The Odd Conservative Argument That Food Stamps and Medicaid Saved the Poor From Welfare Reform
This week marked the 20th anniversary of welfare reform, the landmark legislation signed into law by Bill Clinton that many on the left, myself included, have accused of eviscerating a key part of the safety net that protected the poorest of America's poor—namely, penniless single mothers. In honor of the occasion, Scott Winship of the conservative Manhattan Institute has come out with a new report defending reform's legacy, while attempting to debunk many of the statistics liberals typically wield against it (Republicans have long argued that the bill was a rousing success). It's a lengthy, careful piece of work, but I doubt it will change many minds on this issue. It also implicitly makes the argument that welfare reform was harmless in part because Medicaid and food stamps saved the most vulnerable from deep deprivation—which is a tad awkward to hear coming from the right.
Clinton made good on his promise to “end welfare as we know it” by dismantling Aid to Families With Dependent Children, the old entitlement program that had sent cash to needy households largely headed by single mothers. He replaced it with a new system called Temporary Assistance to Needy Families, or TANF, which among other things attached work requirements and time limits to cash benefits, and turned welfare's funding into a fixed block grant that states had the de facto power to spend however they pleased. The idea was to put more emphasis on efforts that would move jobless mothers into work. To simplify a bit, the rap against TANF is that it turned welfare into a slush fund that states have used to plug random budget holes, and that while the reforms may have actually helped reduce the poverty rate overall by convincing some women to find work rather than apply for monthly benefits, it exacerbated the worst kinds of poverty by cutting off cash aid to the truly desperate.
This is, admittedly, a somewhat tricky argument to illustrate, because no single data source does a perfect job tracking the incomes of the very, very poor. When they're asked to fill out government surveys, Americans notoriously under-report their earnings as well as the benefits they receive from programs like food stamps. Poor families with unstable housing situations can also be hard to track down, especially if they're living in homeless shelters. So rather than tout a single big number, experts in this field have tended to rely on a constellation of data points that suggest Americans at the absolute bottom of the income distribution suffered in the post-welfare reform era.
Early research, for instance, found that the number of so-called “disconnected mothers” who were neither working nor in school nor receiving welfare benefits rose after 1996. More recently, Johns Hopkins University's Kathryn Edin and the University of Michigan's Luke Shaefer made serious waves when they reported that “the number of households living on $2 or less in cash income per person per day in a given month increased from about 636,000 in 1996 to about 1.65 million in mid-2011, a growth of 159.1 percent.” In the same vein, the Center on Budget and Policy Priorities found that, after including safety net benefits like food stamps and adjusting for under-reporting, the percentage of children living in so-called “deep poverty,” meaning their family income amounted to less than half the poverty line, rose from 2.1 percent in 1995 to 3 percent in 2005. Using a different data set, a group of researchers including Johns Hopkins' Robert Moffit found that, after taxes and transfers, the percentage of families in deep poverty rose from 4.5 percent in 1993 to 6.6 percent in 2004. The number of food stamp recipients reporting no income has also gone up.
Winship attempts to pick these findings apart one by one. But while he does an excellent job raising questions and demonstrating why it's dangerous to rest your argument on a single stat, I don't think he succeeds in his main goal of casting doubt on the idea that, more likely than not, severe poverty has been rising.
Winship's report starts off by making a basically uncontroversial but important point: Child poverty is lower today than it was in 1996, including among families headed by single mothers. The trend looks even better once you start adding the value of various safety net benefits like food stamps, housing assistance, and Medicaid into the mix. The important thing to keep in mind here, however, is that the 1996 welfare reform law is at best responsible for only some of these improvements. Prior to TANF, states had already begun reforming their welfare programs through a federal waiver program that required them to test their approaches and demonstrate positive outcomes (TANF imposed no such demands). And in 1993, Clinton expanded the Earned Income Tax Credit, which boosts after-tax incomes for low-wage workers and drew an enormous number of single mothers into the labor force. “Indeed, the sizable expansions of this particular anti-poverty tool appear to be the most important single factor in explaining why female family heads increased their employment over the 1993-1999 period,” University of Chicago economist Jeffrey Grogger wrote in one often-cited study. As for TANF itself? Economists Robert Schoeni and Rebecca Blank estimated that its creation led to a roughly 2 percentage point decline in the poverty rate for women with less than a high school degree (similar to the effect of the waivers).
Point being: TANF may have had some positive effects on the headline poverty rate, but it didn't single-handedly work miracles.
Winship's arguments about the poorest of the poor are interesting but less sturdy. Take his analysis of deep poverty, which, again, is the fraction of children living below half of the poverty threshold. Just like the Center on Budget and Policy Priorities (CBPP), his results show that once you've accounted for the way households tend to under-report the benefits they receive from the government, deep poverty among children rose after welfare reform. He finds the rate is lower overall, because, among other things, he adjusts his numbers using a non-standard measure of inflation called the Personal Consumption Expenditure Deflator, and includes Medicaid benefits as income. (The latter move is a debatable, but not entirely ridiculous, choice. The value of health insurance partly just reflects the absurd escalation of medical costs in this country, but it's also obviously valuable). But the same basic pattern remains, as you can see from the green and purple lines below.
Winship argues that these changes are too small, and the data too imprecise, to make any judgments about it. When the CBPP looked at the issue, however, it found the rise in deep poverty after welfare reform to be statistically significant. Winship also suggests that the whole issue could be an artifact of bad data collection. Families receiving fewer welfare cash benefits, he argues, may just be under-reporting their incomes more severely than before:
Imagine a family where earnings are completely unreported—and large enough that, if reported, they would be enough to escape deep poverty. Imagine, too, that welfare income is reported fully and also amounts to over half the poverty line. Now imagine that welfare income disappears over time, so that those earnings eventually become the only income received by the family. The family will, at some point, appear to fall into deep poverty, even though it remains above the deep poverty threshold the whole time, thanks to its (unreported, unchanging) earnings.
This is an elegant theory. But in practical terms, it's also not very reassuring, at least if you're concerned about the wellbeing of America's children. Winship is essentially saying that while it's entirely possible welfare's demise left a substantial number of needy families a bit poorer, they may nonetheless have enough secret income to keep them above the somewhat arbitrary mark of 50 percent of the poverty threshold. I am not sure how many people are going to comforted by this speculation. Which is, I repeat, just speculation.
Winship's attempt to debunk Shaefer and Edin's now-famous $2-a-day statistic is equally shaky. The point of the pair's research is that a slice of America is living largely without access to ready cash income, which leaves their lives especially prone to hardship and disaster. Food stamps and Medicaid are wonderful, but unless you illegally sell your SNAP benefits (which some people of course do), they don't let you pay a phone or electricity bill. They don't let you fill up your car to get to work or fix a leak that's destroying your house. Even if you do include the value of certain benefits as income, the researchers find that the number of Americans living below the $2-per-person-per-day mark still rose in the wake of welfare reform.
Winship's response is to mimic Shaefer and Edin's analysis using a different data set. (They rely on the Survey of Income and Program Participation, while he chooses census figures. You can argue about which is superior for these purposes. I won't bore you.) His graphs show that, in fact, the number of children living below the $2-per-day mark began its current upward trend prior to welfare reform. This suggests that Clinton's legislation may have merely exacerbated an old trend rather than singlehandedly caused it. That's an interesting point, but not necessarily helpful to his cause.
Winship then attempts to make the trend disappear by adding in Medicaid and other noncash benefits and tweaking his inflation measure before finally doing away with the conceit of measuring dollars, per-person. As he puts it:
Rather than dividing income by the number of household members to determine whether income is above $2 a day, Line 7 divides income using an “equivalence scale” that better accounts for the needs of households with different numbers of adults and children. I used an adjustment based on the recommendation of an expert panel convened in the mid-1990s. This adjustment lowers extreme child poverty rates even further.
Suffice to say, Winship is no longer measuring the same thing as Edin and Shaefer at all. Instead he's gone and created his own measure of extreme hardship that, among other things, illustrates how government benefits—especially Medicaid and food stamps—have helped prevent a good deal of desperate need in this country in the years after cash welfare was eviscerated. This is encouraging, but a bit odd coming from a Republican, given that the party's congressional delegation has spent the last six years vowing to shred those programs.
Winship's paper is long and detailed, and I can't possibly do it justice by addressing all of its arguments, point by point. But his main ones, again, do little in my mind to dispel the idea that something has gone wrong for the very poor in the two decades after welfare reform. He points out that that data on consumption tend to suggest lower levels of poverty than data on income. Of course, part of that may have to do with the ready availability of predatory credit in this country. Moreover, research has shown that the Consumer Expenditure Survey (which Winship's favored researchers rely on) is a bit of an outlier when it comes poverty trends, and doesn't track well with other indicators like unemployment or consumption figures from the Panel Survey of Income Dynamics. He suggests that the rise of food stamp applicants with no income may be a product of the same of under-reporting that he thinks influences deep poverty. This is, again, mostly speculative. But he does marshall some evidence. For instance, he cites a government study that interviewed 50 food stamp recipients and found a little more than half made money they didn't report by doing things like odd jobs for friends and family, like mowing lawns. Of course, were their part-time lawncare businesses properly accounted for, I'm guessing most of those people would still qualify as dirt poor—to use a technical term.
Winship's study is a valuable demonstration of just how much freedom researchers have when it comes to crafting poverty data. Add in some Medicaid benefits here, impute some food stamps there, and you can totally change a trend line. But while it raises questions about the stats underlying the case against welfare reform, it hardly disproves them.
Still, I do hope people read this paper. It's not often a conservative mounts this kind of a defense of what remains of our safety net.
Nextdoor, a Social Network for Neighborhoods, Has a Racial Profiling Problem. Will This Change Fix It?
This is something any company that maintains an online community will want to pay attention to.
Neighborhood social network Nextdoor found itself facing intense criticism last year over instances of racial profiling on its platform. The issues reached a point where officials in Oakland, California debated whether to ban use of the platform by city departments.
Users were reporting everyday activities of members of minority groups in their neighborhoods as “suspicious.” Some users allegedly threatened to report others who raised concerns about racist posts. One user who had raised concerns was said to be removed from her neighborhood group.
The CEO Who Hiked EpiPen Prices Actually Just Said, “No One’s More Frustrated Than Me”
After drawing public wrath and congressional scrutiny over its decision to raise the price of life-saving EpiPens to about $600 a pack, Mylan is trying to save its image. On Thursday the pharmaceutical company announced it would give a $300 coupon to lower- and middle-income customers who have to pay for the device out of pocket because they lack health coverage or have a high-deductible insurance plan (previously, it offered a $100 discount card). Meanwhile, CEO Heather Bresch appeared on CNBC's Squawk Box to try to quell some of the outrage by laying blame for the price hike at the feet of our “broken” health care system.
It was not an especially convincing performance.
Before we get into Bresch's interview, a word about the coupon. Even at half price, EpiPens—which stop allergic reactions by injecting epinephrine into users—are still far more costly today than a few years ago. (Full disclosure: I carry one myself). When Mylan purchased the device in 2007, a pack cost about $100. Giving patients a 50 percent break after increasing prices 500 percent is not exactly a sweeping act of charity, even if it does help some families erase their entire co-pays. It's also worth noting that this latest move is very much in Mylan's own self-interest. Pharmaceutical companies don't typically make their profits off of middle-income patients who have to choose between gas money and their kids' allergy meds; rather, they count on big payments from insurers, who pass it on to consumers in the form of higher premiums. Obscuring the true cost of drugs from the public through discounts and donations is part of the game pharma manufacturers play to avoid accidentally causing an uproar of the sort Mylan has witlessly stumbled into—which is to say, Bresch and her fellow executives were negligent in not offering that coupon sooner.
And now about that CNBC spot. Mylan's main talking point seems to be that journalists have erred by focusing on the EpiPen's list price of $608 per pack. In reality, few patients actually pay that cost, the company notes, because they are either insured or receive a discount. Meanwhile, Mylan itself only makes about $274 on each sale—the rest goes to other companies in the drug supply chain, including wholesalers, pharmacies, and pharmacy benefit managers. It even put together a handy flow chart for PR purposes.
Bresch echoed this point in her interview with CNBC's Brian Sullivan. But then things got a bit weird, as the CEO declared that she too was outraged by the high cost of America's prescription drugs.
Brian Sullivan: But surely you must understand the outrage. Somebody I talked to last night said people are outraged because it seems outrageous. That the American Medical Association has said this is basically the same product it was in 2009. And yet the price has gone up 3 or 400 fold.
Heather Bresch: Look, no one’s more frustrated than me. I’ve been in this business for 25 years…
Sullivan: But you’re the one raising the price, how can you be frustrated?
Bresch: My frustration is there’s a list price of $608. There is a system. I laid out that there are four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter. No one, everybody should be frustrated, I am hoping that this is an inflection point for this country. Our health care is in a crisis. It’s no different than the mortgage and financial crisis back in 2007. This bubble is going to burst.
This would all make more sense—and feel less hollow—if Mylan were not actually profiting from its price increases. In that case, it could fairly argue that leechlike middlemen were pushing up costs while allowing manufacturers to take the blame. And, to be sure, there is some of that going on. As the New York Times notes, Mylan upped EpiPen list prices by about 30 percent in 2015, yet didn't record any additional revenue. That suggests pharmacy benefit managers—which deal with prescription drugs for insurers and other clients—managed to negotiate some fairly large discounts. But make no mistake, Mylan has cashed in. Per the Times:
In other years, though, sales of EpiPen rose by larger amounts and Mylan seemed to have retained about half the extra revenue that would be expected from its list price increases and prescription growth, according to Umer Raffat, an analyst at Evercore ISI. Even in 2015, he said, the rebates were kept by insurers and pharmacy benefit managers, and were not seen in lower prices paid by consumers.
“Someone definitely got that,” Mr. Raffat said of the rebates. “Who is that? It wasn’t passed on to customers.”
If you want to boil it down even further, think of it this way: Mylan is crying that it only gets to keep $274 each time someone buys an EpiPen pack. That's still nearly three times the list price when it acquired the product.
So, I am sure Bresch truly is frustrated by the fact that Mylan is taking most of the heat for price increases when other companies are profiting from them, too. But that doesn't excuse her company's own role. As the Times reports, the manufacturer appeared to be increasing the EpiPen's price to squeeze a few last inflated profits from the product before a generic competitor landed on the market. In a twist, though, the Food and Drug Administration rejected the generic, and the EpiPen's one major alternative was pulled from pharmacies due to reliability issues, leaving Mylan with an unexpected monopoly that it is now profiting from. Is it the company’s fault the government nixed its big new competitor? No. But nobody forced Mylan to jack up prices for one last big sales push.
It all almost makes you miss Martin Shkreli; at least he was happy to own his villainy.
Good Lord. Even the Price of Insulin Is Skyrocketing.
At this point, it’s getting hard to keep track of all the stories of drug companies jacking up the prices of prescription medications to nauseating heights for little identifiable reason other than the fact that, unlike in other developed countries, the U.S. government lets them. At the moment, Congress is getting exercised over EpiPens, the fast-acting epinephrine injectors made by Mylan that are used to stop potentially deadly allergy attacks. (I carry one myself, because bees.) Mylan has upped EpiPen prices by 400 percent since it bought the decades-old device from Merck in 2007. The company says the moves are justified by “product improvements,” a line that presumably even they couldn’t possibly believe. Sen. Chuck Grassley has some questions.
On Wednesday I noticed yet another disturbing story about drug prices—one that, despite some coverage in the New York Times and elsewhere, hasn’t become a national scandal quite on the order of the EpiPen or the adventures of Martin Shkreli. It turns out that the cost of insulin, which diabetics rely on to stabilize their blood sugar, has been going through the roof. A study published by the Journal of the American Medical Association in April found that between 2002 and 2013, insulin's cost had leapt by more than 200 percent, from $231 to $736 per patient annually.
“Insulin is a life-saving medication,” William Herman, one of the study's authors and a professor of medicine and epidemiology at the University of Michigan School of Public Health, told Stat at the time. “There are people with type 1 diabetes who will die without insulin. And while there have been incremental benefits in insulin products, prices have been rising. So there are people who can’t afford them. It’s a real problem.”
Drugmakers have a few go-to excuses when reporters query them about price hikes. The drugs are typically covered by insurance, so patients don't really feel the pain. They offer big discounts, so list prices don't necessarily reflect what people and companies are paying on the market, etc.
What makes the insulin story so disturbing is that it specifically affects patients who are likely to have trouble affording meds. Diabetics tend to be older—the JAMA study found the average user was 60—and many rely on Medicare Part D's prescription drug benefit to cover their prescriptions. Unfortunately, Part D has a coverage gap, sometimes called the “doughnut hole,” that can force seniors with high drug expenses to pay thousands of dollars out of pocket.
Faced with high costs, many patients seem to be skipping or rationing shots of a hormone they are required to take multiple times a day in order to stay alive, keep from going blind, or lose a foot to amputation. At least, that's what seems to be happening if you believe the front-line reports from doctors in clinical practice. Take these stories from a recent article in the Missoulian (it got a write-up at Consumerist, which is how I came across it):
Hirsch and many of his colleagues are not subtle when they describe what “price gouging of a medication required for survival” is doing to their patients.
“I had a patient tell me her insulin bill is suddenly costing her as much as her mortgage,” Hirsch said.
Dr. Claresa Levetan, chief of endocrinology at Chestnut Hill Hospital, said “just about 100 percent of them are having problems affording the higher cost of insulin.
“I see people every day in the hospital because they can’t get their required doses of insulin. Many are in the ICU with what is called diabetic ketoacidosis, a life-threatening condition. This lack of insulin brings the patients to a critical juncture, where they will become extraordinarily sick, go into a coma and could ultimately die.
“I have patients who tell me that they have to make a decision between food and insulin, and their rent and insulin.“I mean, seriously, food, rent or insulin,’’ she said.
Why is the price of insulin, a hormone we've known about since the 1920s, spiking? There seem to be a few major reasons, all of which speak to the fundamental dysfunctions in the pharmaceutical market. Rather than compete against one another, the three major drug companies that produce insulin in the U.S.—Sanofi, Eli Lilly, and Novo Nordisk—seem to have raised their prices in tandem. As Bloomberg explains, this follow-the-leader approach is called “shadow pricing,” and it’s fairly common in pharma. At the same time, there is no generic insulin on the U.S. market, in part because the branded makers have found ways to extend their patents by making small improvements to the product. There may be more competition on the horizon, as Eli Lilly is expected to start selling a biosimilar version of Sanofi's Lantus. But experts only expect that to shave 20 or 30 percent off the cost. Pharmacy benefit managers, which handle prescriptions and negotiate with drugmakers on behalf of insurers, are another likely culprit. These companies often receive commissionlike “rebates” from drug producers that may be encouraging them to buy more expensive products for their clients, as Kasia Lipska noted in the New York Times in February.
As always, though, the overriding issue is that unlike most developed nations, the U.S. government doesn't cap what drugmakers can charge. Instead, we have a semifree market that lets essentially monopolistic drugmakers set prices for essential drugs, with the frequently misplaced assumption that generic competition will lower costs somewhere down the line. In the case of insulin, we're starting to see the human casualties the system leaves behind.
The U.S. Government Is Buying 11 Million Pounds of Cheese
Behold: cheese mountains. No longer mere tasty figments of your most sumptuous daydreams, giant stockpiles of cheese have been amassing all over the country for months. And now, the U.S. government is going to buy them.
I Would Like to Take Back One Mean Thing I Said About Jill Stein. (It Involves Bees.)
I try to follow the principle that people should update their beliefs to reflect new information as it comes along, and admit when they were wrong when called for. In that spirit, I would like to retract one of the (many) critical things I have written about Green Party presidential candidate Jill Stein.
I admit it. I was too harsh on her stance regarding honeybees.
Last month, I wrote an article titled "Jill Stein's Ideas Are Terrible. She Is Not the Savior the Left Is Waiting For." Among other issues, it noted that Stein and her party seemed to have an unfortunate tolerance for scientific quackery, such as fearmongering over vaccines and genetically modified foods. That fundamental fact hasn't changed. However, the following line in my piece has not aged well:
She would also “Ban neonicotinoids and other pesticides that threaten the survival of bees, butterflies, and other pollinators.” This is a nod to the discredited theory that some pesticides are driving the collapse of honeybee populations (which, by the way, are not actually collapsing).
I spoke too soon. A major new study published this week in Nature Communications suggests that neonicotinoids, or neonic pesticides, may be responsible for the long-term decline in England's wild bee population. Including Stein's concerns about pollinators on her anti-science rap sheet, it seems, was excessive.
Why did I write that the bee theory was “discredited” in the first place? The bee issue involves several distinct but interrelated scientific issues. But when I read Stein's platform plank about pesticides and pollinators, I took it primarily as a reference to the hysteria over colony collapse disorder, “the phenomenon that occurs when the majority of worker bees in a colony disappear and leave behind a queen,” as the Environmental Protection Agency puts it. (Yes, her platform plank mentions butterflies too, but they haven't been the focus of a recent media frenzy.) Commercial beekeepers started reporting incidents of collapse in 2006, and the story eventually reached an apocalyptic pitch around 2013. Magazines asked readers to imagine a world without bees. They churned out portmanteaus to describe an impending “beepocalypse” and “beemageddon” that could wreck American agriculture (something has to pollinate all those almonds in California, after all). The timing was a bit ironic; just as U.S. journalists had started whipping up a frenzy over the issue, the percentage of hive losses due to colony collapse disorder each year was actually in decline. But beekeepers have continued to watch a very large fraction of their colonies die annually, and nobody has figured out precisely why. The running theory is that it's probably a combination of factors including parasites like the varroa mite, disease, poor nutrition, habitat destruction and, yes, the multitude of pesticides, herbicides, and fungicides bees encounter in the field.
Many environmental groups, though, have tried to pin blame specifically on neonics, which American farmers began using in the 1990s. The evidence has never been especially strong (though that didn't stop Europe from passing a temporary ban on their use out of an abundance of caution). While scientists agree that neonics can be lethal for bees in large enough doses—they are pesticides, after all—it's not clear the quantities they encounter in the field have much effect. After reviewing the experimental literature and circumstantial evidence, a trio of the field's leading experts concluded in 2012 that, “dietary neonicotinoids cannot be implicated in honey bee declines.” Their position, they added, was “provisional because important gaps remain in current knowledge.” But a smoking gun still hasn't really emerged. The authors of one widely touted study in 2014 claimed they had demonstrated that “neonicotinoids are highly likely to be responsible for triggering 'colony collapse disorder' in honeybee hives that were healthy prior to the arrival of winter.” But the paper was written off by experts who noted that its authors had exposed the poor insects to unrealistically massive doses of pesticides that manufacturers already acknowledged were deadly.
It's also important to understand that despite the large die-offs that have become a yearly event, the U.S. commercial honeybee population actually rose after 2006, thanks to beekeepers who've become adept at rebuilding their colonies. In 2014, it reached a 20-year peak.
So I went with "discredited." Afterward, I had some testy Twitter conversations about whether that word was too strong—there are studies showing neonics have sublethal effects on honeybees for instance, so it's conceivable that they play some role in the constellation of factors behind colony wipeouts. But I felt comfy with my language.
Thanks to the new research out of England, which was funded by the U.K. government, I feel differently. As Nature notes, the study “is the first to link the controversial insecticides [neonics] to the decline of many bee species in real-world conditions.” The scientists looked at 62 species of wild bees using 18 years of data, and found that populations tended to disappear in areas where oilseed rape had been treated with neonics. Notably, species that foraged on the crops suffered significantly greater declines than those that did not. Overall, they estimated the pesticides cut the number of populations by 7 percent on average, and about 10 percent for foragers that may have been feasting on the pesticides.
“Our results provide the first evidence that sub-lethal impacts of neonicotinoid exposure can be linked to large-scale population extinctions of wild bee species, with these effects being strongest for species that are known to forage on oilseed rape crops,” the authors conclude. Industry representatives have complained that the study is only correlational, but I haven't seen an especially compelling rebuttal yet.
To be clear, this study is not about commercial honeybee populations, which are biologically distinct creatures from the wild bees involved in this research. In fact, they are specifically excluded from the study. The scientists write that their results do “support the findings of previous studies on commercially bred pollinators that have identified the underlying mechanisms affecting mortality.” But field research out of Sweden has previously suggested that neonics may have worse effects on wild than domesticated bees. Either way, the paper notes that its authors have received funding for a separate large-scale study on neonics and honeybees.
More to the point, this makes it pretty clear that the neonic controversy shouldn't be tossed into the quack science bin, especially if one is fretting over wild bee populations, which have tended to receive less focus in the U.S., but could certainly be covered by the language in Stein's platform. It seems I leaned a little bit ahead of my skis on this one.
Who’s Left to Embarrass Silicon Valley Now That Peter Thiel Has Killed Gawker?
On Thursday, the fallout from Peter Thiel’s vendetta against Gawker Media continued with the news that the company’s flagship blog, Gawker, will shut down, even as its other properties live on under new ownership. That sounds like a nail in the coffin for the brand of hypocrisy-shaming dirt-dishing that Gawker and its defunct sibling Valleywag pioneered. Which is, of course, exactly what Thiel intended.
In a New York Times op-ed earlier this week, the PayPal and Palantir co-founder argued that his backing of Hulk Hogan’s lawsuit against Gawker wasn’t simply an act of revenge for a 2007 Valleywag post that outed him as gay. Rather, he argued, it was a defense of online privacy, and therefore no one need fear a broader chilling effect on America’s press freedom. “As for Gawker,” he added, “whatever good work it did will continue in the future, and suggesting otherwise would be an insult to its writers and to readers.” What exactly Thiel meant by that particular sentence is hard to parse. What good work does he think Gawker did? What made him think that good work would continue following the company’s bankruptcy? And exactly when did the man who crushed Gawker grow so concerned about people insulting it?
But let's try for at least a moment to take this claim seriously. With Valleywag already dead of (mostly) natural causes and Gawker by Thiel’s hand, who in the media should we expect to carry on their legacy, particularly with respect to the demimonde that Thiel inhabits, the high-flying society and culture of Silicon Valley and the technology industry?
The answer is not immediately obvious.
That's partly because, as Adrienne LaFrance observes in an essay for Nieman Reports, the technology industry now enjoys unprecedented power over the media. The man who owns Amazon also owns the Washington Post; a co-founder of Facebook bought and overhauled and then sold the New Republic; even the Intercept, an explicitly investigative enterprise, owes its existence to a tech magnate. BuzzFeed isn't owned by Silicon Valley billionaires, but it does rely on their venture capital funding. That doesn’t mean these companies’ owners shape their tech coverage, but it creates at least the potential for conflicts of interest.
Even those publications that aren't owned by tech kingpins are beholden to the technology industry in troubling ways. We're beholden to them for basic access to products and information, which Machiavellian PR operations like Apple’s staunchly withhold from any journalist or publication they consider overly critical. And our entire industry is now beholden to them for the distribution of our work to readers, which social media companies such as Facebook and Snapchat increasingly mediate. To make matters worse, LaFrance notes, tech journalism lacks an oppositional reporting tradition, because it began as fodder for a sort of advertising-friendly consumer-lifestyle section. As the New York Times' David Streitfeld puts it: "There is no Woodward and Bernstein or Kate Boo of tech reporting."
To be clear, Gawker or Valleywag's tech blogging rarely if ever rose to anything approaching Pulitzer-worthy investigative work—that wasn’t its role. Some of the work was petty and cheap. Much of it was not reporting at all, but aggregation of news reported elsewhere, filtered through a lens of righteous fury. Yet Gawker's refusal to pull punches meant that it landed some pretty good ones. And if its lens was rather monochromatic, it was at least of a more vivid color than the rose-tinted access journalism that prevails in the mainstream tech press.
There are really two voids, then, in contemporary coverage of the technology industry.
There has always been a dearth of sober, meticulous, investigative tech journalism. That's due in part to the factors mentioned above, but also to big tech firms' ruthless control over access to their own information. Draconian nondisclosure agreements for all employees are the norm, and they’re strictly enforced, to the point that workers at a company like Apple can't even tell their spouses what they're working on. (Gawker Media’s Gizmodo was among the first to shine a light on the company’s extreme secrecy.)
And now we have a second, Gawker-size hole in the supply of lively, critical commentary and personal gossip about the fabulously powerful and secretive people who increasingly control the world's information (and a good chunk of its money). What kind of people did Google executive Eric Schmidt follow on Instagram? What did a protected California redwood forest look like after entrepreneur Sean Parker held his “dream wedding” there? How much did Mark Zuckerberg pay to buy his neighbors’ houses so that he could protect his own privacy, after insisting that Facebook users surrender much of theirs? And how did he feel when paparazzi deprived him of it? We know the answers to these questions partly because Gawker brought them to wider public attention. Who among our docile tech press will do that now that it's gone?
A better question might be: Who would dare, now that Thiel has set a precedent for Silicon Valley's ruling class to wield their fortunes to exact revenge on publications that offend them? Who would want to, now that he has successfully made the Gawker mothership so toxic that a new owner would rather shutter it than keep the lights on?
These aren’t rhetorical questions. There are journalists out there who were holding industry captains to account in various ways long before Valleywag and Gawker shut down, and I don't doubt that they'll continue to do so even in the face of the existential threat posed by tycoons with vendettas. There just aren't enough of them.
Here are a few, though, that come to mind. I’m thinking of people like ex-Valleywag editor Nitasha Tiku and Charlie Warzel of BuzzFeed; former Valleywag writer Sam Biddle, who recently decamped from Gawker to the Intercept; Michael F. Nuñez of Gizmodo; Kashmir Hill of Fusion (and editor Alexis Madrigal, who broke the Parker wedding story); Zeynep Tufekci, a UNC professor who writes for the New York Times’ opinion section; and Streitfeld, a relentless pursuer of Amazon for the New York Times. These are not all necessarily the finest journalists covering the industry—although some of them are that too—but those who can be counted on to cover its powerful companies and personalities with a critical eye and an investigative edge. Many of them likely also have smart and fearless editors behind them, supporting their work. And, thankfully, there are investigative reporters at major news organizations who sometimes range into tech, like the Wall Street Journal’s John Carreyrou, who broke the Theranos scandal. Meanwhile, the fictional HBO show Silicon Valley has forged entertaining satire out of the same sort of material that Valleywag used to report on.
Here are a few more names proposed by people who responded to my query on Twitter (some more earnestly than others):
I believe that the Forbes Contributor Network will keep tech executives in line. https://t.co/tKHzZJyaP4— Prof Jeff Harambe (@ProfJeffJarviss) August 18, 2016
There are more that we’re missing, I'm sure. If you think of them, please feel free to post their names in the comments so that Thiel's lawyers can start combing through their records for actionable misdeeds. I mean, so that we can all applaud and benefit from their noble work.
Disclosure: One Slate editor is married to a Gawker editor. One is married to a lawyer who represented Gawker in the Hulk Hogan trial. One is a former Gawker Media executive editor. None of these Slate staffers worked on this story.
Harley-Davidson Has to Stop Selling a Pollution-Causing Device and Pay $15 Million
On Thursday the U.S. Department of Justice and the Environmental Protection Agency announced that famed motorcycle manufacturer Harley-Davidson has agreed to pay a $12 million civil fineafter selling illegal after-market devices, called super tuners, that increased vehicles’ emissions. The settlement also requires that Harley-Davidson pay $3 million in a deal with the EPA to help mitigate air pollution caused by the super tuners, buy them back from its dealers, and destroy them.
According to the government, since 2008 Harley-Davidson has manufactured and sold about 340,000 Screamin’ Eagle Pro Super Tuners, which allow users to modify their motorcycle’s emission control system and increase power and performance. Officials claim that these tuners allow riders to violate the Clean Air Act because of the higher emissions that resulted.
Obama Administration to San Francisco: Your Anti-Gentrification Plan Promotes Segregation
Last fall, San Francisco passed a bill designed to give the city’s dwindling black population a better shot in the lottery for subsidized housing. The legislation reserved 40 percent of all new subsidized housing for people already living within a half-mile of the project or within its municipal district.
On Wednesday, the San Francisco Chronicle reported that the U.S. Department of Housing and Urban Development had rejected that plan for a senior housing development in the Western Addition neighborhood, writing to the city that it could “limit equal access to housing and perpetuate segregation,” in violation of the Fair Housing Act.
It’s a statement that could resonate beyond projects that, like that San Francisco senior center, have been financed directly by HUD. The department has long supported the use of so-called local preferences in public housing, based on “local housing needs and priorities.” But the letter seems to indicate that Washington may be changing its position as part of an aggressive push towards integration in housing.
Why Another Big Insurer Is Bailing on Obamacare
On Monday night, Aetna announced that it will stop offering health coverage through the Affordable Care Act's marketplaces in most of the states where it currently does so, making it the latest major insurer to pull back from the exchanges after losing significant amounts of money on them. The company currently markets Obamacare plans in 15 states; next year, it will sell them in just four. As a result, Americans in many parts of the country will have fewer options when shopping for health insurance in 2017, and there is at least one market, Pinal County in Arizona, where as of now no insurers—as in zero—are planning to provide coverage through the exchanges*.
Aetna is the country's third largest insurer and currently enrolls about 1.1 million customers in its Obamacare plans. The company is expecting to lose more than $300 million on that portion of its business this year. And its troubles mirror those of its fellow large insurers that have had difficulty making a go of it on the exchanges. In July, Humana said it would cut back from 19 to 11 states after losing around $1 billion over the past two years on its ACA business. UnitedHealth Group, the country's largest insurance carrier, has decided that beginning next year it will operate in “three or fewer exchange markets,” down from 34, after losing a few hundred million itself.
So what does this trend mean for the health of health care reform? I think there are two basic ways you can spin it. The upbeat story would be that this is a victory for consumer choice, which is how Sara Collins of the Commonwealth Fund framed things in an interview with CNBC. The big insurers, like Aetna, are known for selling pricey coverage to employers (an Aetna plan is one of the options for Slate employees) or to Medicare beneficiaries, and so they weren't necessarily equipped to compete for consumers on the exchanges, who've turned out to be very, very cost-conscious. In contrast, some of the smaller companies like Centene that have been making a mint on the Obamacare exchanges had a background serving Medicaid enrollees, which gave them a leg up catering to low-income customers. “It is not surprising given the high level of price competition that there will be winners and losers in the reformed individual insurance market," Collins said. "Aetna's announcement this week is consistent with this."
The more dour story, which Carolyn Johnson at the Washington Post lays out nicely, is that Obamacare enrollees are simply just much older and sicker than big insurers like Aetna expected, and that's made it impossible to earn a profit off them. Companies hoped that after an initial wave of high-cost customers signed up in Obamacare's early days, more young and healthy Americans would trickle into the market. That doesn't seem to be happening yet. Last week, for instance, the Department of Health and Human Services released a report finding that medical costs for exchange customers didn't budge between 2014 and 2015. The agency painted that as a good thing, but for companies like Aetna that were counting on an influx of spry, twentysomething SoulCycle addicts to balance out all their 50-year-old customers in need of hip replacements, no news was bad news.
In reality, these two stories can exist at once. Obamacare's risk pool—the ratio of sick to healthy customers on the exchanges—is probably worse than a lot of these companies like. At the same time, behemoths like Aetna are probably getting outcompeted for young patients at the low end of the market by companies offering cheaper, less expansive coverage. Fundamentally, though, Aetna, Humana, and UnitedHealth's decisions to bail simply aren't a positive sign for the current state of Obamacare, which was designed to expand coverage largely by subsidizing private insurance. In order for that to work, private insurers need to make a profit. And in an ideal world, the Affordable Care Act's marketplaces would be large and diverse enough to support the major insurers that offer fuller plans, as well as the smaller companies specializing at rock-bottom prices. Unfortunately, that's just doesn't seem to be the case yet.
Update, August 17: This story has taken a somewhat interesting political twist. In the wee hours of Wednesday morning, HuffingtonPost broke the news that Aetna wrote a letter to the Justice Department in July threatening to pull out of the exchanges if the government sued to block its proposed merger with Humana. “[I]nstead of expanding to 20 states next year, we would reduce our presence to no more than 10 states,” CEO Mark Bertoli warned. Of course, the DOJ went and sued to stop the merger anyway.
Even before this scoop, Sen. Elizabeth Warren had suggested that Aetna’s decision to bail on the marketplaces might have been motivated by its merger battle, writing in a Facebook post that, “The health of the American people should not be used as a bargaining chip to force the government to bend to one giant company's will." As Bertoli’s letter shows, Warren wasn’t entirely off base. But in the end, I don’t think it makes sense to characterize Aetna’s decision as a case of corporate blackmail. The bottom line is that the company has been losing money on the exchanges—it can’t lie about that in public. Merging might have made remaining in the marketplaces more tenable. Or, maybe the company was just promising to expand to new markets in order to win merger approval—companies make all sorts of flimsy projections about the wonderful things that will happen post tie-up in order to win regulatory approval. It’s hard to tell. But if Aetna were making a killing on Obamacare plans right now, or thought it was about to be, I don’t think it’d cutting and running right now.
*Correction, Aug. 16, 2016: This article originally misidentified the county in Arizona where there are presently no insurers planning to participate in the health care exchanges next year as Pinellas County. It is Pinal County.