Taxes and Transparency

While I'm glad that Paul Ryan is finally forcing the President to seriously engage -- or at least engage -- on the issue of our long-term federal deficit, I'm mystified as to why Republicans do not seek structural reforms that make the tax burden on American taxpayers more transparent.

Employers are required to pay a matching FICA tax to employees, but that is nothing more than an accounting gimmick as it represents the employer's cost of hiring an employee.  There are other words often used to describe the cost of hiring an employee (e.g., wage, salary, etc.).  In other words, every dollar the employer spends on the FICA tax is a dollar that the employer would otherwise pay the employee in salary or wages, so the employer's FICA payment is fundamentally the same as the employer's withholding of federal income taxes on behalf of an employee.

So in addition to pushing for spending restraint, Republicans should prioritize process reforms that highlight the burden each individual -- not just the employer -- bears in the form of government spending.  When taxpayers see that they are paying 12 plus percent of their income for Social Security, not to mention their share of federal income taxes, they may start questioning the size, scope, and efficiency of our federal government in a way that they've never done before.  And they may really start to think that a plan that designates some portion of an individual's FICA tax to a savings account should be considered.

Just take a step back now and then . . . .

Look, anyone who takes the time to blog about public policy issues -- yours truly included -- probably cares a great deal about the underlying policies and the values that are often driving these debates.  We all tend to give short shrift to the value preferences of others and assume that we're on the side of what is just and fair.  More often than not, though, we just have different values and place a greater priority on some values than others (usually a preference for liberty over equality or vice versa).

Occasionally, it helps to take a step back and remember that as important as we all make this stuff out to be, it pales in comparison to the actual lives that we have the most influence over:  our friends and family.  Why carry around bitterness about what a politician who, even if he wanted to change the world and remake it in a way you find objectionable, doesn't really have the power to do anything that's likely to change your life in a meaningful way.

So when I see a story like  this, my overriding reaction is one of pity.

Oppo Research on News Editors

When you start conducting opposition research and digging for the bones in the closets of middle management at a company like Fox News, you should probably re-think how much time you spend following politics and allow for the possibility that you're taking things a little too personally.  And the question you have to ask yourself is whether it's worth it, and relatedly, whether that emotional energy could be directed to a more productive endeavor.

Life is just too short to carry that level of bitterness around.  And for what?

A Special Place in the Hall of Shame for Reuters . . . .

A bomb explodes near a bus stop, and Reuters can't even cover the story in a semi-objective fashion, injecting moral equivalence into the story in a way that is utterly shameful by suggesting that Israel created this term "terrorism" as a way of disparaging Palestinians rather than because . . . the attacks are actually . . . terrorist attacks.  It isn't just bias; in this case, it's absolute stupidity.

Reuters: Not exactly fair and balanced.

A National Branding Opportunity

Right now, President Obama is taking a lot of heat for his lack of leadership on Libya.  That criticism may be overstated, however, as those urging action seem more interested in doing "something" rather than having an actual plan in mind.  I don't think it's a leadership vice to maintain some level of uncertainty in a situation where the answer may not be clear.

If criticism is due right now, I think it actually relates to Japan.  Sure, the Administration has said we will help Japan, but the support has been tepid at best.  Right now, we need to stand with one of our most dependable allies and demonstrate that we will do whatever it takes to bring Japan back.  I think people take for granted the miracle that is our relationship with Japan.  It's as if Pearl Harbor and Hiroshima never happened.  That is truly remarkable, and it is largely, in my view, a product of the fact that once the war was over, we embarked on a program to help rebuild Japan.  We didn't use our military victory as a vehicle for inflicting additional punishment on an aggressor.

Japan has taken a body-blow, and we have an opportunity to show our ally that America stands with its friends to the last.  Let's face it, the President's role on policy affairs is overstated due the checks and balances existing in our system.  His role in being our national voice, however, is not overstated, and we need him to speak loudly about Japan.  The enduring impression that we need to leave is that Japan will be back and that the U.S. will be there, hand-in-hand, as we help in their rebuilding efforts.

Why Governments Waste Money

One unfortunate byproduct of debates about public employee unions is the tendency to disparage government employees and attribute to them character flaws that lead to inefficient government.  To be clear:  the problem originates not from the employees themselves but from the absence of competitive pressure.  Governments are no different than monopolistic companies, and absent the discipline that can only be exerted by market competitors, corporations can and do exhibit the same inefficiencies.  The problem is that from the perspective of those governed, there are no viable competitors to discipline an inefficient government.  So if your government isn't responsive, you don't really have the option of shopping elsewhere (although some States are surely testing that thesis).  I therefore do not blame the government employees for exhibiting traditional characteristics of a monopolist.  I do, however, blame those who denigrate private sector monopolies at every opportunity while simultaneously pretending that the government monopoly has some mystical ability to transcend basic principles of industrial organization.

"Hope" is the last thing this Administration is selling.

Recent poll numbers show that only 22% of Americans think the country is on the right track.  (Rasmussen Poll).  That isn't entirely or even mostly the fault of Barack Obama.  He inherited a financial crisis (although one his party, like the Republicans, had a role in creating).  And it isn't as if the Middle East just now became a model of instability.  Even the best chief executive would have a tough time pulling a plus-50 number given many of the circumstances President Obama inherited.  So I don't want to overstate his failures and attribute every failure on earth to his Presidency the way Democrats did to President Bush.

That does not, however, excuse the President from generating the very thing that was supposed to be his singular strength -- hope.  I think most people realize that the next few years will be a struggle, but the reason they have no optimism is that this President is offering no reasonable prospect that the very real problems we have will be addressed in any serious way.  His health care system was predicated on a series of dubious assumptions and accounting gimmicks that would make Bernie Madoff proud.  And the President has been conspicuously absent from discussions about how to cut the budget.

I could even accept the argument -- even if I don't agree with it -- that now isn't the time to tackle the deficit because of the precarious nature of our economic situation.  The problem with that Keynesian argument is two-fold.  First, the President isn't making it.  He did a poor job of selling the first stimulus on Keynesian grounds because he delegated the drafting of the bill to congressional democrats, who promptly larded the bill up interest group payoffs rather than the type of real infrastructure improvements that many Americans might support.  The second problem is related to the first, in that Democrats are not actually proposing any "game changers" that Americans believe will actually affect their future.  The Administration's best attempt along these fronts is high speed rail, but no one cares because we all know that taking a train from Tampa to Orlando is a pretty useless exercise if you have to walk once you get there.  And if you don't have riders, what you have is a recurring budget expense.  Oh -- you mean people are supposed to ride the train?

Tell America that we're going to Mars.  Build the 21st Century version of the Interstate Highway System (but make sure that people will actually use it).  Or take on some massive project designed to help alleviate the water shortages in the Western part of the country.  If you're going to spend a lot of money, at least do something big to make people believe that it may offer some benefit to us, either in terms of technological advances or national prestige (Mars) or by lowering the transportation costs for future generations.

And if none of that is feasible, try coming within the Western Hemisphere of spending as much money as you take in on a yearly basis.  Otherwise, it's hard to make people believe that we aren't on our way to becoming a Banana Republic.

We don't need a bumper sticker.  We actually need H-O-P-E.

Fundamentally Unserious

Facing an astronomical national debt and a potential sovereign debt crisis, the Democratic Senate Majority Leader actually complained that a GOP bill would result in the end of a cowboy poetry festival.  According to Politico (full article here:  Save the Cowboy Poets!):

“The mean-spirited bill, H.R. 1 … eliminates the National Endowment of the Humanities, National Endowment of the Arts,” said Reid. “These programs create jobs. The National Endowment of the Humanities is the reason we have in northern Nevada every January a cowboy poetry festival. Had that program not been around, the tens of thousands of people who come there every year would not exist.”


Of course, one could argue that Reid was complaining about the fact that Republicans want to eliminate the NEH altogether and illustrating some of the good works of the program.  Even accepting that, the argument speaks volumes about the mindset of Democrats generally.  You are simply not a fundamentally serious person if in a budget environment like this, cowboy poetry is on your radar screen.  That is the lowest of the low fruit, and when you can't even muster the will to take that on, what hope is there that you could ever address Medicare, Social Security, or the Defense Budget?  


What is even more striking is that the Republicans are not riding this like the gift that it is.  There are many ways a budget battle can be perceived -- ask Newt Gingrich.  If Republicans end up looking like the group that wants to protect the rich by balancing the budget on the backs of the poor, they will have no one to blame but themselves.  Between the President's inaction on the budget and statements like this, Republicans have a golden opportunity to seize the mantle as the party of the grown ups that is willing to get serious.  The independent voter will view a party that defends cowboy poetry as not ready for prime time.  But there is a lot of noise out there, so how many independent voters will even remember this in six months, much less two years?  


Republicans should use this as a point of derision every day for the next month and should continue bringing it up as long as Reid is the Majority Leader.  They literally can't bring it up enough because it's that bad.  It sums up their contrasting world views in a way that voters can really understand.  

Some Unanswered Questions About Public Employee Unions

I tend to view the debate out over Governor Walker's attempt to strip government employees of various collective bargaining rights as one where liberals and progressives have picked their "side" and not one where they actually believe in the underlying merits of the positions advanced by the unions.  I admit that this may be a convenient interpretation, as I stand firmly on the other side of this issue, and it's common (if unfortunate) to dismiss opponents' arguments as something less than intellectually principled. But in this case, I think the argument that liberals and progressives are making pretextual defenses of unions holds up to objective scrutiny.  I will address that in more detail below, but I approach this debate by asking the following questions, ones that I view as central to addressing the merits of each side's position:

1. Do you think that unions representing public employees will put the priorities of their members over the priorities of the government?  Even if you believe their interests are aligned (a claim that strikes me as largely frivolous and bordering on rationalization) -- assume that a conflict exists.  Which side of that conflict do you believe the union will pick?
2. Do you believe that labor unions involve collusive agreements to fix prices?  Do you think price-fixing typically results in the sub-optimal allocation of resources by those who purchase the services of those fixing prices?  If not, would you have the same reaction to price-fixing by corporations?  Be careful here -- I'm not asking whether you believe that economic distortions caused by price-fixing should be tolerated for unions but not corporations.  I'm asking whether you believe that collective bargaining causes any distortions in the price paid for government employee services (putting aside for the moment whether the countervailing benefits from such a price-fixing arrangement outweigh any negative effects from those distortions).  
3. If the answer to the first question is yes, do you think that the government can provide more or less services for the same amount of money with or without collective bargaining?  
4. If the answer to the second question is yes, what are the countervailing benefits of a union shop that justify the economic distortions of the fixed prices?  The NLRA and other federal laws affecting working conditions were passed during an era when employer abuse -- real abuse, not ten hour days and working in July -- was not uncommon and collective bargaining was viewed as a necessary evil to protect the rights of workers.  Do the same concerns really exist in the 21st Century?  And if they do, do they actually exist in the government sector, where employees always have the recourse of seeking relief in federal court given the fact that managerial excesses by the government could arise to the level of a constitutional violation?  
5. If the answer to the last question is that collective bargaining by public employees will benefit a group that is disproportionately middle class and that this furthers egalitarian goals in general, why shouldn't the poor and middle class as a whole receive the benefits?  Why should they be limited to unionized government employees?
6. If collective bargaining by public employees results in the government having to pay more than it would otherwise have to pay for the services it provides, why would liberals/progressives who want government to play a larger role in society knowingly incur increased costs that will result in the government being able to provide fewer services?  

I answer these questions as follows:

1. Of course unions represent the interests of their members and, if forced to choose, will always represent the interests of the members even if it negatively affects the entity employing the members.  Some people use pejorative descriptions when talking about unions, as if they should be representing something other than their membership.  I take it as a given, however, that their very purpose is to represent their constituents and that they will do so zealously.  I, therefore, do not view this as some "bad intention" by the unions but rather a systemic bias that must always be recognized when they claim they are acting in the public interest (the same criticisms, mind you, apply to defense contractors and many others that point to the public benefits of the services or goods they provide).  
2. If unions are empowered to collectively bargain over wages, they are fixing prices.  And unless the price-fixing is necessary to bring the product to market in the first instance (and here it is not), the agreement on prices will typically result in a higher price for those services than would prevail in the absence of collusion, and that results in a loss of consumer surplus that would otherwise flow to the public at large.
3. In light of the answer to question number 2, I think the answer to question 3 is obvious:  the government will have to pay more for the services it provides as a result of collusive pricing.
4. Here, in my mind, is where the rubber really hits the road in this debate.  I simply do not see any benefits of unionization in the public employment sphere that justify the economic distortions they cause.  I've seen arguments that talk about the importance of seniority for teachers and things of that sort, but those really don't speak to the benefits of collective bargaining.  That's an argument for paying teachers more (in the form of increased security), and those measures can be adopted without providing collective bargaining rights to any particular group.  I've rarely seen any arguments about the benefits public employee unions provide in the administration of government.  And I suspect this is why apologists like Paul Krugman point to public employee unions as a "counterweight" to corporations in terms of influencing the direction of the government.  But even making those arguments gives the game away.  It's tantamount to saying "Well, yeah, public employee unions may make government more expensive, but if we don't have them, who else is going to speak for the poor and middle class?"  If that is what motivates the defense of public employee unions, the solution is to adopt measures that limit corporate influence or that make it easier for individuals to aggregate their resources to protect their own interests.  It is not to make the cost of government more expensive by using public funds to set up a permanent, glorified "pro-government" public relations firm.  
5. If this is nothing more than a battle over who should get a bigger share of the pie, no principled reason exists for affording government employees a larger share at the expense of their private counterparts.  The counter argument to this is that any savings will only benefit the rich and that this is the only practical way to steer benefits toward those with less means.  The flaw in this argument is that if the government has to pay more for the services it provides, the same alleged misallocation of the burden between rich and poor will still exist but now the bill will be higher in absolute terms.  In addition, very few government employees live in actual poverty, so although the challenges they face are real and not inconsequential, any dollars we shift in their direction are dollars that could have been devoted to individuals in greater need.
6. Because liberals and progressives should generally be in favor of a leaner, more efficient government so that scarce resources can be allocated to those in real need, I am left with the belief that their support of public employee unions is, as the Krugman types hint at, that these unions are viewed as an ally in a greater struggle.  If true, that means that liberals aren't backing public employee unions because they genuinely believe in the core functions that those unions provide; instead, they support those unions because they share a common interest in promoting more government.   While that position may be rational if you accept the worldview of a modern liberal or progressive, it doesn't make many of the defenses made by many liberals any less contrived.  

What other questions should be asked?  What are the best liberal/progressive arguments for why these unions are needed in the public workplace (i.e., putting aside their value as political allies)?