Cost Of Doing Business

Politico recently reported on a proposed law in Maine that would tax food wrappers. Before you react (either by yawning or rolling your eyes), consider the likely motive for imposing such a tax, and the potential implications.

Maine’s bill is an effort to recoup at least some of the costs governments incur when recycling tons of packaging waste. Managing America’s trash is expensive, its costs continue to escalate, and a significant percentage of those costs are paid with tax dollars. 

According to the report,  business groups actually asked lawmakers to tax food wrappers and containers. Industry groups did emerge to oppose certain parts of the proposal–mainly, who would control the tax revenue and how it’s spent. Packagers and consumer brands wanted authority to manage the money and use it exclusively for recycling. Maine regulators and their allies in the Legislature wanted the revenues to reimburse municipalities for hauling waste to landfills, too.

The industry won that battle, and the bill–that has now passed– designated revenues for recycling. This legislation appears be the first of its kind in the country; it could give momentum to a broader push to curb plastic waste and rationalize a recycling system that is outdated and varies from town to town. 

What I find really hopeful, however, is that I see  this as an (admittedly small) step toward dealing with the serious challenges posed by  externalities.

As I have often noted, I am a proponent of markets and capitalism–properly understood and properly regulated. The usual description of a working–and workable–market is that it is characterized by transactions between willing buyers and willing sellers  who are each in possession of all  information relevant to the transaction. That description is an accurate depiction of the ultimate purchase and sale, but it elides other, equally important assumptions–including the assumption that the pricing of a good accurately reflects the costs of its manufacture plus a reasonable profit.

That assumption isn’t necessarily accurate.

If I am manufacturing widgets, and the process involves the use or creation of a pollutant, the cost of production–and the price charged to the consumer– should include the expense of properly disposing of that pollutant. If –instead of following the rules for such disposal– I dump my contaminated waste in the local river (where it will have to be cleaned up by adjacent municipalities) I can price my widgets more advantageously than widget manufacturers who follow the rules and pay to dispose of their waste properly.

In a properly operating marketplace, the price of goods will reflect the complete cost of their manufacture–the expense of raw materials, all costs of turning those raw materials into a salable item, and the associated expenses of marketing and packaging. Appropriate regulations are those aimed at preventing some companies from gaining unfair advantage by “offloading” a portion of what should be their costs onto unsuspecting taxpayers.

Properly operating markets benefit us all. What doesn’t benefit us are (1) markets in clearly inappropriate economic sectors, like health care, where there is a huge (and unbridgeable) disparity in information and urgency between the parties to a transaction, and (2) inadequately or improperly regulated markets that allow–or even encourage–companies to profit by cheating.  

The packaging issue being addressed in Maine isn’t an instance of cheating; technically, I doubt that the need to recycle packaging is even a true externality–at least, as economists would categorize it–but the need to recycle packaging waste clearly does impose a cost that is currently being covered by taxpayers rather than manufacturers.

Maine appears to be the first state to address the allocation of that expense, and it will be interesting to see how many other states (if any) follow suit. At the very least, efforts of this sort raise awareness of an issue that is all too easy to ignore.

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From Your Mouth…

My grandmother used to have a favorite response to rosy predictions: “From your mouth to God’s ears.” In other words, “I sure hope so, but whether God is listening remains to be seen.”

That was my reaction to a recent column by David Brooks in the New York Times.In a very real way, Brooks column–titled “The American Renaissance Has Begun “–  put flesh on President Biden’s frequent assertion that “America is back.”

He began the analysis by harkening back to the post-World War Two period, when West Germany and Japan emerged from widespread devastation to experience “miraculous” economic growth, while Britain, with its institutions more intact, entered a period of slow economic growth.

Brooks cited a 1982 book by Mancur Olson, which offered an explanation:

“The Rise and Decline of Nations,” Olson concluded that Germany and Japan enjoyed explosive growth precisely because their old arrangements had been disrupted. The devastation itself, and the forces of American occupation and reconstruction, dislodged the interest groups that had held back innovation. The old patterns that stifled experimentation were swept away. The disruption opened space for something new.

Brooks hypothesizes that the pandemic may have ushered in similar disruption, and he bolsters that argument with a number of data points: the 4.4 million new businesses that were started in 2020 represent a modern record.  The 38 percent of workers who took some additional training during 2020 was a substantial increase from the 14 percent who did so in 2019. U.S. start-ups raised $69 billion dollars, which was a 41 percent increase over the previous record, set in 2018. Productivity is up. Perennially low savings rates increased.

After decades in which consumption took preference over savings, Americans socked away trillions of dollars in 2020, reducing their debt burdens to lows not seen since 1980 and putting themselves in a position to spend lavishly as things open up.

Brooks says these and other data points are signs of three major shifts–growing worker power, a “rebalancing” of population between urban and suburban America, and a similar rebalancing of work and domestic life. I think the latter two predictions are “iffy”–it remains to be seen how many businesses will institutionalize remote work and how, and those decisions will affect workers’ need–and willingness–to relocate and commute.

If population dispersal does occur, our political polarization might ease; Brooks quotes a professor of urban studies who predicts such movement and as a result, forecasts a decline in the economic and cultural gaps between coastal cities and inland communities.

It remains to be seen whether these predicted population movements and changes in the culture of work will materialize, but the shift of power from employers to workers is clearly underway, and just as clearly overdue.

Power has begun shifting from employers to workers. In March, U.S. manufacturing, for example, expanded at the fastest pace in nearly four decades. Companies are desperate for new workers. Between April 2020 and March 2021, the number of unemployed people per opening plummeted to 1.2 from 5.

Workers are in the driver’s seat, for now, and they know it. The “quit rate” — the number of workers who quit their jobs because they are confident they can get a better one — is at the highest in two decades. Employers are raising wages and benefits to try to lure workers back.

This is a “rebalancing” that matters. Unions were formed originally to counter the disproportionate power of employers. Over time, in some industries, unions then became dominant–more powerful than employers. Over the past decades, however, as technology and gig work and successful corporate lobbying eviscerated union power, employers once again gained the upper hand–and a number happily exploited both their regained advantage and their workforces.

The operation of supply and demand, referenced by Brooks, is returning a measure of power to workers. (The recent Supreme Court decision upholding Obamacare will also help with that “rebalancing.” Employers’ positions were substantially strengthened by America’s insistence on tying health insurance to employment –workers with pre-existing conditions were effectively precluded from quitting and losing their coverage.)

The next few years will tell the economic story. But we also need to recognize that America  won’t truly be “back,” let alone “better,” unless we repair our infrastructure–physical and social–and protect our democracy.

If there’s a God, I hope she’s listening…..

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More Than One Way To Skin The Filibuster Cat…

Americans who may never have heard of the filibuster–or who were previously only dimly aware of that parliamentary mechanism–are passionately debating its continued existence. One reason so many of us favor its elimination is that the filibuster in its current iteration bears little or no resemblance to the original rule.

Whatever the original purpose of the filibuster, for many years its use was infrequent. For one thing, it required a Senator to actually make a lengthy speech on the Senate floor–unlike today. In its current form, it operates to require government by super-majority–it has become a weapon employed by extremists to hold the country hostage.

A bit of history is instructive.

The original idea of a filibuster was that so long as a senator kept talking, the bill in question couldn’t move forward. Once those opposed to the measure felt they had made their case, or at least exhausted their argument, they would leave the Senate floor and allow a vote. In 1917, when filibustering Senators threatened President Wilson’s ability to respond to a perceived military threat, the Senate adopted a mechanism called cloture, allowing a super-majority vote to end a filibuster.

In 1975, the Senate again changed the rules, making it much, much easier to filibuster.

The new rules allowed other business to be conducted during the time a filibuster is (theoretically) taking place. Senators no longer are required to take to the Senate floor and publicly argue their case. This “virtual” use has increased dramatically as partisan polarization has worsened, and it has effectively abolished the principle of majority rule. It now takes the sixty votes needed for cloture to pass any legislation. This anti-democratic result isn’t just in direct conflict with the intent of the Founders, it has brought normal government operation to a standstill.

Meanwhile, the lack of any requirement to publicly debate the matter keeps Americans  from hearing and evaluating the rationale for opposition to a measure–or even understanding why nothing is getting done.

There is really no principled argument for maintaining the filibuster in its current iteration. But there may be alternatives to simply jettisoning it, as Ezra Klein points out in a recent column about Joe Manchin.

Klein is clear-eyed about Manchin’s purported reasons for maintaining the filibuster– devotion to a long-gone “bipartisanship.”

At his worst, Manchin prizes the aesthetic of bipartisanship over its actual pursuit. In those moments, he becomes a defender of the status quo and, paradoxically, an enabler of Republican partisanship. But over the past 24 hours, a plausible path has emerged through which Manchin could build a more cooperative and deliberative Senate. It’s narrow, but it’s there.

Part of the strategy relies on changing the rules. Manchin has said, over and over again, that he will not eliminate or weaken the filibuster. I wish he’d reconsider, but he won’t. The possibility remains, however, that he will strengthen the filibuster.

Klein points out how dramatically the filibuster has morphed from its original form, and considers–in lieu of simply getting rid of it–how it might be returned to something approximating its historical form.

It’s possible to imagine a set of reforms that would restore something more like the filibuster of yore and rebuild the deliberative capacities of the Senate. This would begin with a variation on the congressional scholar Norm Ornstein’s idea to shift the burden of the filibuster: Instead of demanding 60 votes to end debate, require 40 (or 41) to continue it.

That would return the filibuster to something more like we imagine it to be: Impassioned minorities could hold the floor with theatrical speeches, shining public attention on their arguments, but the majority could end debate if the minority relented. To sustain this kind of filibuster would be grueling, which is as it should be. The filibuster is an extraordinary measure, and it should require extraordinary commitment to deploy.

The majority, for its part, would have to carefully weigh the consequences of proceeding with partisan legislation: They would gamble weeks or months of Senate time if they chose to face down a filibuster, with no guarantee of passage on the other end. A reform like this would demand more from both the majority and the minority and ignite the kinds of lengthy, public debates that the Senate was once known for.

In leaked audio published by The Intercept on Wednesday, Manchin appeared to favor exactly this kind of change. “I think, basically, it should be 41 people have to force the issue versus the 60 that we need in the affirmative,” he said.

I think that most of us who are exasperated by the constant, dishonest and sneaky use of the filibuster in its current form would be willing to give this modification a try. 

Fingers crossed.

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Politics And The Courts

I hate sports analogies, but sometimes, they just fit.

For those of you who are sports fans (I am not one of you), here’s a question: how much would you enjoy watching a game if you knew that the umpire or referee had been bribed, or even just recruited from a group of rabid fans of one of the teams on the field?

The decisions America’s founders incorporated in our constitution haven’t all stood the test of time–exhibit one, the Electoral College–but one that has was their determination that  the judiciary should be protected from political pressure to the extent possible.

There are sound reasons that federal judges are not elected–not “answerable” to the public in the same way that members of the legislative and executive branches are.

When we discussed judicial independence in my classes, I didn’t use the sports analogy; instead, I would pose a different hypothetical: let’s say you live in a small town where you are a party to a lawsuit. Trial is in the local court, where the judge has been elected. What if the lawyer representing the other guy was one of the biggest donors to that judge’s campaign, and is a regular at the judge’s Wednesday night poker get-together? If the judge ruled against you, how likely would you be to believe you’d been judged fairly and impartially?

Or let’s assume a judge is presiding over a high-profile case in which a majority of local folks are emotionally invested. Assume too that controlling law is on the side of the publicly disfavored position–and further assume that the judge is facing re-election. She’s a widow with a mortgage and a couple of kids in college, and she knows that following the law means losing the election.

You get the picture. Even if every judge in these hypotheticals is a paragon of virtue who ignores personal considerations and “calls them like s/he sees them,” public trust in the process would be hard to maintain.

Separation of powers was the division of our government into three branches. Two of those branches were intended to be answerable to public opinion, even public passion. The third was tasked with being an impartial arbiter, insulated from electoral pressure. When judges are wrong–and there are plenty of times they will be–we want them to be wrong because they misread the law, not because they were in thrall to donors or interest groups.

That’s why the constitution requires an appointed judiciary in the federal courts, a decision that has slowed–but certainly not stopped–efforts to politicize America’s court system.

It is admittedly impossible to keep politics completely out of the judicial selection process–especially selections for the Supreme Court. But the problem is far worse in the large number of states that continue to elect their judges. A recent report from Governing Magazine shows just how far state-level politicians (mostly, but not exclusively, Republicans) will go to game the court system.

Last Monday, Republicans in the Louisiana House tried to pass a proposed constitutional amendment to redraw election districts for the state Supreme Court, while adding two seats to it. The effort came up short, but it was just the latest move by a state legislature to try to change how high court justices are elected. Just three days earlier, Illinois Gov. J.B. Pritzker, a Democrat, signed a bill that redraws election districts for his state’s Supreme Court, a move observers believe is aimed at maintaining his party’s 4-3 majority in next year’s elections. And Republicans in Montana and Pennsylvania passed bills in the past year to create districts for their high courts, both of which currently have progressive majorities and whose members are now elected statewide.

The article focused on what it termed “judicial gerrymandering,” and like all gerrymandering, the goal is unearned power. In states across the country, politicians are redrawing their state’s high court election districts in ways that favor their party’s candidates.

Admittedly, there is no way to entirely insulate courts from political pressures. Here in Indiana, where a judicial nominating committee considers candidates for the State Supreme Court and sends three names to the Governor, it’s a given that the ultimate choice will be someone from the Governor’s political party. For that matter, the committee members will be impressed (or repelled) by the identities and politics of the people “lobbying” for particular candidates.

Nevertheless, Indiana’s process significantly attenuates the role played by partisanship. It recognizes that when the umpire is effectively a member of one of the teams on the field, the teams and their fans are all losers.

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Investigating Rural Rage

Over the past several years, it has become impossible to ignore America’s urban/rural divide. The causes of that divide are subject to debate, and the focus of a good deal of research. Back in 2018, Robert Wuthnow–a noted scholar– published a book based upon eight years of interviews with rural folks across the country. It was titled The Left Behind: Decline and Rage in Rural America, and Wuthnow was interviewed about his findings by Sean Illing of Vox.

it made for fascinating, albeit depressing, reading.

The interviews were conducted between 2006 and 2014, and included people in every state in the country. The research team limited its focus to small towns with fewer than 25,000 people and excluded those close to suburbs or cities in recognition of data showing that suburban and exurban cultures differ from those of more isolated small towns.

Approximately 90 percent of small-town America is White, a demographic factor that explains a great deal (although Wuthnow notes that diversity is growing even in these precincts, as Latinos increasingly settle in them).

Wuthnow argues that the anger being expressed in rural America is less about economic concerns and more about the “perception that Washington is threatening the way of life in small towns.”

And just how, Illing asks him, is Washington accomplishing that?

I’m not sure that Washington is doing anything to harm these communities. To be honest, a lot of it is just scapegoating. And that’s why you see more xenophobia and racism in these communities. There’s a sense that things are going badly, and the impulse is to blame “others.

They believe that Washington really does have power over their lives. They recognize that the federal government controls vast resources, and they feel threatened if they perceive Washington’s interest being directed more toward urban areas than rural areas, or toward immigrants more than non-immigrants, or toward minority populations instead of the traditional white Anglo population.

These attitudes have hardened as small-town America has continued to empty out. These smaller communities have lost population steadily over the last few decades, and Wuthnow’s interviews and the book’s title reflected that reality. As he points out,

It’s not as though these people are desperate to leave but can’t. They value their local community. They understand its problems, but they like knowing their neighbors and they like the slow pace of life and they like living in a community that feels small and closed. Maybe they’re making the best of a bad situation, but they choose to stay.

They recognize themselves as being left behind because, in fact, they are the ones in their family and in their social networks who did stay where they were. Most of the people I spoke to grew up in the small town they currently live in, or some other small town nearby. Often their children have already left, either to college or in search of a better job somewhere else.

In that sense, they believe, quite correctly, that they’re the ones who stayed in these small towns while young people — and really the country as a whole — moved on.

That feeling of being left behind generates resentment–and that resentment is directed toward politicians they don’t like and especially toward people who don’t look or pray the way they do.

Wuthnow also found significant fear of change– expressed as a fear that traditional moral rules were “being wiped out by a government and a culture that doesn’t understand the people who still believe in these things.”

I think the concerns about moral decline often miss the mark. I think a lot of white Americans in these small towns are simply reacting against a country that is becoming more diverse — racially, religiously, and culturally. They just don’t how to deal with it. And that’s why you’re seeing this spike in white nationalism.

Wuthnow cautions against painting rural America with too broad a brush, and of course he’s right. Not all small towns are filled with seething reactionaries, just as not all urban neighborhoods are enclaves of brotherly love. Still, the data about opioid addiction and suicide rates should give pause to the notion that every small town is Mayberry or Green Acres or even Schitt’s Creek.

I missed Wuthnow’s book when it came out. I need to find it, because in the three years since its publication, the anger he studied has gotten more delusional and considerably more dangerous. It’s as if the people Wuthnow interviewed were fireplace tinder, and Trump and his sycophants were the arsonists who lit the match…

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