Our “Godfather” Government

During the early 1950s, Americans were transfixed by hearings and investigations conducted by U.S. Senator Estes Kefauver of Tennessee.  Senator Kefauver laid bare the power and profits of organized crime in America, which generated massive income for mobsters through gambling, drugs, and pornography/prostitution operations that spanned our nation.  As a result, Americans supported a renewed crackdown on organized crime operations that sent many top mobsters to prison.

The scourge of organized crime still exists today, but what is truly odd is how many of the profit centers for the criminals of the past have been transformed into government-run agencies that generate jobs, grant political power, and allow states and the federal government to skim their cutin the form of taxes.  Even more oddly, more and more law enforcement resources are today devoted to destroying illegaloperations so that government can protect its growing monopoly on the profits to be made from human sin and weakness.  Woe to that misguided fool who tries to deal a little marijuana without first purchasing a state license to do so!

Government has, of course, always enacted sin taxesin order to finance its operations.  Taxes on whiskey helped to fund our new nation.  Revenue from the sale of tobacco and tobacco products have been mainstays of state and federal coffers.  Prior to the creation of the national income tax in 1913, roughly 1/3 of all federal revenues came from taxes on liquor, and when income tax revenues evaporated at the height of The Great Depression in 1933, Prohibition was rapidly repealed so that federal liquor taxes could again slosh into the U.S. Treasury.

This last exampleProhibition being repealed to fund a dead broke governmentis perhaps the most pertinent regarding where we are today.  Bedeviled by crumbling infrastructure, crushed by legacy retirement expenses, and faced with a shrinking population of active workers, government entities at all levels are desperate for whatever tax dollars they can find.  Therefore, virtually any human activity and enterprise now finds itself subject to more taxes, fees, and surcharges meant to fund local, state, and federal budgets that are awash in red ink.

It should, therefore, surprise few that government has increasingly legalized that which was once illegal in order to generate the dollars it needs to stay afloat.  As a result, the numbers racket of the 1950s is now the state lottery agency.  The demon weed dealer of the 1950s is now the licensedand tax payingmarijuana dispensary providing service with a smile.  The shady pornographer snapping photos in the seedier parts of town is now a web conglomerate with an army of attorneys watching out for its best interests.  What all now have in common is that what was once the illicit business of the criminal class has now become the revenue generator of the political classand each day new ideas for better marketing that will help to milk them for more taxes are considered.  I can only imagine the chagrin of a numbers runner of the 1950s if he could only see the ads blaring from televisions today regarding the size of this weeks Powerball prize.  State lottery revenues alone are now over $70 billion nationally each yearnot exactly chump change.

Many wouldand haveargued that is is better for government rather than gangsters to profit from vice.  Those who, for example, tout state lotteries as a way to (sort of) support public education see nothing but advantage from putting the neighborhood numbers runner on the sidelines.  Watching video slot machines sprout like daffodils after an April rain in my ownvery brokestate of Illinois, it is clear that looming bankruptcy is the mother of all moral compromise.  Politicians and civic leaders who are eager to increase funding for government programs and services they deem essential in the face of yawning budget deficits have no compunctions about taking whatever money they can by any means necessary.  A 2009 article entitled Paying With Our Sinsperhaps expressed this notion more unashamedly that most:

Here’s a better ideaand one that will help the federal and state governments fill their coffers: Legalize drugs and then tax sales of them. And while we’re at it, welcome all forms of gambling (rather than just the few currently and arbitrarily allowed) and let prostitution go legit too. All of these vices, involving billions of dollars and consenting adults, already take place. They just take place beyond the taxman’s reach.

This is the basic and succinct argument for turning dysfunctional and damaging behaviors into lovely tax dollars, and assessed upon its ruthlessly practical merits it makes perfect sense.  Is there, however, a hidden cost to all the money that might rain from the sky if we were take the governments propensity for profiting from human weakness, addiction, and desire to its logical and utterly amoral extreme?  Is turning human misery into tax money by legitimizing that from which government wasat one time long agoconstituted to protect us delegitimizing the very purpose of government and exposing millions to untold risk, danger, and death?

Politicians often seem befuddled about the publics low opinion of them.  Why should this not be the case?  Do we admire the player, pusher, or pimp?  Are we supposed to sing the praises of those who instead of wanting a chicken in every pot propose a prostitute on every street cornertax identification numbers ready in hand?  Given that so many of our leaders seem just fine with throwing any shred of morality out the window in pursuit of a tax dollarand the campaign contribution sure to shortly follow hard uponit should be little wonder that a sense of absolute betrayal and disgust aimed at our elected officials seems so baked into the very fabric of our society at the current time.  

Over the course of a single human lifespan, we have descended from aspiring to raise individuals higher so they can escape the clutches of human frailty to pushing them lower so that we can turn a profit for the government from their flaws.  To hear a contemporary American politician speak of honor and integrity when they are complicit in a system as damaging to individuals, families, and communities as ours is today is learn what the meaning of mendacity truly is.  We need changeand soonbefore we finally choke on the bile of so many official lies.

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How To Shrink Government—For Real

When I first started working in the advertising business in New York City many years ago, one of my senior colleagues told me the following joke—both to make me laugh and provide me with a little insight into reality….

 Starting his first day at a new job, a man ran into his predecessor cleaning out his desk, who gestured to the top right hand drawer.

 “I hear you’re taking over from me.  This is a pretty demanding position, so there’s a little tradition we keep up here.  I’ve put three sealed and numbered envelopes in this drawer.  When you hit your first crisis with our boss, open envelope number one.  When the second crisis strikes, open number two.  When you and our boss have your third falling out, open the third envelope.”  

 Smiling at the seeming absurdity of the three envelopes, the man said goodbye to his predecessor and started his new job.

 However, one terrible morning several months later, after his boss had chewed him out for not meeting his performance goals, the man went back to his desk and—his hands shaking—opened the first envelope and read the note: “Blame your predecessor.”  After lunch he went in and explained to his boss what a mess his department was in when he took over the position. It worked.  Mollified by the explanation, his boss sent him back to his desk without further comment.

 A couple of months later his boss was on the rampage again, demanding to know when improved results were forthcoming.  After anxiously reaching into his desk, the man pulled out the second envelope and read the advice: “Announce a reorganization.”  Racing into his boss’s office, the man explained that he was changing around the responsibilities of the people in his department in order to increase productivity.  A bit disbelieving but still satisfied by this plan, his boss sent the man on his way.

 Unfortunately, as yet more months passed, no improvements were apparent.  Frothing with rage, the boss told his underling to be in his office the next morning with a new strategy to finally turn around his department.  Remembering how the first two envelopes had saved him, the man raced back his desk and frantically tore open the third envelope.  

 Inside he found a note that read as follows: “Prepare three envelopes….”

 A good deal of private sector work tracks right along with the three envelopes.  Managers and supervisors have, from time immemorial, followed exactly this arc to keep those above them happy—at least for a while.  Government bureaucracies—and the bureaucrats and elected officials that run them—are likewise prone to either blame their predecessors or announce a reorganization when problems become too obvious to ignore.

 However, those who survive in government jobs become experts at one particular “skill” above all others: keeping their heads down and asking no questions.  Consequently, we employ millions of men and women who will—from the day they start work until the day they retire—plod placidly along while paying little heed to either the utility of their work or its societal outcomes.  The consequence is an ever growing chasm between the costs of government and the actual benefits that are provided to our nation.  

 If you’ve ever wondered why we spend our lives paying taxes for schools that don’t educate, roads filled with potholes, and various departments and agencies that seem to have no discernible or logical function, you are asking the right questions—but you are wrong in believing improvements are possible.  Absent the private sector accountability provided by the need to both produce measurable results and turn a profit, it will always be the predisposition of government to cost more and provide less over time.  Although there are many who believe—believe with all their hearts and souls in many cases—that those who want to reduce the size of government are heartless haters who are putting our lives and the future of our nation at risk, the catastrophic rise of both daily government expense and government indebtedness compels those with the least smidgen of sanity to question our current direction—and seek change.

 Obviously, we need government, and there are basic responsibilities that government is best suited to fulfill.  National defense, local law enforcement, health and safety regulations, and maintenance of the infrastructure and the regulatory framework necessary for interstate and international commerce are clearly the purview of government managed by elected officials.  Protection of our environment is also necessary to help ensure the health and welfare of our citizens.  A free, taxpayer-supported system of primary and secondary education—whether provided by public or charter schools—must certainly be in place to put each generation in a position for future success.

 However, the accountability necessary for well-managed government programs is impeded by the sheer immortality of government agencies and departments—that which is once funded never goes away.  Much like that famous fictional Count from Transylvania, government agencies and departments live forever, sucking the life blood of the citizenry and striking fear into the hearts of all who dare defy them.  Elected and appointed officials, although nominally in control, rarely have the staying power to do much to rein in their inexorable growth.

 Government is, at least in theory, the servant of the people, so the solution might be to let the people decide—directly.  

 Therefore, we should consider allowing the appropriations for every government agency and department—except for a very select few deemed absolutely vital to our nation—to “sunset” every ten years.  In order to continue operations, they would need to be voted back into existence by our citizens—not a handful of legislators who have been purchased through campaign contributions.  During the ten year cycle, appropriations and oversight would be left to elected officials and appointees, but thereafter a plebiscite of the citizenry—local, state, or national, depending on the department or agency or question—would decide whether to allow it to continue to function.  There would, of course, be a brief winding down period if programs were closed so that the enforcement responsibility for regulations promulgated could be smoothly transferred, but this would be manageable—and of limited duration and cost compared to the eternal life and expense prior.

 There will, quite naturally, be those who for a variety of reasons would vociferously oppose such an idea.  The status quo always has its fans—particularly when there is (as is always the case with government) jobs and money involved.  Nonetheless, unless we want to continue to spin on as we are until every last penny is gone from our pockets—and the pockets of our children and grandchildren—we must take affirmative and direct control over the mechanisms of our government.

 If not, we will soon be preparing our own “third envelope” for our nation and its future.  This is an outcome we dare not allow to occur.

The Cost Of Compassion

A few weeks ago Ruth Marcus caused quite a stir with a commentary in The Washington Post entitled “I would’ve aborted a fetus with Down syndrome. Women need that right.” Her viewpoint was offered as a counterpoint to the actions of state legislatures in North Dakota, Ohio, Indiana, and Louisiana, which have passed legislation that prohibits abortion if the sole reason for terminating the pregnancy is a pre-natal diagnosis of Down Syndrome, a genetic problem that results in impaired cognitive functioning and health problems associated with a shortened lifespan. Ms. Marcus framed this controversy as an attack on the reproductive rights of women, and data she quoted seemed to demonstrate that the majority of women would not choose to bring a child with Down Syndrome into the world because of the long-term financial costs involved—as well as the emotional toll on the parents and family.

However, I wonder whether this horrid discussion actually touches on much broader issues that increasingly vex our nation and seem more and more at the core of many controversies: Are there reasonable financial limits to our compassion, and how should these limitations translate into issues of law and public policy?

Americans are often adverse to the notion of limitations, which is reflected in our continued political inability to live within our means. Our breathtaking levels of federal debt, which has more than doubled in just the past ten years to $21 trillion, and willingness to both impose all sorts of unfunded mandates and pass legislation that robs the future to pay for the present is symptomatic of our societal refusal to grapple with economic reality. Ms. Marcus’ decision-making might seem cold-hearted and inhumane to some, but she is at least honest about the financial limitations of her personal compassion for others.

Public policy and spending are likewise increasingly embroiled in questions regarding the boundary between compassion and foolishness. Whether we are discussing healthcare, housing, education, immigration, or a host of other concerns, the shape of the dialogue does not vary. On the one side we have those who are arguing for limitations based on fiscal reality—they are the “heartless” ones. On the other side, we have those who demand expansion or protection of government programs and services—they are the “compassionate” ones. The dynamic plays out over and over, much like that endless loop of Muzak in the dentist’s office while your teeth are being drilled, and each side shakes their heads at the other while the borrowing and spending continues unabated. Our recent omnibus federal spending bill, which will tack another several hundred billion dollars of debt onto Americans by the end of only this fiscal year, is simply another in a long line of bipartisan failures to somehow balance compassion and the “heartless” arithmetic of fiscal reality.

Those of us who live in Illinois should have a front row seat for the collision of the rhetoric of our “heartless” Governor, Bruce Rauner, and his “compassionate” Democratic challenger, J.B. Pritzker, during the upcoming gubernatorial election. Governor Rauner will, probably to no avail, argue for more fiscal restraint because Illinois is crushed by debt. During just the past year—despite an increase in the state income tax and a strong national economy—the financial health of our state government has continued to deteriorate with astonishing speed. Illinois is now so far underwater that simply rising to the surface to gasp for air is now beyond all imagining.

The functional bankruptcy of our great state will, however, mean little to all those “compassionate” souls who will harken to Mr. Pritzker’s calls for increased spending on education, healthcare, senior care, and social programs. It is, after all, the belief of many that government exists to distribute benefits to the multitudes, which will somehow be financed by higher taxes on Illinois’ rapidly shrinking pool of “wealthy” taxpayers—many of whom are joining the general exodus of residents from Illinois as we sail blithely downwards toward insolvency.

It has been interesting to read the comments regarding Ms. Marcus’ ideas concerning the connection abortion rights and Down Syndrome. Many who agreed with her privileged her right to control her own future by refusing to accept responsibility for a child that would likely impose extra financial burdens on her life and that of her family. Her compassion in this situation is circumscribed by a dollar sign, which seems perfectly appropriate to those who worry about their life choices being limited by government.

Oddly enough, what many compassionate souls fail to recognize is that their demands for more—and more expensive—government programs and benefits are corroding our individual rights because it is binding our futures to unsustainable debt that will limit the choices available to us all. Politicians often try to mitigate the shock of out-of-control spending by framing pure pork as “investments”, but more commonly any effort to rein in spending is positioned as a test of our “compassion”, which puts those who want to spend away our collective futures in the morally enviable positions of being the nice people fighting against those nasty folks who aren’t nearly as good-hearted and generous. We don’t wear signs around our necks detailing the amounts of debt our federal, state, and local governments have saddled us with paying, but anyone who is, for example, struggling with the monthly costs of student loan payments has a clear understanding of how yesterday’s debt tends to constrict the choices available today.

Setting aside the question of the obvious immorality inherent in ending the life of a child for reasons that, high-flown rhetoric aside, pretty much boil down to personal convenience, Ms. Marcus is at least astute enough to recognize that her compassion has a price tag attached—and she can easily recognize this because the costs will not be spread out among our nation’s beleaguered taxpayers. The next time she publicly advocates for more borrowing and spending due to her finely tuned sense of concern for others, perhaps she should remember how the money borrowed today to help demonstrate how much more wonderful she is (unlike those meanies who understand arithmetic) simply burdens generations of Americans to come with the bill for her marvelous “compassion”.

If anyone can effectively explain why bankrupting our nation and its citizens with government spending is compassionate, there is a future in politics—or perhaps an editorship at The Washington Post—waiting for you.

The Tax Cut Gamble

Barring unforeseen circumstances, the Republican-led Congress will pass a significant tax cut. This prospect is—depending on your tax bracket, political ideology, and the state where you reside—a cause for either rejoicing or anger. Expert predictions about the effects of this tax cut bill, which will certainly reduce overall federal government revenues, should not be trusted. The long-term outcome will be determined by the unknowable responses of legislators and individuals to both its specific provisions and broad intent—which is to push broad reductions in the size and scope of government by cutting off access to funding.

Those who predict that this bill will increase the deficit and drive yet more federal debt have ample cause for concern. Previous cuts to federal taxes during the Reagan and Bush administrations produced exactly this outcome because there was no political will in Congress to reduce outlays to match available revenue. Washington simply borrowed to make up the difference, which has ballooned federal debt from roughly $1 trillion at the start of the Reagan administration to over $20 trillion today. If voters keep electing members of Congress who promise more despite less money in the coffers, the net result of this tax cut will be no reforms and continuing fiscal catastrophe at the federal level.

Any drop in federal revenues also impacts the states. Washington’s largesse is particularly important to local economies built around schools and healthcare (“Eds and Meds”), which are dependent on a variety of federal cash sources and could suffer if the D.C. money stops flowing. Moreover, given the many mechanisms that shift federal dollars into state economies—which run the gamut from research grants to highway construction money to public safety funding—the possibility that the spigot might be tightened is sending shivers down many a spine.

If states decide the easiest path forward is to raise state taxes in order to avoid making difficult fiscal choices, the effect of any federal tax relief will be lessened. A lack of political will to cut spending to match available revenue—this time on the state level—will diminish or eliminate any positive effect of the federal tax cut for many citizens.

This tax cut legislation is a significant risk for Republicans in Congress because—whether due to sheer economic ignorance or partisan political posturing—many opponents are describing this bill as a “tax cut for the wealthy”. They are absolutely correct that the wealthiest will enjoy most of the gains, but this is simply because the rich pay most of the federal taxes—about 45% of Americans, in fact, pay no net federal income taxes at all. It’s not a conspiracy against the poor, but it plays well with audiences who perhaps slept through ECON 101 in college, and you can be certain that those in government and elsewhere who are worried that shrinking tax revenues might reduce their influence and power will repeat this half-truth—loudly and endlessly.

This does not, however, mean that the Federal tax code is either sound or fair. There are far too many opportunities for imaginative accountants to find perfectly legal deductions and loopholes for wealthy individuals and corporations that enable them to avoid paying their fair share—and this needs to be remedied. These additional revenues can help to correct fiscal imbalances in critical federal safety net programs such as Social Security, which is in dire financial condition due to the flood of baby boomers rapidly bankrupting the system.

One flash point for many voters is the status of the deduction for SALT (State And Local Taxes) now enshrined in the federal tax code, which works out to be an indirect subsidy paid by everyone to those who live in high tax states such as New York and California. As financially painful as the loss or reduction of this deduction might be for some, it works out to be an immense windfall for the wealthiest, an egregiously disparate benefit offered to those who earn the most. In order to cushion the effect, changes could be phased in over a two year period, but this is a reform that must be made out of a sense of fairness for all. Sometimes “me-me-me” must be set aside for a greater societal good, and this might also force wasteful state and local governments to reconsider their excessively expensive policies and practices.

This tax reform is a gamble, but to continue as we are is a disastrous “sure thing”—more wasted tax dollars and more crushing government debt.

 

 

 

 

 

Tinkerbell Explains It All

I have a vague memory of being taken to a performance of Peter Pan when I was a child. Like almost everyone of a certain age, what sticks out the most is the scene where Tinkerbell is apparently dying, and we were exhorted to clap our hands to a near-insane pitch of enthusiasm until, accompanied by our childish squeals of delight, “Tink” revived—thanks to the sheer power of our collective belief.

The “Tinkerbell Effect” refers to the peculiar phenomenon of something seeming to exist only because we desperately wish to believe it is so—and I wonder whether this explains much about the country we live in today. We have chosen to believe in a host of lies and half-truths peddled by our financial, political, educational, and cultural elites—no matter how illogical and inexplicable they might be—and these falsehoods have survived because of our refusals to acknowledge any evidence they might not be true.

Therefore, we ignore increasingly urgent warnings regarding the dangers of our inflated stock markets and housing prices, educationally-deficient schools and colleges, overextended military, and staggering public debts. If we just clap our hands hard enough, we will be safe from any consequences of our greed, stupidity, hubris, and profligacy. Concerns that any—or all—of these problems are imperiling our nation’s future are regularly debunked by elected leaders and well-paid experts who soothingly assure us that all is well.

And we clap our hands like trained seals, content to believe the unbelievable. Stock market and housing bubbles are just fine. Diplomas based on content-free coursework guarantee our children are academically prepared to pursue their dreams. Endless wars have no effect on our military readiness. Functionally bankrupt governments will still be able to take care of our many needs and wants.

Clap. Clap. Clap. Clap

It is, of course, basic human nature to ignore bad news and actively distract ourselves with the trivial and sensational, so it makes perfect sense that vote-seeking politicians and smiling lobbyists can easily convince us the party will never end. Nonetheless, we need to peek up from our digital devices in order to discern the difference between what is truth and what is deception.

We will, unfortunately, need to find a way to solve our problems despite our empty pockets—and the refusal of so many to accept this fact. It is now (nearly) impossible to ignore our dire public sector fiscal problems, which have been compounded by several decades of resolutely refusing to live within our means. The expansive promises of politicians who claim to be able to protect us from all harm through the magic of ever-expanding government programs has become a self-destructive exercise in spending that has been sustained only by increasingly suspect guarantees security is just one more big tax increase away.

However, if you find any of these observations disturbing, upsetting, insulting, or contrary to your most cherished beliefs, that’s your prerogative. If you keep clapping, I’m certain everything will turn out just fine—somehow.

Clap. Clap. Clap. Clap.