Isaac Laquedem

The Oregonian finds what the Bureau of Planning and Sustainability didn't want to look for

It's hard to improve on the Oregonian's headline in today's print edition: "$11.5M city contract awarded to executive with history of fraud."  (The story is available online to subscribers, here.)  The reporter, Shane Dixon Kavanaugh, writes that the directors of the Portland Clean Energy Community Benefits Fund, a city office of some sort, awarded a $11.5 million contract to a newish nonprofit corporation called Diversifying Energy to buy and install portable heat pumps and cooling units inside 15,000 homes and apartments.  (That's about $750 per heat pump or cooling unit.)

The story points out three oddities in the city's choice of a contractor.  First is that Diversifying Energy is not even two years old.  Its president, secretary, and executive director Linda Woodley formed the corporation in July 2020, and originally named "Energizing Diversity."  Its 2020 tax return indicates that it received less than $50,000 from all sources in 2020.  Mr. Kavanaugh reports that the City of Portland did award Diversifying Energy a $198,000 contract in April 2021 to upgrade three buildings for air quality.

Second is that Ms. Woodley is subject to an IRS tax lien for not paying income taxes in 2015, 2016, and 2017, and had been convicted of bankruptcy fraud and tax fraud in 1997.

Third is that city staff who evaluated the applications for the grant had concerns about Diversifying Energy's high personnel costs and recommended that the city accept the competing bid.  The city's grants committee rejected the staff recommendation and recommended that the city offer the contract to Diversifying Energy.  The city council unanimously approved the committee's recommendation, also rejecting the staff advice.

Not mentioned in the story, but odd, is that the IRS determination letter for Diversifying Energy was issued not to Diversifying Energy or its prior name when it was formed, but to "Shades of Green" the month before Energizing Diversity was incorporated.   (A "determination letter" is the letter from the IRS that says that a nonprofit organization qualifies as a 501(c)(3) and that contributions to the organization will be tax-deductible.)  The state had two businesses using the name "Shades of Green."  One was in Klamath County and has been in existence for 20 years.  The other was a for-profit corporation called Prisma Point Incorporated, formed by Ms. Woodley in 2014 and still arounds today, operating from the same office as the nonprofit.  It's extremely unusual for a non-profit to have a determination letter that had been issued to a for-profit corporation; in fact, it's not supposed to happen.

Mr. Kavanaugh's story contains the obligatory disclaimer by city officials (there should be a hotkey for that phrase), that "neither city staffers nor grants committee members knew of Woodley's troubling past, Portland officials told The Oregonian / OregonLive, when the news outlet informed them of reams of public records documenting her financial fraud and unpaid taxes.  Nor were they aware of a series of mischaracterizations and possible outright fabrications in her firm's proposal that The Oregonian / OregonLive found during fact-checking, they said."

What conclusion can we draw from The Oregonian and Mr. Kavanaugh finding information that the city missed?  The obvious one is that when city management determines to award someone a contract, it shuts its collective eye to warning signs.  The less obvious one is that the grants committee, part of the Bureau of Planning and Sustainability, awarded the contract on something other than business history, financial qualification, track record, and economic efficiency.  The City Council should insist that the members of the committee explain their thinking before the city allows them to award any other contracts.

The Laquedem Plan to measure and index the minimum wage

In real-dollar terms, the minimum wage of $7.25/hour is at its lowest point since shortly after its creation in 1938.  It has been $7.25/hour since 2009.  One of our major political parties, fearful of directing money to people who might actually need to spend it, has obstructed efforts to raise the wage to $15.

Isaac has devised a plan to satisfy the Republicans' philosophical objections and honor the memory of St. Ronald Reagan, all in one package.  Let's begin by directing our thoughts to the Reagan administration, the Laffer curve, and the large tax cuts of that era.  The theory of the Reagan tax cuts, honored in two later Republican administrations, is that by reducing income taxes on large corporations the tax savings would become free cash that would trickle down to the people who were actually doing the work. 

That didn't happen.

I'd like to suggest a new metric for measuring the minimum wage, which is to measure it not in dollars but in how many hours of work at the minimum wage equals one year of a Congressional salary.

The base Congressional salary (leaders get more) is $174,000/year.  The minimum wage is $7.25/hour.  One year in Congress carries remuneration equal to 24,000 hours at the minimum wage.

Now go back to the first year of the Reagan era.  Congresspeople received $60,662.50/year.  The minimum wage was $3.35.  One year in Congress in 1981 equaled 18,108 hours at the minimum wage.

The facile interpretation is that our Congresspeople are 33% more productive than they were in 1981, because they now earn 33% more than their predecessors did in 1981, in terms of the minimum wage.  We have only to look at the Senate of the last few years to reject an explanation based on productivity.  So let's go back to trickle-down economics.

If trickle-down economics had worked as Reagan and Laffer had predicted, then there would be few - maybe no - minimum-wage jobs remaining, because the price of labor would be higher in real-dollar terms than it was in 1981.  The plutocrats would have taken the dollars showered upon them by the appreciative Solons and spent them pursuing labor, driving up wages.  That wages did not keep up is a strong mark against the Reagan-Laffer theory.

But let us assume, as Mitch McConnell and his merry band of naysayers must, that the tax cuts in fact trickled down.  In that case there would be no harm in raising the minimum wage to a level that assumes that the tax cuts did in fact trickle down.  That level, I suggest, is the 1981 ratio, when the minimum wage was 1/18,108 of a Congressional salary.  Today that's $9.61/hour. 

If Senator McConnell is willing to adopt standard Republican economic theory, then he should be all in favor of raising the minimum wage to $9.61/hour, and to index it to equal at least 1/18,108 of a Congressional salary.  If he continues to oppose raising the wage to keep up with costs, then we should insist that Congress adopt another Republican principle and tie Congressional salaries to productivity.  One refinement would be to provide that if a session of Congress is less productive than the historical average, its leaders should get not more, but less, than the base salary.  It seems unjust to call Senator McConnell a legislator when he's working as hard as he can not to legislate.

No Peloton for Christmas? Those two contentious jobs at the Port of Portland cast a long shadow

Readers with long memories will recall that in 2014 the ILWU and the electricians' union fought over two jobs at Terminal 6, the Port of Portland's container facility on the Columbia River (pictured).  The question was whether the task of plugging power cords into refrigerated containers was properly allocated to the ILWU (because the containers were sitting on docks) or to the electricians (because the task involved wiring).  The fight between the unions turned into a general slowdown that drove container shipping away from Portland in 2017.  One freight line tenuously returned (one ship a week) in early 2020, just before the pandemic struck. 

The idled union workers might ask their leadership to read this story about the Port of Los Angeles, the busiest port on the west coast.  Shipping times from China to Los Angeles have ballooned from 2 weeks to 7 or 8 weeks.  The ships still chug across the Pacific Ocean at the same speed -- until they get to Los Angeles, where they sit and wait offshore for weeks with their cargoes of Pelotons and other Christmas gifts (now Twelfth Night gifts?) before they can dock and unload.  Everyone involved justly blames the Covid-19 pandemic.  The delays in unloading in Los Angeles are so great that many importers paid extra - a lot extra - to have their goods flown to the United States instead of taking their chances on being marooned offshore.

Consider the Port of Portland's nearly idle Terminal 6, its facility for handling shipping containers.  Certainly the warring unions couldn't have predicted in 2014 that a worldwide pandemic would strike in 2020.  But they might have considered that anything that caused a slowdown at a larger west coast port might encourage freight companies to divert their ships to Terminal 6, and keep their members employed.

Ted Cruz would eat his words, if he had electricity to cook them with

Except now it's Texas that can't perform even basic functions of civilization as millions of Texans are without power because the state elected to go it alone with its electric grid.  Ted Cruz took off for a vacation in Cancun, where the state government is able to provide power and water.

Endorsements Zero: a general thought on taxation

If one of the three main selling points of a request that you approve a new tax is that you won't have to pay the tax -- it's a tax entirely on other people, or on businesses, or on sales of things that you don't buy -- then the promoters are tacitly admitting that the cause isn't good enough to spend your own money on -- or theirs either, if the promoters are all exempt from the tax themselves.  I'll be elaborating on this thought later in endorsement season.

Harvard Professor Raj Chetty explains COVID-19's impact in a nonpartisan way based on actual data and economics. We should listen.

Here is a link to actual data on the effect of the pandemic on the American economy.  It's a website, "Track The Recovery," maintained by a group of economists led by Harvard professor Raj Chetty.  Bloomberg News has a good description of Professor Chetty's work, and the data on which it's based, here.

Among the most pointed findings is that "the recession has nearly ended for high-wage workers, but job losses persist for low-wage workers."  The money quote from the Bloomberg article:

On video calls with dozens of Democrats and Republicans in Congress, as well as Treasury officials and state and local policymakers, his message has been consistent: Get the virus under control at all costs—a task the U.S. has so far failed at pitifully. No matter how many businesses are allowed to reopen, normal economic life will not resume until their customers feel they’re no longer at risk of contagion. In the meantime, he tells them, target assistance to the people, businesses, and places that need it. There’s no use sending stimulus checks to people making $150,000 a year or cutting their payroll taxes. They have plenty of money; what they lack is places to safely spend it.

 

Why does the Republican Party support the death penalty and oppose abortion? The reason is economics, not ethics

The recent experience with the novel coronavirus and the economic effects of the shutdown gives us all an opportunity to calculate how much the pro-life party values life. Approximately 30 million Americans lost their jobs because of the coronavirus pandemic. The shutdown if continued through the phased reopening without being rushed will save perhaps 1 million American lives. It follows that to the (mostly Republican) politicians who wished to end the shutdown in the early summer, one life to them is worth not more than about 30 jobs. It also explains the Republican fascination with the death penalty. If the average death penalty case costs about $100,000 to try, which we can evaluate as equal to roughly 2 jobs for a year, but if only one out of every 40 people convicted of a death penalty crime is actually executed, then each execution produces roughly 80 jobs, a very decent return on investment from this coldly capitalist point of view.

The same analysis explains also the Republican position on abortion and right to life. If a healthcare team of four people can perform two abortions a day for 250 business days a year, equaling 500 per year altogether, then each abortion produces only 1/125 of a job for a year, far below the job production from capital punishment. What we have taken for years as Republican hypocrisy about human life may merely be economics. Further research is needed to determine the normative Republican value for job-life equivalence. I think it will turn out to be about 20 jobs per life.

Could the Pony Express have delivered mail from Utah to Oregon in 13 days?

This Washington Post story, about the Postal Service intentionally slowing down mail sorting and delivery, may explain why the mortgage statement that my lender sent from Utah on July 15 arrived at my house on July 28.

 

The Laquedem Coronavirus Relief Plan for cruise lines: out of site, out of mind

That's not a typo.  One of the good points of the CARES Act, which provides relief for small businesses across the country, is that to qualify, a business must be "created or organized in the United States or under the laws of the United States," and it must have "significant operations in and a majority of its employees based in the United States."  The CARES Act intentionally omits the major cruise lines from its benefits.  Congress should hold firm against the pleas of the cruise industry for a bailout.  Here's why.

Consider Carnival Cruise Lines, the most American of the major lines.  It consists of two entities, both publicly traded.  The United States entity, Carnival Corporation, has its corporate offices and operational headquarters in Florida.  It is, however, a Panama corporation, though its Seabourn and Holland America brands operate  through American subsidiaries from a Seattle office, and its Princess Cruises brand operates from California.

As for its ships: the Seabourn fleet sails under the flags of Norway and Bahamas.  Holland America's ships fly the flags of Malta, the Netherlands, Great Britain, and Bahamas.  The Princess Cruises ships are registered in Bermuda and Great Britain.  Carnival's own ships are flagged in Panama and Bahamas.

Carnival's management has chosen to register its ships in foreign countries and not site them in the United States for two main reasons: to avoid American income taxes and to avoid American wage and safety regulations.  I would be disappointed if Congress gave in to the industry's pleas for help.  I'd applaud any member of Congress who will tell the cruise line owners to look for relief for their foreign ships from Panama, Malta, and Bahamas, the nations they chose to support.

Jane Ace tells off a hospital that asked for a gift

On March 9 the Wall Street Journal published this article by Alexandra Samuel about feedback fatigue, describing how "in their eagerness to deliver a better customer experience" by incessantly asking for reviews and evaluations, "companies have created a new kind of bad customer experience: feedback fatigue."  Ms. Samuel cites two studies that discovered that customers don't like the surveys.  "Repeated surveys," she wrote, "may make customers reluctant to return."  She described a 2014 study as showing that "over-surveying by different organizations leads to exhaustion with all the requests for feedback."  

The article brought to mind one fine example of a business being less than careful with its customer outreach, way back in 1974.  The particular business was a New York City hospital, and it sent this letter to a former patient, Jane Ace.  I've shortened it a bit:

December 6, 1974

Dear Mrs. Ace:

As a recent patient you have seen how our hospital serves its community by providing a full range of medical services, offering a high level of nursing service together with physical amenities, enabling the hospital to treat the patient as a person, rather than a number.  We are appealing to former patients like yourself to contribute to the hospital's Capital Improvement Fund . . .

[Signed by the president of the hospital]

Mrs. Ace and her husband Goodman Ace were well-known radio personalities, and he was a veteran humorist.  He felt that the letter wasn't appropriate, and wrote the following response, which has stuck with me since I first read it in 1975:

December 8, 1974

Dear Sir:

As a former patient I did notice your high-level nursing service together with its other amenities, and I would dearly like to contribute to your hospital fund.  But, you see, on November 11 I died in your hospital.  Maybe we can get together later.

Sincerely, Jane Ace