Public Policy and Governance – Page 98

Return On Investment

I tend to get testy when I hear people intone that government should “be run like a business.” (Granted–I’m testy a lot…) Government is very different from business–its purposes (which do not include a profit motive) are distinct. Not recognizing the substantial differences between governance and enterprise marks those making that facile comment as–at best– uninformed.

That said, there is one concept fundamental to both business plans and investment decisions that should also guide governmental decisions: return on investment. Interestingly, however, many of the same folks who want more businesslike governance routinely ignore that calculation.

If I’m purchasing stock in a company, I want evidence that the shares I purchase will appreciate in value–or at least pay dividends. If I am a savvy/mature investor, rather than a gambler playing the market, I understand that such appreciation will likely not be immediate; I will invest “for the long haul.”

That same calculation ought to determine America’s investments in social spending. Although appropriate returns on government investment will not and should not be monetary, a number of studies confirm that a surprising number of programs actually do turn a fiscal profit for taxpayers.

Children who have been fed thanks to food stamps grow up into healthier, more productive adults than those who didn’t get enough to eat. That greater productivity means that government eventually recoups much of what it spent on those food stamps–and also saves money due to reduced spending on things like disability payments.

A recent study by Harvard economists found that many programs — especially those focused on children and young adults — made money for taxpayers, when all costs and benefits were factored in.

That’s because they improved the health and education of enrollees and their families, who eventually earned more income, paid more taxes and needed less government assistance over all.

The study, published in The Quarterly Journal of Economics, analyzed 101 government programs. In one way, it was a standard cost/benefit analysis–it looked at what government’s costs were, and the resulting benefits to the recipients. However, the researchers took an extra step–they calculated the “fiscal externalities: the indirect ways that a program affected the government’s budget.”

In other words, in addition to the upfront costs, they calculated the monetary return on taxpayers’ investment.

Consider one program: health insurance for pregnant women. In the mid-1980s, the federal government allowed states to expand Medicaid eligibility to more low-income pregnant women. Some, but not all, states took up the offer. Increased Medicaid coverage enabled women to receive prenatal care and better obstetric care, and to save on personal medical spending.

For the federal government, the most straightforward fiscal impact of this expanded coverage was increased spending on health insurance. The indirect fiscal effects were more complex, and could easily be overlooked, but they have been enormous.

First, newly eligible women had fewer uninsured medical costs. The federal government picks up part of the tab for the uninsured because it reimburses hospitals for “uncompensated care,” or unpaid bills. Thus, this saved the government some money. On the other hand, some of the women stopped working, probably because they no longer needed employer-provided private health insurance, and this cost the government money.

But the biggest indirect effects were not apparent until children born to the Medicaid-covered women became adults. As shown in a study by Sarah Miller at the University of Michigan and Laura Wherry at the University of California, Los Angeles, those second-generation beneficiaries were healthier in adulthood, with fewer hospitalizations. The government saved money because it would have paid for part of those hospital bills. The now-adult beneficiaries had more education and earned more money than people in similar situations whose mothers did not get Medicaid benefits. That meant higher tax revenue.

Data on other social programs yields similar results. Researchers have found that Medicaid expansion, for example, more than paid for itself, even after accounting for the fact that future benefits are “discounted”–i.e., worth less today.

Businesspeople understand that it usually takes time to realize profit. With government social programs, too, the fiscal “payoff” generally is delayed. That doesn’t mean it is less substantial or less real. In the cited study, 16 of the social policies that the researchers examined either broke even or actually made a profit.

I’m certainly not suggesting that government programs be limited to those with a positive financial return–government is most definitely not a business. I am suggesting, however, that we consider government social programs investments–and that the returns on those investments aren’t limited to improving the safety and security of the communities in which we all live, sufficient as that return would be. In many cases, taxpayers also get a positive monetary return on investment.

Just like well-run businesses.

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This Isn’t Dunkirk

Longtime readers of this blog know that I rarely, if ever, post about foreign policy. There’s a reason for that–I am uninformed about most aspects of such policies, and I am deeply conflicted about America’s obligations vis a vis purely humanitarian concerns.

When it comes to warfare, I mostly agree with those who insist we should keep our cotton-pickin’ hands off unless there is a very clear American interest to be protected, or a humanitarian crisis of significant proportions that we are actually in a position to ameliorate. I will readily admit that the definition of American interests and the nature and extent of humanitarian crises are matters of considerable debate.

If I had been the person determining the parameters of America’s intervention in Afghanistan, I would have approved an initial intervention to root out Al Qaida and “get” Osama Bin Laden–but not the slog of the subsequent 18 years, during which we wasted trillions of dollars–not to mention the lives of thousands of soldiers and civilians.

But here we are.

President Biden has made what I consider the absolutely correct call–and the media and self-styled pundits, abetted by deeply dishonest Republicans sensing political advantage, are having a field day attacking him for, among other things, recognizing and admitting the obvious.

I think that Michael Moore, of all people, has it right in the following paragraphs. (I say “of all people” because I tend to find Moore tiresome–you usually know precisely what he’ll say because, like far too many people, he approaches all issues through an unshakable, pre-defined lens. Sometimes, of course, like that “stopped clock” he’s right; sometimes, not so much.)

In this case,I think he is “on point.” In his recent letter, Moore wrote about our departure from Afghanistan:

This is nothing here to celebrate. This should only be a monumental gut-check moment of serious reflection and a desire to seek redemption for ourselves. We don’t need to spend a single minute right now analyzing how Biden has or has not messed up while bravely handling the end of this mess he was handed — including his incredible private negotiations all this week with the Taliban leaders to ensure that not a single enemy combatant from the occupying force (that would be us; e.g., U.S. soldiers and spies and embassy staff), will be harmed. And Biden so far has gotten every American and foreign journalist out alive, plus a promise from the Taliban that those who stay to cover it will not be harmed. And not a single one has! Usually a force like the Taliban rushes in killing every enemy in sight. That has not happened! And we will learn that it was because of the negotiating skills and smarts of the Biden team that there was no mass slaughter. This is not Dunkirk.

Dozens of planes have safely taken off all week — and not one of them has been shot down. None of our troops in this chaotic situation have been killed. Despite the breathless shrieks of panic from maleducated journalists who think they’re covering the Taliban of the 1990s (Jake Tapper on CNN keeps making references to “beheadings“ and how girls might be “kidnapped” and “raped” and forced to become “child brides”), none of this seems to be happening. I do not want to hear how we “need to study” what went wrong with this Taliban victory and our evacuation because (switching to all caps because I can’t scream this loud enough): WE ARE NEVER GOING TO FIND OURSELVES IN A SITUATION LIKE THIS AGAIN BECAUSE OUR DAYS OF INVADING AND TAKING OVER COUNTRIES MUST END. RIGHT? RIGHT!!

Unfortunately, we probably will find ourselves in similar situations, because a substantial portion of our citizenry believes we have the right–indeed, the duty–to impose our will around the globe, irrespective of any threat to genuine American interests.

Is our exit from Afghanistan being accomplished smoothly? No. To the extent both the war and the exit were bungled, we’ll need sober analyses of those failures in order to inform future foreign policy decisions. But sober analyses are not what we’re getting–for that matter, even presumably straightforward eyewitness reports of what is occurring “on the ground” are wildly inconsistent.

If people of good will are truly concerned about the fate of non-Taliban Afghanis–especially Afghani women–under a fundamentalist religious regime, what they can and must do is extend a welcome to those who want to emigrate, and work to facilitate their speedy immigration and resettlement.

It is telling–but not surprising– that the monkeys throwing poo in hopes it sticks to the administration are unwilling to do that.

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Maybe The Horse Isn’t Dead Yet…

My friend Morton Marcus–an Indiana columnist who was for many years the Director of the Indiana Business Research Center–used a recent column to weigh in on the plight of local journalism. As he noted, one of the major causes of the decline of local news outlets has been the displacement of private financing “from independent, local entrepreneurs to large corporate chains that “trimmed” costs.”

“Trimmed ” is a very nice word for the ferocious and destructive cost-cutting that has virtually killed local news– the very product those outlets were selling.

As Morton noted (I got this in an email, so no link–sorry)

Corporations behave like individuals; they seek to avoid the risks of change and the challenges of diversity. Therefore, editors who accept the risk of divergent views are best removed. Reporters who impede corporate strategy are best discharged. Radio and TV stations are bought and stripped of their distinctive local content.
Given lower costs of production, newspaper and magazine offices, TV and radio stations, housing older equipment, with their associated personnel, become unnecessary drags on profits. A conglomerate can morph an enterprise from news and reasoned commentary into a conveyor of entertainment and sensationalism. “Efficiency” of the corporation often out-weighs the quality and nature of the product.

Lest you think Morton’s column was merely another flogging of that “dead horse” along the lines of my post yesterday, you will be happy to learn that he ended with some very good news: the introduction of companion measures in both the House and Senate titled “The Local Journalism Sustainability Act.”

The bill is intended to provide a “pathway to financial viability” for local news produced by newspapers–including all-digital ones–plus television and radio. The mechanism through which this is to be achieved is a combination of three tax credits: a credit aimed at incentivizing subscribers; a credit to provide news outlets an increased ability to hire and retain journalists; and a credit intended to encourage small businesses to advertise in these local news outlets.

The individual credit for subscribers is described as a five-year credit of up to $250 annually, available to individuals who either subscribe to a local newspaper or donate to a nonprofit news organization. It would cover 80% of those costs the first year, and 50% in four subsequent years.

The effort is billed as bipartisan, which–if accurate–should increase its chances of passage.

Will these tax credits work to stem the bleeding? Who knows? I have my concerns about the use of tax incentives, which tend to add to the complexity of America’s tax system, and where “goodies” intended to reward donors can be shielded from the light of day. On the other hand, there are–as I have recently noted–examples of the successful use of such incentives to prompt socially beneficial behaviors.

Perhaps the most significant positive aspect of this effort is that it signals recognition of the problem. If this particular measure doesn’t pass–or fails to stem or reverse the decline of local news–that recognition is a sign that other interventions are likely to be tried.

The importance of that–the importance of agreement over the existence of a problem–is hard to overstate.

There really is no problem we humans cannot address more or less successfully, once there is broad agreement on the existence and nature of a problem.We see this most vividly as we confront climate change and regret the years wasted–the years during which we might have avoided what is now unavoidable–because too many people refused to admit the existence and nature of the threat. We are seeing it in the insistence by right-wingers who refuse to get vaccinated that COVID is a “hoax.”

We can’t solve problems we refuse to see.

What is most heartening about the Local Journalism Sustainability Act is its recognition of the importance of credible, comprehensive local news sources, and the determination to keep that horse alive.

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When Policy Works…

When I was much younger and far less aware of the complex interactions of governance and political culture, I was very critical of America’s use of the tax system to influence behavior. If the government needs X dollars to pay for the services we want that government to provide, why not simply set a rate or rates sufficient to collect those dollars? Why include provisions–aka “loopholes”–intended to promote or discourage targeted behaviors?

I’m still aware of the considerable pitfalls of using tax policy to mold desired behaviors; after all, we humans remain blissfully ignorant of the ways in which human incentives/disincentives actually work, and far too often, a provision intended to produce outcome A turns out to produce an altogether unanticipated and negative outcome B.

That said, I’ve reluctantly come to admit that carefully crafted and thoughtful policies can advance important goals. My husband recently shared with me an article from Bloomberg, reporting on one such success.

Cities, states and the federal government are trying to reduce traffic congestion, air pollution and carbon emissions, but a Catch-22 in the federal tax code works against these goals. The income tax exemption for employer-paid parking subsidizes solo driving to work, which helps explain why 81% of American commuters drive to work alone.

The tax exemption for employer-paid parking creates three big problems. First, free parking at work increases the number of cars driven to work by about a third, mostly at peak hours. Second, higher-income commuters are more likely to get tax-exempt parking subsidies. The tax exemption is also worth nothing to the 44% of American households who pay no income tax because of their low incomes. Third, free parking doesn’t help transit riders, who are disproportionately communities of color. In Los Angeles, for example, 92% of Metro riders are people of color.

Repealing the tax exemption for a popular fringe benefit is unlikely, but the discussion doesn’t end there. In a bid to reduce driving and increase fairness, the District of Columbia enacted its Transportation Benefits Equity Amendment in 2020. If an employer with 20 or more employees subsidizes parking at work, the law requires the employer to offer an equal benefit to employees who do not drive.

Called “parking cash out,” this policy gives commuters flexibility to choose between free parking or another benefit of equal value. Commuters can continue to drive and park free, or they can take the cash value of the parking subsidy and use it for anything they want, such as putting it toward the rent of an apartment within walking or biking distance of work.

California enacted a similar cash-out law in 1992. The California Air Resources Board examined the law’s effects in a travel study of 1,694 commuters at eight firms in Southern California. The 1997 study found that after employers offered the cash option, solo driving to work fell 17%, carpooling increased 64%, transit ridership increased 50%, and walking or biking increased 39%. These changes reduced vehicle travel to work by 12% — equivalent to removing from the road one of every eight cars driven to work. Employers reported that parking cash out was cheap, easy to manage and fair. It also helped them to recruit and retain workers.

This appears to be an example of policy done right: it was simple and easily understandable, it corrected inequities in the existing tax structure, and perhaps most importantly, there was ongoing monitoring by California–research to confirm (or not) that the policy change was working as intended. (One of the frustrations of policymaking in the U.S. is the usual lack of such follow-up and the difficulty of changing or abandoning interventions that have proven to be counterproductive.)

It’s getting more and more difficult for the science deniers to ignore climate change. As California and Oregon burn, as Miami spends billions of dollars trying to elevate its airport above the encroachment of the ocean, as national and international weather patterns become more and more destructive, it becomes critically important to identify and enact policy interventions that retard or at least minimize our more ecologically destructive human behaviors.

That may mean that the tax code continues to be considerably less than straightforward, but I guess I can live with that…..

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Will It Work?

I have previously made the point that solving our social and political animosities requires an accurate diagnosis of their causes–or at the very least, recognition of the elements of contemporary life that are feeding those animosities.

If, as many sociologists and political scientists believe, the roots of much contemporary discord can be found in the economic inequality that characterizes today’s U.S.–if that inequality provides the fertile soil for the racism and tribalism that are tearing us apart–then efforts to address economic insecurity should substantially ameliorate that discord.

In one of her daily Letters from an American, Heather Cox Richardson assumes the accuracy of that diagnosis, and notes that the Biden Administration is pursuing policies that should mitigate some of the worst of our current economic disparities:

Trump and his loyalists feed off Americans who have been dispossessed economically since the Reagan revolution that began in 1981 started the massive redistribution of wealth upward. Those disaffected people, slipping away from the secure middle-class life their parents lived, are the natural supporters of authoritarians who assure them their problems come not from the systems leaders have put in place, but rather from Black people, people of color, and feminist women.

President Joe Biden appears to be trying to combat this dangerous dynamic not by trying to peel disaffected Americans away from Trump and his party by arguing against the former president, but by reducing the pressure on those who support him.

A study from the Niskanen Center think tank shows that the expanded Child Tax Credit, which last month began to put up to $300 per child per month into the bank accounts of most U.S. households with children, will primarily benefit rural Americans and will give a disproportionately large relative boost to their local economies. According to the Washington Post’s Greg Sargent, “the…nine states that will gain the most per capita from the expanded child allowance are all red states.”

Other elements of administration policy should also be ameliorative: the infrastructure bill will bring high-speed internet to every household in the U.S.; it will also provide $3.5 billion intended to reduce energy costs for more than 700,000 low-income households.

Richardson is a historian, and history teaches us that economic distress has often provided an impetus for the surfacing of bigotries that folks are less likely to express in more prosperous times. A number of scholars, for example, have pointed to Germany’s runaway inflation–and national humiliation–in the wake of World War I as one reason for the country’s receptivity to Nazism and willingness to express long-simmering anti-Semitism, and more recent academic literature supports the thesis that that economic scarcity promotes racial animus.

As an article in Time Magazine reported, numerous studies have demonstrated that economic scarcity influences how people treat those outside of their own social groups. (There is also a “chicken and egg” element to the relationship between economic anxiety and racism–a column in the Washington Post reported on one study that suggested racial resentment may be driving economic anxiety, not the other way around.)

Democrats often bewail the tendency of low-income voters to cast ballots “against their own interests”–a complaint that assumes (I believe incorrectly) that those interests are economic rather than cultural. A somewhat different but related question is whether a significant improvement in the economic situation of low-income Americans will “take the edge off” and moderate the expression of their cultural fears.

The Biden Administration’s policies will go a long way toward answering that question–and America’s future is riding on the result.

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