Category Archives: Public Policy and Governance

Job Creators or a Tale of Two Big Boxes

There are job creators, and then there are job creators.

Debates about economic policies tend to center on concerns about job creation. Corporate CEOs often argue that raising tax rates or the minimum wage will suppress hiring. (I’ve often wondered why we can’t just offer a tax credit for each job created, rather than keeping rates low and hoping that will translate into additional employment. But I digress.)

The question that is too seldom addressed is: what kind of jobs do we want to incentivize? Because all jobs are not equal–not from the standpoint of the employee, and not from the standpoint of the taxpayer.

A recent study released by Congressional Democrats underlines the issue. According to that study, Walmart’s wages and benefits are so low that many of its employees are forced to turn to the government for aid, costing taxpayers between $900,000 and $1.75 million per store. As Mother Jones reports,

Walmart’s history of suppressing local wages and busting fledgling union efforts is common knowledge. But the Democrats’ new report used data from Wisconsin’s Medicaid program to quantify Walmart’s cost to taxpayers. The report cites a confluence of trends that have forced more workers to rely on safety-net programs: the depressed bargaining power of labor in a still struggling economy; a 97 year low in union enrollment; and the fact that the middle-wage jobs lost during the recession have been replaced by low-wage jobs. The problem of minimum-wage work isn’t confined to Walmart. But as the country’s largest low-wage employer, with about 1.4 million employees in the US—roughly 10 percent of the American retail workforce—Walmart’s policies are a driving force in keeping wages low.

Businesses do not have to be conducted this way. Good jobs that don’t require public support are not inconsistent with  healthy profits. A recent Business Week article reports on the very different business approach taken by Walmart competitor Costco.

Despite the sagging economy and challenges to the industry, Costco pays its hourly workers an average of $20.89 an hour, not including overtime (vs. the minimum wage of $7.25 an hour). By comparison, Walmart said its average wage for full-time employees in the U.S. is $12.67 an hour, according to a letter it sent in April to activist Ralph Nader. Eighty-eight percent of Costco employees have company-sponsored health insurance; Walmart says that “more than half” of its do. Costco workers with coverage pay premiums that amount to less than 10 percent of the overall cost of their plans. It treats its employees well in the belief that a happier work environment will result in a more profitable company. “I just think people need to make a living wage with health benefits,” says Jelinek. “It also puts more money back into the economy and creates a healthier country. It’s really that simple.”

Despite its higher wages and more generous benefits, Costco nets more per square foot than Walmart.

I have increasing numbers of students who believe that all business enterprises are at worst evil and at best unconcerned with anything but the bottom line. They look at Walmart and the many businesses that emulate its rapacious approach; more recently they point to the employers who are cutting workers hours in order to avoid having to provide health insurance under the terms of the Affordable Care Act, and they note the huge disparities between the salaries of CEOs and their employees, and they see those behaviors as an inevitable result of market capitalism. It isn’t.

Costco and many, many other enterprises demonstrate that concern for workers’ welfare is entirely consistent with a healthy bottom line. The problem is not with our markets, it is with our culture, and with public policies that enable and reward despicable behaviors.

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Why Trust Erodes

A couple of days ago, I linked to an essay by David Frum, in which he encouraged “reform” of the current conservative movement, and professed to see some signs of that reform emerging. I hope he’s right, because this country desperately needs two responsible, reality-based political parties.

As Jonathan Chait put it recently:  “The radicalism of the current Republican Party – its ideological extremism, disdain for empiricism, the inability to share or modulate power – is, to me, the central problem in American life. In the long run, the resolution to nearly every policy problem depends on the GOP refashioning itself as a normal, non-pathological party.”

For specific examples of what Chait is referencing, see this post on “The Wonk Gap.”

In today’s world, governments must fashion policy in areas so complex that average voters simply cannot be expected to understand the underlying challenges or the proposed interventions; we increasingly need the expertise of the relevant specialists–policy wonks. And we need to be able to trust that those specialists are telling us the truth as they see it. When the experts are willing to place partisanship above honesty, when people who presumably know what they’re talking about are delivering fundamentally inconsistent messages, citizens either withdraw from the political arena or they choose to believe the experts who are telling them what they want to hear.

In either case, governance suffers.

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Just the Facts

As regular readers of this blog know, I tend to harp a lot on the inadequacies of the media and the importance of accurate and complete information. My (frequently unarticulated) assumption is that if people agree about the facts of a matter, they are more likely to agree upon what those facts mean. So facts matter. A lot.

Case in point: yesterday, I shared my frustration about Fox News and its incessant drumbeat about a ‘Benghazi scandal’ the details of which the network neglects to specify. One of the commenters purported to fill in the blanks by asserting that the administration had refused to deploy troops that were within range and might have saved lives.

That would indeed be scandalous, if true. But as most other media outlets have reported, every military official in a position to know has emphatically denied the allegation. (Former Secretary of Defense Gates characterized the belief that the nearest troops could have gotten to Benghazi in time to defend the embassy as based upon “a cartoonish understanding” of military operations.) Unless every military expert from Gates on down is part of a conspiracy to protect the administration, the facts do not support the single concrete accusation being made.

I’ve been mulling over the role fact-finding plays in our political debates, because I’ve been reading a book that has been getting a lot of attention lately, Jonathan Haidt’s The Righteous Mind: Why Good People are Divided by Politics and Religion. Haidt’s scholarship is focused upon moral psychology, and the book is an excellent and very accessible exploration of evolutionary morality and the operation of culture on innate human tendencies.

One of the innate tendencies Haidt identifies is a belief in proportionality; that is, a belief that reward should be based upon contribution. Most of us have an innate “fairness” monitor that tells us that the member of the tribe who works hard should be entitled to a greater share of communal goods produced than the slacker.

I think both conservatives and liberals agree with this moral premise. Their dispute is with application—that is, with the facts. For example, if you believe that people are poor because they are lazy and conniving—that is, slackers, you will resent their dependence on public assistance. If you discover that the great majority of poor people work 40 or more hours a week at jobs that simply do not pay enough to allow them to get by, and that those who are “gaming the system” are a very small percentage, you are less likely to feel that you’ve been taken advantage of and more likely to support policies aimed at making the working poor self-sufficient.

There are lots of other examples, but the basic point is: facts matter. Conservatives and liberals (terms that have lost much clarity in any event) share many more moral premises than the pundits and pontificators assume.

What we increasingly do not share is accurate and complete information–and a uniformly credible media.

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Scandal at the IRS

I’ve been reading a variety of reports about the allegations that the IRS singled out Tea Party tax exemption applications for extra scrutiny. So here are a few random observations, culled from those reports and accusations:

1) It’s worth noting that condemnation has been utterly bipartisan. Liberal blogs and Democratic commentators have been highly critical of politicization of the IRS. (Why do I think that, if this had happened during a Republican administration, the reaction at Fox “News” would have been considerably more defensive?) And let me be clear: if the IRS singled out any organizations for differential treatment based upon their politics, that was wrong. 

2) That said, what we are seeing is in significant measure yet another unanticipated result of the wrongheaded Citizen’s United decision. Citizens United allowed any organization of any kind to spend money out of its general treasury to run political ads. As Chris Hayes has noted, that decision brought about a pivotal moment for politics and taxes and campaign spending in this country and we’re still dealing with the fallout. Republican Karl Rove and Democrat Bill Burton used the Citizens United ruling in the run-up to the 2012 elections. Both of them used social welfare nonprofits to run overtly political ads; that allowed them to intervene in political campaigns without disclosing their donors. Others soon followed.

“Suddenly, the IRS starts getting a flood of new applications from other political groups and strategists saying, ‘Oh, oh, it turns out I too want to set up a social welfare organization that just so happens to be focused on taking the country back from Barack Hussein Obama. Now, here is the thing the IRS appears to have done unequivocally wrong, that we all agree was absolutely inexcusable. They reacted to all this by targeting one part of the ideological spectrum in looking at whether this flood of new applicants passed the smell test. Being skeptical about a new wave of wolves in sheep’s clothing invading the nonprofit game was entirely appropriate.”

3) As Hayes points out, Congress requires the IRS to review every application for tax-exempt status to weed out organizations that are partisan, political, or that generate private gain. Congress has imposed this requirement on the IRS, and its predecessor agencies, since 1913.  When it comes to 501(c)(4) organizations, the IRS is supposed to draw a distinction between groups that are “primarily engaged” in politics and groups that really are primarily engaged in “social welfare”—somehow “promoting the common good and social welfare of the community.”

4) The social welfare tax exemption is being used by existing 501(c)(4) organizations, including some very large ones, to promote partisan political interests—the very activity Congress has explicitly prohibited for a century. The New York Times ran a useful explanation  about this last Tuesday.

5) It is not an excuse, but it does bear noting that none of the organizations that the IRS subjected to improper levels of scrutiny was denied tax exempt status.

6)  Congress is demanding that the agency do more and more with less and less. As David Levinthal reported at the Center for Public Integrity, the IRS’ Exempt Organization Division–the division charged with the violations–processed significantly more applications in 2012 than it ever had. At the same time, the entire IRS was operating on a much-reduced budget, as a result of several rounds of Congressional cost-cutting.

“Over the last two years, government watchdog groups filed more than a dozen complaints with the Internal Revenue Service seeking inquiries into whether large nonprofit organizations like those founded by the Republican political operative Karl Rove and former Obama administration aides had violated their tax-exempt status by spending tens of millions of dollars on political advertising. The I.R.S. never responded… Because they purport to be engaged primarily in issue advocacy, not election advocacy, tax-exempt groups are not closely regulated by the Federal Election Commission. That task falls, instead, to the I.R.S., which can take years to investigate problems and is required to do so in strict secrecy… The tax code states that 501(c)(4)’s must operate “exclusively” to promote social welfare, a category that excludes political spending. “

The fact that the agency is understaffed does not excuse lawbreaking; what this revelation does, however, is point to systemic fiscal and managerial issues within the IRS that need to be addressed. Unfortunately, given the blood-lust of those in Congress who are intent upon using the IRS misbehavior for entirely partisan purposes, a carefully calibrated and deliberate review of agency operations is unlikely.

What the IRS should be doing is looking closely at every application. The politics of the applicant is irrelevant–but compliance with the rules governing tax-exempt status is anything but. Granted, those rules have been considerably complicated and confused thanks to Citizens United, but that makes competent, even-handed oversight more important than ever.

If Congress wasn’t so broken, this episode might lead to meaningful reform. I’m not holding my breath.

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And Now a Word from the Doctor

I’m relinquishing my space today to my cousin the cardiologist. As he notes, it should be possible to legislate restrictions that will save lives without running afoul of the 2d Amendment. Unfortunately, in our current bipolar political environment, where every issue is painted in black and white –where complexity and shades of gray are “elitist notions” and the most innocuous regulations are omens of the coming apocalypse–the prospects aren’t bright.

            FIREARM VIOLENCE IN THE UNITED STATES: A MEDICAL OPINION

Most people don’t realize that over 30,000 people are purposely shot to death each year in the U.S. Moreover, rates of firearm-related violent crimes continue to climb, having increased by 26% since 2008. To gain perspective on these numbers, firearm deaths have now reached a yearly rate that equals that of automobile fatalities. What we can do to stem such violence is urgent but hampered severely by the rabid supporters of the second amendment and, of course, the gun lobby. Some clarification recently has been shed on this problem by a study appearing in the prestigious medical journal, the AMA sponsored Archives of Internal Medicine. These authors explored the question whether more restrictive firearm laws in a given state are associated with fewer shooting deaths. To answer this question, using sophisticated statistical methods, they measured the association between the rate of shooting deaths in a state-by-state rating (divided into quarters) of strength of legislation designed to limit sale and use of firearms. Their results were very illuminating: Those states with the fewest firearm regulations, as exemplified by Utah and Louisiana (0-2 laws), suffered the highest rate of firearm fatalities, which included both homicides and suicides. The states with the strictest pattern of regulation, as exemplified by Hawaii and Massachusetts (9-24 laws) experienced the lowest fatality rates. Indiana fell into the second lowest category for regulation and, as expected, fell into the second highest incidence of firearm deaths.

These authors freely admitted that finding an association between two factors—gun laws and mortality—does not prove that these two are causally related. But it sure raises important thoughts about what we as a society can do about this problem. Further research is obviously needed, but it is quite likely that more restrictive gun laws can save lives.

More aggressive attempts to identify, treat and constrain the huge numbers of those who are mentally ill is an exercise doomed to failure. Widespread arming of teachers and/or police officers is equally ridiculous, especially since it would increase chances for erroneous shootings in the absence of any expected benefits.

With such limited options available, what are we left with? Although we need not scrap the second amendment, those who hold legislative power should seriously consider stronger laws restricting guns, while, at the same time, sponsoring and performing more comprehensive research on this urgent problem. If we value life, we cannot afford to wait!

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