries the size of a double-wide trailer are ing at a constant speed. Now the flywheel is being used for a different purpose: stor- being tested at several wind farms. They offer the advantage of ing energy to stabilize the output from electrical grids especial- storing large amounts of energy that is released at a comparatively efficient rate, but they remain very expensive. ly grids that rely on intermittent sources of energy such as wind. Engineers are also exploring ways to store energy in other ways, What flywheel systems can do 24/7 is act as shock absorbers to the grid, says Gene Hunt, director of corporate comsuch as by creating reservoirs of compressed air in underground cavities. The air is used to spin the turbine munications for Beacon Power Corp., on a generator when electricity is needed. a Tyngsboro, Mass., company that is One of the key challenges to overnight developing flywheels for utilities. They storage systems is the cost. Whereas a new allow you to maintain as close a balgas-fired power plant can generate elecance in the demand and supply of tricity for about $600 to $1,200 per kiloelectricity as possible. watt, a battery that offers eight hours of Beacon Power is finishing constorage would likely cost $4,000 or more, struction on a 20-megawatt energysays Paul Denholm, a senior energy anastorage facility in Stephentown, N.Y., lyst at the National Renewable Energy Labthat uses 200 flywheels to store oratory. A 2008 report by the American Inelectricity from wind or other sources stitute of Chemical Engineers estimated that in the form of kinetic energy and reit could cost more than $340 billion to delease it to the grid when needed. velop mass-energy storage systems if reThe flywheels spin at 16,000 rotanewable energy were to supply 20 percent tions per minute. By releasing enerof the nations energy needs. 1 gy to the grid for as long as 15 minutes, they can temporarily regulate Unless technological innovations can sigthe frequency of electrical power if nificantly reduce the cost of such storage demand or supply suddenly change. systems, experts say utilities that are inteLena Hansen of the Rocky Mountain Flywheels are at the forefront of a grating more renewable energy will try to Institute views electricity storage as a key wave of technological innovation derely on other methods for meeting peak challenge for the wind-energy industry. signed to address a major concern electrical demand. In addition to using flyabout wind energy: its intermittency, or unreliability. If engineers wheels, they can manage demand by reimbursing residents who can develop economical systems to store energy when the wind reduce their electrical use during peak times by using systems to is blowing and release it to the grid when winds are calm, the cycle air conditioning on and off or setting dishwashers to run late changeable nature of wind would no longer represent a serious at night. Utilities can also trade electricity more broadly, meeting a obstacle to integrating large amounts of wind into electrical grids. spike in demand in one region with extra supply from another. While the flywheels are designed to provide a cushion of But overnight storage will likely continue to get considera few minutes while traditional power plants ramp up, much able interest. of todays research focuses on storing energy overnight and reOne of the biggest constraints for the system now is the inleasing it during peak demand times during the day. ability to store electricity, says Lena Hansen, an expert on renewFor decades, utilities have stored comparatively small amounts able energy and biofuels at the Rocky Mountain Institute, a reof energy the old-fashioned way by pumping water uphill search group in Colorado. Electricity storage would be game-changing. from one reservoir to another with surplus electricity. When that David Hosansky energy is needed during the day, the water is released downhill to flow through a turbine the modern version of the water1 Bernard Lee and David Gushee, Massive Electricity Storage, American wheel on an old gristmill creating electricity. Although such a Institute of Chemical Engineers, June 2008, www.aiche.org/uploadedFiles/ system works well, constructing additional reservoirs would in- About/DepartmentUploads/PDFs/MES%20White%20Paper%20submittal%20to% 20GRC%206-2008.pdf. volve significant costs and extended environmental reviews.
Rocky Mountain Institute
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blades made of fiberglass and other materials and sophisticated controls to better capture wind gusts. In 1998, turbines had an average capacity of seven to 10 times the capacity of those in the1980s, and costs had dropped nearly 80 percent. 19 By the first decade of the 21st century, increasingly durable and powerful turbines could generate as much as five megawatts apiece on land; offshore turbines approached the 10-megawatt level. With individual turbines nearing maximum efficiency, engineers and scientists began focusing more on such issues as arranging arrays of turbines to make maximum use of winds, improving wind forecasting and using remote-sensing technology to automatically reposition blades to take better advantage of gusts. Such research can help wind farms generate more power in low-wind situations. Over the past decade, concerns about climate change, energy security and the long-term availability of fossil fuels have spurred rapid expansion of wind and other forms of renewable energy in the United States and overseas. The U.S. wind-power industry expanded by as much as 50 percent annually, increasing capacity from 2.5 gigawatts in 2000 to about 40 at the end of 2010. 20 Much of the expansion stemmed from the enactment of renewableenergy standards by more than two dozen states, beginning with Iowa in 1983. The federal production tax credit, first enacted in 1992 as part of comprehensive energy legislation, has also spurred wind-farm development although its expiration in 1999 and again in 2003 caused sporadic growth. In 2005, the United States re-established itself as the world leader in wind-energy capacity, only to lose the title last year to China, which is aggressively turning to wind to help meet its fast-growing energy needs.
Wind Supplies Tiny Slice of U.S. Energy

Wind power and other renewable-energy sources supplied less than 10 percent of U.S. energy in 2009. Most of the renewable energy came from hydroelectric and biomass sources, with small amounts produced by wind, solar and geothermal power. More than 80 percent of the nations electricity came from oil, natural gas and coal.
Sources of the Nations Energy Supply, 2009

Renewable Nuclear
8% 9%
Petroleum Coal
37%
Natural Gas
21% 25%
Source: U.S. Energy Information Administration, August, 2010, www. eia.doe.gov/cneaf/alternate/page/renew_ energy_consump/rea_prereport.html
Although wind energy is generally popular in Europe, its increased use has spurred controversy, especially over wind turbines in scenic areas and the cost of new transmission lines. Moreover, concerns have arisen over high residential electricity rates stemming partly from wind-energy subsidies, especially in Denmark. As wind developers begin running out of optimal sites on land, they are looking into more offshore locations where turbine towers can be secured to the sea bottom. Offshore wind farms present greater engineering challenges and are more expensive to build and maintain than those on land. But winds over the water are comparatively reliable and contain less turbulence, which allows the turbines to extract more energy. Furthermore, offshore turbines can support larger blades and thereby generate more power. Europe has emerged as a center for offshore development, partly because it has limited sites for landbased wind farms. The United States has yet to construct an offshore wind farm. But a number of projects are under consideration, and U.S. Interior Secretary Ken Salazar last year approved development of the Cape Wind project off Cape Cod, a proposed 130-turbine wind farm that has faced vigorous local opposition because of potential visual and environmental impacts on Nantucket Sound. (See sidebar, p. 295.)
European countries, seeking to cut carbon-dioxide emissions, continue to use tax incentives and renewableenergy goals to promote wind energy. Wind accounts for 24 percent of electricity use in Denmark, 14.4 percent in Spain, 14.8 percent in Portugal, 9.4 percent in Germany and 10.1 percent in the Irish Republic. 21 Gains have required creative approaches to the grid. Denmark, for example, sometimes exports energy to its neighbors and sometimes imports it, depending on fluctuations in winds.
CURRENT SITUATION
White House Support
n this years State of the Union address, President Obama set a goal of
Continued on p. 306
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At Issue:
Should the federal government do more to support wind energy?
yes
CEO, AMERICAN WIND ENERGY ASSOCIATION

DENISE BODE
ind power is here. Today wind power is a major, mainstream source of electricity that successfully competes in all ways with any of the more traditional sources of energy. Wind power, for example, competes on size. This safe, inexhaustible resource accounts for 35 percent of all new electricity generation since 2007 more than coal and nuclear combined. Wind power also competes on cost. New wind installations beat new coal and nuclear plants on electricity cost and are competitive with natural gas. Thus, no technological advances are needed to bring wind power into the mainstream. It already is. Still, policy incentives are needed but only to level the playing field. The Congressional Research Service notes that for more than 90 years, fossil-fuel industries have been receiving subsidies via generous tax breaks. They are seldom debated or, for that matter, heard of, because they are permanent. Examining the issue during the Bush administration, the Government Accountability Office concluded that fossil fuels continue to receive nearly five times the tax incentives as renewable energy. Moreover, on top of direct subsidies, fossil fuels cost Americans $120 billion annually in health damages, according to a National Academy of Sciences report commissioned by the Bush administration. Wind power, meanwhile, has had to compete despite receiving only one- and two-year policy extensions. Yet the industry already boasts 85,000 jobs and 400 manufacturing plants in the United States making the wind-power industry one of the fastest-growing manufacturing sectors in America. Strong policy support for fossil fuels during the last century helped create an abundance of affordable domestic energy, powering strong economic growth. It also created an addiction to fossil fuels. But rising demand, volatile prices and instability overseas have created the need for a more diverse energy supply. With wind power, utilities can lock in power prices with 20-year contracts, providing a hedge against fuel-price increases and volatility. Wind is a fuel, and its free. America boasts some of the worlds best wind resources. Theres enough wind-energy potential to power this land 10 times over. Iowa already makes 15 percent of its electricity from wind, and soon winds share will be 20 percent. In 2008, the Department of Energy confirmed what the industry already knew that wind can provide 20 percent of the nations electricity by 2030. The industry is anxious to meet that benchmark. It just needs a little policy stability to do so.
no
yes no
t
April 1, 2011 CQ Press Custom Books - Page319
DIRECTOR OF STATE AND REGULATORY AFFAIRS, INSTITUTE FOR ENERGY RESEARCH

DANIEL SIMMONS
here is no justification for increasing support for wind. It is time that wind pulls its own weight instead of relying on taxpayers dollars and pleading for additional subsidies and mandates. Wind proponents argue that wind is not a mature technology and should therefore receive subsidies, set-asides and preferential treatment from the government. This argument ignores the fact that wind energy has been used for more than 7,000 years. It also ignores the fact that wind has been used to produce electricity for over 120 years. In fact, coal has been used to make electricity for only five years longer than wind. Wind may not seem like a mature technology because it is unreliable. People switched away from wind to other sources of energy such as coal, hydroelectric, natural gas and petroleum because the wind doesnt always blow, and these other sources could be counted upon. For example, shipping became much more reliable when vessels switched from sails to coal power. Wind proponents also argue that their industry should receive support because wind energy could reduce Americas imports of oil. This is unlikely because wind produces electricity while cars and trucks run on gasoline and diesel. Electric vehicles might reduce oil consumption, but they are not competitive with gas and diesel vehicles. Nissan has sold only 173 Leafs, and Chevy has sold 928 Volts. These anemic sales should improve, but electric cars are very expensive and lack the range of conventional vehicles. For over 100 years, people have been trying to build electric vehicles that are competitive with conventional vehicles. They have yet to succeed. The wind lobby also argues that wind should receive subsidies because conventional fuels do. While fossil fuels receive larger total subsidies, if the comparison is made on a per-unitof-energy-output basis, wind subsidies dwarf conventional energy subsidies. According to the Energy Information Administration, total federal subsidies for wind-generated electricity for fiscal 2007 were $23.37 per megawatt hour, compared to $1.59 for nuclear, 44 cents for coal and 25 cents for natural gas and petroleum liquids. Our energy and fiscal situation would be improved if we removed all energy subsidies. Wind energy does not merit increased government support. Federal policies have supported wind power for decades despite the fact that it is inefficient and unreliable. Wind is a mature energy technology. Its time that it starts acting like it.
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to ensure that a percentage of the nations energy generating 80 percent comes from renewable of the nations energy sources perhaps by infrom so-called cleancluding a specific target energy sources by 2035. within the broader clean Some folks want wind energy goal. Or, alternaand solar, Obama said. tively, would the legislaOthers want nuclear, tion allow natural gas and clean coal and natural coal to continue to domgas. To meet this goal, inate electricity markets, we will need them all which the wind industry and I urge Democargues could prevent wind rats and Republicans to from expanding? work together to make Whether Congress it happen. 22 looks at the renewableFrom the viewpoint energy standard or the of wind and other reclean-energy standard, they newable-energy indusshould be focused on entries, the proposal suring diversity in our enmarked a strategic reergy portfolio, says Gramtreat. The House in 2009 lich of the American Wind voted to require that Energy Association. A big 20 percent of the napart of their responsibility tions energy come from is to avoid fuel-price volatilrenewable sources by ity. Wind can offer a stable 2020, and the Senate Enprice, but Im not aware of ergy and Natural Reany non-renewable sources sources Committee apthat can do the same. proved a 15 percent While the presidents prorenewable-energy stanposal for a clean-energy standard that would have dard is likely to generate taken effect in 2021. Neidebate over the nations enther proposal, howevWind turbines tower over a farmhouse in rural northern Illinois. ergy future, it appears to er, reached Obamas The battle between operators of wind farms and residents trying face long odds in the curdesk before Congress to stop their development is reaching a crescendo in Wisconsin, rent Congress. A number of adjourned, largely bewhere the wind industry says proposed statewide standards for Democrats greeted Obamas cause of bitter debate in locating turbines will stymie their construction. Some homeowners say the flickering shadows and noise from plan with enthusiasm, but Congress over climategiant turbines are so distracting that they want to Republicans argued that a change legislation. sell their houses if they can and move. federal standard could drive By broadening the up electricity rates and unproposed energy standard to include nuclear, natural gas with the investment firm Sanford C. duly favor one energy sector over anand clean coal, Obama hoped to draw Bernstein & Co. But, Singh adds, The other. Leaving such mandates to the support from those industries cru- standard thats proposed is very states would be wiser, they said. A clean-energy standard is better cial to his energy agenda given the amorphous right now. Its a big picsharply conservative tilt of Congress ture. A lot of work needs to go into than a renewable-energy standard or defining clean energy. one that picks and chooses among the following the 2010 elections. The wind industry, which prefers a kinds of energy, said Sen. Lamar AlexanObamas broadened the constituency by proposing a clean-energy renewable-energy standard, is respond- der, R-Tenn. But I would prefer to let standard, and that might help his ing cautiously until more details of the states make these decisions. 23 Added Fred Upton, R-Mich., chairman plan get more support, says Saurabh plan emerge. A major issue is whether Singh, a senior research associate a standard would include provisions of the House Energy and Commerce
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Committee, energy independence is not achieved through government dependence. 24 In addition to a clean-energy standard, the wind industry is keeping a close eye on federal incentives, such as the production tax credit for renewable energy. Last extended as part of an economic stimulus plan in 2010, the credit will expire next year. A top priority for the wind industry is making the credit permanent, or at least passing a long-term extension. All the traditional energy sources have their support permanently, but wind only has it for a year or two, says Gates of Clipper Windpower. The uncertainty over the tax credit has a negative effect on the business and . . . long-term job growth. The wind industry is concerned that allowing the tax credit to expire would stunt new investment. Over the last decade, the industry has experienced boom-and-bust cycles, with growth plummeting by 70 to 90 percent in years such as 2004 after the tax credit was allowed to expire. Given congressional concerns over the budget deficit, however, analysts warn that a renewal of the production tax credit is far from certain. When we go into the expiration at the end of 2012, were going to have a very difficult debate, says Christine Tezak, senior energy and policy analyst at the international investment firm Robert W. Baird & Co. It will be very challenging for the industry. As for the desire to make the production tax credit permanent, she says flatly, A permanent extension is a dream too far.
cerned that proposed statewide standards for selecting locations for turbines will make it virtually impossible to build new wind farms and may energize wind opponents in other states. Local officials in Wisconsin, as in many other states, have the authority to determine how close a wind turbine may be built to a house or property line. This has led to a conflicting set of rules, with residents worried that wind farms are encroaching on farms and subdivisions. Some homeowners say the flickering shadows and noise from giant turbines is so distracting that they want to sell
against the wind industry, erupted in December when Wisconsins Public Service Commission approved rules that, among other things, prevent local governments from requiring wind turbines to be built more than 1,250 feet from a house. The wind industry viewed the new rules as a model for replacing a confusing and often shifting patchwork of city and county regulations with a single, predictable statewide standard. But the new setback standard drew sharp criticism from property owners. Republican Gov. Scott Walker proposed much a stricter standard, barring tur-
Residents have indicated that the turbines that are located too close to homes can have an adverse impact on their health everything from high anxiety levels to high blood pressure to rapid heart rate.
Tom Larson Director of Legal and Public Affairs, Wisconsin Realtors Association
Not in My Backyard
he battle between energy companies that want to install new wind farms and residents trying to stop development is reaching a crescendo in Wisconsin. The wind industry is con-
their houses and move. But that can be difficult. Nearby turbines can drive down property values by 40 percent, according to the Wisconsin Realtors Association. Residents have indicated that the turbines that are located too close to homes can have an adverse impact on their health everything from high anxiety levels to high blood pressure to rapid heart rate, says Tom Larson, chief lobbyist and director of legal and public affairs for the association. He adds that flickering shadows from the turbines are like the Bat-signal [for Batman] right on your house, constantly. Its a big deal. They [the turbines] are monsters. The debate over wind-turbine setbacks, which pits property owners
bines from being built within 1,800 feet of a property line. The situation is now in limbo. A joint legislative committee voted March 1 to suspend the rules, giving local governments, at least temporarily, the power to establish setbacks on a case-by-case basis. Meanwhile, lawmakers are considering a bill to give the Public Service Commission seven months to revise the rules. If Walkers proposal were adopted, that would be pretty devastating, says Gramlich of the American Wind Energy Association. He warns that the requirements are so strict that wind developers would be unable to build new wind farms in Wisconsin.
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Some worry that Wisconsins approach, if adopted in other states, could prevent the nation from expanding its wind-energy capabilities. Larson says Wisconsin has become a national battleground on the issue. Weve seen a lot of involvement from national organizations, he says. He worries that unless the two sides are able to reach a compromise, the controversy will continue to roil the state. I think therell be lawsuits, he says. I think itll be a mess. of people and companies, and I dont think Republicans want to support a big program right now, he says. Without a boost in government support, the short-term outlook for the U.S. wind industry is uncertain. It faces two challenges: Demand for new energy has declined because of the economic downturn, and natural gas prices are at unusually low levels making gas an attractive alternative to wind. As a result, new wind installations in 2010 were only half the level of 2009. (See graph, p. 301.) China likely installed three times as much new wind capacity as the United States in 2010, and Europe twice as much. 25 In addition to the competition with traditional fuel sources, wind may soon face increased competition from solar energy. Singh says technical innovations could start driving down solar prices in the next five years. And solar offers some advantages over wind: Rooftop photovoltaic cells reduce the need for transmission lines, and energy from the sun tends to correspond with peak consumer demand. Singh says that wind may eventually account for about 10 percent of the nations electricity consumption, but much higher than that is unlikely. Wind will definitely have decent growth rates. But I think the growth rates over time will become less than solar. Industry executives, however, are more bullish on winds long-term prospects. Gates of Clipper Windpower believes that the peak growth years of the last decade, in which the wind industry added as much as 10 gigawatts of capacity, may be hard to replicate. But he sees steady growth of about 5 gigawatts yearly. The industry has potential, he says. The world needs more electricity. It needs more generation of every type. Some renewable-energy advocates envision a future in which wind plays a vital role in meeting the worlds energy needs. They believe technological innovations, such as storing surplus wind energy in giant batteries and using wind power to fuel electric cars, can, along with conservation and other renewable sources, eventually make fossil fuels virtually obsolete. Although supporters and skeptics may disagree over the extent to which wind farms may help to power America, both sides agree that there is no shortage of wind energys key ingredient. As Paul Denholm, a senior energy analyst at the National Renewable Energy Lab puts it, In terms of the raw resource, theres plenty there.
OUTLOOK
Delicate Circumstances
t seems unlikely that the federal government will adopt a clean-energy standard any time soon, analysts say. Congress is too focused on other highly contentious issues, such as cutting the budget and rolling back regulations. The big challenge for a [clean energy standard] is that right now the stars are not particularly aligned for it, says Baird & Co.s Tezak. She gives it a slight chance of passing, especially if supporters try to attach it to a larger energy measure. But, she adds, that is one delicate set of circumstances. Investment analyst Singh is even more dubious. I think the chances of Obamas clean-energy standard passing in the near term are effectively zero because its going to be a pretty ambitious target thats going to affect a lot
Notes
Quoted in Andrea Thompson, First U.S. Town Powered Completely By Wind, Live Science, July 15, 2008, www.livescience.com/ 2704-town-powered-completely-wind.html. 2 For background, see the following CQ Researcher reports: Jennifer Weeks, Modernizing the Grid, Feb. 19, 2010, pp. 145-168; Marcia Clemmitt, Energy and Climate, July 24, 2009, pp. 621-644; and Barbara Mantel, Energy Efficiency, May 19, 2006, pp. 433-456. 3 Statistics for wind and other energy sources in the United States from the U.S. Energy Information Administration, Electric Power Industry 2009: Year in Review, revised Jan. 4, 2011, www. eia.doe.gov/cneaf/electricity/epa/epa_sum.html. Statistics for Iowa from the Iowa Policy Project, Think Wind Power, Think Iowa, March 2010, www.iowapolicyproject.org/2010docs/100303IPP-wind.pdf. 4 John Lorinc, Study Suggests Wind Power Potential Is Much Higher Than Current Estimates, The New York Times, July 16, 2009, http:// green.blogs.nytimes.com/2009/07/16/studysuggests-wind-power-potential-is-much-higherthan-current-estimates/; and Marc Schwartz, Donna Heimiller, Steve Haymes and Walt Musial, Assessment of Offshore Wind Ener1
About the Author

David Hosansky is a freelance writer in the Denver area who specializes in environmental issues. He previously was a senior writer at CQ Weekly and the Florida Times-Union in Jacksonville, where he was twice nominated for a Pulitzer Prize. His previous CQ Researcher reports include Food Safety and Youth Suicide.
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gy Resources in the United States, National Renewable Energy Laboratory, June 2010, www. nrel.gov/news/press/2010/885.html. 5 Non-fossil fuels to take up 11.4% of Chinas energy, China Daily, March 4, 2011, www.china daily.com.cn/bizchina/2011-03/04/content_12 117490.htm. 6 Wind industry finishes 2010 with half the installations of 2009, activity up in 2011, now cost-competitive with natural gas, American Wind Energy Association, Jan. 24, 2011, www. awea.org/newsroom/pressreleases/release_0124-11.cfm. 7 Wind Power in Americas Future: 20% Wind Energy by 2030, U.S. Department of Energy, 2008, p. 20, www1.eere.energy.gov/windand hydro/pdfs/41869.pdf. 8 Wind turbine capacity is given in ibid., p. 221; capacity for other energy sources is provided by U.S. Energy Information Administration, Electric Power Annual, revised Jan. 4, 2011, www.eia.doe.gov/cneaf/electricity/epa/epaxlfile 5_2.pdf. 9 Wind Power in Americas Future, ibid., p. 95. 10 U.S. Poll Shows Wind Works for Americans, American Wind Energy Association, April 22, 2010, http://archive.awea.org/news room/releases/04-22-10_Poll_Shows_Wind_ Works_for_Americans.html. 11 Wind Power: Impacts on Wildlife and Government Responsibilities for Regulating Development and Protecting Wildlife, U.S. General Accounting Office, September 2005, p. 2, www.gao.gov/new.items/d05906.pdf. 12 Quoted in Maria Glod, Court constricts W. Va. wind farm to protect bats, The Washington Post, Dec. 10, 2009, www.washington post.com/wp-dyn/content/article/2009/12/09/ AR2009120904106.html. 13 U.S. General Accounting Office, op. cit. 14 Ibid., p. 19. 15 Robert Bryce, Power Hungry: The Myths of Green Energy and the Real Fuels of the Future (2010), p. 84. 16 How Less Became More: Wind, Power and Unintended Consequences in the Colorado Energy Market, Bentek Energy, April 16, 2010, p. 9, www.bentekenergy.com/documents/ben tek_how_less_became_more_100420-319.pdf. 17 By Meeting Renewable Energy Goal 15 Years Ahead of Schedule, Texas Shows Policies Work, Public Citizen, April 6, 2010, http://texasvox. org/2010/04/06/by-meeting-renewable-energygoal-15-years-ahead-of-schedule-texas-showspolicies-work/. 18 For background, see Peter Katel, Oil Jitters, CQ Researcher, Jan. 4, 2008, pp. 1-24.

American Wind Energy Association, 1501 M St., N.W., Suite 1000, Washington, DC 20005; (202) 383-2500; www.awea.org. National trade association representing windpower project developers, suppliers, service providers and others in the wind industry. Cape Wind, 75 Arlington St., Suite 704, Boston, MA 02116; (617) 904-3100; www.capewind.org. Wind farm proposed in Nantucket Sound; potential to become first offshore wind-energy project in U.S. coastal waters. Clean Energy Research Centre, University of British Columbia, 2360 East Mall, Vancouver, British Columbia V6T 1Z3, Canada; (604) 827-4342; www.cerc.ubc.ca. Seeks to reduce the environmental impact of energy use. Energize Vermont, P.O. Box 605, Rutland, VT 05702; (802) 778-0660; www.energize vermont.org. Advocates for renewable energy in Vermont. Energy Information Administration, U.S. Department of Energy, 1000 Independence Ave., S.W., Washington, DC 20585; (202) 586-8800; www.eia.doe.gov. Statistical and analytical agency within the U.S. Department of Energy. European Wind Energy Association, Rue dArlon 80, 1040 Brussels, Belgium; 32-2-213-1811; www.ewea.org. Promotes use of wind power across Europe. Global Wind Energy Council, Rue dArlon 80, 1040 Brussels, Belgium; 32-2-2131897; www.gwec.net. Trade association for the international wind-energy industry. Institute for Energy Research, 1100 H St., N.W., Suite 400, Washington, DC 20005; (202) 621-2950; www.instituteforenergyresearch.org. Conducts research and analysis on the functions, operations and regulations of global energy markets. National Renewable Energy Laboratory, U.S. Department of Energy, 1617 Cole Blvd., Golden, CO 80401; (303) 275-3000; www.nrel.gov. The United States primary laboratory for renewable-energy and energy-efficiency research and development. Nature Conservancy, 4245 N. Fairfax Dr., Suite 100, Arlington, VA 22203; (703) 841-5300; www.nature.org. Opposes many wind-turbine development projects because of potential environmental consequences. Public Citizen, 1600 20th St., N.W., Washington, DC 20009; (202) 588-1000; www.citizen.org. Consumer advocacy group lobbying for renewable-energy standards. Rocky Mountain Institute, 1820 Folsom St., Boulder, CO 80302; (303) 245-1003; www.rmi.org. Think tank focusing on efficient use of natural resources. Union of Concerned Scientists, 2 Brattle Square, Cambridge, MA 02138; (617) 5475552; www.ucsusa.org. Advocacy group whose focus includes environmental issues.
Wind Power in Americas Future, op. cit., p. 6. 20 Wind Powering America, Department of Energy Wind and Water Power Program, www. windpoweringamerica.gov/wind_installed_ capacity.asp. 21 Wind in Power: 2010 European Statistics, European Wind Energy Association, February 2011, www.ewea.org/fileadmin/ewea_documents/ documents/statistics/EWEA_Annual_Statistics_ 2010.pdf. 22 White House press office, www.whitehouse.
19
gov/the-press-office/2011/01/25/remarks-presi dent-state-union-address. 23 Darren Goode, State of the Union 2011: Key senators laud Obama clean energy push, Politico, Jan. 16, 2011, www.politico.com/news/ stories/0111/48209.html#ixzz1GVTCjN1H. 24 Ibid. 25 U.S. Wind Industry: 2010 Year in Review, Sustainable Business, Jan. 7, 2011, www.sustain ablebusiness.com/index.cfm/go/news.display/ id/21684.
April 1, 2011
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Bibliography
Selected Sources
Books
Bryce, Robert, Power Hungry: The Myths of Green Energy and the Real Fuels of the Future, Public Affairs, 2010. A veteran energy journalist presents an engaging but highly critical look at sustainable-energy technologies, including wind. Evans, Robert L., Fueling Our Future: An Introduction to Sustainable Energy, Cambridge University Press, 2007. The inaugural director of the Clean Energy Research Centre at the University of British Columbia gives a balanced look at sustainable energy. Goodall, Chris, Ten Technologies to Save the Planet, Greystone Books, 2008. An expert on climate change analyzes the potential of wind and other sustainable technologies to provide energy without high carbon-dioxide emission. Naff, Clay Farris, ed., Fueling the Future: Wind, Thomson Gale, 2007. A science writer presents opposing viewpoints about controversial aspects of wind energy, such as whether it can meet future energy demand in a cost-effective manner. Parks, Peggy, Wind Power, Reference Point Press, 2010. Parks offers a concise introduction to key wind-energy issues, with plentiful graphics and quotes from leading experts. McNulty, Sheila, Renewables in the US: uneven incentives hamper growth, Financial Times, Jan. 14, 2011, www.ft. com/cms/s/0/6f5e9afc-1f71-11e0-87ca-00144feab49a.html. McNulty explains how the U.S. wind industry is hampered by uncertainty over future government policies, such as tax breaks. Wald, Matthew L., Wind Energy Bumps into Power Grids Limits, The New York Times, April 27, 2008, www.nytimes. com/2008/08/27/business/27grid.html. Wald examines the extent to which the nations limited transmission system is holding back wind-energy development.
Reports
U.S. Wind Energy Year-End 2010 Market Report, American Wind Energy Association, January 2011, www.awea. org/learnabout/publications/loader.cfm?csModule=security/ getfile&PageID=5083. A trade association provides statistics on the state of the U.S. wind industry. Wind Power: Impacts on Wildlife and Government Responsibilities for Regulating Development and Protecting Wildlife, General Accounting Office, September 2005, www.gao.gov/new.items/d05906.pdf. The congressional watchdog group analyzes the potential impacts of wind farms on wildlife. Wind Power in Americas Future: 20% Wind Energy by 2030, U.S. Department of Energy, 2008, http://www1. eere.energy.gov/windandhydro/pdfs/41869.pdf. The federal agency examines the potential benefits of wind energy and the challenges of deriving 20 percent of the nations electricity from the renewable resource by 2030. Kreutzer, David, Karen Campbell, William Beach, Ben Lieberman and Nicolas Loris, A Renewable Electricity Standard: What It Will Really Cost Americans, Heritage Foundation, May 5, 2010, www.heritage.org/Research/ Reports/2010/05/A-Renewable-Electricity-Standard-WhatIt-Will-Really-Cost-Americans. A conservative think tank argues that a proposed federal renewable-energy standard would be highly expensive and endanger the economy. Logan, Jeffrey, and Stan Mark Kaplan, Wind Power in the United States: Technology, Economic, and Policy Issues, Congressional Research Service, June 20, 2008, accessed at http://assets.opencrs.com/rpts/RL34546_20080620.pdf. A concise and objective overview of the benefits and drawbacks of wind energy, focusing on technology, economics and policy issues.
Articles
Clayton, Mark, How Enormous Batteries Could Safeguard the Grid, The Christian Science Monitor, March 22, 2009, www.csmonitor.com/Innovation/Responsible-Tech/2009/ 0322/how-enormous-batteries-could-safeguard-the-power-grid. Clayton offers a comprehensive look at batteries and other storage technologies that can boost efforts to integrate more wind energy into the electrical grid. Fahey, Jonathan, How Clean Is Obamas Clean Energy Standard? The Associated Press, Jan. 26, 2011, viewed at http://abcnews.go.com/Business/wireStory?id=12771095. Fahey analyzes the benefits and drawbacks of various energy sources, including wind, that may be included under a clean-energy standard. Gurwitt, Rob, Renewable energy industry shows surprising clout, Stateline, Jan. 4, 2011, www.stateline.org/live/ details/story?contentId=539044. Gurwitt provides a fascinating look at the wind industrys clout in influencing policy makers across the political spectrum.
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1. STATES AND FEDERALISM

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