An Explosion of Events

October 4, 2020

by Steve Stofka

This has been a week of surprises. Sunday night, the NY Times released the details of President Trump’s tax documents which he has sought to keep hidden under the pretense that an IRS audit prevents him from doing so. We learned that Mr. Trump’s wealth is a ruse, like that of Bernie Madoff. We discovered the reason for the IRS audit: a $72 million refund that Mr. Trump was paid in 2009 under a dubious interpretation of rules in the Recovery Act following the 2008 financial crisis.

The report contains many instances of rule bending if not outright fraud. It serves as an example of why Republicans have repeatedly cut funding for the IRS. With fewer people, the IRS is unable to monitor the shenanigans of Mr. Trump and his accountants.

The last two decades have seen the largest accounting scandals, and most of them happened while Republicans controlled the majority if not all of the federal government. Enron, Tyco and Health South in the early 2000s were just the prelude to the 2008 financial crisis. The Enron scandal exposed the misdeeds of one of the largest accounting firms in the world, Arthur Anderson, who was forced to surrender their license in 2002. During these past twenty years, Republicans have consistently fought to undermine the mission of all government monitoring, to bend the rules in favor of large industry. Mr. Trump called us working stiffs suckers for paying taxes.

On Tuesday’s debate between both Presidential candidates, Mr. Trump’s interruptions broke debate protocol and the rules he had agreed to. That’s not a surprise. He is a notorious cheater at golf and has a motor mouth. He is an entertainer, not a statesman or a gentleman. The surprise was that Mr. Biden met the verbal assault without fluster. Afflicted with stuttering since he was a child, Mr. Biden has learned to speak with deliberation, a common strategy taught to stutterers. Kids around the country, watch Mr. Biden. This is how you stand up to bullies.

The announcement late Thursday night that Mr. Trump had tested positive for Covid surprised those of us who wondered how the disease had not caught up to the President, who has played the tough guy and pooh-poohed caution. Mr. Trump has several comorbidities, his physician said, without being specific. A lack of prudence might be one of them. Several hours later, Mr. Trump was taken to Walter Reed hospital out of “an abundance of caution.” With a month left before the election, Mr. Trump had a busy election schedule, which is up in the air for the next two weeks, at least. More on that at the end of this post.

The surprise in Friday’s monthly hiring report was the weak job recovery. The employment population ratio is 56.6%, significantly down from 61% in February, before Covid. In February, 1.5 people working supported each person not working, including children. Now it is 1.3 people supporting each person not working.

The growing debt of the Federal government has relieved some of the burden on workers, because, in times of crisis, the rest of the world wants to buy U.S. Treasuries. State and local governments are squeezed. Governments laid off 216,000 workers in September. Who will they turn to except the Federal government? Senate Republican Leader Mitch McConnell balks at aid to the states, particularly the “blue” states.

In the past weeks, airlines and other industries have been announcing permanent layoffs. Older people may be taking early retirement. The four industries that have not suffered during this crisis are utilities, consumer staples, technology and health care. The effect of tech on the stock market has been dramatic. The SP500, weighted by market cap, is up 7% since January. An evenly weighted SP500 index is down 17%. That reflects a general economic misery.  

The week was still not done. On Saturday, we learned that the President had known earlier that he had Covid. He met with prominent Republicans and did not tell them he had the disease. Former NJ governor and campaign advisor Chris Christie has now tested positive for the disease. Mr. Christie is younger but is obese, the chief co-morbidity leading to death. Kellyanne Conway, Mr. Trump’s White House advisor, has also tested positive. The White House is doing a trace of all people who came into contact with Mr. Trump. He hates his enemies, but he doesn’t spare his friends either.

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Photo by Jens Johnsson on Unsplash

Thumbs Up?

August 30, 2020

by Steve Stofka

I tuned into the Republican National Convention (RNC) for a short time and learned that everything is ok. 175,000 people dead from COVID – ok. Millions of people out of work – ok. Older folks losing their retirement savings and a lifetime of sweat equity as their businesses close – ok. Seniors unable to get their medications and prescriptions on time – ok. People lined up at food banks – ok. People sitting on their furniture after being evicted – OK.

Black men being shot down for non-compliance to police orders – ok. Peaceful and violent protests in cities around the country  – ok. Food left rotting in the fields – ok. Growers can’t get H-2B visas to hire foreign workers and Americans don’t want the jobs – ok. More suicides, especially by former military – ok. More domestic abuse – ok. More drug abuse – ok.

The White House – our house – used for political grandstanding- that’s ok. This week American soldiers in an MRAP in Syria sideswiped and injured by Russian soldiers – that’s ok. The president is pulling troops out. Deficits of many trillions of dollars – ok.

As long as the stock market is up, it’s all ok.

In Shakespearean tragedies a powerful man – always a man – is brought down by one fatal flaw of character. Circumstance exposes the flaw. Othello, Hamlet, Macbeth, Richard III, King Lear. English students are asked to identify the fatal flaw and explain their choice. Students are asked to privately imagine themselves in a position of power. What would be their fatal flaw?

Can a great nation have a fatal flaw? James Madison and Alexander Hamilton worried that democracy would lead to mob rule and bring down our country. Thomas Jefferson worried that regional interests would create a ruling aristocracy and a nation ruled by monarchy. I watched a few minutes of the White House pomp on Thursday night. Our president embodies both fears of our founders. 

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Notes:

Photo by Max Muselmann on Unsplash

Moral Hazard

July 26, 2020

by Steve Stofka

This week additional unemployment benefits will cease but Senate Republicans and the White House announced that they could not agree among themselves about the appropriate course of action for a second stimulus bill. What is the problem? Many Republicans think that an extra $600 a week in unemployment benefits rewards people for not working. The issue is a familiar one to policymakers and economists: moral hazard.

Moral hazard arises when party A has no incentive to do X because party B will pay the cost. In this example, Party A = a taxpayer. X = go to work. Party B = the federal government. An insurance policy illustrates the problem of moral hazard. If an insurance company – called the principal – provided comprehensive insurance for a house, the homeowner – the agent – would have less incentive to maintain the property because the owner bears little of the cost of repair. Comprehensive is the key word. There must be some cost to the insured. Moral hazard was evident during the financial crisis over a decade ago. Financial traders made a lot of money by taking risks. When those risks blew up, taxpayers picked up the bill for the loss.

Another key ingredient of moral hazard is asymmetry of information. In a purchase transaction, the seller – the one receiving the money – knows more about the item being sold than the buyer – the one paying out the money. Laws and regulations attempt to minimize the asymmetry, but it is an inherent feature of a transaction. In a principal-agent model, the agent – a babysitter or the CEO of a public company – knows more than the principal – the parents or the stockholders. The principal must trust the agent to some degree and monitor the agent to some degree.

With that bit of background, let’s return to the issue of extended unemployment benefits. Who is the agent and who is the principal? Republican leaders think of themselves as the principal, as though it was their money that they are paying out. In their thinking, we, the taxpayers, are the agents who cannot be fully trusted. If Republicans pay people unemployment benefits, how do they know that people will look for a job?

This concern demonstrates the patriarchy that is the core ideology of the Republican Party. Lawmakers are not the parents, or the principals. In a democratic republic, lawmakers are the agents of the citizens. We worry about the moral character of our representatives, not the other way around. We, the citizens, are the principals.

Senator McConnell says that he is acting on behalf of taxpayers. Which taxpayers is he referring to? The ones who will be unable to pay their mortgage or their rent next month? The taxpayers of the future? He wasn’t concerned about them when Republicans passed their tax bill a few years ago. That tax bill was meant to appease the stakeholders, the big moneyed interests that are the real principals in this country. In effect, we, the citizens, are but their agents.

230 years ago, American colonialists rebelled against the aristocracy that controlled the economy and politics of Britain and its colonies. Here we are again. Senator McConnell is one of the most powerful men in this country because he is an agent for the American aristocracy. For one day a year, citizens act as principals by voting. Sensing that the tide of sentiment is going against Republicans in this election, Republican lawmakers and the White House are trying every legal maneuver to deny the vote to as many people as possible.

The moral hazard is when the agent takes effective control from the principal. That is the government of Venezuela under Nicolás Maduro. The Republican party proclaims that they are the champions of “small government.” What those two words mean is government by a small elite. If you prefer an impotent and passive role as a citizen, vote Republican this fall. If you want a more robust government which acts like an agent of the people, make another choice.

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Photo by Esteban Lopez on Unsplash

Photo by Scott Graham on Unsplash

The Social Contract

July 5, 2020

by Steve Stofka

Am I my brother’s – or sister’s – keeper? If I am, what is the extent of that care and concern? We’ve been discussing this issue for a few thousand years, and this pandemic brings several issues to a sharp focus. On this Independence weekend, how independent are we? How do we view the social contract?

Writing in the 1840s, Ralph Waldo Emerson distinguished between “direct” and “reflex” recognition of duties (Emerson, 1841). A direct type is one based on principles that we respect and embrace. A reflex type is one we recognize simply because others hold it as a duty. The second type is like wearing an uncomfortable style of shoe because it is a popular style. Who decides what my duties are?

There was a video of Florida protesters chanting, “My body, my choice.” Sound familiar? No, it wasn’t a pro-choice rally. It was a protest of the governor’s requirement that people wear masks. Is my freedom more important that your health? Let’s say that it is. It’s a soccer match and the team “My Freedom” with green uniforms beats the team “Your Health” in blue uniforms. Should choices about priorities be a dualistic – win or lose – debate? We are often forced to make such choices when we vote.

This past week two women in their twenties walked out of a clothing store. One hurriedly took off her mask and said, “God, I can’t stand these things.” Her friend was calm and kept her mask on as they walked to their car. Some people may protest “My Freedom” when it’s just a matter of being uncomfortable. Chanting “My Freedom” sounds like a principle. It’s noble. Chanting “My Comfort” sounds like an 18-year old who wants to wear sandals and surfer shorts to a job interview.

Most hospital employees who have contact with patients must wear masks or they are fired. Businesses serving the public may require that their employees wear masks as well. So why the objection to being told to wear a mask at the park or beach? Several decades ago, many people had this same debate about seat belts and being forced to wear helmets while operating a motorcycle. Does the government have a right to require people to wear safety equipment?

NO) It’s my body and I have a right to not wear a seat belt or a helmet.
YES) We don’t have a constitutional right to drive. It is a state-issued license.

In 1972, the Supreme Court settled the legal question, concurring with many state Supreme Courts that people did not have a constitutional right to drive a vehicle (Jones & Bayer, 2007). The case was about helmet laws for motorcycle drivers but the decision threatened car manufacturers who did not want to be forced to install seat belts in cars. Federal legislation was passed that exempted states who wanted to repeal helmet laws. Three states still don’t have helmet laws. Despite more than a decade of legal battles and lobbying, Congress passed legislation that required seat belts to be installed in new vehicles (Wolinsky, 1985).

What is a license and what is a right guaranteed by the Constitution? In 2012, the Supreme Court heard a legal challenge to the ACA, or Obamacare. Does the government have a right to require a person to buy health insurance?

YES) The government requires that people buy auto insurance. Same thing.
NO) Health insurance is our health, the act of simply being alive. That is a right protected by the Constitution. The government cannot require you to buy health insurance.

In 2012, the Supreme Court agreed with the No argument. “The federal government does not have the power to order people to buy health insurance,” Chief Justice Roberts wrote (Norman, 2012). However, the government can charge a person a tax for not buying health insurance. The penalty was a tax. With that understanding, Obamacare was allowed to stand.

Wearing a seat belt or motorcycle helmet protects us. Wearing a mask protects others. Don’t we have a duty to others in our community? Isn’t that part of the implied social contract? This debate is similar to the one about vaccines, especially those given for childhood diseases. Getting a vaccine helps protect others. Can a public school require my child to be vaccinated?

The Yang Gang is a group of supporters named after former Presidential candidate Andrew Yang. He proposed a Universal Basic Income program that would send money to most households every month. The program recognizes human dignity and provides a minimum threshold of financial support. Members of the Yang Gang recognize a broad social contract that includes a duty to help support others. Their motto is “not left or right, but forward.”

Some recognize two forms of the social contract. The first is an involuntary participation in society that is regulated by a coercive government. This is the reflexive form of duty that Emerson wrote about. We accept the rules, duties and principles even if we don’t agree with them. We make a bargain to ensure some security of our freedom and property. The second type of social contract is voluntary, or at least non-coercive, akin to what Emerson called a direct duty. This includes our family, our church, civic groups and the people we mingle with.

We feel strongly about our opinions, and weigh the various aspects of an issue differently. Emerson thought each person’s synthesis of experience was unique and that each of us formed “a new classification” of the world. A democracy requires consensus. In a nation that prides itself on its independence, we have chosen a form of government that makes us dependent on each other to create the rules for our society. On July 4th , we declared our independence from Britain, and our in-dependence on each other.

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Photo by Scott Graham on Unsplash

Emerson, R. W. (1841). On Self-Reliance. American Transcendentalism Web. Retrieved July 04, 2020, from https://archive.vcu.edu/english/engweb/transcendentalism/authors/emerson/essays/selfreliance.html

Jones, M., & Bayer, R. (2007, February). Paternalism and its discontents: Motorcycle helmet laws, libertarian values, and public health. Retrieved July 04, 2020, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1781413/

Norman, J. (2012). Supreme Court Upholds Health Care Law in 5-4 Decision. Retrieved July 04, 2020, from https://www.commonwealthfund.org/publications/newsletter-article/supreme-court-upholds-health-care-law-5-4-decision

Wolinsky, L. (1985, February 19). Big Lobbies Clash in Fight on Seat Belts : Hearings Open Today as California Joins Auto Safety Debate. Los Angeles Times. Retrieved July 04, 2020, from https://www.latimes.com/archives/la-xpm-1985-02-19-mn-546-story.html.

All Together Now

April 5, 2020

by Steve Stofka

We’re all in this together. Andrew Cuomo, the governor of New York State, tells us that in his daily conference. N.Y. State reported its first case of Coronavirus on March 1. In a month, the emergency rooms of some hospitals in New York City look like a war zone. President Trump says those photos are fake news. Deaths in red states are real. Deaths in blue states are not?

We’re all in this together proclaims Phil Murphy, the governor of the neighboring state of New Jersey. The zombies are already in his state but, as he looks across the Hudson River at NYC, he knows that vast hordes of zombies are coming. They are microscopic and invisible. They are not the Kaiju of Pacific Rim or the burrowing monsters of Tremors. They are the invisible demons of Poltergeist. Patients come into New York hospitals frantically gasping for air (NBC New York, 2020).

During this pandemic, we are discovering who is in this together. The maintenance man at the local school has just discovered that he is not essential now that the school has closed for the semester. This is the week when lawn maintenance companies begin mowing grass in much of the U.S. That maintenance man could be weeding and mowing grass, but the school district gave that job away to an outside lawn maintenance contractor to save money on employee pension and health benefits. Public private partnerships reduce the burden of local government on taxpayers.

He could be doing a hundred different fixups around the school now that it is empty. Patching and touch up painting, plumbing, the loose stalls in the bathroom, reglue those cove base tile that he hasn’t had time to get to during the school year. Upgrade those light bulbs. Something he’s been meaning to get to. Empty hallways is a good time for that. The school district says that he is not essential. Preventive maintenance is not essential. Someone at headquarters decided to wait until it’s broke. Then it’s essential.

The people who are essential are the policymakers and their minions who spend hours crafting memos that explain to employees why they are not essential.  Explaining the loss of health and pension benefits to employees is a delicate topic and requires a lot of training. We’re in this together but we’re not in this together. You do understand, don’t you?

Many teachers have discovered that they are not essential. Knowing their students well would be an asset in redesigning classes for an online format. But that job is done by instructional designers who have little experience in a classroom. They are experts in the design of education content. They are essential. Teachers are not.

Nurses are essential. Well, now they are. There is a shortage of nurses across the country because nursing schools have not been expanded to meet the needs of the population (Moore, 2019). Nurses have demonstrated for better patient care, for more investment in nursing, and in a safer patient nurse ratio (Lardieri, 2019). Sorry, nurses. Put down your signs. You’re not essential. Well, that was last year and the year before that and the year before that. This year is different.

Here, we have protective clothing for you, our essential workers. Here’s a 39-gallon lawn and leaf garbage bag. Yep, they’re the big ones with lots of room. One size fits all! Take these scissors and cut out a hole for your head in the bottom of the bag, then cut out armholes in each side. See, isn’t that good? It comes almost to your knees. Yes, it is a little bit hot because garbage bags don’t breathe very well. But it will keep you protected from nasty Covid-19 air thingees.

What about face masks? Oh sure, they are coming. President Trump told us so a few weeks ago. Here, just spray some bleach on the face mask you are wearing, then take a hair dryer and dry it out. See, good as new! I told you. We are all in this together.

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Notes:

Photo by Ani Kolleshi on Unsplash

Lardieri, A. (2019, September 20). Thousands of Nurses Strike for More Staffing, Better Patient Ratios. U.S. News & World Report. [Web page]. Retrieved from https://www.usnews.com/news/health-news/articles/2019-09-20/thousands-of-nurses-strike-for-more-staffing-better-patient-ratios

Moore, D. (2019, March 29). A rush for nurses strains colleges and hospitals as health care booms in Pittsburgh. [Web page]. Retrieved from https://www.post-gazette.com/business/career-workplace/2019/04/22/Nurses-hospitals-Allegheny-Health-Network-UPMC-Pittsburgh-jobs/stories/201903110158

NBC New York. (2020, March 30). ‘Yes It’s Real’: Doctors Describe ‘Eerie’ Way COVID-19 Sickens Random People. [Web page]. Retrieved from https://www.nbcnewyork.com/news/local/yes-its-real-doctors-describe-eerie-way-covid-19-sickens-random-people/2350645/