Category Archives: Public Policy and Governance

No Free Burgers…

If there’s one thing that conservative and liberal economists agree about, it’s that old bromide about there being no free lunch.

That widget you are manufacturing contains raw materials, its construction takes labor, and its distribution and marketing must be paid for. Your facility and utilities cost money.  Those costs–plus some profit–have to be reflected in the price, or you’ll go broke.

You may be able to gain a market advantage by shifting some of your costs to others–we all know of cases where pollution created during production is discharged into the air or water to be paid for by the community at large, rather than by being properly disposed of and the cost of that disposal factored into the product’s sales price–but if it’s a cost of doing business, someone has to pay it.

Market theory assumes that the widget manufacturer will pay all the costs of production,  and then pass those costs on to the ultimate consumer, as part of the price.

Increasingly, however, taxpayers are assuming those costs.

Case in point: we are subsidizing the wages of a quarter of the people who have jobs today. A recent study from UC Berkeley and the University of Illinois found that fully 52% of fast-food workers receive public assistance–mostly Medicaid and food stamps–to the tune of $7 billion dollars a year. (McDonald’s workers alone got $1.2 billion of that.) One Wisconsin Wal-Mart costs taxpayers over a million dollars a year.

The United States now has the highest proportion of low-wage workers in the developed world. And as the report noted, every dollar taxpayers spend subsidizing corporations so they can continue paying their workers poverty wages is a dollar not spent on early childhood programs, or schools, or roads, or any other social good.

We need to have a national conversation about who is paying for that burger.

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About That Brain Drain…

Indiana has long suffered from “brain drain”–we have great universities that draw very bright students from around the country (and increasingly, the world), but we don’t keep many of them. In fact, the higher a student’s level of education, the more likely the student is to move away from the state after graduation.

Only about 16 percent of PhD recipients remain in Indiana’s workforce one year after graduation.

There are various reasons advanced for this situation; the nature of Indiana’s job market, the attractions of urban life (with few exceptions, Indiana is a pretty rural state), and the relative absence of other college graduates.

We aren’t the only state with this problem. Michigan, for example, is in a similar situation, and a Michigan legislator has proposed an interesting “fix.”

State Sen. Glenn Anderson, D-Westland, recently introduced SB 408, which offers a tax credit to recent college graduates who choose to stay and work in Michigan. This legislation will make it possible for talented young professionals to earn their livelihood in the state by easing the burden of student debt. The bill offers a tax credit to recent graduates who remain in state that lowers annual payments on student loans. 

Student loan debt is increasingly seen as a drag on economic growth, as well as a burden on the indebted individuals. A young person who has to divert a significant percentage of her disposable income to loan repayment isn’t buying a new stove or car or house.

I don’t know whether the numbers in Senator Anderson’s proposal are the right ones, and there may be downsides to his proposal that aren’t immediately apparent.

A tax credit might not be enough to keep graduates in Hoosier cornfields. But it’s an intriguing idea.

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Pursuit of Happiness

Last Sunday’s New York Times ran an op-ed by  Arthur Brooks in which he reported the current state of research into that elusive quality we call happiness.

About half of human happiness appears to be “hard-wired”–a genetic inheritance for which we can thank or blame our parents and other forebears. Another forty percent or so apparently comes from relatively evanescent events in our lives–a great new job, an inheritance, divorce ….the sorts of “stuff happens” for good or ill that people post to their Facebook pages.

The remaining 12 percent, Brooks tells us, comes down to four elements: faith, family, community and work.

Actually, while Brooks doesn’t cite it, there is also a fair amount of research suggesting that the first three of those–faith, family and community–are really just surrogates for an underlying data-point: the strength of an individual’s social support system. (It doesn’t matter, for example, what “faith” one cites–the value, and contributor to happiness/contentment, lies in the existence of a supportive congregational community. That need for connection can be met by avowedly secular communities as well as deeply devotional ones.)

It was when he discussed the importance of work that Brooks made a less-appreciated and important observation.

This shouldn’t shock us. Vocation is central to the American ideal, the root of the aphorism that we “live to work” while others “work to live.” Throughout our history, America’s flexible labor markets and dynamic society have given its citizens a unique say over our work — and made our work uniquely relevant to our happiness. When Frederick Douglass rhapsodized about “patient, enduring, honest, unremitting and indefatigable work, into which the whole heart is put,” he struck the bedrock of our culture and character.

Brooks uses the data about the importance of rewarding work to emphasize the role of the free market, and that’s fair enough. Certainly, the ability to choose the work we do is an important element in finding that work meaningful. But I took another, darker lesson from his data.

Americans do indeed measure our  self-worth in terms of our jobs. That means that people who are unemployed don’t just face financial challenges–they face the loss of self-respect. Despite “makers and takers” talking points and the deeply-seated scorn displayed by comfortable Americans who are sure that “those people” don’t really want to work, decades of research underscore the humiliation and deep despair of most unemployed workers–especially those who have lost their jobs in economic downturns.

Policymakers give great lip-service to job creation, but regularly ignore evidence that contradicts their pre-existing beliefs about which policies actually create those jobs.

Brooks has done us a service by reminding us that high unemployment doesn’t just run up the bill for unemployment insurance, food stamps, Medicaid and the like. It increases human misery, and makes a mockery of the American Dream.

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What Am I Missing?

I have to admit I frequently listen to a political or policy discussion, and have what might be called a “duh” moment–wondering why I see a rather obvious approach that everyone  else is ignoring.

This week, Governor Pence announced that state revenues have fallen below budget estimates for the past few months, and the only remedy is to cut funds to education and state agencies and sell the state airplane. Leaving aside the airplane gesture (a one-time, largely symbolic “sacrifice”) why is the administration focusing on cutting services rather than delaying or foregoing its beloved tax cuts?

There are two ways to handle revenue shortfalls, after all–cut expenses or raise revenue.

Despite the fervent belief that lower taxes stimulate the economy and foster job growth, there isn’t an iota of evidence supporting that belief. Indiana is already one of the lowest-tax states in the Midwest, our economic indicators still lag those of our higher-tax neighbors, and the case for continued tax cuts is thin, to put it mildly. (Indeed, research indicates that quality of life drives economic development; continued service cuts that diminish quality of life indicators–far from stimulating the economy– are probably counterproductive.)

Then there was the research report presented at a recent meeting of the Advisory Board of the Institute for Working Families. The subject was paid sick leave, which relatively few Indiana employers offer. When researchers talked to those who opposed a law requiring a sick-leave benefit, they found that the major objection wasn’t to paid sick leave, it was to the idea of a government mandate. (Don’t tell me how to run my business!!)

If the objection is to the use of a stick, why not offer a carrot? Why not give a tax deduction or other incentive to employers who voluntarily decide to offer paid sick leave? Avoid the mandate, but reward the desired behavior.  Evidently, such an approach hasn’t been considered.

My grandmother used to say there’s more than one way to skin a cat.

What am I missing?

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