That Which Is Left Unexplained

We actually understand a lot about the Sequester, the Shutdown and, most recently, the threat of default on the federal debt (“the Debt Ceiling”).  These are sad – tragic by their effects – failures by our leaders to govern responsibly at the federal level.

The Sequester came about because of a political miscalculation by President Obama.  It provides for “across-the-board” (arbitrary) cuts of the same percentage from every government program, without regard to importance or priority.  The proposal was made to buy time; it was supposed to be so transparently wrong as to guarantee that congress would work out compromise alternative spending decisions in most categories across the entire federal budget.  But guess what: the raw Sequester stuck.  It would take a majority of Republicans in the house to pass any change in the Sequester law.  The conservative wing (read “Tea Party”) controlled the agenda and there was no movement forthcoming to restore sequester cuts.  For a catalogue of people damaged by the mindless cuts – including 57,000 Head Start students, thousands of food stamp recipients, hundreds of thousands of federal workers, scientific researchers and participants in countless scaled back programs – go here.

The Shutdown has been accurately characterized as “hostage taking”.  The strategy was crafted and enabled by a handful of Tea Party Republicans, mostly in the House of Representatives.  The idea is to bypass the Constitutional model of developing legislation through negotiations in each house of the legislature and to replace it with a non-negotiable demand backed up by a threat to “shut down” the government.  The precise mechanism for shutdown is by withholding passage of a Continuing Resolution needed to fund the government past the expiration date of authorized spending.  The demand was to de-fund (kill) Obamacare.  Other intended participants in the new negotiation model responded by not participating and the crisis unfolded.  Like the Sequester, seemingly-acceptable collateral damage includes thousands who have been “furloughed” (laid-off indefinitely) and clients of hundreds of federal programs which are not currently staffed.

Of course those are only considerations of what happens to ordinary people.  If you want to talk about some real damage, playing chicken with the Debt Ceiling goes to the heart of what really counts: the full faith and credit of the United States (or the comfort and security of the holders of US Treasury bonds) and the stability of markets.  To be sure, those caught in this net include effectively everyone - not just bondholders or financial movers and shakers.  Included are people with retirement accounts or home equity; or people who will lose their job as the recession re-ignites; or incalculable losses to everybody from inflation as the dollar exchange rates turn against us.

These are all predicted and well-understood effects of actions that have been taken deliberately.  To cut to the chase, all of these turns of the screw have been engineered by Tea Party Republicans, mostly in the House of Representatives.  Speaking of hostage taking, House Speaker John Boehner has been totally Shanghaied by these members of his own party.  He is trying an impossible balancing act of placating the radical end of his party while still acting as a credible agent and leader of that party.  He can’t do both.

Who are these guys (with a gender-non-specific nod to Michelle Bachman) and why do they do what they do?  The much-referenced Tea Party Republicans are actually Libertarians - whether self-identified or not. The central belief of Libertarianism is about the role of government - minimal and practically invisible.  I’ve also read that Libertarians are not ready to compromise on principle for strategic reasons, and that they are indifferent to, if not outright hostile to, party politics.   But their principles overlap enough with conservative Republican values that so-called Tea Party Republicans have made a home of convenience in the Republican party.  There are forty or more Tea Party Republicans in the House and about six in the Senate.  Of crucial importance is the fact that the Republicans in the House only have a majority if they have the support of their Tea Party members.

It would be a comfortable assumption to say that Tea Party Republicans are tools of monied interests - the Koch brothers or Rupert Murdoch come to mind. That’s probably not fair or accurate. They are just willing recipients of piles of cash for something that they’d do anyway.  I’ve referenced the best illustration of Libertarian philosophy before in another context.  Grover Norquist spoke of shrinking the government down to the size where “you could drown it in the bathtub” (see the cover of Mother Jones).  

None of this gets the Republicans off the hook.  It has been their choice to ally themselves with true wreckers.

Charitable Giving as Conspicuous Consumption

Poof - I made you a billionaire.  No - hypothetically, you did it yourself.  You stood on the shoulders of giants; you reconfigured some great ideas and some promising startups and came up with the next greatest thing. The people love it and they love you too. Now your net worth is exactly one billion dollars.  The first question is, How much do you need to look and feel unquestionably wealthy and comfortable for the rest of your life?

Of course you’ll need to provide for your children - and your children’s children. You wealthy folks have families with 2.3 children. (I made that up.  It sounds reasonable.)  With the good health and long life that you can afford, you will probably enjoy a warm relationship with at least one great-grandchild.  Let’s create a $10M trust fund for each of the kids - all 12.167 of them. Hopefully, with good financial management, those nest eggs will have appreciated handsomely by the time they are ready to hatch.

That was very generous of you but it decreased your principal - your $1B - by $121.7 M.  You are now only an 878.3-millionaire.  Not only that, your investments are doing poorly - lately only a 1%/year rate of return on your principal, giving you, this year, passive income of only $8.783 million dollars.  For political and public relations reasons you only accept $2M/year as chairman of your corporation but with that $10.783M/year, you should be able to scrape by without touching your principal.

In your position you have to keep up appearances.  I’m not talking about expensive suits and runway fashions.  I’m talking about noblesse oblige.  Phil Knight is the 24th richest man in the US and currently worth about $16.3B.  Bill Gates is, well, much richer. Wikipedia says of Bill and Melinda Gates, “As of 2007, Bill and Melinda Gates were the second-most generous philanthropists in America, having given over $28 billion to charity; the couple plan to eventually donate 95% of their wealth to charity.” If Bill and Melinda reach their goal, their fortune will have shrunk to a mere $3.6B based on Bill’s current net worth.

Phil Knight just pledged a $500M challenge grant to Oregon Health Sciences University - or 3.1% of his current net worth.  Good suits aren’t cheap.  What if you did that?  You’re not even in his league.  You’d be reduced to a mere 378.3-millionaire.  

And what if the apocalypse came and your effective tax rate became 75%?  Well, that would only affect your miserable pittance of an income and not your net worth.  Now, you might take a heavy hit with a 75% estate tax but you’d be dead.  Hopefully, your kids could eke out  a living on the trust funds and the $94.6M worth of crumbs left over after estate taxes. Considering that Doomsday scenario, the $500M pledge would be worth it.  That kind of gift giving buys you a lot of credibility.  You are among the magnanimous rich - a pillar of your community and a benefactor to the world … and not nearly as prominent a target.

Will it buy off the peasants with pitchforks, screaming for tax revenue for schools and health care? Apparently it does.  If you didn’t have to pay a 75% effective tax rate or a 75% estate tax, then you - now only a $378.3-millionaire - could pick and choose and orchestrate your grand gestures, look good, and live large.  About Phil’s $500M gesture: I applaud OHSU’s good fortune and I know they will give back vital services to the community.  But if they were in a lineup with food-stamp clients, students, the elderly, the sick, and the homeless, would they get all $500M?  That kind of distribution is inefficient, unfair, undemocratic, even whimsical, since it is based entirely on a single person’s choice.

But you and Phil and Bill earned it, right?  This is America and you have the right to do whatever you want with your money - all billions and billions of it.  That brings us to the second question:  How much is enough?

The Teachable Moment of the Shutdown

Jimmy Kimmel performed a great public service when he made a person-on-the-street interview for his show on October 1 – the first day of the Shutdown.  Kimmel is a late-night talk show host.  His teaching was brilliant.  A few things were revealed, among them, the power of pejorative labels like Obamacare.  Also, people liked the particulars of Obamacare when they were separated from the concept, Obamacare.  Another critical part of the discussion on the merits and demerits of Obamacare:  people did not know that Obamacare and the Affordable Care Act were the same thing.  They liked Obamacare when it was called the Affordable Care Act.  They didn’t like it when it was called Obamacare.

In education as in comedy, timing is crucial.  You can bet that language arts and social studies teachers across the nation abandoned their tried-and-true curriculum for at least a day and focused on the Shutdown.  Presidential elections may come every four years but terrorism, natural catastrophe or celestial events are more or less serendipity.  Even in the blandest retelling of this story – working like a contortionist to be “objective” – folly, recklessness, self-absorption, and worse, form themselves and leave a lasting impression. This fable will not play out well for the authors.

Unfortunately for those most active players in this farce, that which would have remained obscure becomes, if not familiar, at least recognizable.  Gerrymandering?  Years of partisan-led redistricting (redrawing the boundaries of voting districts to gain a majority) have created enclaves of true believers, and a representative from such a district will face a bruising primary challenge if he or she won’t toe the party line – at any cost.  A strong disincentive against compromise and negotiation means brinksmanship is a rational choice. 

The mysteries shrouding Obamacare drop away if you bother to study it closely to find out why it is so terrible as to warrant hostage taking.  There may be problems or worrisome possibilities in a plan so ambitious.  But neither sinister intent nor the maw of disaster seem to be leering back at us. Do those screaming the loudest have something to lose?  Privilege?  The mantle of infallibility?  Tax breaks?  Where is all that noise coming from?

 

And with all this fidgety rumination, some paranoia does seep through:  What if they are afraid that people will love Obamacare and that everybody will want even bigger and more expensive government programs?

We are learning a lot.  Nobody will come out looking entirely clean in the bright sunlight.  The revelations will be stark.  But seeing what we are up against gives us a fighting chance.

Who Are the Puppet Masters?

I suppose it is a tremendous missed opportunity but I’m glad I was unavailable to comment during the run-up and starting bell of the Shutdown.  I am saved from being stridently indignant and shrill.  Anything I could say at this point about the transparent and irresponsible behavior of the House Republicans would be redundant.  I couldn’t possibly make a difference by adding to the stunning pile of invective shoveled onto that hapless crew.  Rather than gulping bitter draughts of rage, I can return to a state of serene wonderment.  How could the Tea Party pirates so completely Shanghai the House Republicans? 

For those coming out of hyperdrive suspended animation, the House of Representatives did not pass the (usually) routine Continuing Resolution to continue funding the government beyond the end of the fiscal year.  As a practical matter, that means that 800,000 government workers get “furloughed”;  make no mistake, that means their livelihood has ended abruptly and the reset date is unknowable.  There must be a compelling reason for such a cruel and hostile procedural maneuver against them.  There are other inconveniences as well: shuttered national parks, curtailment of numerous boring but urgent bureaucratic functions.  The hostage-taking metaphor has been used a hundred times and it’s apt.  The majority in the House will not allow the CR to pass unless their demands are met.  The ransom is to surrender Obamacare.  That object is almost incidental.  It’s the tactic itself that’s reprehensible.  Stop. I promised myself I wouldn’t go there.

  

House Majority Leader John Boehner comes out looking decidedly the worse for wear.  See the video link for – relatively speaking – the majestic utterances of a statesman. Published on YouTube on September 28, in it, Boehner accedes to the unalterable fact that the Affordable Care Act – I mean, Obamacare – is the law of the land:  it’s not actually a bill to be negotiated in a conference committee.  Now you don’t see any sign of that understanding.  What a difference five days can make.  That must have been one helluva party.  Something must have bitten him.