Public Policy and Governance – Page 319

The Older I Get, the Less I Understand….

Final week is over, grades are in, and I’ve had more time to read the news. That’s obviously a mixed blessing.

There are so many things I just don’t understand.

There’s a toaster that embosses the face of Jesus on each piece of bread as it toasts. It is evidently selling briskly.

There’s Newt Gingrich.

And then there’s the House GOP. Even the Senate GOP is scratching its collective head over them. After the Senate passed one of the few genuinely bipartisan measures that has emerged this year, extending unemployment benefits and the payroll tax reduction for two more months, the House Republicans are refusing to go along. No coherent reason why has yet emerged, although John Boehner has seemed particularly teary.

Think about this: Christmas is coming. So the House GOP wants to raise taxes on America’s dwindling middle class and its working poor, while continuing to insist that the historically low taxes on the rich cannot move up an inch. Ignore, for the moment, the moral poverty and economic danger of that position. Think about the political obtuseness of the message they’re sending.

Even they must recognize that this is not the way to popular acclaim. The New York Times reported this morning that “rather than have a straight up-or-down vote, the House will implement a procedural maneuver in which they will “reject” the Senate bill while requesting to go to conference with members of that chamber in a single measure, protecting House members from having to actually vote against extending a payroll tax cut. During the conference meeting among Republican members, some members expressed concern about effectively voting for a tax increase on the eve of an election year, said some who attended.”

Ya think?

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The Wrong Role Model

Let’s get real: if so-called “Right to Work” laws generated economic growth, Mississippi would be an epicenter of economic activity.

As Brian Howey notes, the current push for Right to Work is simply a continuation of the war on unions Daniels inaugurated soon after he himself was inaugurated; the sorts of jobs Indiana has been trying to grow–life sciences, biotech, etc.–aren’t union jobs anyway. But if we were to take Governor Daniels and Speaker Bosma at their word, their argument boils down to the contention that creating a “good business environment” requires that we be a low-wage, low tax state.

A story may be instructive: Several years ago, Toyota was negotiating with three such states (all in the south) to locate a new plant. The states in question all had low wage workforces and low taxes; in addition, all were offering tax incentives. Toyota ended up going to Canada, and the economic development officers of the losing states were dumbfounded, because taxes were higher and no incentives were involved. Toyota’s explanation? The workforce was much more highly educated, and thanks to Canada’s “socialized” system, they wouldn’t need to provide healthcare.

When you look at independent research on right-to-work laws (i.e., research not sponsored by/paid for by either unions or Chambers of Commerce), there is absolutely no evidence that such laws affect job growth one way or the other. Once you control for the other factors that affect economic conditions, it appears that the only effect of such laws is to lower wages for both unionized and non-union workers.

The “liberty” argument for right-to-work is that no one should have to join a union in order to work. I agree–and under current law, they don’t. They do have to pay for services rendered by the union that benefit them–that is, their share of the cost of negotiation for wages and working conditions. That’s it. They don’t have to become a member, or support any other activities with which they disagree. The “liberty” argument against right-to-work is that employers should be free to bargain with whomever they choose–that the state should not have the power to dictate an owner’s otherwise lawful workplace policies and arrangements.

If we really want to promote job growth and a healthy economic environment, our focus should be on creating efficient, transparent state government, high-quality public schools, good public services (especially public transportation), and an improved quality of life.

Add in workers who have enough money to spend in the marketplace, and believe me, the employers will come.

Wrong is Wrong

Since the election of Barack Obama, the GOP–aka “the party of no”–has shown impressive discipline, putting party orthodoxy ahead of both the common good and, frequently, sanity. The Democrats, on the other hand, have happily confirmed Will Rogers’ great line: “I’m not a member of any organized political party; I’m a Democrat.” The left wing of the party has pretty constantly criticized the President for not doing more, not doing it more quickly, and not doing what they wanted.

I’ve considered much of this criticism unfair–often it has been the result of not understanding the constraints imposed by Separation of Powers, or the magnitude of the economic threat he inherited. Other complaints have had more merit–contrary to Republican rhetoric, for example, Obama has often seemed too willing to compromise, too reluctant to play hard-ball. But by far the most serious criticism has been his acceptance of Bush-era infringements on civil liberties.

This is a man who taught Constitutional law, a man who stood up for the rule of law as a Senator and who said all the right things as a candidate. It was a relief, after 8 years of a profoundly lawless administration, to cast a vote for someone who could be expected to respect Constitutional limits. That expectation has proved illusory, and Obama’s embrace of Bush-era surveillance measures has been painfully disappointing.

The recent announcement that the President would not veto the current Defense bill , however, is worse. While much of the bill is uncontroversial, its counterterrorism section states that the entire world, including American soil, is a battlefield in the war on terror, and that the U.S. military thus has the authority to arrest and indefinitely detain anyone, even citizens, suspected of aiding terrorists.

I can’t think of anything more profoundly unAmerican.

It’s bad enough that large numbers of Congressmen and Senators support this assault on the Constitution and the rule of law. For Obama–who clearly knows better–to sign it is simply inexcusable. Laura Murphy, the longtime head of the ACLU’s Washington office, said it best:

“If President Obama signs this bill, it will damage both his legacy and American’s reputation for upholding the rule of law. The last time Congress passed indefinite detention legislation was during the McCarthy era and President Truman had the courage to veto that bill. We hope that the president will consider the long view of history before codifying indefinite detention without charge or trial.”

In ordinary times, when we had two responsible political parties, the loyal opposition would provide a corrective to Executive Branch over-reaching. The saddest thing about the farce that is our current political environment is that no such counterbalance exists; indeed, the major movers of this appalling provision include Lindsay Graham and the ever-angrier John McCain. The same GOP that contests the power of the White House to reform health care evidently has no problem handing over the power to arrest and indefinitely detain American citizens.

We can only hope the Supreme Court remains sufficiently “activist” to invalidate this incredibly unAmerican measure.

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Who Should We Trust?

These may not be the times that try men’s souls, but they sure are times that confound economic policymakers.

We have one set of economists telling countries to implement austerity measures, and another group insisting that for now, stimulus is the answer. For those of us who are not trained in the “dismal science,” it’s increasingly difficult to distinguish between medicine and snake oil. Prescriptions sounding eminently reasonable to those of us unschooled in economic arcana turn out to be counter-productive in practice—case in point: research showing that so-called “right to work” legislation just depresses wages without generating the promised economic growth.

So where should we look for advice?

An October paper for the New America Foundation, by Daniel Alpert, Robert Hockett and Nouriel Roubini (not-so-affectionately dubbed “Dr. Doom” after he predicted the mortgage meltdown) proposes a way forward, and the logic seems—at least to this non-economist—pretty compelling.

The authors spend considerable space analyzing “how we got here,” and they note that digging out of the present crisis will be particularly difficult because, thanks to the entry into the world economy of “successive waves of new export-oriented economies,” and the concurrent, dramatic rise in productivity gains “rooted in new information technologies and the globalization of corporate supply chains,” the world economy now has excess supplies of labor, capital and productive capacity relative to global demand. Furthermore, the integration of new economies with competitive workforces has shifted the balance between capital and labor, resulting in income inequality as bad as—if not worse than—the gilded age.

The bottom line, as they see it: it will be difficult to sustain even current levels of consumption without improved wages and incomes, but such increases are unlikely due to the gluts of both labor and capital. In such a situation, austerity simply leads to a vicious downward cycle of weaker demand, weaker investment and more unemployment.

What to do? The authors lay out a three-part prescription: first, a “substantial” five to seven year public investment program to repair America’s crumbling infrastructure; second, a “comprehensive” debt restructuring plan; and third, global reforms to offset diminished demand in the developed world and correct the current imbalance in supply and demand.

The paper is long and quite detailed, and the descriptions of each proposal deserve to be read in their entirety, but I was particularly struck by the logic of the infrastructure recommendations.

Fixing infrastructure now would take advantage of a “historically unique opportunity” to put idle capital and labor to work rebuilding at an extremely low cost and with potentially high returns. Capital costs are now at historic lows, and labor is in abundant supply. It will never be less expensive to fix our decaying infrastructure than it is now.
The American Society of Civil Engineers estimates we need 2.2 trillion to meet even the most basic infrastructure needs. Less than half of that is currently budgeted.
Every billion dollars invested in infrastructure generates 23,000 well-paying jobs. Over the course of five years, such a program would create over 5.52 million jobs.
The CBO estimates that every dollar of infrastructure spending generates a 1.6 dollar increase in GDP.
Fixing our infrastructure is also essential to restoring American competitiveness. China invests 9% of GDP annually in infrastructure—we spend less than 3%. Public infrastructure investment lowers the costs of transportation, electricity and other core business expenses.

Even if these economists are overstating the case, what’s the worst that would happen if we took their advice? Our bridges might stop falling down? Pollution levels would abate? Workers with jobs might have money to spend?

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Who Deserves?

I caught a bit of one of those interminable talking-head debates on television the other day, in which one pontificator was explaining that in America, we work for what we get, and it is thus unAmerican to begrudge wealth to those who have earned it.

I agree. When someone works hard, innovates and creates that better mousetrap, we all benefit. That person has earned what he or she has. I also agree that this emphasis on meritocracy–the belief (however unwarranted) that anyone can compete and succeed if they just work hard enough–is a quintessentially American belief.

What the talking head didn’t seem to understand was that he was in the wrong conversation.

The people criticizing the status quo today are clearly not angry with capitalism, nor hostile to those who have done well by actually producing something. They are angry–justifiably, in my view–with a government that seems to have two sets of rules, one for those rich enough to hire lobbyists and another for the rest of us. They are angry with a system that confers obscene rewards on people who produce nothing, people who simply play financial games and buy influence.

Genuine capitalism requires the rule of law and a level playing field, where the same rules apply to everyone. When some people–or corporations–are able to buy a pass, buy a separate set of rules for themselves, that is no longer capitalism. It’s cronyism, and it violates deeply embedded precepts of American culture.

I’ve always been puzzled by the double standard so many seem to live by: you’ll hear people talk disparagingly about “welfare bums” who “work the system” and don’t deserve our help. And I know there are people who fit that description–although research suggests they make up only 2% or so of welfare recipients. Until quite recently, however, I did not hear similar opinions offered about people with unearned wealth–those who inherited it, or especially those who broke the rules in order to get it. I heard few complaints about corporate lobbyists who “work the system” to get special benefits others don’t enjoy. If we truly believe that merit should be rewarded, and cheating punished, we aren’t doing a very good job of selecting the winners and losers.

What we are seeing right now is a shameful effort to defend unearned privilege, by claiming that the rich are all “job creators,” or that objections to the status quo are “class warfare.” It’s telling that those who genuinely earned their wealth–think Bill Gates or Warren Buffett–are among the most vocal critics.

If we are going to dispense welfare, who truly deserves extra help from the taxpayers? The single mom struggling to raise her children in an economy she did not produce–an economy hollowed out by wars of choice, tax breaks for the powerful and permissive regulations that enabled dishonesty all the way from Enron to the banksters–or the people who run corporations like Halliburton and banks like Citicorp and Bank of America? I’m prepared to concede that we couldn’t allow the financial system to melt down–the consequences would have been horrific for everyone–but now that we have stabilized it, we need to address the inequities of an economic system that demands far more from the working poor than it does from the well-connected rich.

We Americans need to rethink who we are, where our taxes should come from and where they ought to go, and who “deserves” what.

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