Saturday, December 28, 2013

Politics and Markets: How Governments Help and Hurt Economies

Lots of political rhetoric is spewed across news and the social media.  Most of it is just ideology, repeated and spun by pundits or posted across the social media, appearing as Facebook  facts” where propositions come to be accepted as political truths.  But they reality is that so much of passes as political fact is simply ideology; untested assertions or simply statements about the world that fail to stand up to rigorous social science scrutiny.  This is the case with assertions about taxes, or voter fraud, or a slew of many other propositions.  Two of the most cherished theories held dear to many conservatives are that the government cannot innovate and that the pathway to economic recovery is through austerity and cuts in government spending and taxes.  Both of these myths are convincingly challenged in two recent books, Mariana Mazzucato’s The Entrepreneurial State, and  Mark Blyth’s Austerity: The History of a Dangerous Idea.
    Mazzucato begins her book by constructing the stereotype of a dynamic innovative private sector where the engine that drives businesses is the “creative destruction” that economist Joseph Schumpeter once described in contrast to the dull, risk-aversive bureaucratic behavior of the government.  The myth is that government cannot innovate; it instead impedes creativity and job creation, and that the best way to foster economic growth is by limiting government activity in the economy, including taxes and regulation on businesses and creative individuals.  Government in effect crowds out entrepreneurial activity.  A wonderful theory, but how accurate is it? 
    Mazzucato offers ample empirical evidence to challenge this myth.  Her work is drawn heavily from examination of US and European economic policy and data.  What she actually finds first is that government is often a risk taker, providing a significant portion of the venture capital that has produced some of the most important technological innovations since World War II.  On one score, US research and development (R&D) tax credits and investments in military technology, the internet, and in drugs have provided most of the capital in these fields, yielding some of the most important and significant inventions in these areas.  Mazzucato points out how Apple’s Ipad, Ipod, and Iphone all were made possible by technology investments underwritten by the US government.  Agencies and programs such as the Defense Advanced Research Projects Agency, the Small Business Innovation Research program, and the Orphan Drug Act (some of which were created under Ronald Reagan) have been remarkably good at fostering innovation.
    The second point that Mazzucato makes is that the government often funds innovation at stages and in places where private sector venture capital dare not go.  Private venture capital rarely funds projects in the infancy stage where the risk is too great and the expectations of payoff are slim.  Venture capitalists are smart–they do not enter the fray until the real risks are diminished and, they invest with a short time horizon there is a likelihood of a profit.  Venture capitalists are not gamblers–they want to invest but only on good bets and when their returns quick results.  Venture capitalists invest at later stages in technology of business development and often get out quickly.
    Not so with the government.  Mazzucato points to how the government often invests at early stages where payoffs are less certain and the risks are greater, paying the way for businesses and venture capitalists later on to profit.  Government socializes early risks, is willing to underwrite more risky but long term investments, and in effect helps nurture the conditions that make private entrepreneurial activity possible.  Government thus does not so much crowd out innovation but instead facilitates first a “crowding in” and then a “dynamizing in” of investment and innovation.
    In contrast to Mazzucato who challenges the myth that government activity crowds out business activity, Blyth assails austerity as a political economic policy.  Simply put, austerity argues that during recessions or in other times when the economy is performing badly, the cure is to cut government spending, thereby freeing up capital for investment.  The idea is based on Say’s Law–supply creates demand–a staple theory of supply-side and neoclassical economic thought.  It is the idea that once enough cuts have taken place–the damage and destruction that has occurred to the economy as a result of high wages, taxes, or government spending–a new economic equilibrium were be reached whereby investors will again invest and business will hire individuals.  Yet the power of Blyth’s book both is to question the theory of government austerity and then look to its practice to see if as applied it has actually led to situations where governments can “cut their way to prosperity.”
    Blyth begins by discussing John Maynard Keynes concept of the “paradox of thrift.”  Individually it might make sense in tough economic times for one person to refuse to spend or invest and instead save.  But multiple such a policy across millions of individuals and businesses and what one gets is a recession.  With no one willing to spend or consume no businesses are willing to invest.  Merely getting tax cuts will no induce businesses to hire since no one is going to buy their products.  What results instead is a variation of a reverse prisoners’ dilemma where no one invests for fear that the economy will not rebound.  The paradox of thrift in economics is Keynes rejoinder to Say's Law;  a challenge that merely cutting taxes or placing more money in peoples’ or businesses’ hands will stimulate the economy.  Instead, so long as the risk that others will not spend or consume continues the economy will not pick up.  Thus, the need for government to stimulate demand.
    Up to this point  Austerity is no more than a forceful defense of Keynesian economics.  But Blyth goes after bigger game, challenging those, such as Tea Party advocates who single-mindedly want to cut government spending as part of a broader battle to reduce government debt.  Their argument, as Blyth describes it, sums up as “more debt doesn’t cure debt,” is assuring but simplistic and wrong for many reasons.  On a theoretical level it assumes that what is good for one individual (saving) is good as a national policy.  This is the fallacy of composition.  Second, austerity is unfair.  It asks the poor and middle class who did not benefit from the economic good times to pay for the mistakes of the rich when the economy goes bad.  By that, in 2008, it was the finance sector and the banks that brought on the recession and austerity meant that they were bailed out while the poor suffered and continue to do so by cut to food stamps and other social welfare programs.   
    Third, austerity just does not work in theory as an economy theory.  This is the strength of Blyth’s book.  Many point to Germany as an example of how austerity works successfully or conversely, why a lack thereof is the cause of Greece’s problems.  Both are exceptions.  In the case of Germany which has run a high savings export driven economy, it only works because in part other countries run deficits.  Not every country can run surpluses and be export driven.  If no one consumes then there are no exports to buy.  Germany is a unique case, as is Greece because of its  high degree of corruption.  Simply cutting debt or spending to turnaround an economy does little to stimulate investment, it places burdens disproportionally on the poor, and it fails to lift the GDP over  time.  Instead, the more successful world economies balance debt-management with investments along the line Mazzucato suggests, providing support for demand and an infrastructure that facilitates growth.
    Together Mazzucato and Blyth paint a theoretical and empirical picture that severely damages arguments that the minimalist state is the pathway to economic growth and entrepreneurial activity.  They describe a more nuanced picture of how government and business can work together to sustain  economies while producing economic fairness and equity.   They move the discussion beyond ideology where all too often many anti-tax, anti-government advocates sit.  Policy makers in Minnesota and across the country wishing to get a better understanding of what governments really do and how they can make a difference would be well suited to read these books.  The same can be said of advocates of the myths Mazzucato and Blyth attack.

Tuesday, December 17, 2013

Charity and the Poor: The Rich and Their Bah Humbug Attitudes

"Let me tell you about the very rich.  They are different from you and me.”
         —Rich Boy, F. Scott Fitzgerald

    The rich are different from the rest of us.  It is not just that they have more money.
    We already know that the rich are doing well.  Over a 30 year period their income has increased by nearly 300% while for those at the bottom it has gone up by less than 20%.  Wealth and income inequality are at record levels in the United States and social and economic mobility in America has all but halted.  Those born to rich parents are likely to stay rich, those born to poor parents are likely to stay that way.  Our educational and tax systems no long mitigate inequalities but reinforce and exacerbate them.   All this is common knowledge–at least to those who study the numbers and read the reports from the Congressional Budget Office, the Census Bureau, and scores of other organizations documenting the new class structure of America.
    Yet many justify the inequalities and tax breaks for the rich by invoking trickle down economics or by claiming that the low taxes will perhaps lead to the affluent giving to charity and providing alms to the poor.   “Government crowds out charity, depressing benevolence,” at least this is what some claim.  But is it true?  Have the rich responded to their new found excess by giving to the poor?  The simple answer is no.  Instead, what permeates their attitudes would make Scrooge smile with indifferent delight.
    Yes, the rich–those in the top quintile or top one percent income bracket do give more money overall to charity than others in society.  They have more money and therefore give more.  According to the IRS, the wealthiest 1% gave away 3.4% of their adjusted gross income in 2008–a higher percentage than any other income bracket.  But that number really is misleading.  Adjusted gross income is the income after all tax deductions are counted–deductions for mortgage interest and business losses. But what really matters is giving out of discretionary income–the money remaining after taxes and bills are paid.  Discretionary income is the place where people have choices–give to charity or hold on to the money–and this is where the rich fall down.
    According to a 2012 Chronicle of Philanthropy study the top one percent give 2.8% of their discretionary income to charity, with those making $100,000 or more giving 4.2%, and those making $50,000 to $75,000 per year giving 7.6% of their discretionary income.  Ken Stern, author of With Charity for All: Why Charities Are Failing and a Better Way to Give, wrote in the April 2013 Atlantic: “In 2011, the wealthiest Americans—those with earnings in the top 20 percent—contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their income.” Middle class and poor are more generous to charity than the rich.   These statistics may even undercount giving by the poor since they are less likely to itemize and therefore count their deductions in the way the more affluent do.
    The giving patterns for the rich are also interesting.  The rich are more likely to give to the arts and education whereas the middle class give to their religious institutions.  The least affluent are more likely to give to the poor–they can better sympathize with them it seems, whereas the rich cannot.  In fact, out of sight out of mind characterizes the charitable pattern of the rich.  The richest enclaves in America–areas where there are the fewest poor people and the greatest concentration of the affluent–have the worst percentages in terms of giving to charity overall and to the poor in specific.  On balance, if we lived in a more egalitarian society not only would there be less poverty but charitable giving would increase because those less than rich would donate a greater percentage of their income than the affluent.  Equality fosters charity, reinforcing government programs that do the same.  Government programs do not crowd out charity, they enable it.
     We are cutting food stamps to the poor, unemployment benefits to victims of the recession, and refusing to do charity to help the least advantaged.  How have we become a nation so indifferent to the poor?  How could people who consider the United States a Christian nation act so uncharitable? Pope Francis is admonishing the Catholic Church to return to its roots and again help the poor.. Maybe the Pope’s words will change these individuals’ minds about social policy and get the rich to open up their wallets.  Perhaps this holiday season we can begin to do more to help the needy–first through charity but more importantly through supporting social justice and government programs.
  It is also that
they don’t care about the rest of us, especially the poor.  At least this is what we can conclude when we look at charitable giving in the United States.  What we find is that the rich are stingy and

callous–Scroogelike not only with taxes, food stamps and other support for the poor–but also in how they compare to the rest of us when it comes to charity for the needy and least advantaged.

Friday, December 6, 2013

Economic Inequality and the End of the American Dream

On December 4, President Obama declared that “The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream.”  So what is the state of inequality in America?  It’s not good.
    Alexis deTocqueville’s 1835 Democracy in America described the United States as a country pervaded by a general equality of conditions.  Equality was not talked of in terms of political and legal rights but also in terms of economics.  While economic inequalities existed, along with slavery, conditions in America were generally more egalitarian when compared to the European monarchies.  But that equality was undone during the robber baron era of the late nineteenth and early twentieth centuries as the Rockefellers, Vanderbilts, Morgans, and Hills amassed major fortunes, culminating levels of economic inequality unmatched...until now.
    While from the New Deal until the late 1970s social policy in America was directed toward mitigating economic inequality, those policies have been undone.  More than a generation ago Kevin  Phillips in The Politics of Rich and Poor and Bennett Harrison and Barry Bluestone in The Great U-Turn noted how the Reagan Era was ushering in an abandonment of economic egalitarianism, it is not clear what 30 years of those policies have wrought.
    A 2011 Congressional Budget Office  found that the after-tax income gap (and this includes after calculating in transfers payments and welfare)  between the top one-percent of the population and everyone else more than tripled since 1979. After-tax income for the top one-percent increased by 275% between 1973 and 2007,  for the bottom quintile it was merely 18% while for middle class or middle three quintiles it increased by not quite 40%, According to the census Bureau, the median family income fell in 2012 from $51,100 to $51,017, with average Americans earning less now than they did in real dollars in 1989.  However, there is some good news–since 2009 the income of the wealthiest 1% has increased by 31%.
    But income only tells part of the story.  Maldistributions in wealth also exacerbating and growing. According to the Institute for Policy Studies, in 2007 the top one-percent controls almost 34% of the wealth in the country, with half of the population possessing less than 3%. The racial disparities for wealth mirror those of income. Since 2007 the wealth gap has increased as the value of American homes–the single largest source of wealth for most Americans– has eroded. Studies such as the Survey of Consumer Finances by the Federal Reserve Board have similarly concluded that the wealth gap has increased since the 1980s.
    An April 2013 Pew Research Center report documents how since the crash of 2008 that the “mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%.”  The richest have recovered nicely from the Great Recession, the rest of us have not done so well.  Moreover, the income gap has a racial component, with the a recent Census Bureau report documents in 2012 that  the median household income for Whites was $57,009, for Hispanics it was $39,005, and for Blacks it was $33,321.   The wealth disparities across race were even worse.  A February 2013 Brandeis University study by the Institute on Assets and Social Policy found that over the last 25 years, the wealth gap between African-Americans and Whites tripled from $85,000 in 1984 to $236,500 in 2009.  For the few African-Americans and Whites at the same income level, the latter had wealth  at least three if not more times that of the former.
    Finally, the gender gap in income persists. According to the Census Bureau, women still only make 77 cents on the dollar compared to males, with this percentage having remained frozen for years.  The median income of a female household in 2001 was $34,340, falling to $34,002 in 2012. While for male households it was $50,602 in 2011, falling to $48,634 in 2011.
    No matter how you slice it, the rich are getting richer and the rest of us are getting not just relatively poorer, but absolutely poorer, with women and people of color taking even a harder hit.  But why?  The Census Bureau notes several factors.  First, real incomes have actually gone up for those at the highest income levels.  We live in an era when we now pay disproportionally high salaries to business leaders and CEOs, thinking that they deserve it.  According to an April 2013 Bloomberg News study, the ratio of the average compensation of a CEO compared to its average worker is 204 to one, increasing by 20% since 2009.  In the case of JC Penny, a company that laid off 43,000 workers in 2013, when it fired its CEO he got a compensation package that was nearly 1,800 times the average wages and benefits of those dismissed.
    Second, inequality has increased because of the package of types of income earned now compared to 1979.  Far less income now is earned from wages and salary now than 30 years ago.  More money now is earned from equities, stocks, and capital gains.  Third, and perhaps most importantly, the federal tax structure is less progressive and more regressive now than 30 years ago.  Capital gains taxes are lower, as are taxes on the rich.  More taxes come from regressive federal payroll taxes than before.  Overall, the tax structure does little to rectify inequalities in income, instead it extenuates and exacerbates the growing inequalities already occurring in the economy.  In effect, the supply side revolution has helped to redistribute income up and not down.
    These policies have continued across Republican administrations and into the Obama era.  Obama more or less continued the inequalities from the Bush era.  Yes many of the Bush era taxes expired but payroll taxes went up, leaving most of us worst off than before.  Obama carried on the Bush policies of bailing out the banks but not homeowners, and even before Republican resistance  effectively ended his second presidential term, Obama showed little appetite for addressing economic inequality in America.
    So what does all this inequality mean for the United States?  In a country where economic wealth can be converted into political power, the rich can use their resources to prevent political change or reform and entrench themselves.  Wall Street and the Koch brothers are examples of this.  Additionally, income is a great predictor of civic engagement and voting and there is not question that there is a class bias in our elections.  Thus the economic inequalities reproduce and mirror themselves in the American political system.
    Class is an America reality.  The evidence is clear but facts seldom sway many individuals or  affect public policy.  Moreover, few want to acknowledge the reality of class in America, even fewer want to do anything about it, even though polls suggest that an overwhelming percentage of Americans think the government does not do enough to help the poor in our society.  There is no indication in the foreseeable future that tax policy or any redistributive policies will be enacted to address inequality, leaving the American dream just that, a dream, for so many.

Saturday, November 30, 2013

The Global Assault on Democracy

Me at Mykolas Romeris University, Vilnius Lithuania
A country polarized and in paralysis by its political parties.  A country that spies on its citizens and where its representatives no longer seem connected or accountable to their people.  A country where the standard of living of its people is eroding.  Sound familiar?  At one time such a description did not include the United States.  It used to be them, those other countries, but not the United States.  But what has become clear is how much the United States has lost its exceptionalism and become just another advanced if not aging democracy in serious need of structural reforms.
    In the last two months I have traveled the world.  Or at least the western European world.  In October to Washington, DC, the capital of the United States and  to Moscow, Russia, the capital of Russia and the former Soviet Union, and in November now just returning from Brussels, the capital for the European Union and de facto capital of Europe.  This last trip was to attend a conference on comparative public policy, hosted by an organization dedicated to the study of comparative politics and efforts to draw conclusions about how law and policy is made across the world.  Beyond its purely academic purposes the group hopes to inform practitioners and public officials to make better laws by seeking to learn from the experiences of countries across the world.
    At the conference were scholars from across the world.  Russia, India, Germany, Belgium, France, Great Britain, Spain, Italy, Greece, the Netherlands, and many other countries were in attendance.
KU Leuven University (location of the conference)

We discussed health care policy and Obamacare, security issues, lobbying and electoral systems, transparency and democracy, energy and food issues, and also simply the process of how governments operate and make decisions.  What fascinated me so much was the reality that it is tough times for democracies and freedom across the world.
    Across the board scholars from India, Russia, Italy, Greece, and other countries noted the paralysis facing their countries.  Political parties have become polarized, unable to compromise and work with one another.  Special interests plague the legislative process, fears arising from terrorism have led to a crackdown on dissent or spying on citizens, or the citizens of other countries.  Economically no country seems to be doing well.  All are still gripped in the aftermath of the 2008 market crash or they are still in the middle of austerity programs with citizens facing high unemployment and countries saddled with crushing debts.  There is a real democracy deficit not just in Europe, but it seems everywhere.
    At the same time we were meeting in Brussels over in Vilnius, Lithuania events were unfolding that also boded poorly for democracy. The EU was supposed to meet to welcome Ukraine into a trade pact that would more firmly move that country into the western European and democratic orbit, away from Russia.  It was a hope to bring Ukraine closer to its historic partners of Poland and Lithuania, but it did not happen.  The Ukraine president decided not to sign the agreement, or free the opposition leader from prison, leaving open the direction of Ukraine and whether it would join Europe or Russia.
    Events such as this are troubling and have a personal meaning for me.  They involve countries and places I have visited, and where I have friends.  It is also the geography of my ancestors.  I have been to Vilnius, Lithuania twice to lecture and teach.  The people are warm and friendly and the country has done a great job joining the democratic west, but the country fears an aggressive Russia to its east.   I have been to Kyiv (Kiev) Ukraine once.  It is a stunning city that feels like it wants to be democratic and west, but it is being pulled toward democracy and authoritarianism simultaneously with no clear answer regarding which wins.  And of course Moscow, a city I have visited five times and where I now have many friends.  In my last visit last month I noted how socially open the city had become.  Whatever we may say politically about the retreat from democracy there, the country is socially open, with young people and my students doing what my students in the United States do.  Russia, or at least Moscow, is in the midst of a generation change, ready to join democracy... if only its leaders would let them.  The people there want to be friends with the United States and the are interested in all things American. The same is true for Ukraine. So much of my impressions of these countries reminds me of the problems we face in the United States. 
    We live in a global world in the sense of sharing similar problems. The problems facing the United States are global and are shared by other countries.  It is a crisis of and a challenge to democracies to solve their problems. Yet no one seems to have a solution regarding how to address the gridlock or paralysis that we are all facing,
Me in Moscow near the Kremlin

Saturday, November 23, 2013

The Case Against the Filibuster--Why the Democrats Got it Only Half Right

The Senate was right to change the filibuster rule for presidential judicial nominees. Yet it was too little change, too late.  What really needed to be done was to abolish the entire filibuster rule for all Senate business.  Senate Democrats will soon find that unless they do that nothing will get done in the Senate and there will be more Ted Cruz's  reading Dr. Seuss.
    After the Democrats were routed in the 2010 midterm elections I argued that one of Obama’s and the Democrats mistakes was not voting to disband the filibuster rule on day one in 2009.  While for 18 months the Democrats had 60 votes in the Senate and potentially could do what they wanted, they had failed to act as a unified party were  held hostage both by Republicans and also by the conservatives among their own ranks including Senators Landrieu and Nelson.  Had they killed the filibuster they would have done not only Obama, progressives, and their party a favor, but they too would have saved both the party and America from what has not transpired in the last three years–gridlock and a country held hostage by extremists.  Remember, a far better health care bill might have been passed had the threat of a filibuster not existed.
    Three arguments bode against changing the rule–tradition, bipartisanship, and minority rights.  All three are fallacious arguments.  First, arguing that changing the filibuster rule is wrong because it goes against a rule that has a long tradition in the Senate makes no sense.  While history may argue in favor of some things and while maybe at one time the filibuster was a good thing for the Senate, times have changed.  Political parties are more polarized, partisan, and ideological than they used to be (except of course prior to the Civil War) and there is now less of a tradition of compromise and bipartisan than there was even a generation ago. At one time even controversial presidential appointments got votes.  Robert Bork failed to be confirmed as a Supreme Court Justice but he got a floor vote.  Clarence Thomas got a floor vote and was confirmed.  Democrats could have filibustered both but did not.  At one time nominees got voted on but times and circumstances have changed in the Senate. Thus, as the Senate changes so must it rules.
    Moreover, one should not forget that the “nuclear option” to change the filibuster rules on judicial nominees was originally a Republican idea.  In 2005 Republican Senators Bill Frist and Trent Lott, frustrated with Senate Democrats who were angry that the latter were blocking George Bush’s judicial nominees, proposed doing then what Harry Reid and the Democrats did this past week.  It was only a compromise and a backing down by Democrats then that prevented the rule change from going into effect back then.  What comes around goes around.
    Second, as just noted, there is less bipartisanship in the Senate now than in recent memory.  At one point it was less likely that the Senate needed 60 votes to get anything done.  But clearly we have seen how especially Senate Republicans have made it clear that they are now joining their House colleagues in making it impossible for Obama to get anything done.  Remember, after the 2010 elections Senate Republicans made it clear that their number one objective was to prevent Obama from getting anything done.  The filibuster now is being used not really to protect rights of minorities, but simply to be obstructionist.
    This leads to the third argument.  Senate Republicans argue that the filibuster is needed to protect minority rights.  This is an aggregated if not false argument.  For many the image of the filibuster is that of Jimmy Stewart in Mr. Smith Goes to Washington, speaking until he is hoarse in defense of principle.  Yet the reality is that more often than not the filibuster has been used to thwart minority rights than to protect it.  The filibuster was deployed in 1946  to block the permanent creation of the Fair Employment Practices Committee.  Strom Thurmond filibusters in an attempt to stop passage of the 1957 Civil Rights Act.  Robert Byrd uses it in an effort to halt the 1964 Civil Rights Act.  The reality is that the filibuster is invoked to prevent prevention of minority rights, not to sustain them.
    But more importantly, while Republicans argue that the recent change to the filibuster rule will hurt minority rights, the reality is that the only minority it hurts if at all are Republicans.  They are invoking filibuster to argue that their rights need to be defended–they are the minority they needs protection.  How odd an argument.  The filibuster is not about protecting party rights, it is about protecting the rights of the people.  Moreover, the Senate and Congress in general are not supposed to be counter-majoritarian bodies.  They are supposed to majoritarian institutions reflecting majority will.   And even if it were the case that the Senate is supposed to embody anti-majoritarian structures–as political scientist Martin Diamond once argued–the representation structure of it granting all states the same number of Senators, along with bicameralism, is more than enough to protect minority interests.
    The first step in reforming Congress for the good is eliminating the filibuster for everything.  It is antiquated rules that is waxed over romantically for reasons that are hard to fathom.  The changes made last week go only part way toward reforming the Senate.  This partial change will no doubt polarize the Senate even more, perhaps leading the Democrats in frustration to finish the job on the filibuster that they already started.

Sunday, November 17, 2013

Political Arithmetic: Why Math Sucks for Obama and is Important for Ranked Choice Voting

Political science students think math sucks, and so do many politicans!  Yet the fate of Barack Obama, Obamacare, and Rank Choice Voting all resident in their numbers.  Let’s think about how this is the case.

Obama and Obamacare

    Health care reform and Obamacare is really all about numbers.  This has been pointed out several times in the past.
    Health care reform is a necessity in the United States.  America spends about 19% of its GDP on health care or about $2.97 trillion dollars annually.  France is the next most expense at 11.6% of its GDP and it has universal coverage.  America’s population is aging.  Right now the a median age in the US is 37, expecting to rise to 38.7 over the next 20 years as Baby Boomers age. With that aging comes increased health care costs.  US GDP expenditures on health care will continue to rise to well over 20% unless something is done.  Thus, reform of health care was a major priority for Obama.  If we could achieve near universal coverage and cut health care spending even to the level found in France (a one-third reduction in spending), that would free up near one trillion dollars per year to invest in the economy or simply to save.
    For Obamacare to work one needed to achieve near universal coverage by getting many young healthy people otherwise not insured into the health care market.  Increase the insurance pool of those healthy and the insurance markets set up with the health care exchanges will work.
    Yet all of this is now falling apart because of other political math.  The federal health care exchange web site is a mess, producing confusion and too few people who have signed up.  Additionally, after candidate Obama promised the American public if they liked their health care plan they could keep it, millions are receiving notice that their current plan is being cancelled.  The president’s approval rating is falling, over 50% think he is not trustworthy, and his own Democrats in Congress are worried about 2014 and want to act.  Thus, last week Obama issues an executive order asking insurance companies to keep their old policies in effect for one more year.  In essence, Obama is delaying by one year requirements for Obamacare, similar to requests pressed by Republicans only a few weeks ago during the shutdown.
    Here is the math rock and hard place Obama is behind.  First, the request to the insurance companies is merely a request and not an order.  Second, how will cancelled policies be reinstated?  Third, the request is only for a year, thereby pushing the cancellation problems into the center of the 2014 elections.   Thus, the order to delay Obamacare is the product of political necessity but it solves little.  Morever, by pushing the delay it potentially upsets the actuarial numbers that insurance companies need to make the policies work at their current rates.  If people keep their current policies then those enrolled in the new health care exchanges may see their rates go up even more.
    Finally, Obamacare was originally supposed to increase coverage by several millions.  Best estimates by the Census Bureau (as I discussed recently in a blog) are that the numbers of people who will actually gain coverage will be far less than thought and because so little thought was given to increasing the supply of doctors and health care providers there are indications that costs will increase over time.  Bottom line: there is little evidence that Obamacare will trim health care expenditures, bend the cost curve, or really lead to a dramatic increase in the numbers insured, beyond certain populations.
    Okay so here is one last number and thought.  What do we do in a post Obamacare world if the Affordable Care Act collapses on itself?  What if one had simply taken the original 2,000 page law and instead did three things: 1) Allow young adults to stay on their parents policy until  age 26:  2) bar denial of coverage for pre-existing illnesses; and 3)   Allow anyone to enroll in Medicaid and pay for its benefits?  My guess is that this legislation would have totaled about 100 pages and achieved far greater results than Obamacare.

Ranked Choice Voting
    RCV in Minneapolis was all about math too. Some numbers to consider.
    First, had the rules of ballot access been that one needed 500 or more signatures to appear on the ballot for mayor then (based on the final votes on election night) only ten individuals would have qualified as candidates.  Something needs to be done to ensure that only serious candidates who have some support appear on the ballot and many cite the $500 ballot access fee in St Paul as an example.  However, that $500 fee may be unconstitutional.  The Supreme and other courts have struck down excessive ballot access fees as unconstitutional.  Most jurisdictions do fees with alternative signature requirements. This is the better math for Minneapolis–$500 or 500 signatures.
    Second, at 11 PM on election night it was clear that the bottom 29 or 30 candidates mathematically could not win the mayor’s race.  This means that had city charter allowed for it, one could have simply eliminated them on the day after the election, transferred their votes, and the race would have been called then.
    Third, the reason there are no voting machines to do the automatic tabulation is also a product of math.  No two cities seem to run RCV the same way, precluding vendors from making machines that can be approved by the Department of Justice for use in elections.

    Overall, do the math!  Politics is often about numbers that do or do not add up.

Saturday, November 9, 2013

The Lessons of the Minneapolis Elections--RCV and Generational Change

This blog originally appeared in an earlier form as a Minnpost Community Voice on November 7, 2013

    The mayoral elections in Minneapolis and St Paul could not have been any different.  One was loud and unscripted the other peaceful and predictable.  Both spoke to the character of the two cities and what they mean for their futures.  Minneapolis’ election was a generation changer preparing the city for the future while in St Paul it was an endorsement of the status quo holding the city in the past.  But in both cases, ranked choice voting (RCV) successfully did its job.   
    Critics were wrong when it came to RCV.   With RCV and 35 mayoral candidates in Minneapolis, skeptics contended that voters would not be smart enough or overwhelmed in their ability to process the information needed to make intelligent choices.  There were worries of spoiled ballots, disenfranchisement of the poor and people of color, or widespread dissatisfaction with RCV.  That did not happen.  Why? 
    Minneapolis learned from experience.  Four years when Minneapolis first used RCV I was asked by the City Elections Department to evaluate implementation of the new voting method.  My report’s biggest concern was evidence of some voter confusion but the recommendation was better voter education.  The City responded with a great voter education program that this election significantly reduced voter error and spoiled ballots.  Moreover, in St Paul, part of why the election ran without a hitch is that they too learned from the 2009 Minneapolis experiences.  For critics of government who say it cannot learn, Minneapolis and St Paul did and the results paid off.
    Voters in Minneapolis learned how to adjust to 35 candidates on the ballot.  The top six candidates received nearly 90% of the total votes cast.  Voters demonstrated a capacity to gather information and select candidates whom they preferred and were deemed viable.  Moreover, worries that voters would select only vanity candidates and not vote for someone who was one of the finalists also seemed largely negligible.  In short, the theoretical and hypothetical worries that the election system would break down did not occur.  As a bonus, the Minneapolis experience confirmed a trend from around the country–RCV discourages attacks on opponents, more civil campaigns, and the potential for more cooperation during and perhaps after elections.
    This is not to say that there were no flaws in Minneapolis’s elections.  For one, ballot access is too easy in that city and it needs to change.  Currently Andrew Jackson ($20) gets you on the ballot.  The Charter Commission is talking of raising that to $500.  That is the wrong direction to go.  The US Supreme Court has ruled that excessive ballot fees unconstitutionally discriminate against the poor.  A better option is a minimum number of signatures to appear on the ballot.  Most races call for either paying of a fee or filing of signatures.  A $500 fee really does not demonstrate a showing of support.  A rich candidate could afford that fee easily or raise it from friends.  Signatures are a better sign of commitment.  A requirement of 500 signatures to appear on the ballot would have  eliminated (based on election night returns) 25 of the candidates from appearing on the ballot.  Thus,  a filing fee of $500 or 500 signatures seems a better way to assure some minimal showing of support to appear on the ballot.
    Additionally, the City needs a better protocol for eliminating and counting candidates who have no mathematical chance of winning.  Changing ballot access rules may solve that, but the two days of counting after Tuesday did some damage to RCV.  Tuesday night it was obvious to me when the final results were in that mathematically the bottom 29 or 30 candidates had no chance of winning.  Had the City simply transferred their votes on Wednesday morning then the race results would have been final by lunch time that day.  Finally, high percentage of “exhausted votes” does lend an appearance that some votes were not counted.  They were counted, at least the first choices were, and perhaps second and third too, but the fact that they were not counted in the final vote lends to impressions that must be addressed in the future.  Again, new ballot access rules may address this or perhaps allowing for more ranking, as they did in St Paul.  For now, RCV haters will latch on to exhausted ballots as a major flaw with the voting system.  Overall, we need to distinguish between ballot access rules, ballot casting rules, and ballot counting rules we evaluating elections.
    Beyond RCV, the elections in the two cities spoke hugely of their futures and characters.  Minneapolis’s election was about a generational change.  It was the older DFL being replaced by a new generation of Democrats.  The old labor-led, white establishment DFL lined up behind Mark Andrew while the new demographics of a racially and politically changing city behind Hodges. Andrew was like Frank Skeffington–Edwin O’Connor’s fictional old line Democrat mayor in The Last Hurrah who loses a reelection bid because he does not realize times have changed and he has not.  Andrew is a solid and noble DFLer, but he is old school at a time when Minneapolis is changing.  With Hodges as mayor and seven new council members Minneapolis is set for the shift to the future with a new agenda for a new constituency.  If Obama in 2008 represented the transition  from Baby Boomer to Gen X and Millennial politics at the national level, this is what happened on Tuesday in Minneapolis.
    Not so in St Paul.  Chris Coleman is perhaps the last mayor of the old St Paul DFL.  He is part of the old Irish Catholic DFL constituency that his father represented.  He represents the past of an insular city DFL party that still controls the city with many council members still playing old school politics. .  It is the coalition of traditional labor unions and party insiders. It is the politics of downtown ballpark stadiums and public subsidies for economic development projects.  Coleman does not really have an agenda for the future.  He is like Robert Redford’s character in The Candidate–elected but asking the question “What do we do now?”  Coleman is the mayor of Baby Boomers seeking to hang on one more time.  Minneapolis's DFL party is more robust and  diverse, St. Paul's is neither.  The St Paul DFL is too monolithic and power, and thereby sloppy in what it believes and who it lets in and what it considers to be Democrat politics.  There needs to be real competition in St Paul politics, either inside or outside the DFL, but it is not there.
    In some ways, the people of both cities got what they wanted, or at least elected mayors suited to their personalities.  Minneapolis is the hip, cool, and forward city looking to the future.  St Paul is more stodgy, less prone to change, and more stuck in tradition than its sister across the Mississippi.  The mayoral elections represent a tale of two cities and a contrast in the way they handled changing generational politics.

Saturday, November 2, 2013

Obamacare: Republican Tragedy, Democrat Farce

By now everyone knows that federal roll out of the Affordable Care Act (Obamacare) health care exchanges has been a disaster. But Obamacare is also a tragedy and a farce.  A tragedy because it is a horrible policy, a farce because it is now forcing Democrats to defend what was essentially a Republican idea.
    The Affordable Care Act is a Republican idea.  Obama himself acknowledged that during his 2012 presidential campaign, repeatedly reminding Mitt Romney that the Affordable Care Act was based significantly upon the policy he signed into law as Massachusetts governor.  But Romneycare’s origins goes back to the 1990s–a policy alternative to the Clinton’s failed healthcare proposals.
    The problems with the Affordable Care Act rests with two original design flaws in the law.  First, the legislation was meant to appease business groups and build on an existing system of health care insurance.  There were too many moving parts, too much capitulation to the industry for the law to work. It was essentially a free-market approach to delivering insurance, giving big insurance companies the opportunity to make more money by selling insurance to the uninsured.  The profit motive of private interests and the free market would solve our health care crisis.  This belief lead to a second and more fundamental problem residing in the assumption that economic markets and competition can deliver health care in an efficient, equitable, and affordable fashion.  The fact that the current health care delivery and insurance system is the most expense in the world with 48 million uninsured and mediocre outcomes attest to that.  The Affordable Care Act is a testament to a foolish belief that market mechanisms will solve health care problems. 
    The Affordable Care Act assumes that consumers can make choices about health care and will buy insurance if affordable.  It assumes that insurance companies will offer policies if markets exist.  The law assume that consumer choice and vendor competition will produce savings.  None of this was true before and there was no reason to think that it should have worked under this act.  If anything, the Affordable Care Act speaks to the limits of free market approaches to delivering vital government services such as health care.  No one in their right mind thinks the US military should fights wars and make a profit doing it, or that police and fire departments should let market mechanisms determine how the bad guys are caught and fire put out.   But Obamacare is a quintessential business pro-business free market idea.  Even the subsidies for the poor are pro-business–if individuals cannot afford health care the government will subsidize it–with the money going to private business.  What a windfall for the private insurance profit margin!
     If these design flaws were not bad enough, the Act has three other problems in terms of cost, coverage, and outcome.  First, the Act does little to address costs.  Currently the US spends 19% of the GDP on health care–we have by far the most expensive health care delivery system in the world.  The next closest are countries such as Canada and France at around 12% GDP, but with universal coverage.  Obamacare is supposed to reduce costs by insuring everyone, thereby reducing emergency room visits and encouraging people to visit doctors before a problem gets too serious.  There are also some provisions in the Act that are supposed to cut costs and in general the entire concept of the health care exchanges is that competition will pressure down costs.  All great theory, but as pointed out in a terrific recent article in special issue of Public Administration Review devoted to Obamacare, these ideas have little empirical foundation and actually most of them were already shown to be ineffective in reducing costs when the Act was being debated.
    Maybe short-term health care costs will go down but there is no evidence that longer term Obamacare will “bend the cost curve.”  On top of that  throwing millions of new consumers into a market with no plans to increase the supply of primary care doctors and nurses means there will be pressure to serve more people with existing resources.  The Act also does nothing to address the going health care needs of aging Baby Boomers who will pressure the health care delivery system.  In effect, the law fails to account for the demographic forces significantly driving up health care costs in the system.
    Additionally, Obamacare is far from universal coverage.  Remember initially that out of fear that universal coverage would lead to illegal aliens jumping the fence along the Mexican border to get free medical care in America ,the 12 million or so undocumented individuals living in America are not eligible for coverage, leaving them with the choice to self-deport themselves back to Mexico.  Many Republican states are also choosing not to extend Medicaid coverage.  The result?  While currently about 83% of individuals in America have health care insurance from their employer, through government, or purchased privately, at best Obamacare will push coverage up to about 90%.  At best, the Affordable Care Act does not even cut in half the number of uninsured in America.  It makes a good dent, but passage of the Act expended so much political capital to achieve so little.
    Finally, the Act does little to address the root cause of so many health care problems–poverty and poor life style choices.  Poverty leads to a host of problems that increase health risks, including malnutrition and homelessness.  But Americans are fact and lazy–we eat, drink, and smoke too much.  Obamacare does nothing to address these issues, problems that health care officials say we need to if we are to really reduce costs and improve outcomes to make America more healthy.  In effect, the act does almost nothing to address preventive or public health issues, again adopting a free market approach that individuals should be free to make their own health care choices.
    Despite all these problems, Democrats and their media apologists defend the law.  They say the law can be fixed or improved over time.  That the law was the camel nose under the tent to further reforms or that–to use the great line that often justifies bad laws–“The good should not be victim to the perfect.”  The reality is that Obamacare was a bad law or idea from the start–it was a bad Republican proposal that the Democrats have now embraced.  Couple the original design flaws along with so many self-inflicted wounds in implementation and so many problems forced upon Obama (a massive Republican effort to destroy a law they originally embraced) and one has a recipe for Democrats going down in 2014 or 2016 because of Obamacare.
    Thus the tragedy and the farce of Obamacare might also have an irony too it–Democrats are embracing a Republican idea and may lose politically because of it and Republicans who originally designed the ideas for Obamacare are now opposing it and may win politically.

Friday, October 25, 2013

Combating Bureaucratic Corruption and Inefficiency: Lessons from the United States

 Note:  On October 26, I head off to Moscow, Russia for a week to lecture and teach.  This blog is one of the talks I will be giving at Peoples Friendship University next week. For those into the nitty gritty of government reform you will like this blog.

Combating government corruption and inefficiency is a problem that is faced across the world. During the communist era bureaucratic inefficiencies and corruption were widespread in the Soviet Union and across Eastern Europe.  Even today, many post-communist countries and emerging democracies face these problems.
    In their transition from communism, many countries employed several mechanisms to address corruption and inefficiency.  In some cases, state-owned enterprises were privatized.  In other situations, administrative law and civil service reform sought to control bureaucratic discretion and corruption. But the introduction of these reforms is not confined to post-communist states. Even the United States overt time has implemented administrative law or civil service reforms to achieve these and similar goals.
    What I would like to discuss today are two techniques, tools, or goals that the United States has adopted to address problems of what I shall bureaucratic discretion.  Bureaucratic discretion is the ability of government officials to make decisions or choices regarding the implementation of the law, adjudicating disputes, or making any other routine decisions.
    The two topics I wish to discuss are the use of administrative law to confine or limit bureaucratic discretion, and also a commitment to transparency in decision making.  Limiting discretion and promoting transparency are important pillars of American administrative law and decision making.

The Constitutional Ethic of Public Service
    Sociologist Max Weber once described government service as a professional calling.  In his description of bureaucracy he noted the such entities controlled bast amounts of power, with bureaucrats able to use their rational technical knowledge and skills to accomplish tasks.  While such power can be efficient and serve good purposes, it can also be corrupting and serve self-interested goals.
    Ensuring that government bureaucracies serve the good of the people is the goal of a democratic society.  In order to do that in the United States, what has developed is a constitutional ethic of public service.  This constitutional ethic has basically two components.  The first is the development of a set of internal or subjective beliefs in bureaucrats that they are supposed to serve the public good by limiting their discretion, avoid corruption, be accountable to their superiors and the public, and make decisions consistent with the rule of law.  In effect, an ethos or psychological commitment is fostered among those who work in government.
    But a second part to the constitutional ethic of public service is the creation of numerous laws, rules, or processes that promote democratic values.  In the United States, these rules include ones that promote political neutrality, respect for individual rights, and limit conflicts of interest.  But in addition, there are two other  types of laws that I wish to focus on today.  The first deals with limits on bureaucratic discretion, the second is the promotion of transparency and openness in making decisions.

Limiting Administrative Discretion
    In the United States efforts to define and constrain administrative discretion have occurred throughout its history.  In part, the building of the American national government was accomplished by the creation of administrative structures.  Efforts to tame the bureaucracy were essential because of the bureaucracy’s role in implementing laws, adjudicating disputes, and distributing benefits and largess.  In the nineteenth century, staffing of the federal bureaucracy through the spoils or patronage system led to corruption and inefficiencies.  This concern over spoils lead to the adoption of the Pendleton Act, America’s first civil service act, in 1883.  The growth of the American administrative state during the presidency of Franklin Roosevelt in the 1930s and 1940s led first to further expansion of civil service reforms, then to the passage of the Hatch Act in 1939 which limited the political activity of federal employees, and then to the adoption of the Administrative Procedure Act in 1944.  All of these reforms sought to constrain or tame presidential power, promote neutral competence (political neutrality), and accommodate bureaucratic power with the goals of American constitutionalism.
    The United States Supreme Court contributed to this limiting of discretion with several of its decisions.  For example, the government must have hearings prior to termination of benefits (Goldberg v. Kelly, 397 U.S. 254 (1970)).  However, even with this due process or procedural requirement, the Court has given broad agency discretion to use rule-making versus adjudication when making rules (Securities and Exchange Commission v. Chenery Corp, 332 U.S. 194 (1947)).  It has also charted out deference to reasonable agency interpretations of law if statutes are silent or Congress has not spoken on the issue (Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)).  But Chevron deference to an agency interpretation applies only if it is clear that Congress intended to give it the authority to make rules carrying the force of law.
    The point here is that there is in the United States a well developed body of statutory and case law defining the boundaries of administrative discretion.  These limits curb executive power, corruption, and protect individual rights through the development of procedural regularity, judicial review, and defining the proper boundaries between bureaucratic and other government actors.  But given that the reforms in administrative law transpired at the same time the American administrative state was expanding to regulate the economy, they also served to build state institutions, improve their performance, and to enhance the economy by way of correcting market failures.
    In summary, the law that has developed in the United States is one that requires government officials to follow specific rules when making decisions.  These decisions, if they do not respect what is called due process of law, are subject to review by the judiciary in the United States.  Judicial review of administrative decisions has helped to limit bureaucratic discretion.

Transparency and Openness In Making Decisions
    A second major value important to limiting government corruption and inefficiency is the concept of transparency.  The idea of transparency refers to the mandate that all government decisions should be made in a open fashion, subject to coverage by the media and review by citizens.
    There are many rules promoting transparency.  Perhaps the most important laws regarding transparency at the national level in the United States are Freedom of Information Act and various open meeting laws.
    In terms of the Freedom of Information Act (FOIA), the law dates from 1966 and it allows for citizens and the press to request documents from the government unless they are otherwise classified as secret.  The goal of this Act is basically state that all information that the government has is open to inspection by the public.  Over its nearly 50 year history the ACT has resulted in tens of millions of government documents being released to the public.
    In addition to the FOIA at the federal level, many state and local governments have their open freedom of information acts.  Along with these laws, all levels of government in the US have what are called Sunshine Acts or Open Meeting Laws.  Six years after passing the Freedom of Information Act, Congress enacted the Federal Advisory Committee Act to open up to public oversight the advisory process of executive branch agencies. Since 1972,  FACA has legally defined how advisory committees operate and has a special emphasis on open meetings. In 1976 Congress adopted the Government in the Sunshine Act, which requires that certain government agency meetings be open to the public.
    In general, these three laws have had a dramatic impact on government decision making.  They establish a general presumption that decisions by government officials and agencies are presumed to be made publicly and that citizens and the media have a right to be able to review choices.  For the most part most government officials voluntarily accept these laws as binding and part of their duties.  But these laws are also enforceable by citizens and the media, both of which may go to court to have violations of the law reviewed and enforced by the judiciary.  Thus, these laws do not just exist in theory, but they have real force to affect bureaucratic behavior.

    The creation of a constitutional ethic of public service has been an important  way for the United States to promote efficiency and reduce corruption in government.    This ethic is a combination of both the creation of subjective beliefs and objective procedures that reinforce a commitment to democratic governance among bureaucrats.  Among the values that are part of this constitutional ethic are those that limit bureaucratic discretion and which promote openness and transparency in decision-making. 
    While this talk has focused mostly on the United States, many other democratic or emerging democratic countries have adopted similar values.  The question that I leave you with is how the lesson from the United States can be applied in Russia and to its bureaucracy to help it combat corruption and inefficiencies.

Campaign Financing and the Price of Democracy

All indications are that the Supreme Court will soon declare yet another campaign finance reform measure unconstitutional, chipping away yet another piece of the Post-Watergate reforms that sought to limit the corrupting influence of money in politics.  At least this is the indication based on the oral arguments in the recently argued McCutcheon v. Federal Election Commission case.  The Roberts Court will do this by arguing that the First Amendment protects the right of individual donors to expend unlimited amounts of money to influence elections.  The basis of the reasoning will be that aggregate spending limits by individuals does not corrupt or lend to the appearance of corruption of the political process.
    In reaching this likely conclusion, the Court will once again come close to saying money is speech.  But in doing that the Court will yet again be making a fatal assumption shared widely by many–that money is a legitimate tool to allocate political power and influence in America.  The fundamental flaw with the way the Supreme Court and many others have approached the issue of the regulation of money in politics is a  willingness to accept the assumption that economic resources should convert over into political influence. This is the core problem that the Supreme Court has failed to address.
    Think about it.  Economic markets may be great mechanisms to allocate sail boats and luxury items, but not political influence and democratic values.  Money is great in its place, but there are limits to what money should buy. No one thinks that school admissions or grades, jobs, or justice in court should be allocated on the basis of ability to pay or by money.  Nor do most of us support the idea that money should be used to allocate organ transplants or basic medical care.  The size
    Money has its place and it should just not be able to buy everything.  There needs to be a wall of separation between money and many things we hold important.  Ardent free marketers just do not seem to understand this.  In their push to privatize and deregulate they somehow think free markets are omniscient and always just.  But even Adam Smith recognized that for free markets to work there needed to be an independent concept of justice and virtue to regulate it.  Economists also talk of market failure and recognize that left to themselves, free markets are not self-regulating, self-regulating, or always fair.  In effect, there are some things money should just not buy, and that includes policy influence in a democracy.
    Democracies are not about one dollar, one vote.  Allocation of political power and influence should be distributed according to non-market criteria. Sociologist  Daniel Bell once pointed out that market logic and concepts were increasingly coming to encroach or infringe upon other parts of American culture including, the political process. Others such as Michael Sandel have argued that the danger now is that the United States is turning from a market economy to a market society where increasingly all types of social intercourse are being reduced to a cash nexus. Robert Kuttner makes a similar point. To a large extent American political power is being subjected to a marketization of its operations.
    The issue here is not one of efficacy or money. By that, the primary issue is not whether money makes a difference in terms of who is elected or who has political influence. One could debate forever whether money buys influence or corrupts and this is where the legal debate on campaign finance is centered. This is the wrong way to look at it. The issue should be whether money should be the criteria by which political power or influence is allocated. The issue instead is one about justice and fairness. It is about whether money is the appropriate criterion to use to determine who has political influence or authority. It is about setting boundaries or, as political theorist Michael Walzer would argue, demarcating distinctions between the market economy and the political system. While the field of political economy may be a legitimate academic discipline, the American political system is not a market democracy—the economic marketplace and the political forum or agora should be distinct. The allocative criterion for a political democracy is not the same as that for market capitalism.
    Even though American democracy has grown along with capitalism, the two should not be conflated. Many of the founding American political values opposed the impact that economic inequalities could have.  James Madison too, in Federalist 10 feared the problems associated with “various and unequal distribution of property.” Additionally, one can occasionally point to some dicta in Supreme Court decisions suggesting a broader understanding regarding a democratic theory of election law that would wall off impermissible uses of money in the political process.
    For example, Justice Rehnquist in First National Bank of Boston v. Bellotti, recognized the illegitimate drive of corporations to want to convert their economic resources into political power.  He declared:  “It might reasonably be concluded that those properties, so beneficial in the economic sphere, pose special dangers in the political sphere.”  And in  Federal Election Commission v. National Right to Work Committee the Court stated that the purpose of limiting money in politics was “to ensure that substantial aggregations of wealth amassed by the special advantages which go with the corporate form of organization should not be converted into political ‘war chests’ which could be used to incur political debts from legislators who are aided by the contributions.”
    What these comments from the Supreme Court suggest is a recognition that money used for political purposes needs to be limited. Politics in general, and campaigns and elections in particular, may be expensive and money may be necessary to run campaigns and elections, but their costs or funding sources should not undermine democratic values. The problem of the Court’s decisions on money in politics is that the Justices failed to understand how a democratic system derives its legitimacy from political equality. Allowing the allocative criteria of the economy to substitute for equality in the political arena gives money and wealth a role that it just should not have in American democracy.

Saturday, October 19, 2013

Making Sense of American Politics in the Age of Barack Obama

 Note:  On October 26, I will be flying to Moscow, Russia to teach at the Peoples Friendship University.  I will also be giving a talk at the American Corner, Moscow. This will be my fifth trip to Moscow. At the University I will be giving several lectures.  One of them is the one that I have decided to make as a blog this week.

Picture of me in 2012 in front of Peoples Friendship University with Professor Daria Stanis, my host.

A couple of weeks ago the United States was on the edge of a crisis.  Had Republicans and Democrats in Congress not come to agreement with President Obama, the United States would have run out of money and defaulted on its debts, potentially throwing the country and the world economy into a recession.  This crisis would have been a result of the Congress failing give the president to raise the debt ceiling which would have authorized him to borrow money to pay America’s bills.
    But this near missing of a crisis came on top of one that had already occurred.  On October 1, Congress and the president failed to reach agreement on a budget, forcing a partial shutdown of the government.  Even though an agreement was reached, it was only temporary and the United States may be back in the same place in three months.
    Moreover, as one observes the United States over the last five years while Barack Obama has been president, America has faced repeated political disagreement that seems to push the government from one internal crisis to another.
    How did all this happen?  To many Americans the partial governmental shutdown and the near default of the United States was hard to understand.  But no doubt to people around the world, including here in the Russian Federation, it must perplexing.  How could such a big and powerful country such as the United States face problems such as this?   Why is the United States so divided now, and what does it all mean?  How do we make sense of America?
    What I would like to do today is explain American politics to you.  For those of you seeking a better understanding of my country, my talk will try to give you a better picture of how our country operates and how it has changed in the last few years.  In particular, I want to explain to you two things about American politics.
    First, I want to briefly describe what I call the logic of American politics.  By that, I want to  explain how our constitutional framers designed the American political system.  I will argue that the  the design of our political system is meant to break up political power and slow down political change.  By that, there are no real single power centers in American government and that to get anything accomplished a significant amount of political consensus is required.
    Second, unfortunately that consensus has broken down.  This is where I shall discuss political parties in the United States.  My argument here will be that what the United States is presently experiencing is a significant political party polarization that is making it difficult to govern.  This is exactly where the United States is now and it explains so much about why the county seems to be moving from crisis to crisis.

The Logic of American Politics
    American politics was born out of a fear of a strong national government and the potential threat that political power could have upon the individual rights of citizens.  This was a fear from American colonial experiences with King George III of England, as well as a fear of mob rule during the early years after independence.  James Madison, one of the original authors of the American Constitution, once described the task of the American political system the following way.

   "If a faction consists of less than a majority, relief is supplied by the republican principle, which enables the majority to defeat its sinister views by regular vote. It may clog the administration, it may convulse the society; but it will be unable to execute and mask its violence under the forms of the Constitution. When a majority is included in a faction, the form of popular government, on the other hand, enables it to sacrifice to its ruling passion or interest both the public good and the rights of other citizens. To secure the public good and private rights against the danger of such a faction, and at the same time to preserve the spirit and the form of popular government, is then the great object to which our inquiries are directed."

The issue then is how to preserve individual liberty and republican government from the threats of majority faction.  This is the core problem of politics that Madison, the Federalist Papers, and the constitutional framers sought to address.  Phrased otherwise, the problem, as Alexis DeTocqueville would later ask, is how can the American republic deal with the threats of the tyranny of the majority?   Another way of stating it: How to balance majority rule with minority rights?  How does one allow for majority opinion to rule, as it should in a popular government, but not let it become destructive, acting impulsively or rashly when threatened?
    Thus, the American political system seeks to preserve individual liberty, or balance majority rule and minority rights, by placing all kinds of checks on political power.  The American political system was meant to make it slow to change, for power to become centralized.  The American political system has many features to break up power.
The government and election system of the United States is unique when compared to the Russian Federation as well as the rest of the world. Much of the formal structure of the government is outlined in the United States Constitution, with additional national, state, and local laws articulating both the structural and electoral systems for the country.
The first two defining characteristics of the United States are that it is a separation of powers government, not parliamentary, and it is also a federal and not a unitary government.  Both of these factors mean that political power in the United States is divided up among three national branches of government and between a national government and 50 states.  The purpose of this division of power is to protect minority rights, respect local decision making, and also to ensure that no one institution has too much political power.  This type of governing system also means that it is difficult to achieve significant political change in a short period of time, thereby encouraging the likelihood that elections will not produce dramatic changes in policy or political direction.
    Unlike a parliamentary system, separation of powers means that the president of the United States is elected separately from Congress.  The president serves both as head of state and head of the government.  Yet in America the president presides only over the executive branch of the government, with the legislative branch (Congress) headed by its own officers.  Because of the separate elections, it is entirely possible for the president to be of one political party, with Congress having a majority controlled by a different party or parties.  This is called divided government in the United States, and such a governing arrangement is not uncommon in the United States.
    Being a federal system means that there is in reality no national election for Congress.  The lower chamber of Congress is the House of Representatives, consisting of 535 members who represent districts spread across the 50 states.  Each district is on the same population.  There are 100 members of the Senate, with each of the states allocated two senators.  House terms are for two years and Senate for six.  In 2012, the entire 535 members of the House of Representatives was up for re-election, while only 33 of the Senators are up for re-election.  Because of the structure of Congress, effectively all of the elections for Congress are really local elections.  Thus, think of 2012 as a situation where there was one national election for president and 568 local elections for Congress.
    There is no proportional representation in Congress.  The United States has a Westminster type of elections—whoever receives the most votes in a congressional election is declared the winner.  Additionally, because of this type of system, third parties generally are not strong and therefore the United States is a two party system where at present Republicans and Democrats are in competition with one another.  Whichever party has the most members in the House or Senate controls that chamber.
    The reason why all this is important is that it is possible to have several variations of party control in the United States.  One could have a situation where the president and both houses of Congress are controlled by the same party.  This was the case when George Bush was president from 2003 to 2007. This occurred again in 2008 when Barack Obama was elected president.  But it is also possible to have the president be from one party and Congress controlled by another.  This again occurred under George Bush from 2007 until 2009.  Another scenario is when the president and one legislative chamber are controlled by one party and the other chamber is controlled by another.  This is currently the cases in the United States.
    There are major differences between the two houses of Congress in terms of their constitutional authority and how they operate.  However, in both chambers, it is generally possible for a minority slow down or stop legislation from passing.  Again, in theory the idea for this is to protect individual liberty or ensure political agreement on major issues.
    Finally, in addition to the United States dividing up power at the national level, America is also a federal system where power is divided among 50 subunits of government that we call states.  Within the states there are cities and other local governments.  Overall, political power in America is highly divided and in order to make any significant political change there needs to be basic consensus and agreement.  No one, not even the president, can simply order things to be done.

Party Divide in the United States
    American politics also operates with party competition.  The two major parties, the Republicans and Democrats, while they have historically disagreed on some issues, really shared some basic agreement on the role of government in our society.  Moreover, the two major parties, up until recently, were less ideologically polarized 20 years ago.
     American political parties used to be more coalitional and regional than they are now.  Parties were more likely to be mixed ideologically.  When I grew up in New York in the 1960s my governor was Republican Nelson Rockefeller.  One Senator was Republican Jacob Javits, the other was Democrat Bobby Kennedy.  The most liberal?  Javits.  The most conservative, Kennedy.
    We have seen in the United States a disappearance of moderates in the two parties.  There is a rise of straight party line votes in the Congress.  The Republicans have become more conservative, the Democrats slightly more liberal.  But more importantly, the Republican Party has seen the rise of the Tea Party faction, a group of ultra-conservative people who are pulling the Republicans further to the right.  The Tea Party also is less likely to believe in compromise, and they  do not believe that shutting down the government is necessarily a bad thing. It was the influence of the Tea Party in the House of Representatives that significantly caused the partial governmental shutdown and the near default.
    But the party divide in America is part of a larger social divide in the United States.  The Democrats and Republicans are a tale of two parties The Republicans are older, whiter, male, more Christian, and part of the Silent generation along with some older Boomers.  They vote against gay marriage, abortion, immigration, and favor smaller government.  The Democrats are younger, more female,  less white, less Christian, and they represent the  Millennials and Gen Xers. They favor gay rights, choice, immigration and diversity, and more government.  The two parties represent two generations and world views, and party of the intensity right now is a demographic contest witnessing the passing of power from one generation to another.  It also represents a racial polarization the greatest since 1988, and an identity shift as America moves from a White Christian nation to something else.
    In addition politics and geography now overlay and intersect.  There is a political sorting of living space by politics and geography.  We increasingly have Democrat and Republican neighborhoods.  We are divided politically by rural and urban.  The result is a decline in the number of real marginal or swing districts and such a problem is only accentuated by redistricting in some states (or conversely, even the best redistricting cannot overcome the political sorting we are experiencing).  There are only 50 or so competitive seats in Congress. The remainder are certainties for either of the two major parties.  Partisan districts create less incentive to compromise, reinforcing  polarization.

    So what does this discussion of the American political system and changing party structure mean in terms of understanding the United States?
    The partisan divide and political polarization that has emerged in the United States over the last 20 years has become very serious since Barack Obama was elected president.  America appears to be a politically divided country where there is no real consensus on some core issues about what government should do.  But even if there were consensus, the logic or structure of the American political system is being manipulated by a minority of the population to pursue its goals.
    This is not a problem that James Madison envisioned. He and the others who wrote the American constitution did not anticipate that a minority could be so powerful that it could affect the country the way it does now.  Nor did Madison and the framers envision a country perhaps so divided on some basic political values or issues.
    Barack Obama’s presidency is about generational change and in part the reason why the country is so divided is because we are witnessing a beginning of a significant generational shift in American politics.
    In the near future the United States will continue to face political division.  But over the longer term the changing demographics or population of the United States may resolve this problem.  As one generation dies off and is replaced by another, the United States will see a change values and  perhaps, then, a new consensus will emerge about where the country should go.

Sunday, October 13, 2013

Ending the Government Shutdown in Court

So what if Congress and the president cannot reach an agreement to end the partial government shut-down or worse, extend the debt limit?  Is the country hopelessly stuck in the middle of a political dispute?  Not necessarily.  Ignored in the entire dispute is one obvious resolution –the Supreme Court.  While some may argue that budget and finance matters are no place for the courts to venture, the partial governmental shutdown and the pending debt limit extension both represent controversies that have a legal or constitutional basis that can be addressed by the courts.
    Alexis DeTocqueville declared in a famous and often quoted passage in his Democracy in America: “There is hardly a political question in the United States which does not sooner or later turn into a judicial one.”   Over time the courts have entered to resolve many contentious political disputes in America, both because the other branches have failed to act, but also because these disputes implicated constitutional legal questions. 
    Questions about reapportionment, presidential power to seize the steel mills during the Korean War, executive privilege and subpoenas, and presidential foreign policy power all implicated difficult political questions often involving interbranch conflicts, but they also bore important constitutional questions that the Supreme Court eventually resolved, for good or bad, depending on your perspective.  While at one point the old political question doctrine deemed many issues non-justiciable (the courts should not hear them), since Baker v. Carr, 369 U.S. 186 (1962) the courts have found fewer and fewer disputes to be beyond the purview of judicial review. The same can be said with the partial governmental shutdown and the extension of the debt limit.
    First, there are constitutional obligations that require funding.  No matter what Congress and the President fail to do, they cannot let the federal courts close.  One can argue that failing to fund the judiciary is a violation of Article III, section I in two distinct ways.  First, there is a separation of powers problem in forcing the courts to close if no agreement is reached on the debt limit.  Congress does not have the authority to act in a way to undermine the constitutional powers of the judiciary.  Second, Article III, Section I declares that judges shall receive a “Compensation, which shall not be diminished during their Continuance in Office.”  Defaulting on the debt limit and running out of money for judicial salaries clearly flies in the face of this language.
    Some might argue that running out of money is a legitimate reason for why Congress may not allocate money to pay the judges and keep the courts open.  However nothing in the text of the Constitution permits this exception.  Moreover, today it is the debt limit, maybe next time Congress uses the excuse “We are out of money”  to punish the judiciary for opinions it does not like.
    Second, Section 4 of the Fourteenth Amendment states that the “validity of the public debt of the United States…shall not be questioned.”  In refusing to extend the debt limit this is exactly what Congress (and the president) are doing.  They have a constitutional duty or obligation to fund the government.
    Third, think of the entire budget as a legal obligation.  Whether it is payments to bondholders, Social Security checks to grandma, food stamps and WIC to the poor, or Medicaid reimbursement payments to the states, the federal government has created legally binding obligations to third parties.  Were any of these creditors to sue in federal court they would have suffered the requisite injuries to have standing and ask the court to compel the federal government to fund their obligations.
    But what if a court did order Congress to pay its debts, what then?  Can it do that?  In Minnesota where the state government has shut down twice because of political disputes between the governor and the legislature, its courts ordered funding for essential governmental functions.   The judiciary ruled that the State had legally binding obligations and it directed the Minnesota Department of Revenue to disburse funds to pay its bills.  While the authority of state and federal courts are different, Minnesota‘s experience points to a path for the federal courts to act.  Moreover, in some cases, such as in Missouri v. Jenkins, 495 U.S. 33 (1990), the Supreme Court has ruled that courts do have the authority to order taxes increases and expenditures to fund court orders.  This could also be the case here with the shutdown or the extension of the debt limit.
    Finally, critics might argue that Supreme Court decision ordering the government to pay its bills would be unenforceable.  Perhaps, but such an order might serve as a catalyst for change, providing conditions or incentives to compel negotiation.  In effect, many court orders, or even the threat of litigation, encourage settlement or negotiation.  This is exactly what is needed now.

Saturday, October 5, 2013

Members of Congress have an ethical and legal duty to fund the government

The political thinker and Irish Member to the British Parliament Edmund Burke once famously declared the duty of a legislator as between being a delegate and doing what constituents demand versus serving them by exercising one's best judgment.  But there is at least another duty that legislators have and that is a legal if not an ethical duty to comply with their own laws and to support the government they were elected to serve.
               The importance of stating this duty asks under what occasions, if any, are members of Congress permitted to disobey a law as a matter of conscience?  This is the question posed by House Republican efforts to repeatedly defund the Affordable Care Act (ACA or Obamacare) and force a partial governmental shutdown.  In effect, do legislators have a right to disobey and obstruct a law they do not support?  Do they have a right to civil disobedience?  While in general civil disobedience is an important act to test the constitutional values and justice of a society, this is not an option open to members of Congress, at least on this issue and for the reasons Republicans give.
               The relationship between law, justice, and civil disobedience has a long history in the west.  Sophocles' Antigone tells the story of a woman who buried a deceased brother in defiance of the king Creon who ordered her not to do so.  Her decision to defy was premised, in part, upon  concepts of justice and religious grounds, contending that her duty to disobey rested upon a higher law from the gods.  Similarly, Socrates’ trial and defense of his philosophizing invoked a duty to a higher law that justified defiance of human law. St. Augustine was one of the first Christian writers to argue that human laws that are unjust really are not laws.  St. Thomas defined a legal tradition that declared that human law must conform with God’s natural laws of justice, inspiring a generation of political theorists including John Locke who articulated a right to revolution against governments that violated natural rights and laws.  In all of these cases, civil disobedience invoked as an appeal to some higher law or rules of justice that dictated defiance of the law.
               The United States as a country is a product of civil disobedience.  The dumping of tea into the Boston Harbor in 1773 and the 1776 Declaration of Independence were acts of civil disobedience, providing the case for why some laws were unjust and should be ignored or defied.  The abolitionists,  including Henry David Thoreau and John Brown, so disliked slavery or the Fugitive Slave Act that defiance, going to jail, and even violence were viewed as proper acts of conscience.  And then of course Rosa Parks, Martin Luther King, Jr., and the many African-Americans who protested segregation by sitting at “Whites' only” lunch counters or who crossed the Edmund Pettus bridge also felt civil disobedience was an appropriate stance to take to challenge laws that thought were wrong.  In all of these cases, appeals to personal conscience, personal morality, or to religious or other values dictated the choices of individuals to defy the law.  But the question is, do legislators have this same right?  May they defy a law they do not support?  Do they have a right to shut down the government?
               Think first about the right of individuals to engage in civil disobedience.  Political theorist John Rawls argued that civil disobedience has a constitutional role in a just society.  It is an appeal to the shared values of a community, aiming to persuade a majority that it is wrong.   Civil disobedience is not an appeal to political expediency or self-interest. It is not a legal right, but an appeal to justice.  Citizens have a general duty to obey the law, but in some cases some feel that the law is wrong and must defy it.  But they do so first with the aim of changing the law and second, cognizant that they face legal retribution for their defiance.  The act of civil disobedience has the potential to change the law because one is willing to go to jail or be punished for one’s act.
               But private citizens are different than legislators and they may have less right to defy laws they dislike.  First, members of Congress not only have a general duty to obey the laws they have authored, but they have taken an oath of office to obey the law.  This current oath commands members of Congress to defend Constitution, accepting this obligation freely, without reservation, and with the help of God.  Such an oath imposes on them a special duty-above and beyond that of a private citizen—to obey laws.  Does that mean congressional members have no recourse to object to laws they dislike?  Of course not.  They can move to repeal the laws they dislike.  House Republicans have tried that 40 plus times when it comes to Obamacare.  The power to legislate and change laws gives them a tool that mere citizens lack.  While one can question the political reasons or wisdom for repeated votes to repeal the ACA, do that is the right of legislators.
 But there is a difference between trying to repeal a law one does not like and defying it.  This is what House Republicans are doing in seeking to defund Obamacare, pushing the government in to a partial shutdown, and perhaps risking a default on America’s debts come October 17.  For good or bad Obamacare is the law of the land—it has not been repealed and it has not been declared unconstitutional.  Members of Congress are under a legal and moral duty to fund laws and programs that they have authorized, even if personally they voted against the laws.  One of the most basic principles of American democracy is majority rule.  Majorities get their way so long as they do not violate the constitutional rights of minorities.  Majority rule settles decisions until such time as a majority reaches a different conclusion. Similarly, majority rule is the rule of Congress.  At some point votes and elections have settled issues and it is time to move on.  This is the case with Obamacare.
Moreover, Republican efforts to defund Obamacare are not premised upon shared constitutional values or principles of justice.  The decision is based on dislike of the law, Obama, or government in general.  Or it is based on political expediency--appealing to what their constituents want or what will appeal to their electoral base--and not on a sense of higher justice.  Or perhaps it is based on  private conscience or belief that the law is wrong.  All these may be great reasons to seek to repeal the law, but they are not proper grounds for refusing to perform one's specific duty to support a law that has been legally adopted in a democratic society.  Contrary to what she make think, Congresswoman Michele is not Rosa Parks--her reasons for opposing Obamacare are not based on appeals to justice and higher laws, but instead on personal and political expediency.
In general members of Congress do not have a right of civil disobedience to oppose laws they have a duty to uphold.  They are not like ordinary citizens exercising the right of civil disobedience.  Finally, legislators who object to the ACA do not have a right to defund Obamacare and hurt the rest of the country with a government shutdown.  In doing that they are not facing legal retribution for their actions as would ordinary citizens face by defying the law.  These members of Congress are taking a political stand, not an ethical one, and they do not have the right to do that.