Public Policy and Governance – Page 158

More About Economic Systems

A comment posted to yesterday’s blog noted that I had not defined capitalism. Fair point.

The following description is from my last book, Talking Politics? What You Need To Know Before Opening Your Mouth, in which I included the following descriptions/comparison of capitalism and socialism.

Capitalism is defined as an economic and political system in which a country’s trade and industry are controlled by private owners for profit. It is characterized by free markets, where the prices of goods and services are determined by supply and demand, rather than set by government. Economists often define the ideal of free trade as a transaction between a willing buyer and a willing seller, both of whom are in possession of all information relevant to that transaction.

Understanding the importance of free trade to capitalism is important, because it defines the proper role of government in a capitalist system—as an “umpire” or referee, ensuring that everyone plays by the rules. For example, Teddy Roosevelt reminded us that monopolies distort markets; if one company can dominate a market, that company can dictate prices and other terms with the result that those transactions will no longer be truly voluntary. If Manufacturer A can avoid the cost of disposing of the waste produced by his factory, by dumping it into the nearest river, he will be able to compete unfairly with Manufacturer B, who is following the rules governing proper waste disposal. If Chicken Farmer A is able to control his costs and gain market share by failing to keep his coops clean and his chickens free of disease, unwary consumers will become ill. Most economists agree that in order for markets to operate properly, government must act as an “umpire,” assuring a level playing field.

This need for government is a response to what economists call “market failure.” There are three situations in which Adam Smith’s “invisible hand” doesn’t work: when monopolies or corrupt practices replace competition; when so-called “externalities” like pollution harm people who aren’t party to the transaction (who are neither buyer nor seller); and when there are “information asymmetries,” that is, when buyers don’t have access to information they need to bargain in their own interest. Since markets don’t have built-in mechanisms for dealing with these situations, most economists argue that regulation is needed.

Economists and others often disagree about the need for particular regulations, but most do agree that an absence of all regulatory activity undermines capitalism. Unregulated markets can lead to a different system, sometimes called corporatism. In corporatist systems, government regulations favoring powerful corporate interests are the result of lobbying by corporate and monied special interests that stand to benefit from them. You might think of it as a football game where one side has paid the umpire to make calls favorable to that team.

Socialism is the collective provision of goods and services. The decision whether to pay for certain services collectively rather than leaving their production and consumption to the free market can be based upon a number of factors. First, there are some goods that free markets cannot or will not produce. Economists call them public goods, and define them as both “non-excludable” –meaning that individuals who haven’t paid for them cannot be effectively kept from using them—and “non-rivalrous,” meaning that use by one person does not reduce the availability of that good to others. Examples of public goods include fresh air, knowledge, lighthouses, national defense, flood control systems and street lighting. If we are to have these goods, they must be supplied by the whole society, usually through government, and paid for with tax dollars.

Not all goods and services that we provide collectively are public goods. Policymakers have often based decisions to socialize services on other considerations: we socialize police and fire protection because doing so is generally more efficient and cost-effective, and because most of us believe that limiting such services only to people who can afford to pay for them would be immoral. We socialize garbage collection in more densely populated urban areas in order to enhance the livability of our cities and to prevent disease transmission.

Getting the “mix” right between goods that we provide collectively and those we leave to the free market is important, because too much socialism hampers economic health. Just as unrestrained capitalism can become corporatism, socializing the provision of goods that the market can supply reduces innovation and incentives to produce. During the 20th Century, many countries experimented with efforts to socialize major areas of their economies, and even implement socialism’s extreme, communism, with uniformly poor results. Not only did economic productivity suffer, so did political freedom. (When governments have too much control over the means of production and distribution, they can easily become authoritarian.)

Virtually all countries today have mixed economies. The challenge is getting the right balance between socialized and free market provision of goods and services.

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My Timing Is Terrible

As some of my readers know, I ran for Congress in 1980. (I even won a Republican primary–and I was pro-choice and pro-gay-rights. That wouldn’t happen in the cult that has replaced the GOP of which I was a member!)

At the time, defense policy was an issue; among the positions I took was that , if we must have a draft, it should include women. (You are beginning to see why I lost the election.)

Well, it is now 39 years later, and a court has concluded that I was right. Not that the army is rushing to comply with the court’s ruling.

AUSTIN, Texas (AP) — The chairman of a panel considering changes to the U.S. military draft said Monday its recommendations to Congress won’t be influenced by a federal judge’s recent ruling that the current system is unconstitutional because it only applies to men.

The military has not drafted anyone into service in more than 40 years, but American men must still register when they turn 18. Recent efforts to make registration also mandatory for women have set off intense debate in Washington.

I have my concerns about our current all-volunteer army, which depends far too heavily on “contractors” (aka mercenaries), and enlists disproportionate numbers of poor kids who have few options while demanding no sacrifice from more comfortable ones. But that’s a post for a different day.

U.S. District Judge Gray Miller declared a male-only draft unconstitutional in his ruling late Friday, but he stopped of ordering the government to make any immediate changes. He said the time for debating “the place of women in the Armed Forces” is over. Women now make up 20 percent of the Air Force, 19 percent of the Navy, 15 percent of the Army and 8.6 percent of the Marines, according to Pentagon figures.

Among the many changes we have experienced since 1980, the nature of war and the identity of the threats America faces have changed rather dramatically. It will be interesting to see whether attitudes about the capacities and obligations of men and women have changed enough to enlarge the draft as well.

The decision comes as Congress awaits a report next year from an 11-member commission to study the issue of selective service. It is chaired by former Nevada Rep. Joe Heck, who personally supports that women also be required to register for the draft.

Heck said the ruling won’t influence its report or hurry along the eventual recommendations to Congress. He described a generational divide in public comments his commission has collected about women and the draft.

“If you talk to those who would be impacted, that is males and females ages 18 to 25, they say, ‘yes, women should have to register. It’s a matter of equality,’” Heck said. “If you talk to an older population, they’re the ones who seem to be reluctant.”

The lawsuit in Texas was brought by the National Coalition for Men, a men’s rights group. The Defense Department lifted the ban on women in combat in 2013, and Miller stopped of ordering the government to take any immediate action with the draft in his ruling late Friday.

The last major decision on selective service was the U.S. Supreme Court ruling in 1981 that upheld excluding women because they were not allowed to serve in combat at the time.

“While historical restrictions on women in the military may have justified past discrimination, men and women are now ‘similarly situated for purposes of a draft or registration for a draft,’” Miller wrote. “If there ever was a time to discuss ‘the place of women in the Armed Services,’ that time has passed.”

My time, on the other hand, may be at hand…

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Assaulting Democracy

The warning signs are everywhere.

Governing Magazine has added to the evidence that America is losing even the pretense of democracy.

In the first several years after the Affordable Care Act (ACA) helped states make more low-income people eligible for Medicaid, it was only Democratic-led states that took the federal government up on its offer. Republicans have since warmed to the idea — but only on their own terms, and sometimes even if it means going against voters’ wishes…..

While some Republicans in Georgia, Oklahoma and Wyoming are exploring the possibility of Medicaid expansion in their states, Idaho and Utah are undoing ballot measures that voters passed in November to expand Medicaid.

In Utah, the Republican governor responded to the success of a ballot initiative expanding Medicaid by signing a bill that would only cover people earning up to the federal poverty line; it would also cap enrollment if costs exceed what’s expected.

But the terms of the ballot measure, which passed with 53 percent of the vote, were to expand Medicaid eligibility to people earning up to 138 percent of the federal poverty line.

Utah has to get federal approval of this law, and similar measures were not approved during the Obama administration. The Trump Administration, of course, is hostile to pretty much everything the federal government does, so it might very well allow what is a clear repudiation of the will of the voters in Utah.

It isn’t only Utah.

Idaho is also eyeing a rollback of its citizen-led Medicaid expansion ballot measure. The initiative won handily, with 61 percent of the vote….But legislation to void the initiative is currently making its way through the Idaho statehouse.

And many of you will recall that in 2016, Maine voters approved Medicaid expansion, but the state’s certifiable nut-case then-governor, Paul LePage, prevented it from taking effect.

Whatever one’s position on Medicaid expansion, these are truly breathtaking examples of legislative and administrative chutzpah. The citizens of these states voted on an issue before them; in essence, they gave instructions to the people who are presumably in office to represent them. And those people simply ignored them.

This is not unlike Trump’s decision to declare an “emergency” that would allow him to defy a Congressional vote. Even if a member of Congress believes the wall should be built, he or she should be appalled by a Presidential action that strikes at the very heart of the Constitution’s separation of powers. It ignores as irrelevant the constitutional provision that vests decisions about spending in Congress, a provision that–before now–has constrained lawmakers and administrators alike.

Congress said no. That should have been the end of it. The President’s “emergency” is not only bogus, it ignores the clear division of authority mandated by the nation’s charter.

Yet every single Indiana Republican Representative voted against the House Resolution to reverse that dangerous attack on a fundamental element of American governance, placing the interests of their political party above both the good of the country and fidelity to their oaths of office.

Without the rule of law–without lawmakers and public officials who are willing to accept the decisions of voters whether they like those decisions or not; without lawmakers who are willing to insist upon compliance with the Constitution even when it is their party that is breaking the rules–we don’t have a democracy or a republic or even a legitimate government.

We have a banana republic.

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“Illegally Constituted” Legislatures..

Every once in a while, I read a news release that makes me go “wow!” I read this one twice–and I love it.

Wake County Superior Court Judge Bryan Collins struck downtwo of the state constitutional amendments passed by North Carolina voters last November. But the reason he gave for his decision was remarkable: in his view, the state legislature is so gerrymandered as to be an illegitimate body that doesn’t really represent voters, and thus had no authority to alter the state constitution.

“An illegally constituted General Assembly does not represent the people of North Carolina and is therefore not empowered to pass legislation that would amend the state’s constitution,” wrote Collins.

The amendments that were struck down by this ruling were an amendment requirement that voters present a strict photo ID at the polls, which is almost identical to a previous law a federal court said targeted African Americans “with almost surgical precision,” and an amendment capping the state income tax rate at 7 percent, which was a huge gift to the wealthy that jeopardized the state budget.

North Carolina voters had approved four constitutional amendments in a referendum, and the Judge let two of them go into effect. He found that the legislature’s description of the two amendments he struck down had been misleading. (A court had previously invalidated an earlier draft of language explaining the amendments.)

North Carolina has been called the most aggressively gerrymandered state in the country, and a case challenging its current legislative and congressional districts will be heard by the Supreme Court during its next term.

The Judge’s decision will, of course, be appealed, and there is no telling what the final outcome will be, but the decision ranks right up there with the pronouncement by a clear-eyed child in the well-known story: “the Emperor has no clothes.”

A few days ago, I cited David Leonhardt’s column in the New York Times, in which he catalogued state legislative actions contrary to the clear desires of the relevant voters, and I compared those examples to the repeated refusal of Indiana’s lawmakers to act on the demonstrable wishes of Hoosier voters that they pass a hate crimes bill.

Thanks to the prevalence of gerrymandering (and assorted other political “dirty tricks” including vote suppression), America currently has several state legislatures that meet Judge Collins’ criteria for illegitimacy.

When the “clothing” of rhetoric is stripped away, the fact that we no longer have a genuine democracy is the “naked” truth.

Three cheers for Judge Collins and his willingness to call it like it is.

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Those Pesky Facts…

Not long after Trump’s childish government shutdown ended, The Washington Post ran an article debunking five “myths” about the federal workforce.

The first myth on the list may be the most pernicious: that government workers earn more than their private-sector counterparts. As the article pointed out, this isn’t true if you are comparing apples to apples. Although workers with only a high-school diploma make slightly more if they work for the government, workers with professional degrees make somewhat less. But overall salary comparisons aren’t useful,

because “federal workers tend to be older, more educated, and more concentrated in professional occupations than private-sector workers,” according to the Congressional Budget Office. There are also comparatively few part-time workers in the government.

Other misconceptions included the belief that most people who work for the federal government are located in Washington, D.C. and don’t “rub elbows” with “real Americans”(actually, only about 1 in 6 federal employees work in D.C.), the belief that government is shrinking (actually, thanks to privatization, it has grown), the belief that private enterprises can deliver services at a lower cost than government (The Project on Government Oversight says that “the government pays billions more annually in taxpayer dollars to hire contractors than it would to hire federal employees to perform comparable services.”), and that it is virtually impossible to fire non-performing government employees (federal employees are fired all the time, although they do have more rights than private-sector employees, who basically don’t have any.)

The linked article includes data supporting each of its corrections, and it’s worth clicking through and reading it in its entirety, but I think the more interesting question involves the reason for these widely-held misconceptions.

I think it comes down to Americans’ ambivalence about government.

A persistent anti-government bias is a long-standing feature of American culture. Reagan’s famous quip that “I’m from the government and I’m here to help you” is met with fear resonated with so many voters because skepticism about government is “baked in” to the American worldview.

Ironically, however, when most Americans are concerned about a problem, whether local or national, their first impulse is to insist that government solve it.

In a rational world (and yes, I know we don’t inhabit such a world), we would launch a national discussion about what it is we believe government should–and shouldn’t–do.

(Unfortunately, thanks to our deficit of civic literacy, most Americans don’t understand that the answer to the the question “what shouldn’t government do?” is found in the Bill of Rights. As I tell my students, the Bill of Rights is essentially a list of things that government is forbidden to do.)

If we could hold such a national conversation, we might come to some agreement about what we expect government in the 21st Century to do–inspect the food supply, keep airplanes from crashing into each other, protect us from criminals and so forth. We might also reinforce understanding of things government has no business deciding–what we read, who we love, whether and how we procreate or pray.

The lesson we should have learned from the government shutdown is that Trump and his abysmal Cabinet are–thankfully– a very small part of the federal government. Despite their incompetence, thousands of people in government’s much-maligned workforce go to their jobs every day to ensure that government functions as expected. They aren’t perfect, and the incompetence at the top does do considerable damage, but without them, we’d be up that proverbial creek without a paddle. And the creek would be polluted.

Perhaps if Americans had a common understanding of the pesky facts about what government employees do every day, we would be less likely to sneer at “government work.”

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