Tom Tomorrow on our fiscal cliffhangers

Liberals, big business and big government

We liberals see a strong government as necessary to protect individuals against the abuses of big corporations.  The problem is that government does not necessarily operate this way.  What we have in the United States today is government increasingly interfering in the lives of individual citizens, while giving free rein to the heads of large corporations.  A recent example of this was the decision of the U.S. Department of Justice to refrain from prosecuting executives of HSBC, a big international bank based in London, for laundering money of the drug cartels because that would be disruptive to the financial system.

It is a mistake to talk about “big government” and “big business” as if they were people.   They are organizational structures through which people can do bad things or good things, but very often can be shielded from the responsibility for the bad things they do.  You can’t punish an organizational structure, or hold it accountable.  Only the individual human beings within the structure are accountable.

Libertarians say that the only way to limit the abuses of government is to limit the authority of government.  They say that if you don’t want governmental officials to have the power to bail out banks, they shouldn’t have the authority to bail out anybody.  My problem with that argument is that this tradeoff isn’t on offer.  Cutting the Social Security pensions of 80-year-old widows won’t do a thing about bankers giving themselves bonuses with taxpayers’ bailout money.

Click on Outrageous HSBC Settlement Proves the Drug War Is a Joke for Matt Taibbi’s comment.

States with veto-proof majorities

There is an increase in the number of states where one party or the other has a veto-proof majority in the state legislature.  To the extent that this represents the will of the people and not just creative legislative redistricting, I think this is a good thing, not a bad thing.   It means the states can be laboratories to test the ideas represented by the respective parties.

Hat tip to The American Conservative.

Statehood for Puerto Rico?

A plurality of the voters of Puerto Rico supported a non-binding referendum in favor of statehood for the U.S. territory.  A few observations:

• Puerto Rico as a state would elect two U.S. senators and five members of the House of Representatives, probably all Democrats in the near-term future.  For this reason statehood for Puerto Rico is unlikely unless Democrats control both the Senate and the House.
• Since representation in the Electoral College is based on representation in the Senate and House, Puerto Rico would have seven electoral votes, probably all Democratic in the near-term future.  This would make total U.S. electoral votes an odd number—making a tie vote impossible in a two-way race, unlike at present.
• Statehood for Puerto Rico would rule out independence for Puerto Rico.  There is precedent for a U.S. territory, the Philippines, becoming an independent nation.  There is no precedent for a state peacefully leaving the union.

Statehood for Puerto Rico is fine by me if that is what Puerto Ricans want.  Likewise independence or continued Commonwealth status.  I hope that if Puerto Ricans do ask for statehood, they are sure this is what they really want, because if they have second thoughts, it may be too late.

Anyhow, the outcome of the referendum is ambiguous.  It was in two parts – whether the voters wanted a change in the island’s status, and, if so, what change they wanted.  The vote represented a majority of those voting on the second question, but not on the first.

The trouble with globalization

The trouble with globalization is that there aren’t any democratic global institutions.

The only global institutions are multinational corporations, international banks and international organizations such as the International Monetary Fund and World Trade Organization that serve the interests of corporations and banks.

During ancient and medieval times, political philosophers believed that democracy was something that could work only on a local level.  They thought a town or city-state could be democratic, but not a large nation.  And it is true that it is hard to make democracy work when you go above the level of the New England town meeting.  But our existing international institutions and organizations don’t even attempt to be democratic.

Sebastian’s Rule

Don’t give sweeping new powers to a branch of government that you wouldn’t ever want to see in the hands of your political opponents.

via Obsidian Wings.

Affluence on the Potomac

The Washington, D.C., area has overtaken Silicon Valley as the nation’s most affluent metropolitan area.

Andrew Ferguson of Time magazine explained why.

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The size of the nonmilitary, nonpostal federal workforce has stayed relatively stable since the 1960s. What has changed is not the government payroll but the number of government contractors.  It’s estimated that, thanks to massive outsourcing over the past 20 years by the Clinton and Bush administrations, there are two government contractors for every worker directly employed by the government.  Federal contracting is the region’s great growth industry.  A government contractor can even hire contractors for help in getting more government contracts.  You could call those guys ­government-contract contractors.

Which means government hasn’t shrunk; it’s just changed clothes (and pretty nice clothes they are). The contractors are famous for secrecy; many have job titles that are designed to bewilder.  What is it, after all, that an analyst, a facilitator, a consultant, an adviser, a strategist actually does to earn his or her paycheck?  Champions of the capital’s Shangri-la economy like to brag of ­Washington’s knowledge workers.

Peter Corbett isn’t so sure about the wisdom of D.C.’s version of the knowledge economy.  Corbett heads a social-media marketing company, with corporate clients that have famous names.  Most of his work involves nonprofit foundations that have flocked to Washington to be close to the fount of grants and tax breaks.  He did a single project for the federal government and then swore it off for good.  He describes his first meeting at the Pentagon.  “There are 12 people sitting around the table,” he says. “I didn’t know eight of them. I said, ‘Who are you?’ They say, ‘I’m with Booz Allen.’ ‘I’m with Lockheed.’ ‘I’m with CACI.’ ‘ But why are you here?’ ‘ We’re consultants on your project.’  I said, ‘You are?’  They were charging the government $300 an hour, and I had no idea what they were doing, and neither did they.  They were just there.  So I just ignored them and did my project with my own people.”

Aside from its wealth, the single defining feature of über-Washington is its youth.  Most of the people who have moved to Washington since 2006 have been under 35; the region has the highest ­percentage of 25-to-34-year-olds in the U.S.  “We’re a mecca for young people,” [economist Stephen] Fuller [of George Mason University] says.   One recent arrival says word has gotten out to new graduates that Washington is where the work is.  “It’s a place where a ­liberal-arts major can still get a job,” she says, “because you don’t need a particular skill.”

Click on Bubble on the Potomac for the full article.  Hat tip for the link to Marginal Revolution, which I list in my Best Blogs menu.

[Later]  I am not anti-government, as anybody who reads this web log will know.  We need letter carriers, school teachers, firefighters, public health nurses and a whole range of other public servants who do actual work.   Most of them are less well compensated, by a long shot, than the people Ferguson described in his article.

America’s bargain postal rates

Kevin Drum of Mother Jones looked at the new bill enacted by the Senate and noticed one thing missing—a increase in postal rates sufficient to cover costs.

Take a look at countries around the world that have smaller volumes of mail than us: they all charge higher postage rates. They have to. And as volumes keep declining in America, we’re going to need higher rates here too. Right now, a first-class equivalent stamp runs 75¢ in Germany, 72¢ in Britain, 82¢ in France, 98¢ in Switzerland, 97¢ in Belgium, and 63¢ in the Netherlands. There’s no way that we can stay at 45¢ as volumes decline and pretend that somehow everything will be hunky-dory.

But allowing the price of a stamp to go up is apparently even more of a political taboo than closing rural post offices. I suppose Democrats are afraid of annoying granny and Republicans are so intent on busting the postal carriers union that they don’t like the idea of anything that brings in more revenue. We are ruled by idiots.

via Mother Jones.

Postal rates are set by an agency called the Postal Regulatory Service.  Under a 2006 law, the price of first-class mail stamps, periodical delivery and other services in which the USPS is “market dominant” can be increased only by such amount as is necessary to keep pace with the rise in the Consumer Price Index.  The USPS is free to increase prices of services in which it is “competitive,” such as priority mail or commercial package delivery.

My impression is that the Postal Service’s main problem is an excessive requirement pre-paying pensions.  The bill passed by the Democratic-controlled Senate eases that requirement, saving the Postal Service $5 billion a year and allowing it to reclaim $11 billion in excess payments.  Whether it will survive the Republican-controlled House of Representatives is another question.

But Kevin Drum makes a good point.  Our so-called “snail mail” is a real bargain.   It’s one respect in which our government service appears to surpass foreign governments.  Why get rid of it?

Click on Rearranging the Deck Chairs at the Postal Service for Kevin Drum’s full summary of the bill.

Click on Senate approves bill to help United States Postal Service for the Los Angeles Times’ report on the bill.

Click on In praise of the U.S. postal service for my earlier post on the Postal Service.

Welfare reform is a partial success story

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Years ago I had a good friend who was a single mother who had received Aid to Dependent Children from the local welfare department.  She attended the same high school I did in the late 1950s and early 1960s, some years after I left to go to college and do my military service.  She became pregnant in her early teens, married the father and dropped out of high school.   She and her young husband were too immature for marriage, and they soon divorced.  In those days, this course of events wasn’t uncommon. She found herself on her own with children to support, and applied for welfare assistance.

When I met her she had a job and no longer was receiving assistance.  She said that going to the welfare department and having her name taken off the public assistance rolls was the hardest thing she ever did in her life.  She told me that she was terrified to do this, because she was putting not only herself but her children at risk.  So long as she was a welfare client, she could be assured that her children would receive food and medical care.  Off welfare, her children’s food and doctor bills were her responsibility.  Things worked out.  Both she and her ex-husband got married again, to different people, and so far as I know did okay thereafter.

Nowadays things might not be so rough for someone in her situation.  Medicaid provides a minimum level of medical insurance for working poor people.  The Affordable Care Act will provide universal health insurance, supposedly at an affordable rate.  The expansion of the food stamp program since that era means that in principle no family need go without enough to eat.

The most significant change was the Clinton administration’s 1996 welfare reform.  Requirements for being on welfare were tightened up, while the Earned Income Tax Credit, a reverse income tax, provides supplemental income so that poor people on welfare are not penalized for getting jobs.

The charts above indicate that the Clinton-era welfare reform worked in terms of moving single-parent families from welfare to work.  It did not work so well in terms of reducing the number of children in poverty, which to my mind is the more important thing.  It is the experience of growing up in poverty, as much asnot just the experience of having a single-parent, that makes an adult likely to be poor themselves.   I don’t think the solution to this is to be found within the welfare system.  What we need is to get back to a full-employment, high-wage economy in which anyone willing to work can earn a decent living.

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Having said this, I acknowledge that there are women in this country who think that it is perfectly normal to make a living by having babies and getting paid by the government to raise them, and that there are men in this country who think it is normal to live off women who are getting paid to raise fatherless children.

I admit I don’t have a good answer.  I don’t believe you can treat children as you would treat unwanted puppies or kittens.  A decent society should not let children go hungry or without needed medical care.

Here is a difference, I think, between liberal and conservative attitudes.  A typical conservative wants to make sure that no help goes to anyone who doesn’t deserve it, even if some deserving people are cut off.  A typical liberal such as myself wants to be sure that everybody who really needs help should get it, even if some undeserving people also are helped.  I agree that a balance is needed, and either attitude can be taken to a harmful extreme.

Click on What Works Is Work: Welfare Reform and Poverty Reduction for a report by Ron Haskins of the Brookings Institution.

Click on Welfare Reform Worked for a shorter report by Haskins along with Peter H. Schuck of Yale Law School.

Click on Indicators of Welfare Dependence for a report from the U.S. Department of Health and Human Services which provides all the statistics on this subject that anybody could ever want.

Social Security is an American success story

For many old people, Social Security make the difference between a life in modest comfort and a life in poverty.  For others, it is the margin of survival.

Social Security has been under attack for decades.  Many young people have been convinced by propaganda that there is a greater chance of encountering a flying saucer than receiving Social Security benefits, and their belief could make this a self-fulfilling prophecy.

The important things to remember about Social Security are:

• Social Security is not broke.  The Social Security Trust Fund has been accumulating a surplus in the form of interest-bearing U.S. Treasury bonds for decades.  Even though Social Security is currently paying out more in benefits than collecting in payroll taxes, the trust fund surplus makes up the difference.
• Social Security contributes nothing to the U.S. government deficit (or surplus).  It has its own financing system.
• “Government IOUs” are the most secure form of investment there are.  The bonds in the trust fund are a fiduciary obligation of the U.S. government, just as much as bonds held in somebody’s Individual Retirement Account or by a foreign bank.
• If there ever comes a time when the U.S. government is unable to fulfill its obligations, then no other U.S. financial asset will be worth anything either.
• At some point the Social Security trust fund may reach a point in which it is unable to pay out benefits at the current level.  If that time comes, the choice will be to reduce Social Security benefits by some percentage or raise payroll taxes (or the cutoff point for taxes) by some percentage.  Neither would be catastrophic, according to current projections.
• The best way to keep Social Security paying out at current levels is to have a growing high-wage full-employment economy.

This chart is from the Economic Policy Institute.