Congressional Shenanigans

Before I did a stint at a trade organization in Washington, DC I thought my knowledge of how our government really works was well above average. I learned I was sadly mistaken. Clueless, even. I believe the organization I worked for was as ethical as they come and played by the rules and I’m proud of the work I did there. I’m still proud of that organization, which, by the way, did many things besides lobby Congress and government agencies. Nonetheless, I believe that the average citizen would be absolutely shocked at what “playing by the rules” really entails. Trust me, neither Democrats nor Republicans are better than the other in this game. The game has become so twisted and convoluted that trying to find the line of sight from the best interest of the country to what actually becomes law will leave you with vertigo.

I believe that if most voters are aware of how things work inside the Beltway, they will demand real change. So when I have the time and opportunity I’m going to try and highlight some of the problems. The examples I’m using today showcase Democratic maneuvers, they are the ones still in charge of the both the House and Senate after all, but don’t take that to mean that Republicans haven’t used the same tactics.

To wit, Harry Reid is trying to quietly tack on to the bill that will extend current tax rates language that will legalize online poker. Questions you may ask are “So? I would kinda like more opportunities to gamble online” and “why would Senator Reid do that?”

I personally rarely gamble and think that many casinos prey on people that can least afford it, but I also highly value an individual’s right to choose how he or she spends time and money. Plus a friend that has made some steady income playing Texas Hold ‘em has told me that with my geeky love of statistics and ability to remember every card thrown playing canasta with my mom that I would be a natural…but I digress. Back on topic, I also haven’t researched the issue so I really have no position on it. I DO have an opinion, however, on whether or not it is appropriate to try to slide this unrelated issue into critical legislation that is being fast-tracked. I believe whole-heartedly that it is NOT appropriate and this kind of maneuvering is one of the many things wrong with our legislative process.

The House Financial Services Committee actually held hearings on the online poker issue and, as a committee, approved proposed legislation to regulate it. The next appropriate steps would be to publish the conference report and recommendations and vote on the legislation crafted by the committee. I have no idea what the conference report says or whether I would agree with it but that’s not the point. Allowing Harry Reid, as Senate Majority Leader, to just slip in the language that he wants makes a mockery of the considered, deliberate process that SHOULD characterize Congress.

So why would Harry Reid pull this stunt? Simple. He owes the casinos. The 2010 midterm elections were the tightest of Reid’s career. It really came down to the wire and Harrah’s and other casinos contributed a boatload of money (see the original article) and even bussed their employees in to vote. I normally would refrain from linking to sources that lean too far left or too far right, but the emails published by the National Review speak for themselves. The Center for Responsive Politics tracks the money and also has an opinion.

Meanwhile, other Democrats, disgruntled by the compromise on tax rates and unemployment benefits reached by Obama and Republicans, are being tempted by legislative "sweeteners" related to…wait for it…corn. If you’re looking for the line of sight from expanding the net for the long-term unemployed to continuing to give credits that make it more profitable to grow corn to burn in cars rather than to grow things to feed people, please don’t hurt yourself as you twist into a pretzel. This is NOT about what is best for the country. Even His Global Warmingness …err…His Climate Changedness, Al Gore, has said that ethanol subsidies are bad policy. But Democrats have whipped out their electoral calculators (reverse polish notation?) and are frantically trying to figure out if the anger their constituencies will have over them caving in to Republicans on tax rate extensions can be overcome by the gratitude (read $$$) that farming interests will undoubtedly shower upon them. I could take this moment to expound on my views of energy policy, an area which I really do have expertise, but I can’t mention the N word until I clear my activities with my current employer. Plus, it would take hours, charts, graphs, etc. All things that tend to bore the bejesus out of my friends. I’m trying to build an audience for this blog, not shrink it.

But back to the main point. Generation X is the population that has the most to lose as we address critical issues like tax rates, government spending, energy policy, entitlement reform, immigration reform, etc. We need to demand that our elected leaders end the shenanigans so that major policy decisions are made in a process that collects data objectively, debates proposals openly, and holds votes that cleanly distinguish among disparate issues.

Don't Blame the Victim

I was reading in Politico forums the reactions people of all stripes had about the tax rate/ unemployment benefits compromise between Obama and Republican leaders when the comments of one poster got my blood boiling. He started by saying

I'm an old fart and I don't understand you younger generations and I suppose you won't understand this.

And went on from there. I'm copying here what I ranted there because it captures much of the reason I started this blog. To all Baby Boomer friends and family that I love, none of this is directed toward individuals. The original poster attacked what he sees as the failures of people younger than him and I questioned his logic in the face of decisions made by policymakers of his generation. My response:

Holy smoke. Are you really saying that the current mess we’re in is somehow the fault of YOUNG PEOPLE?

Do you realize that the average age of a US Senator is 60 and the average age in the House is 55?

Do you realize that for half or more of their careers Baby Boomers and their employers paid about HALF the FICA rate that Gen X and their employers have paid from their first day of work? Does ANYONE think Gen X will have the same level of SS and Medicare benefits when they retire as Boomers will? Nope, we’ll have to work longer, pay in a greater portion of our income and get fewer benefits than our elders.

And what age group voted themselves the biggest increase in entitlements with the prescription drug coverage in Medicare without raising rates during the majority of their own working years to pay for it?

Under which generation’s watch did the sense of entitlement grow from “let’s make sure the elderly and poor don’t starve for lack of food or die from lack of basic shelter and medicine” to “I should be able to keep my house and standard of living in retirement or unemployment regardless of whether or not I saved for it?”

Who RAISED the Millenials that, even before the economy tanked, preferred to live with Mom and Dad into their thirties and that believe having all the latest electronics and unlimited texting and internet access are basic rights regardless of whether they have pursued the training and education for jobs that pay enough to sustain such a lifestyle?

Under which generation’s watch did unions go from a necessary tool to protect workers to being just as greedy as corporations and demanding contracts that brought the US auto industry to its knees?

Under which generation’s watch did education in this country go from the world’s best to US students ranking 25th in math skills?

With the oil crisis in the 1970s you would think our country would have had the collective will to establish a coherent energy policy that would have made us LESS dependent on foreign and polluting sources by now. Sorry, we Gen Xers were a little busy with grade school in the 70s to solve that problem. Gen Y wasn’t even born!

Which generation turned a blind eye over the last 25 years while the number of people in the US illegally rose to tens of millions such that no matter how we solve the problem now it is going to be painful for everyone?

Don’t you dare accuse “young” people of causing this mess. Generation X is smaller than both Baby Boomers and Generation Y. People my age are getting royally screwed.

Unemployment Benefits May Be Necessary but...

Let me start by saying that I’m not advocating to abolish unemployment benefits. And I’m not, at this point, going to try and say how long a person should be allowed to collect them, though I will say emphatically that they cannot be extended indefinitely.

But I flinch every time I read that unemployment benefits “pay for themselves” and every penny goes right back into growing the economy. It makes no intuitive sense to me but I can’t convince anybody simply on my intuition so I’ll turn to my old friends Pat, Chris, and Jamie.

I’ve taken a few economic courses but am no means an expert so I always go back to the first principles I learned in Economics 101 where one person is on an island growing bananas and another person is on a nearby island growing coconuts. Pat, Chris and Jamie are sufficiently gender-neutral names, right?

But I’ll have Pat growing and selling apples and Chris growing and selling daisies. Jamie is just in the scenario as a buyer who always spends the same amount on apples to feed a third island. When things are good, Pat grows enough apples to feed the apple island and to sell to Chris and Jamie. Daisies aren’t really a necessity but make the island a nicer place to live.

As luck would have it, Chris spends the money earned from selling daisies to buy apples from Pat to feed the people on the daisy island.

But then a nasty pest destroys Chris’s daisies and he doesn’t have anything to sell to make money to buy apples to feed the household on his island. The government steps in and taxes Pat to give money to Chris to buy apples. By the logic of the people that say every penny of unemployment benefits goes right back into the economy we must assume that there are no administrative costs associated with the government to collect the money from Pat and give it to Chris. Of course that’s ludicrous but for the sake of simplicity we’ll run with a zero cost government agency here.

So everything flows right back to Pat and everything is fine and he doesn't really need to buy flowers, anyway, right? Sure! As long as Pat’s costs remain exactly the same and no revenues are spent investing in the business.

That can’t happen in the real world, though. What happens when one of Pat’s two apple-picking machine breaks down?

Pat must decide whether to buy a new machine. If Pat buys a new machine the same number of apples will be harvested but profits will be down by the cost of the new machine. Which means Pat will pay less in taxes. That means less money to give to Chris to buy the apples from Pat to feed the daisy island, which means Chris buys fewer apples leading to less profits of Pat’s to tax the next go-round. Of course, the government can step in and raise Pat’s taxes each time to make sure that Chris’s island can buy the same number of apples but that only goes so far.

Because if taxes are raised too far, Pat may not be able to afford to buy the new machine, feed the apple island and still have the same amount of profits to tax without also raising apple prices. So if Pat buys the machine and raises prices so that the government receives the same amount in taxes, it still means that Chris can buy fewer apples than before, which lowers Pat’s profits and the cycle starts again. Without the new machine the apple island will just have to get by producing fewer apples to sell which, again, means fewer profits to tax to give to Chris to buy apples from Pat.

Then what happens if the 2nd machine breaks down and Pat can’t afford to replace it? Now there is nothing of Pat’s to tax and the apple island must depend on the government to feed it, too.

The only way the downward cycle stops is when Chris finds something else to sell.

Those who say that unemployment benefits grow the economy might say that if the government didn’t give Chris the money to buy apples, it would hurt Pat’s business. But if Pat didn’t have to pay the taxes to give to Chris in the first place, it’s a wash for Pat if costs remain the same. If costs increase Pat’s lower tax payment makes funds available to replace equipment or address whatever is driving costs up.

The point isn’t who deserves to receive how much or who deserves to pay how much or how long Chris should be given to find something else to sell or if taxes should help Chris start a new business, etc. The point is that taxing a producer and giving it to a non-producer DOES NOT improve the economy. It actually hampers business growth that would help the economy long-term. It may still be NECESSARY to provide unemployment benefits short-term and temporarily but they must be justified by other reasons, not by an economic fallacy.