Monthly Archives: August 2011

Do we really need a federal government that does more than bomb and arrest non-white people?

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In the wake of Hurricane Irene, Fox News has a new entry in its “Do We Really Need [Insert Literally Any Government Agency or Program]?” genre of editorial. It’s entitled “Do We Really Need a National Weather Service?”, and it’s at least as goofy as it sounds:

Today the NWS justifies itself on public interest grounds. It issues severe weather advisories and hijacks local radio and television stations to get the message out. It presumes that citizens do not pay attention to the weather and so it must force important, perhaps lifesaving, information upon them.

That’s just like the dagblasted government, innit, with all the presuming? They presume I don’t have a gun and a strong willingness/desire to shoot anyone who approaches me on the street, so they go all nanny state and provide police; they presume I don’t have a Hummer, so they go building roads when, as a rugged individualist, I would be happy to just plow over virgin terrain (sexual undertones totally unintended, because my Hummer is decidedly not a penis replacement).

But in all seriousness, how are citizens to pay attention to the weather if somebody isn’t collecting data about it for them? Of course, there are plenty of enterprising private businesses that are happy to fulfill this function, but as with all things, the relationship between such businesses and the government is a bit more complex than in Republican Fantasyland:

In addition to WeatherBug weather station data, WeatherBug integrates data from sources such as the National Weather Service (NWS) and World Meteorological Organization (WMO) (via WeatherBug.com)

Information from the National Weather Service, such as severe weather alerts and current conditions, is transmitted to custom equipment at each cable location (via Weather.com)

But let’s return to Fox News:

A few seconds’ thought reveals how silly this is. The weather might be the subject people care most about on a daily basis. There is a very successful private TV channel dedicated to it, 24 hours a day, as well as any number of phone and PC apps.

Yes, but… you were just talking about those weather alerts that “hijack” our TV and radio stations. Your counterpoint to the necessity of those is that people pay attention to the weather on their own, but does the average citizen really flip from Everybody Loves Raymond to The Weather Channel every time a commercial comes on? Because that’d be pretty much the only way to replace the functionality of those invasive, nanny-state weather alerts. Sure, it may be a relief annoyance when that blaring klaxon blocks out Ray Romano’s voice, but if you’re more concerned with catching the punchline of a sitcom joke than with saving lives, potentially including your own, I’m just not sure you’re equipped to participate in a democracy.

Outside the Fox News bubble, Ron Paul helpfully paints a picture of life in that glorious utopia in which the government doesn’t meddle in our weather:

After a lunch speech today, Ron Paul slammed the Federal Emergency Management Agency, or FEMA, and said that no national response to Hurricane Irene is necessary.

“We should be like 1900; we should be like 1940, 1950, 1960,” Paul said. “I live on the Gulf Coast; we deal with hurricanes all the time. Galveston is in my district.

Of course, between 6,000 and 12,000 people died in the Galveston Hurricane of 1900, but that’s the time period we should be emulating! Sure, more people died preventable deaths due to lack of emergency preparations, but you know what’s more important than human lives? Low tax rates.

(h/t Pandagon commenter sacundim)

Profitability: a bad metric for the worth of a public entity

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Cross-posted from gradient ascent.

Profitability is often held up as a measurement of the worth of a government agency, such as the US Postal Service.  The argument is simple: the USPS (or whichever organization is under attack) is inefficient and an unjustifiable use of public funds, and the lack of profits is evidence of this.

Let’s put aside the normal branch of arguments, those in favor of public goods.  While they do a good job explaining why profitability should not be a concern for public goods, we will focus on the finances of the claim, which are puzzling to say the least.  (Note that while profitability should not be a concern when undertaking public goods, this says nothing about the prudence of budgeting wisely.)

Suppose we have a government organization, call it G.  G takes in dollars (income) from two sources: taxation and rates on its goods and services.  In other words, G gets paid by government directly or by consumers of its services. Thus we can express G’s income simply: income = public spending + revenue.

G must provide its signature service.  In doing so, it incurs production costs.  These include both human costs (the cost of labor, total wages), and non-human costs (trucks, fuel, etc).  Thus we can think of the financial obligations of G constituting both wages and other costs: obligations = wages + costs.

Profit is surplus wealth.  In other words, for G to run a profit, it must pay out less money than it receives.  This means that income must be greater than the obligations of G, that which G pays out.

What does this mean?  G profiting is synonymous with G accumulating reserves of money.  Without using the money for anything, this is equivalent to burning it.  G would be collecting a stack of dollars that would be put to no use.

The main question I wish to ask conservatives (and more conservative Democrats) is: “when G runs a profit, what should it do with that profit?”  Keep in mind that doing nothing at all is doing something (burning it).  G would be extracting its profit (in dollars) from the private sector and from circulation.

Running a profit and then doing nothing with it, as G, impacts our money (however little).  This seems like a strange effect for policies about G to have.  In terms of the USPS, it would be strange to think of setting the price of stamps with an eye toward controlling inflation rates.  But if enough organizations did such a thing (made and sat on profit), it would have roughly a similar effect to the federal government running a surplus: it would drain the private sector of funds.

It’s easy to think of this in terms of a board game.  Suppose we’re playing Monopoly, and halfway through the game the banker is determined to collect more money than he distributes (and follows through on this).  (This example paraphrased from a solid comment from Krugman’s NYT blog a few days ago.)  The bank, running a surplus, would be draining the private market of currency.  Play would slow down as players would see their buying power gradually disappear with their money into the bank.  Remember, if the bank is running a surplus then it’s coming from somewhere.

Therefore, burning the money (just sitting on it) is not an option.  One legitimate use of such funds could be to invest in expected future growth.  Investment outside of its own direct business activities, however, would be highly illegitimate: it would confound policymaking about G and G’s activities with the real outcomes and entrenched interests of G’s investments.  Such entanglements would be so detrimental to lawmaking and sensible governance that investment (as a private entity would invest profits) is not acceptable.

There are only a few things one could do to eliminate (distribute) this profit.  We could lower inputs to G (lower taxes or lower rates), or we could simply increase G’s bills (they could spend more, or they could increase wages). Either way, the money needs to be returned to the private sector.  The different ways of doing so benefit different people in difference ways; we should do it remembering that the government exists to aid the private sector as a whole.  As the public sector, in capitalist societies, exists to promote the health of the private sector (including labor), accumulating profits makes no sense.  It would only do that if it were meant to serve its own needs, which is clearly perverse (government for its own sake).

After all, it stands to reason: if there’s a profit in a public service, then it means somebody is being overcharged, either the tax payers, the people paying rates, or the workers (overcharged for their labor — underpaid).  While liberals and conservatives will fall on other side of that divide (thinking that the rich via taxation should disproportionately cover the financing versus the poor via rates and wages), the point remains: running a profit makes no sense, and G should work to zero any surplus wealth, allowing the funds to go back into the private economy.  Profitability is  poor measurement for the value of services in the public sector, as the public sector does not operate based on profit-motive (nor should it).

What was lost

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Krugman brings updated figures on the lost economic potential that has resulted from the recession:

Potential vs Real GDPWhat the general public needs to understand is that one of the defining features of a recession is that the economy has the potential to produce more – and to employ more people and pay them more wages – than it is, but the people in control of the capital are choosing not to fully utilize it. It’s not necessarily the result of some conspiracy among business owners – although that’s hardly unprecedented. When it comes down to it, the behavior of the market is the aggregate of millions of individual decisions made by property-owners and businesspeople in pursuit of their individual interests as they perceive them.

So even though all of those businesspeople could turn the economy around if they collectively decided to start producing more, none of them individually are going to make that decision, because everybody else’s reluctance to produce more makes for low consumer demand.

That’s why the government has to step in! This point can’t be emphasized enough. Increasing demand, which the government can do simply by spending a lot of money on the right things, leading businesses to hire more workers to address that demand, and ultimately to higher wages as workers are (ideally) allowed to share in the renewed economic prosperity, should be the government’s top priority, not reducing deficits.

The alternative is our current situation, where, for just about four years now, a chunk of the productive capacity of our nation is going to waste. As Krugman says:

So next time someone tells you that it would be irresponsible to engage in more stimulus, monetary, fiscal, or both, ask: in what universe is wasting almost a trillion a year, not to mention the human costs, a responsible thing to do?

Yet another example of businesses failing to contribute to the public good

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The New York Times reports on the rising trend of employers outright refusing to hire people who are currently unemployed.

There are two things to take away from this situation: One, businesses are, as usual, making abundantly clear that they have no interest in actually serving their community or country. They demonstrate that by being so reluctant to hire in the first place, even though hiring on a large scale would do a lot to kick-start the economy by getting money flowing towards the people who will actually spend it (ie, not rich people). But what’s really despicable is that, even to the extent that they are hiring, they’d prefer to hire somebody who already has a job, so they’re not only refusing to help the people who need it most, they’re also doing as little as possible to boost the economy at large.

You can argue, of course, that businesses have a right to look out for their own interests. I would take exception to that, as I’m tired of seeing libertarians and pro-business people in general treat businesses as if they’re human beings who have an inherent right to prosperity and happiness. Why should we allow businesses to exist if they’re not ultimately contributing to the good of their communities and the people who live in those communities? As it is, businesses are asserting their right to exist to serve only the wealthy, but the non-wealthy have every right and reason to demand otherwise.

Whether or not it’s right for businesses to be focused solely on their own interests, the reality is that we’re in a job market that favors the employer. As much as I would like for workers to stand up to businesses and demand that they behave themselves, the short-term solution is to return us to a strong economy that has more jobs than people to do them. But that’s not what Washington is engaged in doing right now.

But the issue of businesses looking out for their own interests is mitigated somewhat by the second takeaway from the NYT article, which is that, in many ways, businesses are engaged in class warfare even to the detriment of their own bottom lines. Note:

Government incentives for companies to hire unemployed workers have met with limited success. One such tax incentive from last year was poorly publicized, so most employers did not know about it. Better publicity may not suffice, either. An experiment from the 1980s found that telling companies that the unemployed were eligible for generous wage subsidies actually made employers less likely to hire such workers.

“Generous wage subsidies” made employees even less likely to get hired. Here we have a situation where businesses could save some money on payroll expenses by hiring employees who will be paid in part by the government. A business that’s looking solely toward its bottom line should, in theory, jump all over that. But evidently, it’s worth paying a little extra to not have a poor person in your office getting their poverty all over everybody.

So the libertarian argument that businesses are rational profit-seekers doesn’t really work, because even if you make hiring poor people more profitable for them, they’d still rather just fuck them over. That’s the reality we’re dealing with.

And this is why any economic policy centered around kick-starting the economy by giving money to businesses, or tax breaks to businesses, or anything focused on helping out businesses, is not going to work. The answer is to turn the rights situation around. Stop declaring that businesses have a right to maximize their profits; stop declaring that shareholders have a right to maximize their returns. Start declaring that every individual American has a right to a job that pays a living wage. Whatever it takes to make those jobs available, even if the government has to hire them directly to clean up the President’s dog’s poop, should be the priority, not the bottom lines of business.

Wealth’s political roots

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Cross-posted from gradient ascent

It’s remarkable how much existing policy frames debate.  Often the issue of “those who make $250,000 and more” is brought up in tax discussions.

Conservative-leaning people think we should take it easy on these folks.  They point to various sources of evidence showing that $250,000 “isn’t that much”, and also claim that taxing such “small earners” hurts small business.  Liberal and otherwise left-leaning people respond by trying to refute these claims, making arguments that these people make “more than enough”.

Both sides are making an error here, but only the conservative side is making an error useful to its own interests.  Let’s examine this, and through it, see an example in which the wealthiest extend their political interests down into the middle class (or how they have managed to do so).

Conservatives are right, in some sense, to distinguish small from large businesses here (leaving aside those who make high salaries just due to being in-demand workers for now).  It doesn’t make sense to tax earnings in the (currently imaginary) bracket of $250,000-$350,000 the same as, say, $10,000,000-$20,000,000.

Liberals are right to smell some cleverness here, but they’re not smelling out the right trick.  They stick to the story that everybody in the existing top-bracket should pay more, seeing this as the only way to battle damaging wealth-accumulation at the very top.  They rarely point out that the number of tax brackets can be changed, and has been changed plenty of times.  In fact, the way in which it has been changed is quite instructive.

Federal income tax brackets over time.

The arguments we’re having about whether or not those making above a magic number ($250,000) are paying enough could only happen in an environment where those arbitrary, magic numbers exist.  The content of the political discourse over federal income taxes would be quite different fifty years ago today than now, precisely because there are more brackets, and more flexibility in distributing the tax load.  Failure to see that we can simply add more brackets is a lack of imagination born from not knowing how we have, in the past, decreased the number of brackets.

While those who supported doing so claimed that doing so was a “necessary simplification of tax policy”, look at what it’s managed to do for the top marginal rates.  As more people are lumped into the same set of interests as the hyper-wealthy, the political roots of wealth-preservation creep further down into the middle class.  This means more money, more people, and overall, more power in the corner of the hyper-wealthy.  Nobody wants to be in a sinking boat, and if the rich have piled as many people into that boat as possible, everybody works to support their artificially-conjoined interest in staying afloat.

What we need to do is broaden the discussion, and discuss the number of brackets (and how to expand them), so that we can sensibly address tax burden and a sensible distribution of debt.  There’s just no way to do this when the wealthy are empowered and augmented by the political power of those with whom they would never normally share interests.  More tax brackets means driving a wedge between the majority of Americans and the hyper-wealthy; it stops the aristocracy from masquerading as the middle class when it comes time for tax season.

Fascism is capitalism in crisis. Take note.

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Cross-posted from gradient ascent.

Today Paul Krugman pointed out the slow, dawning realization in the press that austerity measures move us in the wrong direction.  It’s frightening to internalize just how much the public discussion has diverged from reality and from rational science.  It’s not the first time America has seen the politicization of science, and not the last time we (and the world) will suffer for shelving scientific thought in favor of politically convenient mythology.

Perhaps more frightening to me, however, is the article to which Krugman refers.  Reproduced below is the portion quoted:

Fears of far-right rise in crisis-hit Greece

ATHENS, Greece — They descended by the hundreds — black-shirted, bat-wielding youths chasing down dark-skinned immigrants through the streets of Athens and beating them senseless in an unprecedented show of force by Greece’s far-right extremists.

In Greece, alarm is rising that the twin crises of financial meltdown and soaring illegal immigration are creating the conditions for a right-wing rise — and the Norway massacre on Monday drove authorities to beef up security.

The move comes amid spiraling social unrest that has unleashed waves of rioting and vigilante thuggery on the streets of Athens. The U.N.’s refugee agency warns that some Athens neighborhoods have become zones where “fascist groups have established an odd lawless regime.”

Fascism is nothing more than capitalism in crisis.  Whenever capitalism pushes itself to the brink of collapse, fascism takes over.  Right-wing extremists, armed with bats, clubs, guns, whatever, are sanctioned by the owners of society (the ones whose interests the police primarily serve) to beat political opposition into the ground (something normally referred to as “the police”).  After all, once political forces threaten even a shred of the private ownership “rights” of the upper class over various capacities of life and society, violence must be used to restore security to private property at the expense of the people.  All the better, of course, when you have a monopoly on force or the full and eager compliance of such a monopoly.

To other Americans out there: if you think you’re immune to this sort of treatment, think again.  We’ve already seen here what our politicians and “leaders” are willing to do for the owners, rentiers, and bond-holders.  They are willing to throw away the wellbeing of the working class, and even of the middle class itself (who they heavily rely on for consolidation of political power).  In some ways, our politicians may have “saved” us, bringing the pain and unfairness of austerity measures to avoid the alternative we’re seeing in Greece: the re-establishment of the dominance of established wealth and privilege by violence rather than parliament.

We’ve seen what our political leadership has perpetrated and allowed, viciously robbing working class and middle class Americans by passing the recent debt package (which, no doubt, will fly through Obama’s desk faster than he gave away the store).  They were willing to push us to economic ruin; economic ruin for the poor, that is, as the upper class is so established at this point as to be able to practically ride out any plausible crisis.  What if they didn’t get their way?  At what point will American capital call out the brown shirts?  Or, even worse: when will we see them use the “private” (conservative) militaries that have been constructed with public tax dollars?  When American labor gets uppity, we know what happens.