Wednesday, July 16, 2008

The Biggest Satire of Them All

With all the talk over The New Yorker cover, satirizing Barack Obama as a America-hating, flag-burning, Muslim, fist-jabbing terrorist, I thought of another satire, one that is far more serious. The last 8 years. The Onion (as is usually the case), being far more insightful than I or anyone else in this country, told us exactly what we would, over the coming years, find out. It's truly astonishing to read how accurate a portrayal this article was. It was published just as George W. Bush assumed office.

I laugh, and then I cry:

WASHINGTON, DC–Mere days from assuming the presidency and closing the door on eight years of Bill Clinton, president-elect George W. Bush assured the nation in a televised address Tuesday that "our long national nightmare of peace and prosperity is finally over."

Enlarge Image nation nightmare

President-elect Bush vows that "together, we can put the triumphs of the recent past behind us."

"My fellow Americans," Bush said, "at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us."

Bush swore to do "everything in [his] power" to undo the damage wrought by Clinton's two terms in office, including selling off the national parks to developers, going into massive debt to develop expensive and impractical weapons technologies, and passing sweeping budget cuts that drive the mentally ill out of hospitals and onto the street.

During the 40-minute speech, Bush also promised to bring an end to the severe war drought that plagued the nation under Clinton, assuring citizens that the U.S. will engage in at least one Gulf War-level armed conflict in the next four years.

"You better believe we're going to mix it up with somebody at some point during my administration," said Bush, who plans a 250 percent boost in military spending. "Unlike my predecessor, I am fully committed to putting soldiers in battle situations. Otherwise, what is the point of even having a military?"

On the economic side, Bush vowed to bring back economic stagnation by implementing substantial tax cuts, which would lead to a recession, which would necessitate a tax hike, which would lead to a drop in consumer spending, which would lead to layoffs, which would deepen the recession even further.

Wall Street responded strongly to the Bush speech, with the Dow Jones industrial fluctuating wildly before closing at an 18-month low. The NASDAQ composite index, rattled by a gloomy outlook for tech stocks in 2001, also fell sharply, losing 4.4 percent of its total value between 3 p.m. and the closing bell.

Asked for comment about the cooling technology sector, Bush said: "That's hardly my area of expertise."

Turning to the subject of the environment, Bush said he will do whatever it takes to undo the tremendous damage not done by the Clinton Administration to the Arctic National Wildlife Refuge. He assured citizens that he will follow through on his campaign promise to open the 1.5 million acre refuge's coastal plain to oil drilling. As a sign of his commitment to bringing about a change in the environment, he pointed to his choice of Gale Norton for Secretary of the Interior. Norton, Bush noted, has "extensive experience" fighting environmental causes, working as a lobbyist for lead-paint manufacturers and as an attorney for loggers and miners, in addition to suing the EPA to overturn clean-air standards.

Bush had equally high praise for Attorney General nominee John Ashcroft, whom he praised as "a tireless champion in the battle to protect a woman's right to give birth."

"Soon, with John Ashcroft's help, we will move out of the Dark Ages and into a more enlightened time when a woman will be free to think long and hard before trying to fight her way past throngs of protesters blocking her entrance to an abortion clinic," Bush said. "We as a nation can look forward to lots and lots of babies."

nation nightmare jump

Soldiers at Ft. Bragg march lockstep in preparation for America's return to aggression.

Continued Bush: "John Ashcroft will be invaluable in healing the terrible wedge President Clinton drove between church and state."

The speech was met with overwhelming approval from Republican leaders.

"Finally, the horrific misrule of the Democrats has been brought to a close," House Majority Leader Dennis Hastert (R-IL) told reporters. "Under Bush, we can all look forward to military aggression, deregulation of dangerous, greedy industries, and the defunding of vital domestic social-service programs upon which millions depend. Mercifully, we can now say goodbye to the awful nightmare that was Clinton's America."

"For years, I tirelessly preached the message that Clinton must be stopped," conservative talk-radio host Rush Limbaugh said. "And yet, in 1996, the American public failed to heed my urgent warnings, re-electing Clinton despite the fact that the nation was prosperous and at peace under his regime. But now, thank God, that's all done with. Once again, we will enjoy mounting debt, jingoism, nuclear paranoia, mass deficit, and a massive military build-up."

An overwhelming 49.9 percent of Americans responded enthusiastically to the Bush speech.

"After eight years of relatively sane fiscal policy under the Democrats, we have reached a point where, just a few weeks ago, President Clinton said that the national debt could be paid off by as early as 2012," Rahway, NJ, machinist and father of three Bud Crandall said. "That's not the kind of world I want my children to grow up in."

"You have no idea what it's like to be black and enfranchised," said Marlon Hastings, one of thousands of Miami-Dade County residents whose votes were not counted in the 2000 presidential election. "George W. Bush understands the pain of enfranchisement, and ever since Election Day, he has fought tirelessly to make sure it never happens to my people again."

Bush concluded his speech on a note of healing and redemption.

"We as a people must stand united, banding together to tear this nation in two," Bush said. "Much work lies ahead of us: The gap between the rich and the poor may be wide, be there's much more widening left to do. We must squander our nation's hard-won budget surplus on tax breaks for the wealthiest 15 percent. And, on the foreign front, we must find an enemy and defeat it."

"The insanity is over," Bush said. "After a long, dark night of peace and stability, the sun is finally rising again over America. We look forward to a bright new dawn not seen since the glory days of my dad."

Tuesday, July 15, 2008

Infrastructure Part 2

I went to the Senate Banking committee's hearing on national infrastructure the other day to see Michael Bloomberg (mayor of NYC), Shirley Franklin (mayor of Atlanta), John Peyton (mayor of Jacksonville) and Mark Funkhouser (mayor of Kansas City) give testimony.

Senator Dodd (former presidential candidate) in his opening remarks affirmed his support for a national infrastructure bank that would be an independent institution which ranks and funds projects on their merits. All the witnesses, and especially Bloomberg, expressed their support for such an infrastructure bank, emphasizing the need to fund infrastructure projects on merit.

This seems like a common problem that needs to be addressed, and one that in the current system of national infrastructure funding is certainly not. Accountability and a system meritocracy for the infrastructure projects that are funded by the federal government is virtually non-existent. In the current system, most infrastructure projects are funded through earmarks - projects particular to certain constituencies that are added solely for political reasons. The main argument for an infrastructure bank, besides the increased funding for infrastructure that it would represent, is that it would be an independent commission not privy to political whims.

The proposed infrastructure bank has been compared to the Federal Deposit Insurance Corporation, which I think is an apt comparison - a federal agency that is nevertheless not subjective to the political process. The infrastructure bank would be different, however, in that it would work in close conjunction with Congress in securing funding, but outside of funding (which it could also receive from other sources, such as user fees and puplic-private partnerships), it would be independent.

Along the same lines, Bloomberg and Funkhouser complained about the vision-less-ness of the nation's infrastructure program (or lack thereof). Bloomberg recommended a national commission, similar to the one proposed by Representative Blumenauer in his testimony to the House of Representatives, that would lay out a national vision for infrastructure and make funding recommendations. This, like an infrastructure bank, would provide independence from the political process. One proposal I've heard is that the funding proposals from such a commission would need to be voted down by 3/5 of Congress, providing additional insularity from politicization.

None of these proposals will come to fruition without political initiative, however. What was mentioned by Bloomberg was the "unsexiness" of infrastructure funding, and the disadvantage it receieves from that. This is true: Mayor Funkhouser talked of the $2.3 billion needed to fix Kansas City's sewage system, which emits 6 billion gallons of sewage into nearby lakes and rivers due to deficiencies. Nobody, however big the problem may be, wants to talk about sewage, or even crumbling roads and bridges for that matter. It is encouraging, however, that Congress, and the nation, seem to finally be taking notice - I expect substantial progress on the infrastructure front to be made in 2009, especially if we get a Democratic Congress and a Democratic president (although, to the Republicans' credit, all major infrastructure proposals in Congress to date have been largely bipartisan).

Infrastructure Part 1

I attended a hearing on infrastructure the other day in the House of Representatives and heard testimony from a few representatives about possible solutions.

One solution, proposed by Representatives Keith Ellison (the guy from Minnesota who put his hand on a Qur'an when he was sworn in) and Rosa DeLauro, is to establish a national infrastructure bank that would act as a specially-chartered federal entity charged with investing in major infrastructure. Robert Goodspeed writes of the proposed infrastructure bank,
  1. An infrastructure bank would solve solves the short-sighted funding problem, and creates a new body to fund large projects beyond existing programs, expanding capital for infrastructure. However as planners are well aware, not all transportation infrastructure is self-supporting. The interstate highway system, many bus and subway lines, and an intercity transportation network would not exist today if each of their parts were required to be self-supporting, but that doesn't mean they are bad investments. I worry it would create additional funds for high-visibility projects, leaving the rest to fight over a limit pool of money.
The bank's funds would come from direct subsidies, direct loan guarantees, long-term tax-credit general purpose bonds, and long-term tax-credit infrastructure project specific bonds, with an aim of making the entity self-sustaining in five years. It's a good idea, and one supported by Barack Obama, but I think proposals for the infrastructure bank need to be more ambitious in terms of funding. If required infrastructure improvements alone are estimated to be $1.6 trillion, $60 billion for the bank is not nearly enough. It's also not enough to fund these "large" projects - most infrastructure projects of even moderate size run well into the tens of billions of dollars.

Representative Blumenauer proposed establishing a commission to assess the nation's infrastructure needs and draw up a national vision for infrastructure. He said that this vision should be tantamount to FDR's massive infrastructure plan, and I think that's a good idea. The problem is, Blumenauer's plan doesn't address funding, which is the major impediment to initiating federal infrastructure projects. Hiking up the gas tax is unreasonable andpolitically unpalatable. It is also a conceptually bad idea, as the emphasis should be on reducing driving; if that is achieved, revenue from a gas tax won't be enough to effectively fund infrastructure projects. Indeed, it already isn't - the Highway Trust Fund (which is funded by the gas tax) will go into deficit in 2009 for the first time ever.

It's quite obvious that funding from the federal government will not be able to sustain infrastructure projects alone, which is probably why Ellison's proposed national infrastructure bank is so modest in its funding proposals. One idea, put forward by DeLauro and supported by Representative Mica, is extensive public-private partnership programs. In such a program, which was said to be "more like a business deal," by Mica, the government and the private sector would jointly raise capital for an infrastructure project, with the government assuming a portion of the risk. User fees, usually taking the form of tolls or fees for ridership, are another solution to making infrastructure investment more viable. Regardless, more federal funding is needed, and fortunately Congress will now probably be more willing to release more money for infrastructure, especially transit.

There are also minor funding proposals, such as the container fee on incoming cargo proposed by Representative Calvert. This is a good idea, and a solid incremental step in securing additional infrastructure funding, but a more comprehensive national funding program, such as establishing a national infrastructure bank, is needed to ensure proper funding both for new infrastructure projects, and for infrastructure repair.

In sum, Congressional progress on this issue is encouraging, but if tax hikes are necessary to ensure sufficient funding it will be interesting to see if Congress' mettle holds up. Regardless of the political situation, massive funding increases are required in order to secure America's infrastructure future, especially considering the need, in face of higher gasoline prices and global warming, of a much more extensive nationwide transit system.

Family Leave

There are only four countries in the world that do not offer some form of paid maternity or parental leave, those being Papau New Guinea, Lesotho, Swaziland and the United States. Besides this being an overtly feminist issue, it is also an economic one and one that, I think, would be beneficial to examine.

The first matter that should be addressed is the one of efficiency. If paid family leave is not provided by firms voluntarily - that is, if in a free market with no governmental mandate, paid family leave is not provided, it is assumed that family leave is inefficient. Market theory espouses that in such a situation, the costs of paid family leave outweigh the benefits. Therefore, mandating paid family leave would result in a situation that is not socially optimal. Mandated paid family leave can be efficient, however, if it corrects a market failure - and a market failure does arise in the externalities associated with raising children. Studies have shown that children are healthier and more successful when they are well-cared for, and when their parents raise them (as opposed to a nanny). Healthy and productive children grow up to become healthy and productive adults, accruing benefits for society - thus, there is a positive externality associated with taking good care of children: it is under-provided by the market, and must therefore be subsidized in some manner by the government. Mandated paid family leave is just such a subsidy.

Also, adverse selection is a problem addressed by mandated paid family leave. If only certain firms offered paid family leave, the individuals most likely to work at such firms will have a higher probability of taking advantage of the benefit, and thus the cost of the benefit to the firm will increase. This will result in lower wages, which further worsens the problem of adverse selection, since the only workers willing to work for the lower wage would be the ones most likely to take advantage of the paid leave benefit. Adverse selection results in a lower than optimal number of firms offering paid family leave. Government mandated leave fixes this problem - there will be no downward wage cycle associated with adverse selection if every firm is forced to offer paid family leave.

The most prescient question regarding mandated paid family leave, in my opinion, is one of wages. If mandated paid family leave has a substantial negative effect on wages (particularly woman's wages) then the externality it corrects might not be worth it. According to economic theory, mandated family leave would shift the supply curve for labor to the right (the attractiveness of the benefit will draw more people into the workforce) and the demand curve to the left (as a result of an increase in costs for the firm). This unambiguously lowers wages, but the true result of mandated paid family leave is not so simple. Wages could increase as a result of paid family leave if it encourages longer job tenure and increases the potential for an individual to move up in the company. So, the net effect of paid family leave is somewhat ambiguous.

Studies have shown that paid family leave not in excess of 3 months results in an increase of 3-4% in women's employment relative to men, and no decrease in wages. Paid family leave programs in excess of that amount of time (and especially in excess of 9 months), however, have shown a noticeable drop wages, albeit increased women's employment.

The ambiguous economic effects notwithstanding, having mandated paid family leave is clearly something that is beneficial - if not to wages, then to society. The most obvious reason is to correct the externality of raising children, but paid family leave also works to create a more hospitable work environment for women, something that is certainly needed.