Public Policy and Governance – Page 325

A Very Interesting Question

The New York Times reported today that well before their recent downgrade of the U.S. AAA credit rating, the Justice Department had begun an investigation into whether Standard & Poor had improperly rated dozens of mortgage securities in the years leading up to the financial crisis. As the Times reports, “In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.”

After the housing bubble burst, many of us questioned the ethics of a ratings system in which the issuer of the debt being rated paid the rating agency–to those of us uninitiated into the arcane processes of mortgage banking, this seemed to constitute a clear conflict of interest, a practice that suggested the agencies might be, oh, let’s just say “ethically insensitive.” This morning’s report raises the question whether that insensitivity, or ethical blind spot, might have played a role in the recent downgrade of the US credit rating.

Perhaps it was less a matter of acting on the basis of genuine concern (misplaced or not) and more a matter of retaliation for daring to launch an investigation?

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Tea and Very Little Sympathy

Ever since the emergence of the Tea Party–with its intransigence, ideological rigidity and hostility–there has been a robust debate about who they are, what they want, and whether they are a genuine grass-roots movement or the product of some canny (and wealthy) Republican operatives. Other than poll results, however, there has been very little empirical research informing that debate.

That has changed. In a recent issue of “Perspectives on Politics,” a peer-reviewed journal published by the American Political Science Association, Vanessa Williamson, Theda Skocpol and John Coggin published “The Tea Party and the Remaking of Republican Conservatism.” I don’t know Williamson or Coggin, but Theda Skocpol is a widely-respected Harvard Professor who–among other things–has served as the President of the American Political Science Association.

The article is worth reading in its entirety, but here are some highlights:

The Tea Party is a new incarnation of “long-standing strands” in American conservatism.
Tea Party opposition to the Affordable Care Act is not a manifestation of hostility to social programs per se; the opposition is based upon resentment of “perceived government handouts to “undeserving” people. (Tea partiers see themselves as entitled to Social Security and Medicare.) Their definition of “undeserving” “seems heavily influenced by racial and ethnic stereotypes.”
The Tea Party owes its emergence not only to the Republican elites that initially bankrolled it, but to Fox News. The authors believe that “the best way to understand Fox News’ role is as a national advocacy organization actively fostering a social protest identity.” (63% of Tea Party members watch Fox, as opposed to 11% of the general population.)
Tea Party members are a very small minority of Americans. Only one in five of those who claim to be members have actually attended an event or donated money. Members are older, white and middle-class, and a majority are men. The vast majority are conservative Republicans.

There is much more, but the central finding (in my opinion, at least) was that at the grassroots level, Tea Partiers judge social programs “not in terms of abstract free-market orthodoxy, but according to the perceived deservingness of recipients.” It will not come as a shock to most of us that deservingness is “an implicit cultural category.” Hence the hysteria over immigration (the study finds–surprise!–that “fears of immigration are closely linked to the ethnic identity of the immigrants in question”). Support for the Tea Party “remains a valid predictor of racial resentment” even after controlling for ideology and partisanship, and this finding goes a long way toward explaining what seems to most of us as an irrational hatred of Obama. As the authors put it, “At a fundamental level, Obama’s policies and his person are not within the Tea Party conception of America, so his election seems like a threat to what they understand as their country.”

And they want “their” country back.

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Trust and Transparency

A couple of years ago, I wrote a book titled “Distrust: American Style” in which I argued that much of our current social dysfunction and polarization results from a massive loss of trust in our common institutions–not just government, but also big business and even nonprofits. Think of Enron and World Com, think of the Red Cross scandals, think of doping sports stars. Think of the Catholic Church cover-up scandal.

Things haven’t improved since I wrote the book. In the wake of the fiscal collapse triggered by big investment banks and too-cozy relationships with the people responsible for regulating them, there has been enough information to tarnish our confidence in a whole raft of financial and governmental institutions. Pre-eminent among them were the ratings agencies–the entities most of us had long trusted to serve as “grey eminences” protecting us from accounting shenanigans and other trickery by carefully examining the books of those issuing debt instruments. That they operated with little transparency was rarely noted. What we discovered after the proverbial shit hit the fan was that the ratings agencies–paid by the issuers–weren’t above looking the other way in order to collect their very handsome fees. Somehow, this very real conflict of interest had escaped everyone’s notice.

So I must agree with Senator Bernie Sanders, who issued the following statement when Standard and Poor downgraded U.S. debt this weekend:

“I find it interesting to see S&P so vigilant today in downgrading the U.S. credit rating. Where were they four years ago when they, and other credit rating agencies, helped cause this horrendous recession by providing AAA ratings to worthless sub-prime mortgage securities on behalf of Wall Street investment firms? Where were they last December when Congress and the White House drove up the national debt by $700 billion by extending Bush’s tax breaks for the rich?”

Fair questions.

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Google That!

We’ve returned from vacation, and with reliable internet, blogging will once again become regular. In the meantime, here is my upcoming IBJ column.

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My husband and I just returned from a month visiting various parts of Europe–the sort of vacation that becomes possible only when your children are grown and gone. This trip afforded us the luxury of time for observation and reflection that shorter ones rarely did; I even had time to read some of the books I’d optimistically loaded on my IPad.

So what did I learn on my summer vacation?

One thing that immediately struck me was how homogenized citizens from western industrialized countries have become—how much we all look and dress alike. Thirty years ago, on our first trip to Europe, cultural differences expressed in clothing and mannerisms made it fairly easy to spot Americans. Over the intervening years, that has changed. Today, we dress alike, drive the same cars, watch the same television programs and listen to the same (mostly American) music. IPhones, IPods and IPads (and their various clones) are ubiquitous, as are Facebook and Google. Evidence of the globalization of culture—at least pop culture—is everywhere.

But beneath the surface similarities, there is evidence of quite a contrary trend; as Eli Pariser documents in his recent book, “The Filter Bubble,” the internet technology that promises (and delivers) so much is moving us into what he calls a “mediated future”—a future in which each of us exists in a personalized universe of our own construction.

In an effort to give each of us what we want, sites like Google, Facebook, and Amazon are constantly refining their algorithms in order to deliver results that are “relevant” to each particular searcher, and they have more data about our individual likes and dislikes than we can imagine. As a result, two people googling “BP,” for example, will not necessarily get the same results, and certainly not in the same order. Someone whose search history suggests interest in investment information may get the company’s annual report, while someone with a history of environmental interests will get stories about the Gulf spill. Similarly, Facebook delivers the posts of friends and family that its algorithm suggests are most consistent with the member’s interests and beliefs, not everything those friends post.

Pariser calls this the “filter bubble,” and points out that—unlike choosing to listen to Fox rather than PBS, for example—the resulting bias is invisible to us.

Little by little, search by search, individuals are constructing different–and disparate–realities. At the same time, traditional news sources aimed at a general audience—the newspapers and broadcasts that required reporters to fact-check assertions, label opinion and aim for objectivity—are losing market share. How many will survive is anyone’s guess.

The implications of both these changes—globalization and individuation—will be especially profound for our political structures. We are already seeing the dysfunctions that result when we elect people with radically different views of reality.

At SPEA, where I work, our mission is to teach aspiring public managers how to govern. This used to mean classes in budgeting, in cost-benefit analysis, in urban policy and human resource management. Today, we face more daunting questions: How do public servants govern effectively when there is no commonly accepted role for government? How do public managers communicate with citizens who do not—in any meaningful way—occupy the same country (or in some cases, the same planet)? (We have just introduced a new major—Media and Public Affairs—in an effort to prepare our students for these unprecedented challenges.)

We’ve globalized commerce, and everyone wears tee-shirts and jeans. But personalization and social fragmentation is also global, and we can’t Google the future.

Of Debt and Taxes

I haven’t written about the congressional impasse (polite word for food fight) over the debt ceiling, because really, what could I say that hasn’t been said many times by many people? But being here in Split, surrounded by evidence that human efforts at civilization have persisted over thousands of years, I’ve grudgingly recognized that our species has persisted through many periods of collective craziness, many characterized by even more self-destructive psychosis than now.

In other words, humans will survive the current capture of Congress by unreflective fanatics who believe God has instructed them not to raise the debt ceiling. (To be honest, I’m less sanguine about our ability to survive the climate-change deniers….previous generations haven’t had the means to destroy the Earth.)

But even though my brain–such as it is–tells me we’ll get through this crazy time, I have a lot of trouble understanding the emergence of the Tea Party. Not their existence; we’ve always had strains of malcontents–anti-social or anti-intellectual or white supremacist or other odd movements–but their ability to make resentment of taxes a rallying cry and a focus for so many people’s anger. And not anger at a particular tax or tax policy, but at the very idea of taxes. They have somehow convinced otherwise reasonable citizens that taxes levied for the general welfare are somehow illegitimate.

During this trip, the things we’ve most enjoyed are the products of just such taxes–great public transportation, preservation of historically significant sites, museums…Do these troglodytes think such services are supported by magic? Let alone police and fire protection, garbage collection, etc.? Are they really willing to forego the very things that make us civilized–trade with other cultures, which depends upon confidence that we will pay our bills, the myriad services that make our common lives easier and more pleasant, any sense of common purpose–for gated communities and personal gun collections?

Everywhere we’ve been, we’ve met lovely people who are not remotely anti-American but who are mystified and worried by what is happening to our political system.

Me too.

We have another day and a half in Split, then two days in Rome before we head home. I wonder what we’ll find when we get there.

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