First, Reform Washington

Oh Tyler, what have you done? II

2009-11-13T12:15:00.000-05:00

Best comment from the thread at Marginal Revolution that was the topic of yesterday's post:

You think a voting system that sticks us with a two-party cartel instead of a diverse market in political representatives isn’t a major problem? Are you sure you’re an economist?

Posted by: Max Kaehn at Nov 12, 2009 4:03:50 PM

Pithy! I like this guy's style. I'm going to have to remember the "two-party cartel" phrase too.

More bribes needed

2009-11-13T08:56:00.001-05:00

From The Hill:

Rangel, meanwhile, has attracted criticism in recent weeks for lining his campaign coffers with donations from those on both sides of the contentious rum-tax issue.

Contributions to Rangel from the Virgin Islands totaled more than $167,000 between 1999 and 2008, and more than half of that — $84,800 — was given during the 2007-08 election cycle, just as the islands were finalizing the deal to relocate Diageo’s rum operations.

Since Puerto Ricans found out about the deal, their giving to Rangel also has shot up. Puerto Rico now ranks second only to New York this cycle in places from which Rangel has collected contributions, according to CQMoneyLine and a report in The Washington Times. Donors in Puerto Rico have written $36,600 in checks to Rangel this cycle.

Rangel, who is under investigation by the ethics committee for unrelated charges of financial violations, has denied taking sides in the rum-tax dispute and has not indicated whether he will consider moving Pierluisi’s bill.

The blatant bribery on display here is really disgusting. Both sides have given him money just as they needed his help. There isn't even a fig leaf of decency here. Rangel is clearly selling Federal legislation to the highest bidder, and by his actions plainly indicating that no one has bribed him enough yet to make him move.

Charley Rangel is a walking poster boy for campaign finance reform.

The once and future man from New Mexico

2009-11-12T15:26:00.000-05:00

Ryan Mauro at Pajamas Media discusses the potential '12 Presidential run of New Mexico Gov. Gary Johnson. I've never heard of him before, but apparently Gov. Johnson is pretty much a Libertarian running under the GOP banner. He's a fiscal conservative, social liberal and foreign policy dove.

Naturally the topic turns to whether Gov. Johnson has a shot in 2012 of making it through the Republican primaries. Mauro thinks not (I agree), but is hopeful that Johnson's mere presence will force the eventual winner to compromise on some Libertarian issues.

I am doubtful. A Republican primary contest is about winning the largest plurality of conservative voters. Without social conservatives or foreign policy hawks, Johnson is such a non-threat that he can safely be ignored by any Republican candidate. And once the primaries are over, the Republican winner will tack Left in an attempt to pick up enough independents two dethrone Barack Obama; Libertarians are left out again.

But it doesn't have to be this way. Gov. Johnson is a true fiscal conservative as far as I can tell, and many people these days (on both the Left and Right) are looking at the spending picture at the Federal and State/Local level and getting seriously frightened. Combined with Gov. Johnson's liberal social views and soft foreign policy stances, he could appeal to a large swath of the traditional Democratic base. Under Range Voting Gov. Johnson could collect a lot of points from Democrats (minus the Socialists) and Libertarians.

I don't know how popular Gov. Johnson would be in a real general election, or if he would be the Condorcet winner, but it's truly tragic that a viable candidate is rendered non-viable by the electoral system. The voters (of the whole USA, not just Republican primary voters) should decide who is viable or not.

Oh Tyler, what have you done?

2009-11-12T15:11:00.001-05:00

One of the few blogs I visit daily is Marginal Revolution. Tyler and Alex are economics professors at George Mason University, and I enjoy their writing.

Today was not a happy day for me to stop by MR though. Tyler posted on Range Voting, and his conclusion was:

Range voting is a solution in search of a problem. The main problems with democracy include poorly informed, irrational, and short-term voters and politicians. Range voting doesn't cure any of those and arguably by weakening party affiliation it makes some of them worse.

Ouch!

Even if voter apathy is the main problem, I support Range Voting though not because it solves everything, but because it's an improvement that can actually be enacted. We all know that, ceteris paribus, more consumer information = a more efficient market, but Tyler doesn't offer any easy solutions to the voter education problem because there aren't any to be had. Getting information out to a disinterested public is one of the greatest difficulties faced by politicians or businessmen, and the entire marketing industry has struggled for a century to find even a 10% solution. No simple law can change that.

Moreover, I think Tyler deeply misunderstood the promise of Range Voting, even by his own standards of what makes a good electoral system. I posted the following critique to comments:

Tyler said: "it is not clear what advantage range voting brings over either a two-party winner-take-all system"

I can't disagree strongly enough. I can think of many advantages.

The single, biggest advantage I can think of is THIRD PARTIES actually getting a shot at winning an election.
Voters can actually vote honestly, and don't have to vote "strategically" by voting for the lesser of two evils.
Parties cannot entrench themselves in power (as the Democrats and Republicans have done since before the Civil War).
Americans don't have to fit themselves into one of two buckets, but can express their true preferences at the ballot box.
There would no longer be any "safe" districts, and politicians would face real competition in every election.
No spoiler effects.
The centrist candidate not only can win, but pretty much always does.

Let's look at your [meaning Tyler's - Ed.] criteria:

Deliver decent economic growth and an acceptable level of civil liberties.
Build consensus and legitimacy going forward, and
Toss out the truly bad politicians.
The democratic process itself educates people, raises the level of discourse, and makes for a better society.

Re #1, I don't see how RV can result in less economic growth, and the current two Parties often abuses our civil liberties in order to entrench their own power; see: http://blog.heritage.org/2009/10/20/the-politicization-of-justice-kinston-north-carolina/

Re #2, RV is clearly superior at building a consensus candidate. It's not even close. This is just mathematics too, not my opinion; see http://rangevoting.org/AppCW.html

Re #3, RV is clearly superior at tossing out bad politicians. There's actually a way for the WORST candidate to win given our current political system given that multiple good candidates can crowd each other out by competing for the same votes.

Re #4, RV is again superior. Right now most people don't have to think at all when voting - they vote Party line. In an RV system where you have to assign a relative score to each of the candidates you are actually required to enough about them to do this.

I think the summary conclusion on this post couldn't be more wrong. We have real problems in this country already, and RV can be the solution to them. Not the entire solution, but a big part of it.

The comment thread was full of the common misunderstandings about RV, and a few supporters of Instant Runoff Voting chimed in, but I hope my efforts can slowly turn the tide.

A Tale of Three States

2009-11-10T10:17:00.000-05:00

When I started this blog I was pretty sure I could find one story in the news per day that demonstrated the shortcomings of our current system. So far this has been depressingly easy. Today I bring you three stories (all from the last week), all with the same problem.

New York State Will Be Broke Before Christmas

Governor David Paterson called an unusual joint session of the Legislature Monday to implore recalcitrant lawmakers to close the state's huge budget gap before New York runs out of money.

To some lawmakers it's nothing more than a photo op to help Paterson get re-elected. But the governor is dead serious. He said if the Legislature doesn't cut the budget now the state could run out of money by next month.

California Stealin'

Desperation grabs for revenue are nothing new in politics, but California is once again leading the way in creative financing.

To help close yet another gaping budget deficit, now estimated to be $7 billion this year and reach as high as $20 billion next, Sacramento lawmakers have authorized a 10% increase in the amount of taxes withheld from worker paychecks starting November 1 and through 2010. The extra withholding tax will reduce Californians' take-home pay by about $1.7 billion for the year. But the lawmakers say this isn't a tax increase. OK, how about calling it a compulsory interest-free loan from taxpayers to the state?

Sarkozy to act over French pensions shortfall

President Nicolas Sarkozy will next year press ahead with measures to make people work longer for their pensions to reform France’s cash-strapped retirement system, according to a senior official.

Plugging the deficit in the pay-as-you-go pension system is regarded as a critical test of Mr Sarkozy’s appetite for further economic reforms as he enters the second half of his five-year presidency. There have been fears that reform could be postponed until after the 2012 election.

How has it come to this? How have three wealthy States been brought to this crisis? In a word: Incentives. You might think "Too much spending", but where did the spending come from? That's where the incentives come in.

Poor political incentives have lead politicians to write checks the State can't cash. People respond to incentives, and no matter much some may believe otherwise politicians are people too. Like anyone they want to live the good life, and the best way they can do that (as a politician) is to keep getting elected to public office where they can enjoy social influence and position and use the public purse strings to send money towards those (who can send a little back their way), pass laws that favor their donors' interests (who can send a little rent-profit back as campaign contributions) and write IOUs that are the State's responsibility to make good on (usually guaranteed jobs and pensions). That last category provides both donations and votes a two-fer.

These political incentives have lead in some jurisdictions to a one-way ratchet in State spending without any corresponding benefit. France has higher tax rates than any US State, and California and New York have some of the highest tax burdens in the US. These States just pay more for similar services in other States, which is why New York City public school teachers can make more than dentists, even while in the rubber rooms. Californian Prison Workers, French Transit Workers, and similar public-sector unions enjoy similar privileges. But, as The Los Angeles Times reports, this does not guarantee good results; life in Texas has become preferable to California (even taking the weather and scenery into account) because of lower taxes for equivalent services. Meanwhile both California and New York are losing population to low-tax States (voter respond to incentives too, and can vote with their feet if the ballot fails).

These problems can be greatly reduced with better campaign finance laws, and term limits would help too. If politicians knew that only small donations from a large base of voters were available to them as campaign finance, the public sector unions which have co-opted the State's coffers in high-tax jurisdictions would not have nearly so much influence. Further, if the politician knew he would be returning to the "general population" within just at term or two I doubt he would feel as comfortable setting the State on a course towards financial ruin.

There are some things you can't fix, like stupidity and bad philosophies. But if you get the incentives right many of the stupidities are filtered out.

Politicans' promises

2009-11-06T10:49:00.001-05:00

Earlier this week I proposed that the legislative process would be improved by a period of public review. I think a lot of people also think that's a good idea, which is why on September 24th, 2009 House Speaker Nancy Pelosi promised to put the healthcare bill online for 72 hours prior to a vote. Of course that was then, and now she is breaking that promise:

Speaker Nancy Pelosi's office tells THE WEEKLY STANDARD that the speaker will not allow the final language of the health care to be posted online for 72 hours before bringing the bill to a vote on the House floor, despite her September 24 statement that she was "absolutely" committed to doing so.

House members are still negotiating important issues in the bill--whether it will provide taxpayer-funding for abortions, for example. Pelosi is pushing for a Saturday House vote, and a number of big changes will be introduced, likely less than 24 hours before the vote takes place (if in fact it does). The Rules Committee hasn't yet released its resolution, or rule, that must be passed before the bill can move from committee to the floor. The rule will set the terms of debate and determine what amendments are in order.

Seventy-two hours is not enough time to digest a bill 1,900 pages in length; twenty-four hours is a joke. And there's no promise that we will even get it at all.

Fools rush in, but Nancy Pelosi isn't that sort of fool. She knows she'll be above these problems personally for her entire life, thanks to her husband's wealth, so the cost of rushing a bill won't effect her that badly. What would effect her badly is the political opposition that could coalesce given time to read the bill and find things that are going to be unpopular with the public. No self-interested politician would ever keep a promise to let the public review a law before it was enacted; Barack Obama broke his "five day review" promise 11 out of 11 times between January and April.

A period of public review is a good idea, and the public wants it. But unless this concept is written into the Constitution we will never get it. Political promises are too light a reed to lean our legislative system on.

Of Parties and factions

2009-11-05T15:57:00.001-05:00

Under our current electoral system a Party is not a faction, and a faction is not a Party. Factions are groups of individuals who genuinely and objectively hold some interest or belief in common. The Parties are collections of factions existing solely as a matter of convenience for the purpose of winning elections. Our plurality electoral system guarantees that the only stable system is a two-party system, so any faction that's less than half of the electorate (and they all are) must seek other factions (who are not directly opposed to their beliefs) to band together with and get elected.

That's why the Republican Party can often be observed as a coalition of social conservatives, economic liberals, and foreign policy hawks. The Democratic Party is a coalition of social liberals, economic Marxists, African-Americans[1] and foreign policy pacifists. Each also has its fringe (the Pat Buchanan and ALF/ACORN types).

You can understand why the Parties are arranged this way too once you realize that the (atheistic) Marxists in the Democratic Party are at contrary purposes to both the (Christian) social conservatives and (secular) economic liberals in the Republican Party, but are not wholly at odds with African-Americans, social liberals or pacifists. This is the only stable grouping given the factions in America today.[2]

Third Party Rising?
In light of this, consider two stories of the day on Third Parties. The Hill's Congress Blog discussess the question "Will we see the rise of a viable third party?"

Independents and third parties have been playing a bigger role in recent elections. With poll numbers for both parties on the decline, is there a real opening for independent/third party candidates?

Of course the answer is clearly "No" if you mean a Party that runs all the way to the ballot box in the face of Republican and Democratic opponents. We already have a bunch of third parties, and they amount to nothing. Everyone remembers Nader and Perot.

But I see room for "virtual" third parties, but they rely on politicians running for office, but not in the #1 or #2 spot in the polls, to "fall on their sword" right before the election. As long as only two "real" candidates went to the ballot box there would be room for third parties to run a campaign, and polling firms such as Gallup could determine the front runners using a Range Voting method when polling likely voters. This would be sort of an end run around our plurality wins system's two-party limitation.

But as I mentioned, this requires politicians to "do the right thing" every time or it won't work. Dede Scozzafava did withdrew in the NY-23 race that just concluded, but can we rely on that? I don't think so. One day a third-place runner will decide to go all the way, and we'll have Perot/Nader all over again. The faith in third parties will collapse, and we would return to the "realism" of a two party system.

That's a Faction, baby!
But despite the realities of our plurality system, Reason Magazine also asks "Can It Be? A Party for Capitalism?":

The rise of free-market populism in this country finally has manifested in an election. And judging from the hyperbolic reactions, you know it's a political movement with staying power.

When tepid, traditional conservative candidate Doug Hoffman knocked off liberal Republican Dede Scozzafava—a candidate who was supported by nearly every boogeyman in the GOP handbook—you might have thought that the rabble had stormed the Bastille.

Hopeful words perhaps, but silly. They confuse faction and Party. The economic liberals Reason speaks of have existed for some time, and usually vote Republican. The problem is that while economic liberals vote Republican, they are not represented within the Republican Party leadership.

The leadership is part of the "Washington Party" I have jokingly referred to before, but should really call the "Washington Faction." They're the smallest faction in America, but make up for that by being in the positions of power in the Democratic and Republican Parties. Their interests are earmarks, spending and kick-backs. The Washington Faction controlling the Republican Party (when it's in power) usually plays to the social conservatives and hawks in their base because it doesn't cost them anything in terms of lifestyle and personal income. The economic liberals though usually get the Cinderella treatment because reduced spending and government efficiency is a direct threat to the Washington Faction's ability to receive campaign contributions from the big donors that profit at the public's expense.

Our Real Solution
Of course, all of this would be greatly alleviated by our implementation of a Range Voting electoral system. This simple change, which would be easy to implement and even easier for voters to understand how to use, would allow real third party competition all the way to the ballot box. It would allow politicians to court new grouping of existing factions (e.g., social liberal + economic liberal + foreign policy moderate) to make a real run for office and see if there's any "there" there. It might even help getting rid of the Washington Faction.

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[1] This is obviously an argument that will attract some criticism. I stand by it though, so long as I lack a better word to describe this faction. According to FactCheck.org 71% of African-Americans voted for FDR in 1936, and the percentage of the African-American vote that voted Democratic has only risen since. No Republican has gotten more than 15% of their vote since Lyndon Johnson. Al Gore got 90% of the African-American vote and Obama got 96% or better. That's a reliable faction if I've ever seen one.

[2] If the economic liberals and social liberals could agree on a foreign policy stance though, I think they could form a permanent majority.

The legislative process II

2009-11-05T09:58:00.000-05:00

Do you know what the reward for being right is? Usually a kick in the shins. But I can accept that.

Yesterday I wrote The Legislative Process, wherein I castigated the ability for Congressional committees to add earmarks and special deals to legislation. Today we get this:

The Heritage Foundation’s Dennis Smith says that a “manager’s amendment” to Pelosi’s controversial 1,900 –page health care bill includes new provisions that will allow back-door payoffs to specific members of Congress, such as more favorable Medicare reimbursements to particular doctors or hospitals and lower taxes on medical device manufacturers in certain congressional districts.

One such earmark - which Smith says “suddenly appeared” after the Energy and Commerce Committee had already completed its work - creates a new $6 billion Medicaid slush fund for nursing homes to be doled out by Health and Human Services Secretary Kathleen Sebelius, with no input from the states, ordinary rulemaking or administrative review.

Waste, corruption, and theft. This sort of thing should invite an investigation from a white-collar crime unit. Being elected to Congress is not authority to take $6 billion dollars from the public purse and hand it out to whomever you choose.

And this is just today's example. Tomorrow it will be something else.

The legislative process

2009-11-04T11:30:00.001-05:00

The focus of this blog has been and will continue to be the reforms we need in the electoral process. If we select our Representatives well then we have a much better chance of getting much better laws. But there are also improvements needed in the legislative process. A Representative is elected for a term of years, and after a few months in Washington D.C. the less humble of them might begin to confuse this own preferences and the preferences of those who elected him.

The below proposals should help keep our elected Representatives on the straight and narrow path during his or her term in Washington D.C. My proposals make the law writing process less efficient in terms of speed, but they ought to improve the quality immensely while also reducing instances of the sort of corruption that occurs today.

I. A Minimum Period for Public Review

“They didn't want it good, they wanted it Wednesday." - Robert A. Heinlein

Much hay has been made recently of the fact that none of the Congressmen who are voting on the healthcare legislation currently in draft form have read the thing. And who can blame them? It's over 1,900 pages of legalese and gibberish. They read the Cliff Notes version instead and vote based on their opinion of that, not unlike how I formed my first opinions on The Iliad. But such slacking off, while perhaps tolerable in 10th grade English, strikes many Americans as an abdication of duty by our nation's Congress.

As a response to this I have seen some proposals that Congress affirm that they had read each piece of legislation that goes up for vote, but this is a silly idea. It's not that I think reading the laws voted on is silly, but the idea of the affirmation. The Congressmen could lie about that, and how would we know? We don't have the time to watch them 24/7 to make sure they're behaving. This would be an unpoliceable mandate, and quickly ignored.

I prefer a solution that can be easily policed, and I have one: the full legislative text of each law presented for vote must have been made available for public review for a term of not less than X days; otherwise the law is null and void. Exceptions can be made for declarations of war and responses to national disasters, which would naturally terminate after a short period unless approved again. This requirement cannot be lied about - the text is either available for review or it isn't. We can't guarantee that the Congressmen have read it, but we can read it and let our Congressmen know how unhappy we are if it does not meet with our approval.

The beauty of this proposal is that it ensures that Congressmen will read the laws, because they know that the public will have a chance to express their displeasure before the vote if it's a bad law. The laws of political survival will ensure that they do the right thing.

How long should X days be? I personally wouldn't vote for anything less than 30 days. We are writing the laws of the land, not making chess moves. There's no clock, and it pays to get things right the first time with careful review and informed debate. Anything less than 30 days would be undue haste. And I would prefer 60 days, or even 90.

II. A Title and Objective

Policies are many, Principles are few, Policies will change, Principles never do. - John C. Maxwell

The Constitution of the American Confederacy during the Civil War was very similar to our own, with a few differences. One of the better differences which we should adopt as our own is the idea of "Single Topic."

Today many laws which harm our nation but serve some narrow special interest are passed while riding on the coat tails of more popular bills. This happens when Congressman attach a "rider" to a popular law which is completely unrelated that law, knowing that no one is going to vote against the popular bill just because some Congresscritter attached a rider authorizing the construction of a bridge in their home state with Federal monies, or because Nancy Pelosi attached hate crimes legislation to a defense spending bill.

The Confederacy's "single topic" clause put an end to this practice, at least until they lost the Civil War, by requiring that each bill have a Title and that all clauses within the bill meaningfully relate to that title. In practice this meant that a bill titled "Defense Spending 2009" could never have a hate crimes provision; that would have to pass through Congress on its own merits. Any clauses found not to be related to the title would be unenforceable.

America would benefit greatly by enacting the single topic requirement in our own Constitution. No longer would special interests be able to get laws passed harming the national interest.

In addition to the Title though, I think one more thing ought to be included in every law: it's Objective, or Purpose. This would be the guiding principle of the law, and would be very helpful to the Judiciary when deciding particular cases on particular facts.

III. Spring Cleaning

"It is difficult to make our material condition better by the best law,

but it is easy enough to ruin it by bad laws." - Theodore Roosevelt

Do you have any idea how many Federal laws there are? I'm not sure that anyone does. According to the Government Printing Office the tax code alone is 16,845 pages. By comparison this King James Bible is 606 pages. Then there's all the other laws written by Congress, plus all the regulations written by our Administrative Agencies.

It's very hard to quantify just how much harm all these laws do us. The personal and corporate compliance cost with the tax code must run into the hundreds of billions of dollars every year. The costs associated with SEC mandated disclosures have become so exorbitant that many companies which would previously have gone public are opting to raise capital by (private) means, denying the "Main Street" investor access to these investments. Regulatory arbitrage, such as Manhattan socialites invest in Midwestern farms to collect the subsidies, is wasteful. And Mancur Olson spent his academic life showing how the accretion of laws written for the benefit of special interests put a permanent brake of the growth of prosperity and opportunity.

For all these reasons we would be better off with fewer laws on the books, but currently no Congressmen has much incentive to go about cleaning out the legislative attic. The voters seem unaware of the costs, or at least more focused on the problems they want "more laws" to solve, and the lobbyists with money are by definition the successful companies that have learned to navigate the legislative mind fields and see the maze of laws (correctly) as barriers to entry preventing entrepreneurial competition from appearing.

For this reason I propose that we need a structural change be enacted in how we repeal laws in order to encourage a regular review and "spring cleaning." I'm not sure which structural change would be best however, and so I will propose several with the hope that I can provoke some discussion and consensus.

Automatic Expiration. Laws might come with automatic expiration dates, say 20 years. Congress would have to approve them again for them to continue. (I am only including this because I have seen it suggested often. It seems popular, but I actually think it's the worst one of the lot. There are a lot of laws we would not want to expire, like the protections of private property or criminal felonies.)

A House of Repeal. A third Congressional chamber would be added (in addition to the House and Senate) whose only job would be to repeal laws. The politicians in this chamber would have to campaign on the merits of the laws they got rid of, provoking voter attention to the matter. Follow the link for a full discussion on this proposal.

A Session of Repeal. Without creating a new Congressional chamber, at least one Session per year would be devoted solely to repealing old laws. Like the House of Repeal idea this would focus voter's attention on the matter.

Minority Repeal. One of the greatest difficulties a democratic nation faces if the protection of minority rights, but I would note that without a law there can be no oppression by government. The best solution may therefore be to give minorities the right to repeal laws. Perhaps Congress will continue to need a majority to pass laws (or even a super-majority of some kind), but a minority can repeal them. This suggestion can be combined with either of the previous two for greater effect.

GOOOH, Now

2009-11-03T14:22:00.000-05:00

I have discovered a very interesting movement today, which apparently has been around for a couple years: Get Out Of Our House! (or GOOOH). The goal of this organization is nothing less than replacing the entire House of Representatives simultaneously, by running a national campaign and an entrant in every district. It's ambitious, but it could work.

Regardless of who you ask, Congressional approval ratings are abysmal. And yet, 82% of Congressional districts are considered "safe", in the sense that there is no doubt who will win, and ultimately 98% of the House is reelected. How on Earth is this possible, that approval can be so low and reelection so high?

In a word: gerrymandering + Party politics. The two Parties have conspired to make the system as uncompetitive as possible. They know that a given district will always elect an X, and that Party controls who runs for that office by giving or withholding campaign funding. Since the State and National Parties control most of the funding the elected officials work for the Parties first, lobbyists second, and voters a distant third (maybe). It seems unassailable.

But it doesn't have to be unassailable. GOOOH is strictly non-partisan except for the issue of imposing real campaign finance reform and term limits to break the cycle of reelections. They can run center-left liberals in Democratic strongholds and center-right conservatives in Republican strongholds. Given enough funding to get the word out, and the right message, they could be a force to be reckoned with. The national Parties should look at those approval rating and quake in fear at the thought of a real choice in each and every district in the country.

The campaign finance reform is a good idea. Lobbyists can have their say (1st Amendment), but the purchasing of special laws and tax breaks must end. This is the worst sort of corruption.

I am lukewarm on term limits without range voting though. Term limits can be a good thing, but without range voting I think term limits all by themselves might strengthen the Parties. When there are no career politicians with name recognition who can win elections even without the Party endorsement, like Sen. Joe Lieberman, the district candidates would be completely at the mercy of the Party bosses. I favor term limits, but only after range voting is approved.

Electoral Systems: Instant Runoff vs. Ranged Voting
And that brings me to the one thing I am really upset about when it comes to GOOOH. They are non-partisan on all the issues (except Term Limits and Campaign Finance) but they do ask would-be GOOOH Party candidates a series of questions to stake out how they stand on the issues of the day. And one of those questions is whether or not the would-be candidate would support Instant Runoff Voting. ARRGGHHH!

Instant Runoff Voting (IRV) has gotten a lot of attention because it is supported by the FairVote organization, which is well funded and has been around long enough to penetrate the nation's attention. But as a system of electing candidates, it would be a disaster. It results in the same two-party system we have today, with the added bonus of more vote recount debacles! Woo-hoo!

We don't need to implement IRV and "see what happens." It has already been implemented in American jurisdictions and abroad. We know it results in two party rule. We know that it creates multiple opportunities for recounts and hanging chads to determine outcomes. It might be minimally better than our current system, but that's like saying "You should buy a Ford Pinto instead of a Yugo. It only has a 1 in 10 chance of exploding, instead of 1 in 5." What a ringing endorsement, eh?

Range Voting is better than Instant Runoff Voting. It can't be gamed; it can't elect the worst possible choice; voting honestly is always the best strategy; and it guarantees real third-party competition.

I hope GOOOH comes around on this issue, for the country's sake. If you're reading this I encourage you to join GOOOH, and move the needle towards Range Voting.

The system matters

2009-11-03T13:52:00.000-05:00

Do you think that North Koreans are in any way morally or intellectually inferior to their South Korean cousins? What about East Germans and West Germans? Or the Chinese in Hong Kong and Singapore versus the Chinese in 1970s Shanghai? I would hope that anyone reading this would recognize that "No, there is no difference. They are people the world over." And yet, the results are so different. North Korea is literally living in a Dark Age, and East Germany and mainland China are only just emerging from theirs.

The system people are immersed in has a greater effect on outcomes than the character of the people inside them. Good character is important, and necessary, but no one can rise above the rules that governs their society. Ghandi and Martin Luther King, Jr. would not have enjoyed the successes they did in countries that did not inherit the English freedoms of speech and self determination. Even the Chicago radical Saul Alinsky, determined to change so much about America, said this:

Let us in the name of radical pragmatism not forget that in our [American] system with all its repressions we can still speak out and denounce the administration, attack its policies, work to build an opposition political base. True, there is government harassment, but there still is that relative freedom to fight. I can attack my government, try to organize to change it. That’s more than I can do in Moscow, Peking, or Havana. Remember the reaction of the Red Guard to the “cultural revolution” and the fate of the Chinese college students. Just a few of the violent episodes of bombings or a courtroom shootout that we have experienced here would have resulted in a sweeping purge and mass executions in Russia, China, or Cuba. Let’s keep some perspective.

That's why the Tea Party movement, and independents like Doug Hoffman, will ultimately fail unless the rules that govern how Washington D.C., and our elected officials, operates is changed. There is a small chance that a Tea Party will arise to replace a dying and sclerotic GOP, but there is no chance that these Tea Party members will not eventually be corrupted by "the rules". The rules must change.

Range Voting will allow a permanent change for the better in how our officials will be elected. The center will govern, and the Parties will be relics of the past. Instant Runoff Voting cannot deliver a nation free from Party politics.
Term Limits will ensure that there can never be a permanent class of politicians again. It's a mitzvah to serve in Washington D.C., but the perspective of the constituents back in your District will be lost after too many years living among other professional pols.
Campaign finance reform must be enacted if we are to turn the incentives of our officials from representing lobbyists to representing citizens.

Costs vs. Value, and why Washington D.C. is at odds with the American public

2009-11-02T17:25:00.000-05:00

Price is what you pay. Value is what you get. - Warren Buffet

Intuitively, as the personal level, everyone understands the difference between costs and value. When you comparison shop for for TVs, cars, or whatever, you are trying to maximize the value you receive in exchange for the cash you hand over. It's hard to assign a dollar amount to "value", but you know it when you see it. You know it when you look at look at the features on two televisions and try to decide whether the $50 price difference means "get the cheaper one" or if the additional features of the more expensive set adds enough value to justify the higher price.

And it is this process, the process of millions of consumers making cost vs. value decisions on a daily basis, that induce firms to produce goods that provide more value; more "bang for the buck." They want your business, and they work for it by making things better and cheaper all the time.

But something seems to go awry when it comes to government programs. They get more expensive over time, while delivering the same or lesser value. The same thing happens to industries that are highly regulated, or government funded, or are unionized. They succumb to cost disease. Why?

Before we get to why, let's discuss two examples in politics today: NASA and healthcare.

Example 1
NASA recently launched the Ares I-X, which it described as a "prototype" for the future Ares I rocket (even though it has almost no parts in common with that future vehicle). The flight was a "success" in the sense that it did not explode upon ignition or during flight, but instead crashed into the Atlantic Ocean after a short parabolic flight. As a technology demonstrator it might be fascinating, but as a capability demonstrator it didn't provide anything that hasn't been available for over sixty years, and at a cost of "only" $500 million. As Rand Simberg relates at Popular Mechanics, that's roughly the same amount of money it took SpaceX (a private company) to engineer two entire launch systems, build multiple prototypes, and successfully launch several of them all the way to orbit.

How does this happen? How is it that NASA cannot build any new capability over a sixty year period despite an annual budget in the billions of dollars? How did they come to design a rocket that is so expensive that one prototype launch costs as much as a private company's an entire rocket program? Even if the Ares I (and its Ares V brother) were developed for free it would be too expensive to launch! Why can the private sector currently launch rockets with the same capacity for 5% the cost of the Shuttle?

But more importantly, why is not one politician in Washington D.C. pushing for a solution to the costs of NASA? Why do we get so little value (relative to the private sector) for our tax dollars spent on NASA?

Example 2
If you have followed the healthcare reform debates at all, you probably know that America spends a lot more money on healthcare than countries with socialized insurance for no apparent benefit in outcome. The costs are higher, but the outcome is the same; so the vale of US healthcare (health/dollar spent) is much, much lower. But why?

In the Washington Post Ezra Klein speaks to Kaiser Permanente CEO George Halvorson, and shows an incredible set of slides. To put it bluntly, American health insurance is expensive because American pharmaceuticals and hospitals are expensive. Health insurance companies are not crazy profitable; they're just passing on the high costs of hospitals to you.

Why is this? Why are American hospitals so much more expensive?

Some might point to the fact that a powerful, government-run insurance monopsony can bargain down prices as low as it can get away with, and that's true. But don't just look at the socialized countries. Two countries without socialized medicine are Costa Rica and Thailand, and their prices are lower than Europe and their outcomes as good (or better) than America. There are government-run hospitals, but also private ones, the national insurance provider does not force prices down, and prices are universally low. The value received can only be described as "off the charts" relative to most other nations, which is why 15% of their tourists come to Costa Rica specifically to receive medical care. Thailand is in a similar situation.

How does this good fortune happen? But more importantly, why is not one politician in Washington D.C. proposing any solution to the costs of hospitals? Why do Americans get so little value (relative to Thailand or Costa Rica) for our dollars spent on health care?

* * *

The answers to these questions is pretty straight forward: Because the politicians who regulate these industries only care about "value" to the extent that voters hold them accountable (which is really hard to do, given we only get two choices each election - them or "the other guy."). On the other side of the ledger they need campaign contributions, and the higher the costs (meaning "revenues", from the hospitals and NASA contractor's point of view) the more money there is to contribute to election funds. When you have a $500 million budget for a single prototype launch, or charge ten times what a Costa Rican hospital charges for the same CT scan, there's a lot of profit that can go back into the slush funds.

This is why electoral reform and campaign finance reform are important to your personal bottom line, not just ethereal concepts important only to wonks. If we had a Range Voting electoral system, instead of our current one, voters would have a real, honest to god ability to hold even incumbent politicians in "safe" districts accountable for their wasteful ways. If we had real, no kidding campaign finance reform - limiting campaign contributions to a fixed sum received from actual, home sapiens constituents, politicians would have no incentive to bow to the incumbent economic interests of the day.

Electoral reform and Campaign finance reform are populist and pro-democracy, because they move political power from the business and political elite back to the American public, where it belongs. And they just might save you $500/month or more on health care insurance.

Make organizing easy

2009-10-29T10:35:00.002-04:00

At RealClearMarkets Larry Kudlow is writing that "Economic Freedom Fighters Must Unite".

There are two reasons why Larry is writing this essay, both true at different levels. The first reason is that he believes that economic liberty (of the type espoused by Jack Kemp and enacted by Ronald Reagan) is the ticket to lasting national prosperity, and that everyone who agrees with him should get together and vote as a group. But the second reason, the less obvious reason he is writing this, is because organizing a successful political faction of voters in America is really, really hard due to the rules governing our electoral system. Given our plurality-wins voting system we can only ever seriously consider two candidates, so any smaller faction within one of the two "big tents" has to start organizing very early, and very strategically, to make sure their preferred candidate is one of the two "big tent" candidates - and meanwhile all the other factions are doing the same thing.

If we switched to a Ranged Voting arrangement the second reason (the gamesmanship) would go away, and we would be left with the voting for candidates not based on some guess of who is likely to win, but solely on the caliber of their ideas.

Let's consider: under the current arrangement Larry Kudlow has to campaign for someone who is a likely Republican candidate that would be friendly towards market liberty, who we'll call Governor Adam. Gov. Adam is not perfectly friendly towards free markets, but he's okay, and more importantly he's a good Christian so the social conservatives are likely to vote for him. Having hung his hat on Gov. Adam, Larry can now spend until 2012 promoting Adam's candidacy and hopefully making beating out Obama. Late in 2011 though Larry meets Senator Blake, who is an even better free market candidate and a good Christian too, but Adam has the momentum and you can't afford to split the Republican vote. So Blake gets sidelined.

Under Ranged Voting the situation is completely different. Under Ranged Voting Larry can promote Adam and Blake, and he can also promote Governor Crisp too! Gov. Crisp is not a social conservative but a libertarian on both social and economic issues, but that's okay. Under Ranged Voting factions can support any number of candidates, and it's the highest average score that wins. Crisp can draw votes from both the traditional Republican and Democratic factions without doing any harm to the Democratic and Republican candidates. Under Ranged Voting Larry might vote for each of the three candidates with the following scores:

Crisp (L) - 10
Blake (C) - 8
Adam (R) - 7
Jeb Bush (R) - 5
Obama (D) - 2
Nader (G) - 1

What's more, it simply doesn't matter whether Crisp enters the race a year ahead of time or just weeks before the election. There's nothing stopping a faction from organizing around him quickly. This is real competition in the electoral space the likes of which we have never seen in this country, and it will drive quality in our electoral choices exactly the same as competition for automobiles had driven quality there.

The larger issue

2009-10-28T16:58:00.000-04:00

The American Thinker offers advice I would consider "good" from the point of view of the typical GOP partisan voter: GOP Should Grow the Party, Grow the Economy, Shrink the State. It's certainly a stark alternative to the current Democratic platform, and would make it easy for voters to choose between the Republican and Democratic candidates at the polls in 2010. The Republicans could use that sort of message clarity too, as their recent Presidential candidate was considered by many conservative voters to be more "Democrate-lite" than "moderate."

But like so many, the American Thinker is stuck in the paradigm created by our current electoral system. The fact that we're stuck choosing between Republicans and Democrats drives home the larger point: Our electoral system sucks, hard. Any system that allows a contest between George H. W. Bush and Ross Perot to elect Bill Clinton (or a content between Hoffman and Scozzafava to elect Bill Owens, or between Al Gore and Ralph Nader to elect George W. Bush) needs to go, now.

Before we can reform any of the big issues of the day (runaway spending, entitlements, education, etc.) we need to address the biggest issue in the room - Washington D.C.'s need for reform. Congressional approval levels are at an all time low (with good reason) and yet most of them will be reelected. This is a tragedy that would make a Greek playwright weep.

We need Electoral reform. Range voting is (mathematically speaking) the best alternative of several proposals, and far, far superior to the plurality wins system we use now. It's also dead simple to understand. It solves the spoiler effect and breaks the Democratic-Republican monopoly on political power.
We need real, no-kidding campaign finance reform. We all know that both parties are addicted to the money provided by lobbyists. It's time to place a hard limit on who our representatives can take money from. Contributions should be limited to cash received directly from constituents only, and with a cap that applies even to the Bloombergs and Corzines of the world.
We need term limits. A permanent political class that sees itself above the rest of us is not healthy for the nation. 5 terms for the House and 2 for the Senate seem more than enough to me, but I'm open to suggestions. If it were backwards looking too, to immediately disqualify most of our "ruling class" from running ever again, that would probably be a well needed house cleaning to boot.
We need districting reform. Let a council of retired (or active, for all I care) Judges do it without regard to political leanings, gender, religion, or any of that other nonsense. Citizenship is all that should matter.

Everything I had said above threatens the political class, and unless they are extremely principled men and women I suspect the will oppose it. But for the health of our nation and society it is necessary.

A world without tiers

2009-10-28T11:41:00.001-04:00

Popular Mechanics has an article on the ongoing water crisis in California and six of the "prescient" proposals recently offered by a blue ribbon committee to resolve it.

The basic problem is overuse of water following a three-year drought. All the constituencies in the State (farmers, homeowners, commercial businesses, etc.) obviously need water to function, but they're using too much of it given the fall in supply. Ground reserves are being tapped faster than the natural systems can replace them, and there is no major desalinization program to make up the difference. Falling water levels are also having an impact on the fish populations, effecting the fishing industry and the food supply.

Amazingly however, none of the proposals involve letting the market set the price for water. California seems bound and determined to continue setting the price legislatively, and then curbing over-consumption with yet more legislation (and fines and penalties). On the one hand this frustrates me to tears, because the basic principles of economics have been known for centuries - a commodity (such as water) with a price set by a competitive market will never be exhausted because the price will rise or fall to keep supply and demand in equilibrium. On the other hand, this is thoroughly predictable, because the politicians who set the (too low) price are beholden to the constituencies that enjoys that low price (mostly farmers) and there is no constituency (other than the general interest of all citizens) which champions market efficiency.

One only needs to look at page 6 of the PM article to understand how a market price would improve the situation. The committee proposes more regulation to prevent waste, but more expensive water would incent farmers to use more efficient irrigation systems too, thus wasting less water, without the legislature having to take any action at all. The individual market participants would simply act in their own best interests, and we would all profit thereby. There would be no need for additional government-run water management plans, no legal enforcement, and lower costs/taxes for the State thereby. This is why market economies always produce more wealth than planned ones.

I suspect that many folks in the California legislature understand this too, and certainly the Governor does (one does not acquire a B.A. in International Economics from the University of Wisconsin without taking Micro 101). But this is not unlike the parable told by Paul Romer in his TED Talk on developing of new "rules" for organizing societies; they understand, but cannot act. Like the Third World nation in Paul's story (Guinee), California is heading towards a complete breakdown in its ability to provide something as basic as water because the "rules" that govern how Californian society writes laws will not let them write laws enabling competitive markets to set the price.

This is why the rules of the law-writing process are so important. California is in crisis because of bad rules, and on other issues of importance (government spending, entitlements, health care, banking and insurance, public finance, public education, manufacturing, and more) Washington D.C. is similarly paralyzed while the nation heads towards a precipice of systemic proportions. This must change. There is no heavenly mandate providing that the United States shall always be wealthy and its citizens always free from want. This heavenly condition shall only occur for as long as our rules and laws allow us to make it so, and our rules are currently failing - just as Guinee's rules are failing. If we want to keep the United States in the tier of "First World" nations we're going to need to change the rules.

(h/t to Craig Newmark for the PM article)

Meet the new boss ...

2009-10-26T09:40:00.001-04:00

RealClearPolitics - Irate and Independent:

In New Jersey -- which last went for a GOP presidential candidate in 1988 -- Democrat Gov. Jon Corzine averages about 40 percent. GOP challenger Chris Christie has fallen more than six points in two weeks. The beneficiary is independent Chris Daggett, winning double-digit support.

'What do these phenomena have in common? In two words: disillusionment and disgust,' says Lara Brown, Villanova University political science professor.

Registered and likely voters, in particular, are disillusioned and disgusted with both parties and their candidates, who seem to over-promise, under-deliver, ask for too much and take advantage of their positions, explains Brown.

Americans are worn out by inflated rhetoric and Washington insiders who just months ago said they were outsiders.

Me too. More Americans are looking at Independents for a reason - they can see that the Democratic-Republicans are indistinguishable in their ability to promise spending but deliver taxes and more benefits for the political class.

I'm glad that Daggett is doing well, but there are two things that are going to keep his success from being sweeping or permanent: One, he's just a Governor, and you need a Legislature to write and pass laws; Two, his platform is to change policies (education, taxes, etc.) and not the system which allows the Democratic-Republicans to maintain their power and pass government funds to their cronies and contributors.

Two things have to happen for the Democratic-Republican stranglehold on American political spending to be broken: An Independent legislature needs to be elected, and the electoral and campaign funding system needs to be replaced.

Public campaign funding

2009-10-26T09:31:00.000-04:00

Philip Greenspun’s Weblog:

Deval Patrick received $600,000 from donors who wanted to lunch with Obama. Federal taxpayers probably spent at least $2 million on transportation and security for the President. Commoners suffered lost wages and productivity when they found subway stations closed, streets closed, their scheduled airline flight stopped at Logan, etc. Local flight schools alone suffered at least $10,000 in lost revenue. It would be a lot cheaper if we said that every day for the next 8 years the federal government will write a $1 million check to the person of Barack Obama’s choice ...

Here's an example of how our current system is incredibly inefficient. Taxpayers bear the costs of all this travel and security, just so that Obama can hold a fundraiser for Gov. Deval Patrick. Politicians get all the benefits, and taxpayers bear all the costs. Does that seem fair to you?

This is a form of corruption. It must be stopped.

Heh

2009-10-20T16:36:00.000-04:00

Funny because it's true.

Higher Taxes
Low spending/low taxes would benefit the general interest, but in our current system it's special interests who get politicians elected - and special interests love government spending (when the money is spent on them); and thus we get more of it.

Less Freedom
Greater liberty would benefit the general interest, but in our current system it's special interests who get politicians elected - and special interests love their pet issues (whether drunk driving, animal rights, the environment, or whatever); and thus we get more laws telling us what we cannot do.

Hates the Other Guy
America's plurality voting system means that the only stable system is a two-party system. Third parties always create the spoiler effect (see Nader, Ralph and Perot, Ross). Thus you need a core value around which to build a party - that core value in today's parties is "Win elections by buying off special interests more skillfully than the other guys."

* * *

It's not enough to vote for one Party or the other - the system must be changed. Politicians are like anyone else - they respond to the incentives provided to them. Our current system incents them to bow to special interests and screw the general public. Thus "both" choices (as if there could only ever be two points of view on a given political issue) lead to "Higher Taxes, Less Freedom." A system with better incentives is possible, and we should make it so.

The two biggies

2009-10-20T15:46:00.000-04:00

Apparently in last year's election cycle the city of Kinston, N.C. made the "mistake" of voting to switch from an electoral system where City Council members and the Mayor must be affiliated with a partisan Party to one where independents may compete against them. This decision was overturned by the U.S. Justice Department.

There are two really important issues to this story, only one of which the Washington Times really spends much ink on. Let's deal with the obvious one first.

The "Democratic Party" is a special interest too
Yes, you read that correctly. A local government held a referendum to amend their system of governance, and the Federal government told them "You can't do that." The Justice Department claimed this action was driven by concerns that African-American citizens of Kinston would somehow be unable to elect the candidates of their choice under the new system, as if somehow adding competition would reduce choice.

Thankfully the pushback on this decision is broad and vocal. Local politicians, the president of the local NAACP chapter, and members of the U.S. Commission on Civil Rights all see this as a move by the (Democratic) Justice Department to shield the local (Democratic) elected officials from electoral competition.

"The Voting Rights Act is supposed to protect against situations when black voters are locked out because of racism," said Abigail Thernstrom, a Republican appointee to the U.S. Commission on Civil Rights. "There is no entitlement to elect a candidate they prefer on the assumption that all black voters prefer Democratic candidates."

Further, the whole idea of partisan vs. non-partisan is off base.

"To begin with, 'nonpartisan elections' is a misconceived and deceiving statement because even though no party affiliation shows up on a ballot form, candidates still adhere to certain ideologies and people understand that, and are going to identify with who they feel has their best interest at heart," said William Cooke, president of the Kinston/Lenoir County branch of the National Association for the Advancement of Colored People.

That's exactly correct. There is no such thing as "non-partisan", because everyone has their convictions. Independents are as partisan as anyone, and the only difference is what they are partisan about.

So in the end it comes down to one thing: Democrats are protecting their own. Even cynical ol' me is surprised by this brazen action, but I understand the motive.

Maybe I'm wrong, but I suspect that when most people think of "special interests" they think of various unions, the Tort Bar, Big Tobacco, or similar. Those are special interests, but they're small potatoes compared to the two most powerful, successful special interests in the history of the United States: the Republican and Democratic Parties themselves. The more junior of the two (the Republicans) have been around since 1854, and the Democrats since 1792. Can you name any other group that has held onto power for so long?

The motive of the Parties is easy to understand - as long as they're in government they can use political power to spend government money or write regulatory protection for certain other special interests, who in return pay kickbacks to the politicians in power. This is called "profitable collusion", and it costs the public billions of dollars every year. Any change in the law which would increase competition at the ballot box threatens their ability to receive kickbacks, and so much be stopped.

What's worse, the Party's appetite for kickbacks is unlimited, because the moment any one politicians decides that he's rich enough to retire to the Hamptons for the rest of his life and retires, another politician of the Party replaces him hungry for more. America will continue to suffer from this plague forever, unless the Party itself is defeated en toto and the rules are changed so it cannot happen again.

Bad systems produce bad results; Our current system is the worst you can imagine
The second issue in the Kinston story, just as important at the story of the Democratic Party's power grab, is how the electoral system in Kinston effects the ability of that city to elect a representative government. A few quotes from the story illustrates:

Mr. Tyson, who is one of two black members of the six-member City Council, said the best way to help black voters in Kinston is to change the council's structure from citywide voting to representation by district. Kinston voters currently cast as many votes in the at-large races as there are council seats up for election - typically three, or two and the mayor.

"Whether it's partisan or nonpartisan is not a big issue to me, whether or not the city is totally represented is what the issue is to me," he said. "If you have wards and districts, then I feel the total city will be represented."

And ...

In Kinston, William Barker is the only City Council member who voted to continue discussing whether to challenge the Justice Department's ruling.

He said he voted against eliminating partisan elections because the proposed new system would declare a winner simply on who received a plurality of votes instead requiring candidates to reach certain threshold of votes based on turnout.

Note the two issues are related to the speaker's view on "fair representation" of the electorate in the City Council. Mr. Tyson notes that the current system (where the whole city elects each Council member separately) allows a 51% majority of the city's population to elect 100% of the City Council. Mr. Barker complains that the new system would create a spoiler effect that would allow a minority (less than 50%) to win an election, just as Ross Perot spoiled George H. W. Bush's re-election and Ralph Nader spoiled Al Gore's. Both complaints are valid.

Voting systems don't get a lot of attention in American politics, but they should. The method that we use to translates votes into elected officials is one of the single most important variables in determining the quality of government. Until our current electoral system of plurality voting is replaced by a superior method, we will continue to face the inevitability of two-party rule in this country.

Fortunately the problem has been well studied, and you can find thriving debates on the benefits of various systems in all sorts of places. I believe that Range Voting is the best possible alternative for America, but really, anything would be better than what we've got.

E plurubus unum

2009-10-20T13:23:00.001-04:00

The head of the 16-member Eurogroup is worried about the dollar. That's all Breitbard has to report; no analysis is provided, but China is worried too.

No analysis is necessary though. Without going into the greatest details, we all know that the economy is in poor shape and that spending by Washington is out of control. It's enough for this post for us to know they're worried.

This story is an excellent example of how government fails. The dollar, and the larger economy, matters to us all. When the economy is harmed, all of us are harmed. We lose the ability to earn the money that supports ourselves and our families. Given the severity of the crisis you would think that coming to a consensus that the madness must stop would be easy. But it's not.

If government took the actions necessary to save the economy and the dollar, we would all benefit - but only slightly. For many the long term benefits of rational monetary and fiscal policy seem less important than the short term price they would pay in terms of a dwindling share of the government gravy train. Defense contractors want those contracts today. Senior voters want their Social Security and Medicare payments to keep rising forever. Farmers want those subsidies. And no one wants to change the status quo, because it's possible that I'll lose something.

That's a shame, because if we do nothing it's a cast-iron certainty we will all lose something very important - the credit of our nation. And then the spending will stop anyway. But individually each special interest group keeps hoping the spending will only stop for the other guys, and if we just hold out long enough maybe we'll get lucky and the checks will keep coming.

Our currency reads "E Plurubus Unum" - From Many, One. It's an aspirational statement because it posits that one nation can be formed from the actions of many citizens and states. And that's correct, but it's not necessarily good. It's good when our actions are guided by the spirit of giving and cooperation, but it's often bad (even tragic) when all our selfish actions are piled together on the Potomac to create a tragedy greater than the sum of its parts.

This game of brinkmanship is tragic but inevitable, given that our current structure of government allows each Congressman and Senator to pursue their own selfish ends when making spending decisions. Ergo, our government needs to be reformed if we expect the problem to ever be solved. Until then every one of us is Peter and the politically connected are Paul.

When spending decisions are made for the benefit of all; when each spending item must be justified on its own merits without horse trading or quid pro quo; only then will Congress be able to put aside its selfishness and do the right thing for America as a whole.

Quote of the Day

2009-10-20T10:47:00.001-04:00

Tax Analysts: Featured Articles: Patches, Portability, and Punting vs. KISS:

Few things vex our tax system more than the increasing complexity that enables those who can afford the best legal and accounting talent to pay less tax while making mince-meat of basic economic and legal concepts.

Although, to be fair, the only people vexed by that are the ones who cannot afford the best legal and accounting talent. The rich who want loopholes, and pay good campaign contributions to get them, are quite un-vexed. So are the guys who receive the campaign contributions.

But there's another quote in the same article that's equally great, and even more often relevant:

The points Blattmachr and Gans make [about possible estate tax reforms] are all valid, but their flaw is that they start from the premise that current law is the standard to work from.

Indeed. Laws should always begin with values, not present reality, and then build the simplest possible structure to empower them.

Tax Rates for You, and Them

2009-10-19T17:05:00.002-04:00

Bloomberg is reporting that Goldman Sachs is paying a 1% marginal income tax rate for 2008. They paid a more reasonable 34% rate in 2007, but two things are stunning.

The first thing that's stunning at all is that they are paying a 1% marginal rate at all. Wow! Where can I sign up?

The second thing that's stunning is the variability. Bloomberg goes on to report that Goldman "planned" to pay taxes at a 25.1% rate for 2008, but a last-minute tax credit for $1.48 billion scuttled those well laid plans (What rotten luck, eh?). Wouldn't it be nice if you, my dear reader, could plan your personal income tax rate? I think I'd like a 20% rate this year, thanks. Of course this is all somewhat surreal to the average salary-worker. We don't get to "plan" our marginal tax rates with this sort of flexibility. Our choices boil down to choosing how much money to earn in a given year and how much to give away to charity or to save in tax-deferred accounts.

This story provides an excellent case study for how certain special interests have captured the U.S. tax system for their own benefit, to the detriment of the general interests in egalitarian economic opportunity. Simple tax schemes (such as the Fair Tax, Flat Tax or even a loophole-free Progressive Tax) provide low but consistently applied marginal rates to entire classes of economic activity. Low taxes are of course inherently desirable, but the consistent application of non-discriminatory taxes is just as much a benefit as they encourage efficient allocation of resources within the economy and discourage wasting wealth on regulatory arbitrage. This leads to greater wealth production and greater economic opportunity for all over time.

Complex tax codes (such as the one the U.S. has today) require higher marginal rates than simple tax codes because all the loopholes and carve-outs built into the code reduce our ability to collect revenues from people and firms that can "work the system." This harms the national interest in egalitarian economic opportunity but benefits several special interests, namely ...

Large corporations that can afford crack teams of accountants and tax attorneys can often reduce their tax rates to below that of their competitors, as we see in the Goldman example above. It's a zero-sum game to avoid taxes, but it's profitable for the players stuck in the game - so they do it. Society loses out when resources are diverted from companies that produce wealth to companies that manipulate the tax code.
Crack teams of accountants and tax attorneys get to make a nice living by understanding the overly complex tax code better than the people who hire them. Their intelligence and creativity could be put to use inventing the next killer business model or Web technology, but instead it is diverted to this (well paid) pursuit. Society loses twice, first when paying these guys to move money around a balance sheet and second when society forgoes the wealth produced by the next killer business model or Web technology.
Politicians get to receive kick-backs campaign contributions from companies that would rather just pay a politician for a tax break than pay a tax attorney to find them one. Bribes of course are "bad", and society's resources are further misaligned with wealth production by an even more out-of-whack tax code.
Politicians get the personal thrill of playing Live-Action Civilization by engaging in social engineering. ("Let's make mortgages an income deduction to discourage renting!", "Let's give a tax break to wind-power generators.", Etc.) However well intentioned, these tax breaks skew society's resources towards unproductive ventures, or spend resources on something that private actors would have done anyway, and always, always have second-order effects few would predict. Most frequently these deductions are captured by parties the law-writer never envisioned.

By now you should be able to see how a simple tax system (any system) would benefit society at large, but would cost several powerful special interests a lot of money (or even their careers). Further, many, many people could expect a fluctuation (up or down) in the value of their investment assets if we ever switched over to a simple tax system (because the value of the tax dis/advantages is currently priced in, and would go away). And since "Change is bad", it doesn't happen.

Which is the real shame, because regardless of which simplified tax system you prefer it's better than what we've got.

Q: But Cusick [you say], what about the poor/farmers/elderly/homeowners? We really ought to be helping them!

Ah yes, the urge to social engineer is not limited to politicians. Many of us feel the urge to spend our tax money helping one group or another, and maybe in narrow instances it's even a good idea (from the general interest's point of view). Well here's my suggestion: Pay for it.

If subsidizing the poor/farmers/elderly/homeowners (or even the poor, elderly, farming homeowners) is really that important to you, cut them a check. Don't mess with the tax code. The economy will be more efficient, the tax code will remain simple, marginal rates can stay low(-ish), all those tax attorneys can go do something productive, and your favored constituency will get a nice, easy-to-understand check in the mail every month, quarter or year without having to fill out Form 10-Q-iii-(a) in triplicate (at least until you get tired of supporting their lazy butts and cut off the honey). All the benefits, fewer downsides.

It's never good enough

2009-10-19T16:08:00.000-04:00

It seems to me very unlikely that our nation will ever tell Congress "Ok, that's good enough. We don't need any more laws, so let's pack this show up and go home." We will no doubt have Congress in session for as long as our nation exists.

Given that, what should Congress do with its time? There are no doubt some of my friends who would answer "As little as possible.", and I sympathize with that idea given the quality of the Congress we have; less would be more. But I have a better idea.

If we can change the rules of the institutions we use to elect our governments, we can improve the quality of those governments by a fair degree. With a better government in session we could trust them to do that which really needs doing - improving what we've got.

Many of the laws on the books today are far from perfect. Too many of them serve some special interest rather than the general interest, and many of the laws that try to serve the general interest are just ineffective (or even counter-productive). Governments should always be on the lookout for areas in which liberties can be broadened and the opportunities for wealth and happiness spread in a more egalitarian manner. Given that Congress will always be in session, this should be their primary focus.

Hello, and Welcome!

2009-10-19T15:57:00.002-04:00

The purpose of this blog is to discuss how US governments (Federal, State and local) have been engineered to benefit the special interests in this country that have brought the greatest degree of leverage to the lawmaking process, and how to take back our governments so that they benefit the general interest instead.

By "special interests" I mean any group of individuals within American society that identifies with a group smaller than all American citizens generally, and acts as such group to get a law past that benefits that group to the detriment of everyone else. Special interests include labor unions, professional organizations (Doctors, lawyers, teachers, farmers, etc.), the political class itself, and our largest corporations.

By the "general interest" I mean an interest which all Americans share more or less equally. The general interest may also be expressed as the "social interest" or "society", but I mean the same thing by these terms - society generally, and no one group in particular.

A classic example of government capture by special interests is the well-studied military-industrial complex that shapes our nation's defense policy. To the extend these special interests change our policies in such a way that our nation's ability to defend itself and its interests abroad (the general interest) is harmed, these special interests have been naughty - and must be stopped.