Government spending and taxing: room for improvement

This all started with my comment on Krugman's op-ed piece in the NY Times
I posted this on my Facebook status:

Krugman's cogent argument against the Ryan Proposal is in two parts. 1. Despite some theory to the contrary, other theory AND EMPIRICAL EVIDENCE shows that simply cutting taxes does NOT spark the economy and create more revenue. 2. The Ryan Proposal, because it throws the elderly and those who are not rich (not even just the poor) under the bus, is immoral.

One of my high school classmates, with whom I occasionally politely debate political and economic issues (he's an Independent who tends toward the Right but not on everything; I'm a Democrat) commented. He hoped that both sides of the aisle would see the Ryan proposal as a starting point for negotiations about needed cuts. My general impression is that the Ryan Proposal is too extreme for that. But my friend's comment got me thinking about areas where he and I might disagree and where we might agree.

Agreement. There are vulnerable people out there who have a right to government help. A particular area of agreement between us is that the developmentally disabled have special needs which we, as a society, are morally obligated to fulfill. Charitable efforts (and this friend works very hard for Special Olympics) are not enough; we need tax-funded, governmental efforts.

Probable agreement. I think that we need to look at cutting the kinds of subsidies and tax loopholes that provide what I think are unfair benefits for large, profitable corporations. Look, for example, at agricultural subsidies that are primarily helping Archer Daniels Midlands and not family farms. That GE owed no taxes is ridiculous. Oh, it's not ridiculous that that it paid no taxes -- why should they pay more than the tax code requires? -- but the loopholes and the opportunities for "offshoring" profits are ridiculous. So, I think we could do a lot by cutting corporate taxes IFF we also cut out corporate loopholes.

Probably disagreement. Where I think we differ is in our views of what the government *should* be spending money on (in addition to care for the disabled). (See this link for spending categories and expenditures in the budget.) I suspect that my friend would want to see more services privatized. I have not actually seen any evidence that privatizing saves money or makes services more efficient. (Neither have I seen any evidence that it doesn't, to be fair.) One of the privatization trends that I really oppose is in military services. We privatize a lot of tasks that are specifically related to the provision of national security, but it's the State (the US Government) that is supposed to provide security.

I also am a big fan of having the government have sufficient regulators on payroll to make sure that its rules are enforced. (Providing appropriate regulation is a form of "internal" security.) Further, the pay scale needs to be good enough to attract smart, highly trained people (and to keep them from being tempted by bribes.) You get what you pay for. Penny wise, pound foolish.

I would like to see a lot more regulators out there working on food products, determining that food processing plants meet FDA requirements, etc. And need I mention the need to have REALLY highly qualified regulators for the nuclear industry?

Mostly disagreement, I think. There are a lot of other areas on which I believe the government needs to spend. Social security, Medicare, and Medicaid, as well as Defense are very important, in my view. I also believe the government should be spending money on various social safety-nets, on basic research, on the arts, on infrastructure (roads, bridges, railroads [including bullet trains]), and foreign aid.

Probably agreement. Tax cuts on personal income tax will fuel the economy most if they are given to the people who are in the lowest tax brackets because they will go out and spend the money. At the higher end, yes, we should tax more. I'm willing to pay an appropriate amount more in taxes as long as everyone else in my bracket does, too. Cut out the loopholes in personal tax (simplify!) and there might be opportunities for tax cuts at the lower end.

Probable disagreement. I think we need to reconsider the tax break for mortgage income. Think how that works. People of modest incomes who rent get no benefit. For us more well-to-do people, the more house we buy, the bigger the benefit we get. The gap between rich and poor gets bigger, especially across generations. Poor people have little accumulated wealth to leave their children; rich people get tax breaks for mortgages that allow them to accumulate more wealth than they would have accumulated without the tax breaks. Their children inherit, and have a tax-break funded leg-up in the world. The gap between rich and poor increases.

Probable disagreement, but I'm hoping to win him over on this. Our lack of national health care funded by the government (through taxes) ends up being a "tax" on businesses, and the incidence of that tax falls disproportionately on SMEs (Small & Medium size Enterprises.) Why? Because SMEs have to compete for good employees in part with benefits, which include health insurance. The insurance company looks at the SME and thinks about the risk they take on by insuring the SME given its relatively small pool of employees. An individual SME's rates are high. And the SME is pretty much a "price taker." It doesn't have much clout for bargaining. But a large firm or other large employer (like my nonprofit Benevolent Employer) has lots of advantages in negotiating prices because its risk is spread over a larger pool and because it controls a larger market share. My Benevolent Employer is virtually a monopsonist in Maryland! So SMEs are at a significant disadvantage relative to large firms and relative to competing firms from abroad that don't have to worry about health care benefits.

Definite disagreement. I think the economy needs more stimulating through more government spending as we are climbing out of this recession. I expect that cuts -- including Obama's cuts -- will be damaging and will slow the recovery. What we need now is for the government to spend more on things like infrastructure (fixing roads and bridges, etc.), spurring the economy through increased employment while providing tangible benefits.

IR Theory Words to Live By . . .

Once upon a time, when I was an undergraduate, my advisor, who taught the senior seminar in IR theory, had a famous saying about systems & processes. I had completely forgotten about it, until I discovered it when I Googled his name, looking for some of his publications. Instead, I stumbled upon a Facebook page for Florida International University's Latin American and Caribbean Studies Student Group. There, right on the righthand side of the page, was the group motto, appropriately credited to JKZ:

“If you don’t know what you are talking about, call it ‘system’; if you don’t know what it is made of, call it ‘subsystems’; if you don’t know how it works, call it ‘process’ . . . ”
J.K. Zawodny

So, how did the FIU students find this quote?

Data and Teachers: Wisconsin's averages

Back in the old days when I used to teach quantitative methods to undergrads and MA students, I would assign the classic How to Lie with Statistics, by Darrell Huff, illustrated by Irving Geiss (Norton, 1993). The book should be required reading for anyone who is a citizen since so much of what we are presented with nowadays as "facts" are statistical interpretations which may or may not accurately and impartially reflect a condition in the world. (Oh, I know: we can't get away from subjectivity. But I do believe we live in the world and it is important to see what is, to the extent possible.)

I am reminded of the problematic nature of statistics by the debate over what is going on in Wisconsin. Factcheck.org has a nice, well-documented article on claims about Wisconsin's budget that are being made by supporters and opponents of the Wisconsin governor.

The article leads to comments here on use, misuse, and manufacturing of that most plebian of descriptive statistics, the arithmetic mean. So, how much do teachers in Wisconsin make? Not, as Buchanan claimed, $100,000 ($56K in salary and $44K in benefits). That, apparently is a fairly good estimate for the pay of teachers in Milwaukee -- the largest city in the state. Is Milwaukee typical for Wisconsin? Is the mean for Milwaukee teachers a good point estimate for the state? No.

Or consider Rand Paul's more modest claim that

The average teacher in Wisconsin is making $89,000 a year to work nine months

That's not right either. It's not clear whether he's talking about plain salary or salary plus benefits. Even if he were referring to salary plus benefits, it is highly unlikely his number, as precise as it sounds, represents mean salary or salary plus benefits for Wisconsin K12 teachers.

Factcheck.org says:

The state Department of Public Instruction only calculates average teacher salary and benefits on a district by district basis. Of the 425 public school districts in Wisconsin, only one had a salary and benefits package in 2010 that exceeded $100,000; the Nicolet Unified School District average total compensation was $103,315. And only 22 school districts — about 5 percent of the total — paid average total compensation that topped $89,000.

A link, provided by Factcheck.org to the Wisconsin district-by-district averages can be found here. Note that this is an official government website. One thing immediately becomes obvious from the Factcheck.org article: The data are dirty. There are mistakes in the spreadsheet. The known problems are for the Kenosha Unified School District and the Niagara School District. There may be other errors. From what I've seen, we generally assume that reporting errors of this kind are not going to be biased: it's not that the numbers are systematically made too high or too low; it's just that someone typed in the wrong number, and wrong numbers are as likely to be high as low. But data like these are collected and reported by human beings. There will be mistakes.

Another thing to notice is that unless we have information about the number of teachers in each district, we can't use the information in the table to tell us anything about average teacher salaries in Wisconsin. Without the number of teachers per district, we can't compute a weighted mean.

And third is a question of interpretation. We can't judge salaries and fringe unless we have appropriate comparisons from Wisconsin. How much is the governor making? How much does a store manager at Walmart make? How much does a computer programmer make?

In addition to looking at how salaries and fringe vary by locale within Wisconsin, we still need to ask: How does teacher salary vary by seniority (alas, not a great metric), educational level achieved (more for teachers with graduate degrees?), and quality measures (Is there a fund for paying fabulous teachers more money so they keep teaching? There ought to be!). But if there is a superfund for superteachers, their salaries will skew the mean. (More on that below.)

Further the fringe numbers seem really scary, but how many people know exactly the value of their benefits packages? I don't. I know it's a lot of money, but I have no idea how much our Benevolent Patron pays in fringe. When I write a proposal for a grant that would allow me to spend some of my teaching time on research, the University asks me to request my salary + 33% of my salary for fringe benefits. I'm not sure how standard that amount is or the extent to which the cost for fringe benefits varies across different parts of the country. Moreover, I would expect K12 teachers to have a larger proportion of their salaries go to fringe than people who work all 12 months because teachers are specifically paid for 9 months in the classroom, but the fringe benefits (health insurance, most notably) have to be paid all year long.

A final point: the notion of "average" salaries. Everyone here is using arithmetic mean. Means have flaws: they are easily skewed by extreme values. If teacher salaries in Wisconsin are well represented by a normal distribution (a bell curve) or even by a flat distribution (for example: 1/3 of teachers get the same low pay, 1/3 get the same moderate pay, and 1/3 get the same high pay), the mean is reasonably informative as a point estimate, as one number that summarizes the central tendency of the data. But means tell you nothing about dispersion of the data: how stretched out the data are. An example: The numbers 99, 100, 101 have a mean of 100. The numbers 0, 100, 200 have a mean of 100. These are very different distributions! (Standard deviation is the usual statistic used to report the dispersion of the data, but it still doesn't tell you anything about the shape of the distribution.)

My bottom line: As citizens it's our job to be critical about the statistics that are presented to us and to question their accuracy and their meaning.

And a note on teachers:

It's too bad that as a society we don't want to pay our teachers at rates that would attract more excellent teachers. Don't get me wrong. I know many absolutely wonderful teachers out there, but in my experience (anecdote, not statistic, here!), those teachers teach because they love it. They could be earning more money doing something else, but they choose to be teachers because they have a calling. Other potentially wonderful teachers don't consider teaching because they have other concerns and priorities that work against being able to give up more remunerative pay in order to teach.

To paraphrase Rabbi Jonathan Maltzman, wouldn't it be wonderful if we paid our star teachers the way we pay our sports stars? What could be more important to us, our children, our country, and the world than to have highly qualified and competent teachers appropriately compensated for the difficult and critical job that they do?

Saideman's Semi-Spew: Secessionistly Speaking

Steve Saideman's blog post on state's rights is worth reading: Saideman's Semi-Spew: Secessionistly Speaking

Vint Cerf says current Internet governance is "bottoms-up." He's wrong.

In the news today has been UN discussions concerning the governance of the Internet.

Google's Cerf Slams UN 'Monopoly on Internet Governance' | News & Opinion | PCMag.com

It's not reported quite this way, but here's my take on it: The rest of the world is sick and tired of US dominance of Internet governance. Now some of those countries -- the authoritarian ones -- want more control over the Internet because they dislike the architecture that enables end-runs against state-controls on content. But other countries are just annoyed by the fact that much of Internet governance is conducted by the Internet Corporation for Assigned Names and Numbers, a non-profit, created at the behest of the Clinton administration, chartered in California, and operating under a Memorandum of Understanding with the US Department of Commerce. (How weird is that?)

Vint Cerf, quoted in the article above, is wrong, in my opinion. I disagree with the premise of his statement that "The current bottoms-up, open approach works—protecting users from vested interests and enabling rapid innovation." Gone are the days when the only users of Bitnet and ARPANET were the engineers who were creating the network from the bottom up. Governance of the Internet today is NOT "bottoms up" and users are not protected from the vested interests of those who are governing the Internet. In short, ICANN promotes governance of and for corporate vested interests, with large corporations having an advantage. Corporate entities definitely have vested interests, and sometimes those interests involve slowing innovation. (If you created the last great innovation, you want to slow others from creating the next innovation.) Users have little voice (no voice, really) in the governance provided by ICANN, and we users are subject to decisions made by corporate entities such as ISPs.

I wrote about some of these themes a while back in:
R. Marlin-Bennett (2001). “ICANN and Democracy: Contradictions and Possibilities.” info: the journal of regulation and strategy for telecommunications information and media 3.4 (August 2001), pp. 299-311. DOI: http://dx.doi.org/10.1108/14636690110801978

The big problem is that we, the world, have never really figured out what the Internet is. If it's more or less a communication medium, then international cooperation on international communication has some well-established precedents: the Universal Postal Union was created in 1874. The International Telecommunications Union was established even earlier in 1865 to deal with what has been called "the first internet" -- telegraph networks.

Or maybe the Internet is a public, a place for interaction among people who may be geographically distant but can still bump virtual shoulders online. There's a lot of work that suggests that the Internet is becoming a cyberpolis. Perhaps this works in some very limited circumstances (our neighborhood listserv, for example, but that works because of the geographical proximity of the participants not without it). I just don't see this happening to a large extent. Nevertheless, It would be great if the Internet actually were a democratically governed place where cyber-citizens could come together to discuss matters of global public import. After all, here I am writing a blog, at some level engaging in cyber-enabled democratic deliberation. The reality is, though, that VERY FEW -- IF ANY -- people are going to read this. And most of them are my friends. But if the Internet is a cyberpolis, then we might want to think about how it might be democratically governed. ICANN, despite its claims of democratic legitimacy and bottom-up governance, doesn't meet that test, in my opinion.

Or maybe the Internet is nothing more than a rather free market, with minimal regulation and subject to logic of the market place. This is where I think the Internet is, for the most part, heading; this saddens me. In the absence of appropriate regulation, large corporation are becoming dominant. Oligopoly has always been understood as market failure, and oligopolistic control of the Internet (Google, Microsoft) will skew future developments toward things that make money for those corporations that have the power to make the market.

I'm not sure what the answer is. I'm better at critiquing governance than coming up with new forms.

Offshoring key federal government functions????

It seems to me that government must be responsible for its e-government functions, namely its website and citizen services provided online. All in all, I'm usually pretty pleased with the US government's websites. I recently went to the IRS page and used a rather useful calculator to do some planning. The calculator seemed to work fine, but soon things got interesting.

I clicked on a link that promised to explain estimated payments. The information in the window that popped up was not understandable and contained an obvious error, so, good doobie that I am, I reported the problem to the website helpdesk.

When you submit something to the IRS helpdesk, the website helpfully advises you to add irs.gov.website.helpdesk@speedymail.com to your approved email sender list.

Speedymail.com????? Well, boys and girls, we've outsourced the IRS website helpdesk to a company called AFFINA, which is a wholly owned subsidiary of The Hinduja Group, which was "started in Sind, the cradle of the Indus Valley Civilization, where more than 5,000 years ago, the human race learnt its first lessons in organized business and banking."

Now don't get me wrong: I am not actually opposed to offshoring because it can be efficient for firms and helpful for developing economies. (I am, though, a rather enthusiastic supporter of "inshoring," setting up call centers in poorer parts of the US to provide jobs at home. Besides, those people from Arkansas are so nice!) But to get back to my story . . .

I think of this as simple syllogism:

Government services should be performed by nationals of the country in question (whenever possible).
Government services in the information age include e-government services.
Therefore, e-government services should be performed by nationals of the country in question.

Have we reached the point of our de-development that we do not have enough competent people in this country to handle website customer care for the IRS? Is it really the right choice (I don't mean the cheapest choice, I mean the appropriate choice for a public function) to be outsourced?

Tomorrow is election day in Maryland. Maybe we can get the votes counted in India.

Sigh.

Power, Deborah, Shabbat Shirah

In my undergraduate course on power, I start off with passages from the Bible. I think reading the Bible's presentation of power critically is important for students of international relations for a couple of reasons. First of all, the Bible shapes Western thought. Thomas Hobbes read the Bible. When he titled his book, Leviathan, he knew what the leviathan was in Scripture. To understand his and other Western philosophers' starting point, you have to understand the Bible. Second, it is naive to think that the biblical understandings of power (e.g., power as a manifestation of God's will) do not matter in our modern (or postmodern) world. Religious faith motivates an awful lot of political behavior. We would be stupid to forget to analyze it.

So, I have the unusual syllabus that treats the Bible as a source of theory about power. Over the years, I've honed in on a few favorite passages to highlight the particular themes that interest me: the power of words (Balaam and Balak, curses and blessings), the role of leadership (Joshua taking the reins of power), brute -- and brutish -- force (Samson), and the power of women (Deborah, and also in the stories of Rahab and Yael).

It did not occur to me that I would be assigning my students to read the passages from Judges that tell Deborah's story right before Shabbat Shirah, when we'll be reading those very passages in synagogue. Divine inspiration?? I don't think God micro-manages syllabi. A nice coincidence in a stochastic universe.