Category Archives: Public Policy and Governance

The Buffet Rule and the Self-Made Myth

Predictably, the Buffet Rule–which would have raised tax rates on those making a million dollars or more a year–failed for lack of the 60 votes needed to break a Republican filibuster. The GOP defended its position as necessary to encourage entrepreneurship and job creation, despite literally mountains of data disproving the link between lower taxes and economic prosperity.

It may be instructive to consider a couple of observations from a new book written by Bill Gates Senior. It’s titled “Self-Made Myth.”

In the book, Gates explains that Bill Jr. could not have built Microsoft without the United States’ publicly-supported infrastructure, tax laws, government-funded scientific research, public education and patent protection.

The book cites a number of other successful entrepreneurs who readily acknowledge their immense debt to the broad-based, publicly-financed goods our society offers, from the roads over which they ship their goods to the police and firefighters who maintain public safety.

A foreign student of mine once observed that there are plenty of bright, entrepreneurial people in third-world countries who cannot succeed on the scale Americans can, precisely because they lack those public goods, and because the absence of our extensive but largely taken-for-granted public infrastructure prevents the development of a middle class with the wherewithal to purchase their products. Market-based economies require–duh!–markets.

The question we face right now is what happens if we continue down the reckless path we seem to be traveling, a path that promises–among other things–to eliminate or vastly reduce the American middle class?

Ironically, in their zeal to avoid even moderately higher taxation, their unwillingness to repair or improve our crumbling infrastructure, their attacks on the public servants who provide security and education, the wealthiest Americans and their apologists and courtiers run a significant risk of killing the goose that makes their golden eggs possible.

The reality, as Neil Pierce has recently noted, is that government has been an indispensable player in developing America’s prosperity, from the early canals to our transcontinental railways, great dams to the interstate highway system, the first telegraph lines to the government-funded research that led to the Internet. It’s equally true at the local and state level, from public schools for all to our great public universities, the first minimum wage and workplace safety laws.

None of these public goods are free. They are an investment, and over the years, they’ve generated a remarkable rate of return in general prosperity and in all of those “self-made” men.

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NOW I Understand!

A few days ago, in a post about N.J. Governor Christie’s decision to abort a badly needed tunnel linking New Jersey and New York, and his multiple lies about his reasons for doing so, I admitted that I was baffled: there was no scenario I could come up with that made the decision explicable.

Now, Paul Krugman has supplied the answer that eluded me.

I started to quote an excerpt, but his column needs to be read in its entirety. Click through and read it. And ponder.

The degree to which contemporary politicians have substituted delusional ideology and naked self-interest for any lingering allegiance to  the public good is breathtaking. And so very, very depressing.

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The Legacy of “Our Man Mitch”

The NorthWest Times of Indiana has an article detailing the devastation that tax caps are visiting on Indiana’s municipalities. We can thank Mitch Daniels for leading the charge to place these caps in the state’s constitution, where they will continue to strangle local governments until we manage the difficult job of passing a constitutional amendment.

WTHR relayed the result of an environmental group’s investigation that found Indiana’s rivers and streams the most polluted in the nation–no surprise to local environmentalists, who have witnessed the Administration’s distaste for environmental regulation.

Indiana’s much-touted “balanced budget” was achieved without touching tax breaks for business (and in some cases, by increasing them)–by cutting programs that aid those poor and disadvantaged citizens least able to access the political process or otherwise protect themselves.

And–as we’ve seen over the past couple of months–there’s mounting evidence that this Administration can’t even keep its own books.

Add to these “factoids” the war this administration has waged against public workers, it’s divisive, politically-motivated attack on private-sector unions, its willingness to sell off state assets and privatize everything in sight, and we are left with a legacy that will last long after Mitch mounts his motorcycle and rides off into the sunset.

You’ve got to give the Governor credit: he has created a persona that is entirely at odds with reality. Mitch “the knife” was a disaster as Budget Director; he took Clinton’s healthy budget and proceeded to facilitate creation of Bush’s enormous deficits. His reputation as a businessman, rather than a politician, rests on jobs in “government affairs”–that is, as a lobbyist. His standing in the national party rests on a fiction of fiscal expertise and a contrast with undeniably pathetic competition.

Whoever wins the gubernatorial election in November will inherit a broken state that has steadily been stripped of the tools needed to fix it. Of course, if that person is Mike Pence, he won’t notice. He’ll just add a dash of theocracy and an emphasis on social issues, and finish the task of turning Indiana into Mississippi.

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It’s Only Money

As P.J. O’Rourke famously observed, “The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn’t work and then they get elected and prove it.”

P.J., you were prescient!

The headline in the Star tells the story: “For the second time in only four months, the state is admitting it made a massive revenue error.”

“This one cost counties $206 million in revenue that they have been owed from January 2011 to now and which will be repaid with interest as of April 5. The first, announced last December, resulted in a $320 million windfall to the state’s general fund.”

After the news of this latest “programming error” broke, a couple of heads rolled–appropriately, in my view. But the folks taking the fall are hardly the only incompetents in this situation.

As a disgusted (Republican) businessman friend of mine emailed me earlier today,

“So much for fiscal discipline and competent management.  If you recall, late last year the State “found” $320 million just sitting in a bank account, having not been “swept” into the general fund as all other tax revenues have/had; now they “find” – oops – that they failed to pay local units of government hundreds of millions of dollars they were owed.
Riddle me this: How can policy makers and legislators pass good/sound budgets when the governor/administration provides such wildly incorrect information on the state of the budget?  As just one example, Mitch pushed for the “automatic taxpayer refund” because our fiscal house is in such great shape – the State even calculated that taxpayers will get a whopping $70/person (whoopeee)… Will the state still pay that out and further starve govt and localities of needed revenue for essential services like crime control? And how do we know that calculation was even close to correct?”
The scorn heaped on the “lets run government like a business” Daniels Administration is well deserved; no real business would survive fiscal mismanagement on this scale.  But local governments aren’t exactly being run by  the sharpest knives in the drawer, either.  Didn’t the Ballard Administration notice the city had been shorted $41 million dollars? It’s not like Indianapolis was so awash in money that a missing $41 million simply escaped the notice of those charged with managing the City budget.
When the Daniels Administration “found” 320 million dollars it had overlooked a couple of months ago, the Governor brushed away calls for an independent audit. This latest “whoops!” suggests such an audit is considerably overdue.
State Senator Vi Simpson summed up this whole sorry mess in an email sent out today:

Today, we found out that Republican Gov. Mitch Daniels has mishandled more than half a billion dollars of our money.

While he was out of the country, the Governor’s Office said the state has deprived counties of $206 million in revenue between January 2011 and now. That money will be repaid with interest, and several top officials are resigning in the wake of the scandal.

Last year, Daniels jokingly told reporters that “finding” more than $300 million in missing revenue was like getting an early Christmas gift.

It was no joking matter then, and now that the problem has grown $200 million more serious, it’s starting to feel like Hoosier taxpayers have been the victims of a cruel April Fool’s prank.

I was one of several Democrats who publicly called for an outside audit after the first round of missing money was discovered. At the time, Daniels dismissed it as a partisan plea.

He was wrong then, and now we know his frequent cries for “fiscal responsibility” have never applied to his own administration.

The worst part of this story isn’t the horrendous mismanagement of hundreds of millions of taxpayer dollars – it’s the fact that local governments have had to lay off police officers and firefighters and reduce services to make ends meet because Daniels was hording their money.

It’s hard to argue with that assessment.


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In Other News, the Sun Rose this Morning….

According to reports in the IBJ and elsewhere, the trial pitting IBM against the State of the Indiana is winding down. At issue are cross-claims about the reasons for and propriety of the termination of IBM’s contract to provide welfare intake services.

According to the IBJ, IBM’s lawyer argued that the real reason for the termination was state budgetary woes. The State’s lawyers defended the termination by complaining that “IBM was more concerned about profit than getting assistance to needy people.”

And the sun rises in the east….

Those of us who study outsourcing have repeatedly made the point that–while contracting can be a useful tool in many circumstances–it is not appropriate in areas where government is providing essential services to vulnerable populations. Despite lots of irresponsible rhetoric to the contrary, government is not a business. It’s purposes and aims are different. Private, for-profit organizations have a duty to shareholders; government agencies have obligations to citizens.

Evidently, this essential distinction escaped the notice of the Daniels Administration, which is now shocked–shocked to discover that a business would prioritize the pursuit of profit.

In other breaking news, it appears that rain is wet.

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