You Can't Go Home Again

Blaine Young, Chair of our County Commissioners is pushing for elimination of all county funding for non-profits.  He says it’s to save the county from raising taxes, though estimates are that the total county funding for non profits amounts to .1 cent per dollar of the county budget.   So if you have a property tax of $5,000, then annually funding non-profits could cost you a whole $5.  I think he’s chasing a dream, his dream, of life in the county 100 years ago.  His real problem seems to be that he’s after the wrong opponents, and his dream becomes the nightmare of others.

The non-profits he would cut funding for include operations like Heartly House, the Mental Health Association, the Cold Weather Shelter, etc. – all those places that the people derailed from normal living by the stresses and dislocations of our current county way of life go to for help with coping and recovery.  “Have they no poor houses to go to?” snarled Ebenezer Scrooge, and Young’s solution is suspiciously similar.  He seems to think religious congregations and big hearted people around the county will pick up the slack.  But, as an example, for my own congregation to double its giving for such purposes, and that would not be enough, would require an increase in giving of about $50 per member, not the $5 provided through property taxes.  That’s because “many hands make light work”, as the load is shared by the whole county population.

And the problem is a county-wide problem, not just for the poor and for the big-hearted only, but for all the people and for the county government.  The county Young appears to dream of is the sleepy, mainly rural and lightly populated county of 100 years ago.  People knew each other, life didn’t change that fast, and neighbor helped neighbor.  At least that’s the way the dream goes.  But you really can’t go home to that dream again.  The modern county is a high-tech, commuter-oriented place where life changes fast, for better or worse, and the attendant stresses and strains can ruin lives.  Neighbors often don’t know even who lives next door.  Government, like it or not, plays a big role throughout.  State and local government offer tax subsidies and grants to business to stimulate growth, rezone, build new roads, etc., actively working to create the growth and change that alters the lives of their citizens.  They no longer are allowed to disclaim responsibility for the consequences of their actions.

The responsibility of government, and that includes the county, to act has been recognized for many years now, as has also been recognized the impossibility of governments to act flexibly and efficiently enough through direct action to get done all that is needed. The solution to the dilemma has been “third-party government”, the funding by government of private organizations to get done things that government is too unwieldy to accomplish.  Government can’t build advanced fighter planes; that’s why they subsidize defense contractors to do so.  And government can’t directly provide all necessary services to those displaced and traumatized by the changes government has encouraged; that’s why they why they fund non-profits to do so.  That’s what the non-profits are doing that Young seeks to defund. It’s time for Blaine Young to wake up from his dream, and get back to the work of managing effectively all of the county’s responsibilities, not just those of 100 years ago.

Bobby Burns Economics

The English translation goes, “If some little god the gift would give us to see ourselves as others see us, it would from many a blunder free us, and foolish notion.”  That caution from Bobby Burns would be a wise thing to remember this political season as we surround ourselves with ranting advocates waving charts.  We argue about deficits, entitlement reforms, Buffet rules, etc., focusing largely on where we are relative to where the economy was 4 years ago or where we want it to be in another 4 years.  And all the time, great controlled experiments of the kind social scientists dream about are occurring, answers are being produced, and we are blind to them.

Take for example, the issue of the desirability or failure of “the bail-out”, much decried by conservative economists, who strongly prefer deficit reduction and an austerity regimen as the economic cure.  It so happens, that when the global financial crisis hit Europe at the same time as America back in 2008, European bankers, particularly the Germans, prescribed just that. Both the EU and America suffered immediate sharp economic declines.  In Europe the prescribed austerity produced in addition great social trauma, including a “humanitarian crisis” and rioting first in Greece, and now creeping across southern Europe and political crises beginning to spread even to stalwart democracies like France, the Netherlands and the UK.  The economic crisis in Europe meanwhile continues unabated, Spain and the UK have officially entered a double-dip recession, and the Euro zone is expected to shrink another .3 percent this year.

In America, as a result of the lamented “bail-out”, AKA old-fashioned Keynesian economics in thin disguise, the current GDP growth is between 2 and 3 percent, still weak but definitely on the mend, and a number Europe would love to have.  Longer term, the IMF has just projected that German GDP growth to 2017 will be only 40 percent of the American growth rate.  Germany, you will recall, is the leading exponent of severe austerity.  It has become clear to all in Europe, except perhaps Germany, that austerity alone was part of the problem, not the solution.  It’s interesting that the American politicians who most decry the “Europeanization” effect of liberal proposals are the ones  most inclined to follow failed European solutions.

Other experiments are occurring further afield. China, with an expected population over age 60 of 200 million by 2014, is carefully extending its pension plans investments to include up to 40 percent in the equities market.  And China has reduced its average cost to the consumer of medicine by 40 percent by standardizing drug prices.  They are also exploring regulation of hospital administrative practices as a cost-cutting device.  The results are far from in, but worth watching.

The point is, of course, that in this rapidly globalizing world, we need no longer rely only on a longitudinal analysis of American experience to understand our problems and their potential solutions.  It’s time to lift our eyes to the world around and to see both it and ourselves “as others see us.”  We could avoid some costly blunders.

Bubbles, Tiny Bubbles

Travelling between worlds is frequently a wrenching experience, even when done at the dinner table.  I recently found myself making the jump, first while dining with friends who definitely qualify as members in good standing of the east coast establishment, then later with friends who are active in the international scientific community.  My establishment friends are not only very good people, but totally “with it”, able to converse knowledgeably and facilely on just about any topic.  To some extent, they make their living with words.  At a lull in the conversation, I had brought up the subject of the ideas in David Rothkopf’s new book, Power, Inc., regarding the struggle for dominance between multi-national corporations and nation-states.   I thought that since my friends worked daily with both corporations and government, they might find Rothkopf’s conclusions at least interesting. It was like dropping a rock into the abyss. It was not just that they had not read the book; that by itself would never have stopped them from conversing about it.  My friends were obviously flummoxed by the very existence of such ideas and at a rare loss for words, so we quickly passed on to other subjects.  Then, a day later, I brought up the same ideas (you can tell I liked the book) to my scientist friends, who immediately picked up on them, affirming them from their own experience and offering several instances of their significance.  I myself was a little aghast at the chasm it revealed between two superficially overlapping communities.

It brought to mind another book I’m currently reading, Coming Apart: The State of White America, 1960 – 2010, by Charles Murray.   It’s one of those books that is less controversial than its author.  Murray is a conservative sociologist best known as author of The Bell Curve, a book some years ago reporting educational differences between Whites and Blacks that received a lot of criticism for its negative conclusions about the educational attainment of Blacks.  In his new book, Murray reports a study of emerging differences between upper middle class and the working middle class in America, confining himself to a study of white groups only to avoid further racial controversy.  In it, he analyses commonalities and differences between two communities living side by side in a Philadelphia suburb, and their changes over time.  He finds that groups that once, while differing in income and education, essentially shared the same life style, eating the same foods prepared only slightly differently, shopping at the same stores, with children attending the same schools, etc., now are living lives differing in such broad ways that they are increasingly unable to understand and relate to each other’s problems.  Murray describes each group as living in a bubble, out of contact with the other and not even aware of that fact. His conclusions reinforce the observation made in The American Scholar a year or two ago, that the average graduate of an elite college is unable to hold a meaningful conversation with his plumber.

I suppose my problem with the book is that, because he’s doing a longitudinal study of two side-by-side communities, and not for example, including differences between a southern university town, a Midwestern small town and a west coast hi-tech community, Murray’s bubbles are too large and few.  In my view, we are increasingly a nation of smaller and smaller bubbles, and a San Francisco poet or Chicago commodities broker or Duke University teacher might as well, to an affluent farmer in east Texas or to each other, be in Asia. I have cited before the empathy gap in America, and the problems it leads us into.  It will be especially troubling this year, as we go into a general election and begin tearing each other’s values apart.  We always will need to be sensitive to the different bubbles we live in and the different way the world appears from them.  And we must remember that sometimes there’s a whole different world just across the dinner table.

Pursuing Happiness

Most  of us who have parented have noticed  smart little kids going through a stage, sometimes extended, where they love to sort and count things – balls, cars, princesses, dinosaurs, whatever.  The objects are definite, the numbers are understandable and exact, the exercise is lulling, and there’s pleasure in all of that.  Most kids grow past that stage toward involvement in all sorts of other things; the rest become economists.  They have found their bliss in life early on, and will cling to it forever.

Left undisturbed, economists will usually go about quietly, muttering under their breath strange incantations, like “negative elasticity”, “Laffer Curve”, “externalities”, etc., and happily predicting doom just around the corner.  That, after all, is how the field came to be described as “the dismal science.”  They worship odd things that no one else can see, like “perfect competition” and “the rational man”, but we all have our idiosyncrasies, and economists are useful in providing a plausible explanation for things that happened last week, though they never can seem to figure them out in advance.  But the field has been under attack lately, and some are beginning to react strangely.  Perhaps, it’s another tremor in the paradigm.

Take for example, the column the other day by Robert Samuelson in the Washington Post. It was an all-out attack on happiness!  He was obviously upset and outraged about a report just issued, the “World Happiness Report”, which argued that GDP doesn’t measure everything important in life and that economic growth doesn’t always make people happier.  He attributes it to a shadowy, sinister European conspiracy he calls “the happiness movement.” Oh, the Horror!  He’s particularly concerned about a recent study result that economists call “the Easterlin Paradox”, that the rich and middle class are happier than the poor, but after that, getting richer doesn’t cause their own sense of happiness to increase. (It should be noted, by the way, that decades ago, behavioral scientists studying motivation theory learned to distinguish between “satisfiers” and “dissatisfiers”, and then found that lack of money is a dissatisfier, but money is not a satisfier, and by itself is not a motivator. Could it be that motivation counts toward happiness?  They found that what really counted toward “morale”, a kind of group happiness, were gestalt and cohesion – a shared group identity and a sense of active belonging.)

All that is preface of course to his real target, which is the immeasurability of happiness and the lack of a common definition.  He believes that, since no measurable standard of universal happiness exists, governments should not promote it, but stick to things he’s good at measuring like GDP. He notes that the Happiness Report lists Freedom as an essential component of happiness, but that freedom permits self-destructive acts which reduce happiness. Thus, to him, happiness is a utopian vision not worth pursuing, and creates goals doomed to failure.   He’s right that happiness is not an entitlement, and will probably never be achievable for all, but grumpily wrong otherwise.

It starts with his bland premise, that “All rich societies already try to balance economic growth with social justice, security and environmental progress.”  Yet a fellow columnist, Harold Meyerson, reports that since the 1970s all additional income from increases in productivity in America, the richest of nations, have gone to the top ten percent.  Had the minimum wage, now $7.25, increased in line with productivity, it would be $21.72.  The security of families is under constant attack though efforts to chip away Medicare and Social Security.  Environmental progress is challenged every day by oil companies and other entrenched interests, who seek to worsen, not better, the environment through self-serving policies.  And he of course is wrong in his 18^th century attitude that any goal which cannot be measured is not worth seeking.  It was those “utopian visions” that brought his ancestors to America in the first place, that conquered a continent and that serve as the engine that drives America today.  People do not live to pursue a higher GDP; they live, in part, to prosper in a virtuous society. The Founding Fathers, far better than Samuelson, understood that the virtue of a society includes the promotion of individual hopes and dreams, not all achievable or measurable. His bliss lies in counting and measuring; he should not deny others their own.

Tilting the Bargaining Table

I still remember the day my seamstress mother’s pay was raised to 50 cents per hour.  In the early 1950s that was an increase in our household income of about two-thirds, a major cause for celebration.  A few years later a minimum wage law would raise her pay again to 75 cents per hour, but that, while well worth celebrating, had not quite the impact of that original raise.  It had come after a hard-fought battle between the sweat shop owners of the clothing factory in our small East Texas city and the clothing workers union, during which my mother had spent many hours on the picket line.  She always credited the union as making her hard life at least minimally endurable.
Mama’s battle it turns out was occurring at the peak of the union movement in this country.  In 1954, union membership topped out at 35 percent of the work force; it would never again achieve that level, though union membership in absolute numbers would reach 21.8 million workers in 1979.  Union membership nationally has declined to 11.8 percent of the workforce in 2010, but even that is heavily bolstered by the 37 percent unionization of the government workforce (that includes state and local, teacher unions, etc., as well as federal); private sector unions are down to 6.9 percent of their workforce.  It is no coincidence that at the same time, as reported by JPMorgan Chase, U.S. labor compensation is at a 50-year low relative both to company sales and GDP.  It turns out that in 2010, 100 percent of all income growth went to the wealthiest 10 percent of U.S. households.  As Harold Meyerson notes in the Washington Post, unions at 6.9 percent of the private sector workforce have lost the power to bargain effectively for higher pay.
That’s what is especially bemusing about Mitt Romney’s vow that on a first day in the White House he would issue executive orders “to tilt the bargaining table away from the unions.”  A Texan is always ready with a colorful phrase, but one is overburdened in this case; should it be “kicking a man when he’s down”, or “sucking the creek dry” or simply “trying to get blood out of a turnip?” Whatever the metaphor or simile used, it can’t convey either the antiquity of Romney’s labor-management views or the depth of vulture capitalism to which they sink.  They have the ring of sweat shop management from 60 years ago.  If he aspires to be President of all the people, he has a lot of catching up to do.

The Broccoli Test

Well, my Easter break, including a couple of pleasant days at the beach - much too pleasant for early April, but that’s a topic for another day - is over, and it’s time to resume pondering the strange ways of the political world.  There have been so many oddities these last few days that choosing among them is tough.  One of the oddest, that I’ve shied away from because the field was so crowded, was the strange Q&A session of the Supreme Court about the Affordable Care Act.  The high point (?) of the session was the series of questions raised by Justice Scalia about the Individual  Mandate, including “does the government’s position mean that the power to regulate interstate commerce includes the ability  to mandate eating broccoli?”  Clearly he is still dealing with childhood issues.  Actually it is a serious question in its way, involving the issue of establishing a clear legal limit to the power of government to intervene in markets.

The question deserved a clearer answer than it got, but that was left, interestingly enough, not to lawyers, but to Donna Dubinski, former CEO of Palm Computing, in a Sunday column in the Washington Post.  It certainly gives weight to the famous observation by FDR that the Constitution was not written for lawyers.  Ms. Dubinski gave a both legal and economic answer that merits wider circulation.  Her criteria for government mandate under the Interstate Commerce Clause were that 1) the product or service involved must be something everyone must have at some point in their life, and 2) the market for that product or service does not function.  In other words, it must involve a failed market for a required product or service.  That’s about as clear as it gets in Constitutional circles.

Ms. Dubinski goes on to point out that the broccoli fails both tests while the ACA clearly meets both, in that health service is required by everyone at some point, is too expensive for the individual without insurance if left until sickness occurs, and is too expensive for society if the individual “free loads” by refusing insurance while healthy.  She points out that additional evidence of a failed market is that at least 25% of individuals not covered by employment based insurance are uninsured because they are denied coverage even while reasonably healthy, not for failure to seek it. Perhaps, unlike Scalia, she does not see the feasibility of leaving someone dying of leprosy in the streets.  In any event, the “failed market” argument seems powerfully persuasive.  Let us hope Scalia gets over his distaste for broccoli enough to consider the arguments carefully and dispassionately.