Public Policy and Governance – Page 205

What Happened to Faith In The Market?

I’m a capitalist. A real one, not the Congressional variety. I believe in (properly regulated) markets, with the important caveat that I believe in markets in those areas of the economy where markets work. (Markets only work, I constantly remind anyone who listens, in transactions with a willing buyer and a willing seller, both of whom are in possession of all information relevant to the transaction.)

Being predisposed to competition and markets doesn’t mean I think government’s role is unimportant, or that public assistance is never warranted.Government can help markets in a number of ways: outlawing monopolies and anti-competitive practices or, in compelling cases, granting subsidies or tax incentives to industries deemed critical to the national interest.

It won’t surprise anyone reading this to discover that, in today’s America, subsidies are more often used to suffocate progress and protect profitable, established industries than to move the nation forward.

American business spokespersons can be counted on to profess devotion to markets. They can also be counted on to avoid competition whenever possible, because their belief in the market’s level playing field is wholly fictional.

As Vox recently reported,

The coal industry and its allies in the Trump administration have recently devoted considerable energy to arguing that subsidies to renewable energy have distorted energy markets and helped drive coal out of business. “Certain regulations and subsidies,” says Rick Perry, “are having a large impact on the functioning of markets, and thereby challenging our power generation mix.” You can guess which regulations and subsidies he’s talking about.

This is nothing new, of course. It is in keeping with a long conservative tradition of challenging the economic wisdom and effectiveness of energy subsidies.

At least, uh, some energy subsidies.

Energy analysts have made the point again and again that fossil fuels, not renewable energy, most benefit from supportive public policy. Yet this fact, so inconvenient to the conservative worldview, never seems to sink in to the energy debate in a serious way. The supports offered to fossil fuels are so old and familiar, they fade into the background. It is support offered to challengers — typically temporary, fragmentary, and politically uncertain support — that is forever in the spotlight.

The article goes on to shine that spotlight on those older subsidies, beginning with the twenty billion dollar annual production subsidy we taxpayers provide to the fossil fuel industries that contribute massively to climate change. We provide that financial assistance despite the fact that these companies are very, very profitable.

The twenty billion dollar figure is only a beginning. It subsidizes only direct production costs. Another $14.5 billion in consumption subsidies also benefit fossil fuel companies–things like the Low Income Home Energy Assistance Program(LIHEAP), which helps lower-income residents pay their (fuel oil) heating bills.

It also leaves out subsidies for overseas fossil fuel projects ($2.1 billion a year).

Most significantly, OCI’s analysis leaves out indirect subsidies — things like the money the US military spends to protect oil shipping routes, or the unpaid costs of health and climate impacts from burning fossil fuels. These indirect subsidies reach to the hundreds of billions, dwarfing direct subsidies — the IMF says that, globally speaking, they amount to $5.3 trillion a year. But they are controversial and very difficult to measure precisely.

Finally, OCI acknowledges that its estimates of state-level subsidies are probably low, since many states don’t report the costs of tax expenditures (i.e., tax breaks and credits to industry), so data is difficult to come by.

The best available estimate is that energy companies get $20.5 billion annually in corporate welfare, of which 80 percent goes to oil and gas, and 20 percent to coal. And we don’t know how much remediation will eventually add to that figure.

Vox’s summary says it all better than I could:

If you ask people in fossil fuel industries, their support staff in conservative think tanks, or fossil-state politicians, they will tell you why these fossil fuel production subsidies are necessary. It’s always been this way. They’re more than paid back by tax revenue. Other industries get them too. (For the record: More than half the $20 billion is available to fossil fuels alone). They create jobs. They’re important for national security. Tax expenditures aren’t subsidies at all, if you think about it. Etc.

If the endless debate over energy subsidies has taught me anything, it’s that nobody thinks their own subsidy is a subsidy — and no one outside think tanks and universities really gives a damn about the economic distortions of subsidies as such. Everyone thinks their favored energy sources deserve support and the other guys’ don’t. Period. They use whatever economic argument is handy — “picking winners” if you’re against the subsidy, “supporting jobs” if you’re for it — but such arguments are always instrumental. As I said recently about coal’s rent-seeking, there are no true free marketeers in struggling industries.

Speaking of rent-seeking, here’s a final fun factoid from OCI: In the 2015-2016 election cycle, oil, gas, and coal companies spent $354 million in campaign contributions and lobbying and received $29.4 billion in federal subsidies in total over those same years — an 8,200% return on investment.

The next time some corporate poo-bah piously invokes the genius of the market, tell him to give it a rest. It’s abundantly clear that no one really wants to “let the market decide.”

Comments

Connect The Dots!

It’s not just easy access to guns–although that access certainly facilitates rising American homicide rates.

As the Guardian recently reports, there is a strong–if surprising– connection between income inequality, respect, and increases in violence.

A 17-year-old boy shoots a 15-year-old stranger to death, apparently believing that the victim had given him a dirty look. A Chicago man stabs his stepfather in a fight over whether his entry into his parents’ house without knocking was disrespectful. A San Francisco UPS employee guns down three of his co-workers, then turns his weapon on himself, seemingly as a response to minor slights.

These killings may seem unrelated – but they are only a few recent examples of the kind of crime that demonstrates a surprising link between homicide and inequality.

The article cites emerging research that strongly suggests that inequality plays a pivotal role in escalating passions in encounters that might otherwise end with some profanity and fisticuffs–that it raises the stakes of fights for status among men.

The connection is so strong that, according to the World Bank, a simple measure of inequality predicts about half of the variance in murder rates between American states and between countries around the world. When inequality is high and strips large numbers of men of the usual markers of status – like a good job and the ability to support a family – matters of respect and disrespect loom disproportionately.

Inequality predicts homicide rates “better than any other variable”, says Martin Daly, professor emeritus of psychology and neuroscience at McMaster University in Ontario and author of Killing the Competition: Economic Inequality and Homicide.

Other studies show that rates of gun ownership rise when inequality does. Rising inequality also predicts the re-emergence of cultural traits like placing more emphasis on “honor.”

“About 60 [academic] papers show that a very common result of greater inequality is more violence, usually measured by homicide rates,” says Richard Wilkinson, author of The Spirit Level and co-founder of the Equality Trust.

Why would financial inequality lead to a renewed emphasis on status and respect? Researchers explain:

When someone bumps into someone on the dance floor, looks too long at someone else’s girlfriend or makes an insulting remark, it doesn’t threaten the self-respect of people who have other types of status the way it can when you feel this is your only source of value.

“If your social reputation in that milieu is all you’ve got, you’ve got to defend it,” says Daly. “Inequality makes these confrontations more fraught because there’s much more at stake when there are winners and losers and you can see that you are on track to be one of the losers.”

Social science is methodically enumerating the negative social consequences of extreme inequality. Most reasonably well-educated people recognize that inequality produces social instability–history teaches us that growing anger from those with nothing to lose leads to riots, even revolutions–but most of us are less familiar with other ancillary effects.

There is ample evidence that large gaps between the rich and poor retard economic growth, depress marriage rates, and raise crime and homicide rates. (Ignoring the 41 million Americans who live in abject poverty in order to gift your already obscenely wealthy donors with a tax cut also implicates that pesky little thing called morality.) Historical precedent suggests that these effects–left unaddressed– ultimately destroy societies.

None of that evidence, evidently, is persuasive to the Paul Ryans and Mitch McConnells of this world. Or perhaps they know and just don’t care. They are perfect examples of what Hannah Arendt called “the banality of evil.”

Comments

Ryan: I Yam What I Yam

The GOP doesn’t even bother to pretend any more. The party is waging a class war in which the rich and connected are taking unremitting aim at the struggling, powerless and unconnected: children, the disabled and the working poor.

Excuse my language, but the only thing “trickling down” is piss.

On December 6th, The Hill reported on Paul Ryan’s next despicable but not unexpected goal:

House Speaker Paul Ryan (R-Wis.) on Wednesday said House Republicans will aim to cut spending on Medicare, Medicaid and welfare programs next year as a way to trim the federal deficit.

“We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said during an interview on Ross Kaminsky’s talk radio show.

Health-care entitlements such as Medicare and Medicaid “are the big drivers of debt,” Ryan said, “so we spend more time on the health-care entitlements, because that’s really where the problem lies, fiscally speaking.”

No, Mr. Ryan, the “problem” lies with snakes like you.

The ink isn’t even dry on the mammoth tax gift that Congressional Republicans have just jerry-rigged–a bill with one and only one goal: to reward their donors and patrons, and make rich people richer. To be fair, sticking it to the poor wasn’t a goal–it was just an outcome they were perfectly willing to accept. (That isn’t true of the provision that will cost 13 million Americans their health insurance coverage–that was deliberate. I remain amazed by the GOP’s intense hostility to the notion that poor people might get access to medical care. The possibility clearly offends them.)

Ryan is confident that he has gotten the President on board.

“I think the president is understanding choice and competition works everywhere, especially in Medicare,” Ryan said.

Leaving aside the fact that we have a “President” for whom the word “understanding” is never accurate, any economist can explain–to both Ryan and the President–why “choice and competition” do not work for Medicare, or Medicaid, or almost anywhere in health care. Hell–any halfway competent high school student who has taken elementary economics can explain it.

For reasons that escape me, Paul Ryan set his sights on entitlement programs from his first days in Congress. The mental midgets who form a majority of his GOP colleagues have been only too happy to parrot his insistence that Social Security and Medicare are the real impediments to Nirvana–not the greed of their corporate masters or their disdain for facts and evidence. They don’t just ignore the experience of all other Western democratic countries–they ignore American history, and more recent “experiments” like the recent disaster in Kansas.

Ryan also mentioned that he wants to work on changing the welfare system, and Republicans have in the past expressed a desire to add work requirements to programs such as food stamps.

Speaking on the Senate floor while debating the tax bill last week, Senate Finance Committee Chairman Orrin Hatch (R-Utah) said he had a “rough time wanting to spend billions and billions and trillions of dollars to help people who won’t help themselves, won’t lift a finger and expect the federal government to do everything.”

His comments were echoed by Ryan.

“We have a welfare system that’s trapping people in poverty and effectively paying people not to work,” Ryan said Wednesday. “We’ve got to work on that.”

These are the statements of delusional people–inhabitants of fact-free (not to mention compassion-free) bubbles. Most people on food stamps already work, and those who don’t, can’t. The only people we are spending “billions and billions” on who won’t help themselves (unless hiring expensive lobbyists qualifies as self-help) are the recipients of the enormous subsidies and tax giveaways to corporate bigwigs who are unwilling to compete on a level playing field in that market they piously extol.

American government is infested with a (barely) human variety of cockroach: blabberus giganteus Ryan.

Comments

I Wonder Why We Have These Agencies and Programs?

Or, more accurately, why we had them.

A few days ago, The Hill came out with a list of 66 agencies that the tax “reform” bill simply eliminates. They include everything from Agriculture’s Economic Development agencies to the Commerce Department’s National Oceanic and Atmospheric Administration Grants and Education to the Education Department’s Grants for Comprehensive Literacy Development and Effective Instruction.

At a time when our infrastructure is crumbling around us, the bill eliminates the Transportation Department’s National Infrastructure Investments (TIGER).

The list includes many other programs that would seem important, as well as a number of initiatives with puzzling names and obscure purposes.

I would be the last person to argue against pruning the mystifying thicket of federal programs and agencies. I’m sure many of them have outlived whatever usefulness they may have once had–and it wouldn’t shock me to discover that some of them didn’t ever have much justification for their existence. That said, the process through which they are being terminated is simply indefensible.

There has not been a single hearing held to determine the continued utility of any of these agencies. To the best of my knowledge, no notices were sent out to affected constituencies, no publication in the Federal Register invited public comment. Like the rest of this monstrous bill, these decisions were made hastily, in back rooms to which neither Democrats nor more moderate Republicans were invited.

This is not the way a democratic system works. In a representative government that honors due process and the rule of law, how decisions are made is ultimately more important than the substance of the decisions themselves.

The decision to terminate a program or agency should be made in daylight, with people familiar with the purposes and operation; those making the determination should hear from critics and defenders of the program, and from proponents and opponents of its termination. There should be some version of a cost/benefit analysis upon which a final decision is made.

These 66 programs were created for a reason. There should be a principled reason for their discontinuance.

Right now, America is being ruled–not governed, but ruled–by an illegitimate cabal empowered by vote suppression and gerrymandering and answerable not to the citizens who (theoretically) elected them, but to their donors and to a much lesser extent, their rabid and uneducated base.

Comments

Net Neutrality

Well, they did it. Trump’s Verizon puppet at the FCC–after a campaign of disinformation and downright dishonesty–got his (and Verizon’s) fondest wish: they voted yesterday to dispense with Obama-era rules protecting Net Neutrality.

If you are one of the many Americans who is unfamiliar with this policy, or unsure why it matters, Vox has a comprehensive explanation; if you have less time, Paul Krugman recently offered a concise analogy. Asked for his thoughts on the impending vote, and on the policy, he responded that

… for a democratic society, and also just for a society that is open to new ideas, level playing fields are really important. One of the great unifying things that we did very early on in our country’s history was to establish a postal service, where the cost of sending a letter was the same no matter who was sending it, no matter how far you were sending it…

We’ve done very, very well with providers not allowed to discriminate among different users. This is something that’s very much not broken. Why try to fix it?

This assault on Internet equality is just one of the myriad Trump Administration efforts to remake our country into a plutocracy–to make America “great” for the powerful and wealthy.

It gets harder and harder to keep track of the wholesale de-regulation that Trump insists will unleash the productivity of the market–the rollbacks of environmental regulations that keep our air breathable and our water drinkable, the withdrawal of measures to protect students from fraudulent private colleges and sexual assaults, reversal of regulations preventing fossil fuel companies from despoiling protected lands….I teach public policy, so following all of these efforts to eviscerate the rules of fair play (and not-so-incidentally, anything Obama did or favored) is part of my job–and I can’t begin to keep up.

Before the election of this monumentally ignorant man, I was not a huge fan of robust federalism, or the argument that state “laboratories of democracy” would, or at least could, constrain unwise federal policies. As I’ve watched sensible state governments respond to Trumpism by protecting immigrants, decriminalizing marijuana, enacting stringent environmental protections and demonstrating that raising taxes actually promotes economic growth, I’ve warmed to the wisdom of that argument.

And now…

Washington State has followed the shameful vote against Net Neutrality with an announcement that it will fill the void and protect Internet users:

On the eve of an expected vote by the Federal Communications Commission to roll back crucial net neutrality rules, Gov. Jay Inslee joined Attorney General Bob Ferguson, legislators, and business leaders to announce state plans to preserve an open internet and protect Washington consumers from internet companies that are not transparent about costs or services.

Inslee wrote a letter to the FCC earlier this month, in which he made a strong case for the retention of current policy.

All Americans, as a matter of principle, should enjoy equal access to the educational, social and economic power of the internet. Ensuring this important technology remains free and unfettered is critical both to our personal freedoms and to our country’s economy,”

Making Washington State’s announcement, Inslee conceded that the FCC’s vote will preempt states from ensuring full net neutrality. But he said states can take a number of steps to promote an open internet and strengthen protections for consumers–and Washington intends to take them:

Hold companies to their commitments not to block websites, throttle speeds, or impose prioritization pricing

Direct the state’s Utilities and Transportation Commission (UTC) to establish a process for ISPs to certify that they will not engage in practices inconsistent with net neutrality principles.
Limit state-conferred benefits to ISPs that have made such certifications.
Limit applicability of UTC pole attachment rules to ISPs that are net neutral.
Review other state-conferred benefits such as easements and taxes.

Leverage the state’s power as a large purchaser of ISP and telecommunications services

Use the state government’s role as a big customer, and our ability to establish state master contracts used by localities, to incentivize Washington companies to adhere to net neutrality principles.
Pursue regulatory and legislative action to award contracts to vendors that meet net neutral business requirements.
Lead the exploration of a multi-state purchasing cooperative to procure internet service from providers that adhere to net neutrality principles.

Hold companies accountable for warranties made to consumers

Create a state-wide internet speed test. This will allow Washingtonians to test their own broadband speed at home, and submit the test to help appropriate state agencies determine what internet speeds consumers are receiving and where companies may be blocking or throttling.
Collaborate with legislators to strengthen our consumer protection laws to include the principles of net neutrality.

Encourage new entrants into the currently concentrated ISP market

Pursue legislation authorizing public utility districts and rural and urban port districts to provide retail ISP and telecommunications services.
Prohibit government-owned ISP services, such as municipal broadband networks, from engaging in blocking, throttling, or priority pricing for Internet services.

As one Washington state legislator asserted, state governments have the right to prevent a “reckless and power-intoxicated federal government from handing over access to the free flow of information to the largest corporations on this planet.”

If other states follow in Washington’s path, they will do more than protect an essential platform for American democratic discourse.

They’ll make a federalism fan out of this skeptic.

Comments