My Obligatory Rant About the Debt Ceiling

Okay–I’m sure that readers of this blog are well aware of the current threat by the usual suspects to hold the debt limit hostage in order to get concessions on spending from the administration and the Democrats in Congress.

I’m also sure that most of those readers understand what the debt limit actually is–unlike the intended targets of the crazies’ messaging.  America’s debt ceiling does not authorize spending–it authorizes government to borrow funds as necessary to pay for spending that Congress has already authorized. (That’s why the GOP obediently voted to raise it during the Trump administration–even though the Trump tax cuts significantly increased the deficit and thus the amount to be borrowed.)

Here’s an analogy: you went shopping and maxed out your credit card. The bill from the credit card company comes due, and your spouse says “We aren’t paying it until you agree to [whatever].” You either accede to the whatever, or destroy your credit rating, find yourself unwelcome in the places you shop, and incur higher interest rates in the few places that still accept your business.

In 2011, when Republicans last played this game, the delay in raising the limit caused a  downgrade of U.S. Treasury debt, raising government borrowing costs by $18.9 billion over ten years.

If the GOP’s  current game of chicken succeeds–if America fails to pay the bills Congress has previously racked up–the country (and globe) would descend into recession, Social Security and Medicare payments would stop, federal workers, soldiers and defense contractors wouldn’t be paid… And you could kiss your tax refund goodby.

The U.S. is one of only two countries requiring a separate vote to raise the debt limit–most countries understand that a vote to spend X on program Y implicitly authorizes payment even if funds need to be borrowed. For many years, rational lawmakers in both parties routinely raised the limit.

Since “rational” no longer describes most GOP lawmakers, what should the administration do? I’ll let Paul Krugman answer that question.

Krugman  warns that “it’s not even clear that the Biden administration could surrender if it wanted to.”

The current crop of House Republicans makes the Tea Party, which (alas) used the debt limit to blackmail President Barack Obama, look reasonable. Today’s G.O.P. doesn’t even seem to have a coherent set of demands; a significant number of caucus members may well want a crisis, preferring to “watch the world burn” under a Democratic administration.

If surrender isn’t an option, what is?

Democrats could seek a “discharge petition” to force a vote on raising the debt limit despite opposition from G.O.P. leaders. This would both take time and require support from a handful of sane Republican House members. But it’s surely worth trying.

Second, it’s probably possible to use financial engineering to bypass the debt limit. The most famous proposal calls for minting a platinum coin with a face value of, say, $1 trillion, depositing that coin with the Federal Reserve and spending out of the bank account thus created. Believe it or not, this would almost certainly be legal.

Another option would involve raising money by issuing “premium bonds” when existing debts come due — bonds whose face value is the same as that of the bonds they replace, so that they don’t officially increase the debt, but offer high interest rates, so they sell for much more than their notional value.

Krugman also points to language in the 14th Amendment providing that “the validity of public debt shall not be questioned,” and suggests that language might be construed as authorizing the government to ignore the debt ceiling rather than defaulting on payments.

Which option should Democrats pursue? I’d say all of them. Above all, this is no time for officials to worry about seeming silly or undignified. The Biden administration is facing the threat of economic terrorism — that sounds extreme, but it’s basically what creating an artificial debt crisis amounts to. And it should do whatever it takes to face down that threat.

So–what now? The Treasury department is ramping up what it calls “extraordinary measures” to avoid default, but without a resolution, the country will stop being able to pay its bills sometime around June 5th.

Even if the administration was willing to “negotiate,”  Republicans cannot seem to agree on what it is they want. In yet another demonstration of their lack of discipline (and in many cases, sanity), several on the far Right are insisting on cuts to Social Security and Medicare, while others are focused on cutting the Defense budget. 

And what, you might ask, about the “moderate” members of the GOP? That’s easy: there aren’t any. Bret Stephens was right-– today’s GOP consists only of reptiles and invertebrates.

Stay tuned….

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Universal “Scholarships”

Both the IBJ and the Capital Chronicle have reported on the legislature’s current effort to totally privatize education in Indiana. If passed, Senate Bill 305 would allow any and all parents to get taxpayer money to enroll their children in a private school or home school them. 

The legislation would dramatically expand Educational Scholarship Accounts (ESAs)–a more neutral term for the vouchers that–for very good reason– are no longer as popular as they once were.

In 2021, Indiana’s General Assembly approved ESA’s for special education students by burying the proposal in the budget, where it escaped much in the way of sustained scrutiny. SB305 would expand the program to all students, via a universal Education Scholarship Account.

The existing ESAs are limited to students who qualify for special education, and whose families meet income limits. (Not that those limits aren’t generous–a family of four can make up to $154,000 annually. That’s three times the amount required for a student to qualify for the federal free or reduced price lunch program.)

SB 305 would extend the ESA program to all students, regardless of a student’s educational needs or their family’s income level.

So what’s wrong with ESA’s? 
 
As numerous observers point out, there’s a lot wrong. For one thing, the bill lacks any public oversight or measures ensuring accountability. The state would simply give tax dollars to parents who would be trusted to spend it on their children’s education (there doesn’t seem to be any mechanism to ensure that the dollars would actually be used for education) at any school of their choice, or for home schooling and/or educational materials.
 
Apparently, all a parent needs to do to get some $7500 per student is fill out an online application promising to spend “part of the money” for the study of “reading, grammar, mathematics, social studies or science.” No standards. No requirements for art, music, foreign language or–perish the thought–civics. Not even those pesky criminal background checks required of public school teachers and volunteers.

Interestingly, the program would be managed by the state’s treasurer–not the Department of Education. 

Clearly, education isn’t the goal.

Researchers have exhaustively documented the results of current voucher programs, and repeatedly demonstrated that these programs have failed to improve educational outcomes. Over 90% of voucher recipients take them to religious schools that frequently substitute dogma for science and history. My own research confirms that–in Indiana at least– few, if any, include civics instruction. (My personal favorite among the history textbooks most widely used in these religious schools describes slave trade as “sometimes unwilling black immigration.” Ya think?)

As the Capital Chronicle reported,

Indiana has about 87,000 private school students, according to the Indiana Department of Education (IDOE). About 44,000 of those use the state’s Choice Scholarship program — which allows families to receive vouchers to attend private schools. But the remaining 43,000 would be eligible for the grant, which would average around $7,500 statewide.

That would add more than $300 million a year to what the state is already sending to private, mostly religious schools.

The voucher program started similarly with a cap of 7,500 students at a cost of $15 million. The cap doubled the next year and now there is no limit and a current annual cost of $240 million.

As I reminded readers a few days ago, Indiana’s current voucher program classifies families that earn up to $145,000 per year as “poor” enough to have the state pay for their kids to attend private schools. Qualification for state-funded childcare and/or pre-kindergarden is a different matter: families bringing home a mere $27,500 are “too rich” to qualify.

None of this makes sense unless the legislature’s actual goal is to encourage an exodus from the state’s public schools, a goal that furthers other longtime efforts: destroying the teacher’s union, and finding a “work-around” of the First Amendment’s prohibition against funneling tax dollars to religious organizations.

SB 305’s proposed expansion would cost a fortune and fail to deliver educational benefits. Worse, those dollars would come from our already under-resourced public schools. That would especially harm rural Hoosiers who live in areas too sparsely populated to support private alternatives.

Since it is no longer possible to defend vouchers on educational grounds, this misbegotten effort is being sold under the current MAGA banner of “parental choice.” 

Whenever I hear these culture warriors utter the word “choice,” I expect a bolt of lightning to strike. They want the “choice” to avoid vaccinations, the “choice” not to have their children learn accurate history, the “choice” to keep “Heather Has Two Mommies” out of the library…

But other people’s choices? (The choice to support sound, secular public education, or terminate a pregnancy, for example?) Not so fast!

If SB 305 passes, it will certainly affect the choices of people who might otherwise be thinking of relocating to Indiana. 
 



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Pool Tables And Gas Stoves

Sometimes, we need to remind ourselves that drumming up fear to achieve less-than-admirable ends is nothing new.

I was on the treadmill the other day, listening to old show tunes on my iPods. ( My very unsophisticated musical tastes run to Dean Martin and the Rat Pack, although I make exceptions, especially for show tunes.) I was speed-walking to the Music Man. 

“Ya Got Trouble” was the song sung by Professor Harold Hill when he is using the fact that a pool hall has opened in River City to stoke fear in the city’s residents.

You probably remember:

Friends, let me tell you what I mean. You got one, two, three, four, five, six pockets in a table. Pockets that mark the diff’rence Between a gentlemen and a bum, With a capital “B,” And that rhymes with “P” and that stands for pool! And all week long your River City Youth’ll be frittering away, I say your young men’ll be frittering! Frittering away their noontime, suppertime, chore time too! Get the ball in the pocket, Never mind gettin’ Dandelions pulled Or the screen door patched or the beefsteak pounded. Never mind pumpin’ any water ‘Til your parents are caught with the Cistern empty On a Saturday night and that’s trouble, Oh, yes we got lots and lots a’ trouble. I’m thinkin’ of the kids in the knickerbockers, Shirt-tail young ones, peekin’ in the pool Hall window after school, ya got trouble, folks.

Hill ramps up his warning, telling the “fine folks” of River City what’s in store:

One fine night, they leave the pool hall, Headin’ for the dance at the Armory! Libertine men and Scarlet women! And Rag-time, shameless music That’ll grab your son and your daughter With the arms of a jungle animal instinct.

Scary! Hill warns that, “the idle brain is the devil’s playground!” But then he offers the antidote to all this evil: a boy’s band. For which he will sell them the instruments and band uniforms.

Contemporary Harold Hills are selling medicines for imaginary diseases  all around us.

Did the Consumer Product Safety Commission issue a finding that gas stoves can cause asthma in small children? OMG! “They” are coming for our gas ranges! Those “woke” bureaucrats in Washington are going to ban the use of gas cookstoves, and they probably won’t even pay compensation! That’s what you get when you let Democrats run the administrative branch of government!

The fear and frenzy stirred up by GOP culture warriors prompted the head of the agency to issue a statement confirming the research results and the fact that the CPSC is looking for ways to reduce indoor air quality hazards, but does not intend to ban gas stoves. 

CPSC also is actively engaged in strengthening voluntary safety standards for gas stoves.  And later this spring, we will be asking the public to provide us with information about gas stove emissions and potential solutions for reducing any associated risks.  This is part of our product safety mission – learning about hazards and working to make products safer. 

There’s a lesson here for Americans who laughed at the comedic effectiveness of Harold Hill, or are currently marveling at the ability of Republican culture warriors to convince lots of people that “the government” is coming for their gas stoves. Stoking fear about– and then directing anger against– otherwise innocuous matters, works. In the Music Man, the tactic sold band instruments; in the great gas stove eruption, it allows angry citizens to confirm their anti-“wokeness” and determination to vote against “the libs.”

We see the tactic all around us. 

Are LGBTQ people more visible? Those Drag Queen story hours and library books about Heather’s Two Mommies are turning toddlers gay!

Are the kids learning about events we older folks didn’t encounter in school? Things like the Trail of Tears or the Tulsa massacre? Allowing teachers to include the seamier side of American history is a “woke” attack on American Exceptionalism and the firmly-held belief that we are–and have always been–the good guys.

Did epidemiologists tell us to  protect our friends and families from disease by wearing masks during a pandemic? They are obviously part of that “woke” elite that is constantly attacking American freedom!

Etcetera, etcetera.

Ya got trouble, my friend–right here in  America! You need to fight back. Threaten the library. Scream at school board members and have the smug culture warriors who dominate your legislature tell teachers what they can and cannot say. Insist that the President fire Dr. Fauci! (Whoops–too late. He retired.)

And tell your friends on Facebook that the government will have to pry your gas stove out of your cold, dead, oven-mitted hands.

Harold Hill clones are everywhere.

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How NOT To Do Economic Development

According to a recent report in the Capital Chronicle, the Indiana Economic Development Corporation wants a massive increase in funding. It justifies that request by insisting that larger expenditures are necessary to keep Indiana competitive in the national job market,  “especially as Indiana pivots from manufacturing to the “economy of the future.” Those industries — electric vehicles, semiconductors, agricultural technology — will need incentives to come to the Hoosier State.”

The article describes the nature of the “incentives” that will be offered: purchases of land, tax credits, a “Deal Closing Fund,” and others.

If you are interested in the details, you can find them at the link. My reason for highlighting the article is that it underlines Indiana’s persistent–and exclusive– focus on an economic development approach that is essentially bribery.

There’s a lot wrong with that focus.

First of all, even when successful, it uses tax dollars generated by Hoosiers to reward/bribe enterprises new to the state, rather than trying to grow businesses and employers who are already here. Second, it is an approach that buys in to the “zero sum” game being played by American states that are encouraged to bid against each other to lure Enterprise X,  which, if successful, simply moves the site of employment to state A from state B, rather than adding positions to the nation’s job market.

But my biggest beef with the bribery approach is that it misconceives and misunderstands what makes a state attractive both to business and to skilled workers.

In a recent interview, the new CEO of Techpoint spoke of that organization’s commitment to working with partners “to bring more people of color and women into the sector.” Indiana is currently 37th in tech employment, and–as I have previously noted– there are reasons for that.

Economic development– the addition of skilled workers and new companies–depends  on a state’s quality of life. That quality may be enhanced by good weather and natural beauty (assets Indiana mostly lacks), but it is a far more capacious concept.

As one economic development firm explains,  improving quality of life raises a destination’s desirability, attracts (and retains) population, adds revenue, and boosts recognition and reputation.

As the Brookings Institution has found,

There is compelling new data that these traditional economic development tools may be ineffective compared to investments in quality of life and place. Our research on smaller communities has found that community amenities such as recreation opportunities, cultural activities, and excellent services (e.g., good schools, transportation options) are likely bigger contributors to healthy local economies than traditional “business-friendly” measures. Smaller places with a higher quality of life experience both higher employment and population growth than similarly situated communities, including those that rank high by traditional economic competitiveness measures.

Research has shown that people are willing to pay higher housing prices and even accept lower wages to live in places offering a higher quality of life, and that businesses are willing to pay higher real estate prices and offer higher wages to locate in places with more productive workers.

After estimating quality of life (what makes a place attractive to households) and quality of business environment (what makes a place especially productive and attractive to businesses) in communities across the Midwest, we found quality of life matters more for population growth, employment growth, and lower poverty rates than quality of business environment. 

As the article notes, policymakers can’t build a Great Lake, mountain, or other natural feature. But they can focus on enhancing other quality of life aspects and providing solid public services for their current residents.

The Brookings analysis found that one of the strongest factors associated with higher quality of life was spending on public schools, “with public school quality and the availability of early childhood education being two of the most important factors for working parents.”

Bottom line?

The findings reinforce that local leaders and economic developers should prioritize quality of life strategies over tax incentives and lax regulation. The long-standing Midwestern community economic development strategy of low taxes, business incentives, and loose environmental regulations usually doesn’t work, and has often proven disappointing to communities that have given away tax dollars and reduced business standards without seeing substantial returns. Low business taxes often hide a hidden opportunity cost by reducing available funding for local schools and other public amenities. 

If our legislative overlords really wanted to attract skilled workers–including female workers and workers of color– they would fund child care and pre-K programs. They would work to create great public schools and excellent transit systems. (They would also leave medical decisions to the professionals who understand the complexities of those decisions, rather than imposing the beliefs of fundamentalist Christians on all Hoosiers.)

Pledging billions for bribery while ignoring quality of life isn’t a viable economic development strategy.

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Average/Median–Or Lying With Statistics

I have previously mentioned–and sometimes quoted–my friend Morton Marcus. Marcus   is an economist; he is retired from Indiana University, where for many years he headed up the Kelly School’s business research center. Morton and I have been friends for a long time, and have just co-authored a book on the women’s movement. (More on that when it’s published.)

Morton also writes a weekly column on economic data  called “Eye on the Pie,” explaining in relatively simple language what various data points tell us about Indiana. That column runs in a number of the remaining small newspapers around the state. In a recent column, he made a point that I think is so important I feel compelled to share it.

Morton fashioned his column as “A note to Gov. Holcomb,” and began by saying that normally, he doesn’t write to the Governor.

But this week is different. A few days ago, you gave your “State of the State” address to the General Assembly. It was a nice talk and very well presented.
You had some good ideas for our state, but, and this is awkward for me to say, you don’t have a staff that keeps you from making the same mistake time-after-time. You’re not the only Governor who makes this mistake. I’ve known them all from Gov. Whitcomb onwards and they all make the same mistake.

And what was that mistake? (I must admit, it’s an error I have often made too.) Let Morton explain:

Almost always the Indiana Economic Development Corporation (IEDC – bless their hearts) tells us the average wage going to be paid by a firm they have arranged (lured, bribed) to open or expand in Indiana.

Most of the media (bless their hearts) regurgitate the press release because they don’t have the time or energy to remember that the average is the mean of a set of numbers. It can be heavily influenced by extreme (high or low) values.

The median, however, tells a different, more meaningful story (if you’ll excuse a little pun there). The median is the wage above which half of the employees will get paid and below which the other half of the workers will be paid.

Let’s say the top gun gets paid $150,000 per year. The #2 gets $75,000, the other eight get $30,000 each. That’s a total payroll of $465,000 for ten employees or an average (mean) annual wage of $46,500. Yet the median pay is $30,000. That’s $16,500 (35%) below the IEDC-advertised average.

From what I hear, Governor, you’re not the type who intentionally misleads or lies to the people of Indiana. But by using the average (mean), rather than the median figure, you’ve been passing on some real whoppers over the years.

If I might have just a bit more of your attention, let me note the average (mean) annual pay for all occupations in Indiana in 2021 was $50,440 (37th in the nation) or $12,110 (32%) above the median Hoosier pay of $38,330 (39th among the 50 states).

With just two years left in your term of office, you said you were going to work harder than ever for all Hoosiers. Maybe you could get IEDC and your staff to give you the most accurate, realistic numbers. Then the people of Indiana would not continue to be misled by excess enthusiasm and just plain ignorance.

When I read this column, it immediately reminded me of a book I read several years ago, debunking several of the claims that were then being made about the “failures” of the nation’s public schools. The authors noted that much of the data being uncritically reported about “averages” was similar to the rather misleading result one would get when averaging a mouse with an elephant.

If you average my income with that of Bill Gates, you’ll come up with a pretty impressive average…

Actually, Morton’s column does inadvertently highlight a failing of the education system: too many Americans (including, I am sorry to say, the one writing this blog) are innumerate–lacking a basic knowledge of mathematics and arithmetic. That innumeracy encourages the use of statistics to mislead. As the saying goes: statistics don’t lie, but liars (and innumerate folks) do use–or misuse– statistics.

The Governor’s error perpetuates the erroneous belief that Indiana is succeeding with an economic development approach that relies almost entirely on keeping the state’s  taxes low–and ignores the fact that those low tax rates prevent the state from spending tax dollars to achieve a quality of life that would be far more likely to attract the businesses and skilled workers we need.

More on that to come….

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