Obligate Growth

This week Goldman Sachs announced that they were raising the starting salaries for entry level analysts to $110,000 from $85,000. When I heard that on the radio, I remembered the bailout of Goldman Sachs a dozen years ago. I thought of the many hospital workers who have risked their lives during the Covid crisis. Most were not making that kind of money. Under capitalism, market transactions direct resources but do they signal a society’s values?

In Sustainable Capitalism, John Ikerd (2005, 4) calls for a balance of our self-interest with our common-interests, citing the classical economists like Adam Smith who recognized that a market system must work within the ethical bounds of society (2005, 4). There is no point to capitalism if the wealth that the system can generate does not improve the general well-being of a society. Capitalism directs resources but only for goods where two parties can agree on a value. It’s hard to find common agreement on the value of many public or common goods. The infrastructure bill being negotiated in Congress this year bears witness to that reality. What is the value of a well-lit street, improved cable systems, safer electrical generation and the many public goods that we take for granted?

Capitalism evolved to assemble and deploy investment for shipping ventures, and to diffuse the extreme risk of shipping goods across oceans. In the 18th century as many as half of all ships returning to England laden with goods from India were lost at sea. Most ventures were launched without insurance. In the 17th century, insurers often went insolvent and could not cover a great loss (Johns 1958, 126). Many did not know how to price risk. In 1720, Lloyds of London and the Royal Exchange were formed to spread the risk. During the American Revolution the British government contracted out the shipping of armaments and British troops to the colonies. In 1780, a series of sea battles between the British, Spanish and French fleets severely damaged the West Indian fleet and caused great losses to underwriters (Johns 1958, 126). Loss is a good teacher of better risk management.

The underlying principle of capitalism is constant growth. In these early centuries the destruction of capital provided a natural constraint. In the 19th century, inflation from government money printing was another natural constraint (Formaini, n.d.). The capital grew but it bought less. The growth of most populations hits the bounds of their environment. Rabbits run out of food and the population periodically crashes. In the last century following World War 2, economists thought that countries who adopted democracy and capitalism would develop into thriving markets for capital. After key losses, capital managers became reluctant to deploy investment into poor countries without infrastructure, institutions and respect for private property.

Decades later, economists and political scientists now question that growth hypothesis. According to that theory, India and some former African colonies should be thriving. They are not. Given the global constraints of growth, the competition between capitals produces a concentration of capital in fewer multi-national corporations. Countries become segregated into two groups: those whose people are still very much engaged in agriculture and those whose people are engaged in services and to a lesser degree industrialization.

Agriculture is an economic trap because it is seasonal. Farmers harvest a particular crop at the same time and their competition drives the prices down. That is good for everyone except the farmers. Weather events can affect an entire region whose economy is dependent on crop production. As more farmers give up or lose their farms, large corporations take over the land. Their size and dispersal across several regions diffuses risk just as the insurance pools brokered through Lloyds of London in the 18th century.

As capital flows become more concentrated, the pool of those who benefit becomes smaller and smaller. Adam Smith’s “invisible hand” no longer spreads a general sense of well-being to the greater community. A few industries, like finance, prosper while many struggle and scrabble for the remains.

Those on Wall Street make a lot of money, but it is highly competitive and stressful. When Goldman Sachs did an internal survey of entry-level analysts at their firm, those analysts reported working an average of 95 hours a week to meet the upswell of client demand as the Covid vaccine led to a lifting of restrictions (McCaffrey 2021). Many reported physical side-effects from the long hours and stress. That $110,000 a year works out to $23 an hour. The median pay for a plumber is $28 an hour. Those entry level analysts suddenly don’t look like titans of industry. Many have student debt. They live in New York City with its high cost of living. Many probably thought that, if they could hang on for a year or two, their load would lighten and all their study and hard work would pay off. They are on capitalism’s hamster wheel. How long can the wheel keep turning?

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Photo by dylan nolte on Unsplash

Bureau of Labor Statistics (2021). U.S. Department of Labor, Occupational Outlook Handbook, Plumbers, Pipefitters, and Steamfitters. Available from https://www.bls.gov/ooh/construction-and-extraction/plumbers-pipefitters-and-steamfitters.htm (visited July 17, 2021).

Formaini, R. L. (n.d.). David Ricardo Theory of Free International Trade (2nd ed., Vol. 9) (Federal Reserve Bank of Dallas). Dallas, TX: Federal Reserve.

Ikerd, J. (2005). Sustainable Capitalism [Scholarly project]. In University of Missouri. Retrieved August 06, 2021, from https://faculty.missouri.edu/ikerdj/papers/WIMadisonSustainCapitalism.pdf

John, A. H. (1958). The London Assurance company and the marine insurance market of the eighteenth century. Economica, 25(98), 126. doi:10.2307/2551021

McCaffrey, O. (2021, August 02). Goldman Sachs Is Giving Entry-Level Bankers a Nearly 30% Raise. Retrieved August 07, 2021, from https://www.wsj.com/articles/goldman-sachs-is-giving-entry-level-bankers-a-nearly-30-raise-11627930285

Thug

August 1, 2021

by Steve Stofka

Following the Civil War, the Democratic Party welcomed a new breed of thug organized under the name of the Ku Klux Klan. Clad in white hoods and bed sheets, they looked like characters in a Punch and Judy show. Using fear, torture and fire they attacked black people in the South. They used intimidation and poll taxes to discourage blacks from participating in their own government. The Democratic Party hugged the thugs.

In 1954, the Supreme Court decided the Brown v. Board of Education case (Oyez, 2021) and held that segregated schools were not equal. In 1956, a Clinton, TN school was the first high school to attempt integration. The sons and grandsons of the KKK thugs can be seen throwing rocks at black girls trying to go to school (LOC, 2004).

Ten years later, former Texas Senator and now President Lyndon Johnson signed the Civil Rights Act and the Fair Housing Act to help give black people an equal opportunity to participate in politics, and the liberty to compete in the economy without prejudice. He tried to kick the thugs out of the Democratic Party and that bugged the thugs.

Dubbed the “Southern Strategy” Presidential candidate Richard Nixon welcomed them to the Republican Party. Instead of throwing rocks, Nixon proposed vouchers and other taxpayer funds that would help white parents in working class neighborhoods send their children to white only schools (Brown, 2004, 191-2). It was to be called “school choice.” In 1971, Nixon even proposed a Constitutional Amendment to reverse a Supreme Court decision to integrate schools.

“The Democrats don’t care about working people anymore,” became the refrain of voters who switched their allegiance from the Democratic to the Republican Party. In the 1980s President Reagan led a conservative movement that nurtured an intellectual thuggery. The actor Michael Douglas’ rallying cry of “Greed is good!” in the 1987 movie Wall Street portrayed this new-style thug. A 40-something Donald Trump, coddled from birth and protected by bodyguards and lawyers, liked the brashness. He portrayed brash.

Thirty years later Mr. Trump was brash enough to take on a phalanx of Republican Presidential candidates. He was a thug with a mug and spoke to the thugs in the party, saying any damn thing he wanted to because he was a smug thug. Thugs throw rocks at little girls. They grab women’s privates with impunity because they are not bound by the rules of decency. Mr. Trump promised his supporters a wall to keep out the Others. His supporters’ kids wouldn’t have to go to school with those Other kids. When he became President, he appointed an Education Secretary who championed school choice, and for four years he kept trying to build his Big Beautiful wall.

After he lost the election, the thug did not shrug. Rather, he remembered a line from actor Jimmy Cagney, “You dirty rat,” and complained, “Those thugs bugged the polls.” He called his supporters to the White House on January 6th  to take out the dirty rats who had stolen the election from him, including his own Vice-President, Mike Pence. The Presidency was his territory, see, and those Other guys was muscling in on his territory. Mr. Trump called on his supporters to take back the territory and they broke open the doors to Congress.  

Convinced that democracy produces populist thugs like Mr. Trump, the Founding Fathers set up a republic to insulate the institutions of law and government from public passions. After much argument and compromise, they would not let people even vote directly for their own President. Today we elect members of an Electoral College who elect the President. Two years after the drafting of the Constitution in 1787, the French people stormed the Bastille in Paris and ten years of Revolutionary fervor and terror followed. Answering critics, Alexander Hamilton and James Madison pointed to the anarchy that erupted in France as a demonstration that people could not be trusted with the power of a fully democratic state. January 6th was yet another reminder of that truth.

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Photo by Martin Zaenkert on Unsplash

Brown, F. (2004). Nixon’s “Southern strategy” and forces against Brown. The Journal of Negro Education, 73(3), 191. doi:10.2307/4129605

Library of Congress (LOC). (2004, November 13). Brown v. board at Fifty: “with an Even hand” the aftermath. Retrieved July 31, 2021, from http://www.loc.gov/exhibits/brown/brown-aftermath.html#obj121C

Oyez. (2021). Brown v. Board of Education. Retrieved July 31, 2021, from https://www.oyez.org/cases/1940-1955/347us483

Grade School History

July 25, 2021

by Steve Stofka

My mother taught fifth-grade for many years. As I was packing away her school texts for a library donation, I browsed her American history book.  I was surprised that the teaching of history had not changed much since I was a child decades earlier. “It leaves out a lot of the ugly,” I said.

She thought about that for a moment. “They are fifth-graders. There are a lot of immigrants with different cultural histories,” she said. “We teach citizenship and history.”

She went on to explain that the school board chose a text that highlights the rights and duties of citizens, the benefits of negotiation and trade, and the tragedy of war, when people stop talking.

“I just browsed the text but it seems to let white people off the hook for a lot of stuff that happened,” I said. I mentioned the part where Indians and colonists argued over land rights. “The settlers exploited the Indians, claiming the land when they got one minor chief to sign an ‘x’ on a piece of paper,” I said.

She thought about that. “I wonder if a 5th grader would understand the subtlety of that. We’re trying to get them not to call each other names and push each other down. The height differences in the boys are starting to emerge.”

“That warped view of history will stay with them for the rest of their lives,” I said. “Founding Fathers, yadda-yadda-yadda. Freedom and equality for all. They fought tooth and nail with each other. Jefferson wrote about self-evident truths then kept slaves.”

“I think the school board wants the children to learn those aspirational ideals,” she said. “Contradiction, meanness and dishonesty the kids can see every day in their community, on the TV, perhaps in their families. They don’t need to be taught about those things.”

“They need to understand those conflicts and betrayals,” I said. “It would help them understand.”

She shook her head. “No, they wouldn’t. Not at that age. We don’t teach trigonometry to 5th graders because they wouldn’t understand. We teach a simplified version of history for the same reason.”

“It makes history seem remote from their lives,” I protested. “Its why a lot of kids don’t care about history.”

“History happened before they were born,” she said. “For them, history is remote. Some children probably learn more history as part of their religious upbringing. It’s a connection with the past.” She paused. “There might be an old textbook upstairs in one of the bedrooms. You might compare texts from when you were in school.”

I didn’t find an old grade school textbook on American history, but there was a 4th grade math text. Math teaching begins on a base of arithmetic and the four rules of addition, subtraction, multiplication and division, then uses those skills to teach what can be called mathematics – algebra, geometry, trigonometry and calculus. I wonder if we will ever develop a method of study to teach history in a similar manner. If someone did, would the school board approve?

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Photo by British Library on Unsplash

Typology

July 18, 2021

By Steve Stofka

To understand the dynamics of an issue, economists and policy analysts use a typology or matrix of two characteristics and their opposites. Sounds boring but it can be fun, as I’ll show. Grouping by traits or lack of them sometimes reveals an interesting relationship that we might have never considered. Economists and policy makers are often confronted with problems that are difficult to analyze. By looking at the world through a typology, a person or group may see a relationship that was not apparent. As a simple demonstration, let’s use the characteristics of animals with and without opposable digits and those who walk on two legs or not. Does some combination of these traits or lack of traits tell us anything?

A typology forces us to clarify what we mean by a characteristic. What is an opposable digit? There are animals with pseudo-opposable, fully opposable, and long opposable thumbs (Untamed Science, n.d.). What does it mean to walk on two legs? I grouped primates other than humans into a separate category because they don’t customarily walk on two legs. Their pelvis structure is designed for four leg locomotion. However, if locomotion is my test, then horses are two-legged, moving two separate feet at a time either diagonally or on the same side of their body (AMNH, n.d.). Using a locomotion criteria, humans and many birds are now one-legged animals. Not happy with that, I decide not to use locomotion as a criteria but whether an animal normally stands on two legs. I clarify my distinctions.

This exercise can help a group brainstorm any problem. It can be serious or silly. People with curly hair as one characteristic. People who wear sandals and those that don’t. By drawing a typology matrix, we begin to notice people with curly hair and sandals. Do perms count as curly hair? Are clogs counted as sandals? Kids, try this exercise while waiting in line at a theme park this summer.

Economists use this method to classify and analyze different goods and services. Goods are said to be excludable by the seller or provider, and rival or not in consumption. What does that mean? If I eat a candy bar, no one else can eat that candy bar. It is rival in consumption. The seller can charge a price for me to consume the candy bar, making the candy bar excludable.

Using this typology, economists identify toll goods, those which people can use at the same time without rivalry but require an entry fee to use the good. Anyone who has sat in rush hour traffic on a highway might argue that there is a lot of rivalry. This typology helps us identify capacity.

A concert or an airline flight are examples of private goods that can be consumed simultaneously but they are rival because each seat that is sold reduces the ability of other people to attend that concert or take that flight. These private goods share a characteristic with pooled goods.

Because many natural resources are pooled goods, this type of good comes up frequently in the analysis of environmental issues. A person who catches a fish at a lake reduces the number of fish available for other fishermen to catch. States usually restrict access to the lake or require licenses to make this good excludable and manage the capacity. Some whale species became endangered when there was no restriction placed on their capture and killing. Pooled goods must be managed for sustainability, the capacity of that good or animal to replenish itself.

Public goods present problems that must be managed. Civil defense is an example of a good that is consumed simultaneously by everyone and cannot be excluded. Much of public policy involves public or pooled goods. Are police services a public good or a pooled good? If police officers are handling a call at one location, they are not available for others so they are a pooled good.

Typologies help us think about a problem and perhaps question our perspective on an issue by forcing us to narrow our definitions of characteristics. We may come no closer to solving or managing the problem but the new insights we gain can trigger some aha moments, particularly in group brainstorms.

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Photo by Henry & Co. on Unsplash

AMNH. (n.d.). Gaits: AMNH. Retrieved July 18, 2021, from https://www.amnh.org/exhibitions/horse/how-we-shaped-horses-how-horses-shaped-us/trade-and-transportation/gaits

Untamed Science. (n.d.). The Primate Order Explained: Monkeys, Apes, Lemurs… Retrieved July 18, 2021, from https://untamedscience.com/order/primates/

Competition

July 11, 2021

by Steve Stofka

This week President Biden issued an executive order (White House, 2021) to counter the trend toward corporate consolidation and oligarchy that has arisen during the past decades. I appreciated that the report contained links to the outside data sources they are using. After almost six months in office, Mr. Biden has signed 51 orders, almost half of them rescinding the orders of former President Trump (National Archives, 2021). In 2017, Mr. Trump signed 55 orders total but only eight of those were rescinding orders. The pace of orders slows after the first several months in office. I’ll review some highlights from this order.

For the past decade inflation has been below the Fed’s 2% target but the trend toward consolidation in some key industries gives those few companies that dominate an industry greater pricing power. Modern Farmer reported that 80% of the meatpacking industry is controlled by just four companies (Nosowitz, 2020). In 2000, the top 20 home builders controlled 15% of the market. Today it is 30%. Mr. Biden’s order notes that mark-ups, the charges over a company’s cost, have tripled in recent years. Since 2010, Federal Reserve data (2021) shows that after-tax profits have increased almost 50%, substantiating the claim of higher markups. In the past decade, low interest and rising profits have fueled a tripling of the stock market.

For the ten years following 9-11, after-tax profits also tripled, despite the worst financial crisis since the Great Depression in the 1930s. Many financial companies lined up at the corporate soup kitchen in Congress and were bailed out. Homeowners and workers went hungry while Congress paid bonuses to the same speculators that sparked the crisis (Story & Dash, 2009). Sorry, folks, we had to honor the contracts, the politicians in Washington said. It’s the law. Who helped write the laws? The corporations that got bailed out.

The order notes the growing increase of non-compete agreements for new job hires, making it more difficult to move to a more attractive job. It references data from the Economics Innovation Group (EIG, 2021) that the rate of new business formation has sunk by half in the past fifty years. The shift of manufacturing to China has also contributed to the overall decline.

The report notes the upswell in occupational licensing requirements over the past several decades. Licensing appears to be about public safety and some of it is. The states have come to depend on the revenue from the licensing fees and it avoids having to raise some taxes on voters. Trade schools that certify beauticians and other occupations like the tuition revenue they receive. Established business like licensing because it keeps out competition. The benefits are widespread and the costs are concentrated to those seeking careers in those occupations, many of them blue collar and little political power.

There are many faults in our federalist system that an executive order cannot remedy because the Constitution gives a lot of power to the states. What it can do is bring more attention to these anti-competitive practices. New Zealand and Singapore top the World Bank’s list of countries with low obstacles to doing business. The U.S. is sixth, just behind S. Korea and a few places ahead of Norway.

Americans believe in American exceptionalism but the Nordic countries keep beating us in various international categories. People say “You Americans. You should be more like the Nordic countries!” Suck on it, Norway, Finland and Sweden. We are ahead of you in ease of doing business. Next year we’re going to take on S. Korea and after that, tiny Denmark. There is nobody more capitalism loving than America and we’re going to prove it by stopping some of these anti-competitive practices!

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Photo by Pietro Mattia on Unsplash

EIG. (2020, June 29). Dynamism in retreat. Retrieved July 11, 2021, from https://eig.org/dynamism

Federal Reserve. (2021, June 24). Corporate profits after TAX (without IVA And ccadj). Retrieved July 11, 2021, from https://fred.stlouisfed.org/series/CP.

National Archives. (2021). Federal Register: Executive orders. Retrieved July 11, 2021, from https://www.federalregister.gov/presidential-documents/executive-orders/joe-biden/2021

Nosowitz, D. (2020, June 09). DOJ reportedly Subpoenas ‘Big Four’ Meatpackers. Retrieved July 11, 2021, from https://modernfarmer.com/2020/06/doj-reportedly-subpoenas-big-four-meatpackers/

Story, L., & Dash, E. (2009, July 30). Bankers reaped lavish bonuses during bailouts. Retrieved July 11, 2021, from https://www.nytimes.com/2009/07/31/business/31pay.html

Van Dam, A. (2019, October 19). Increasingly, economists find, homebuilding in fewer hands. Retrieved July 11, 2021, from https://www.providencejournal.com/news/20191019/increasingly-economists-find-homebuilding-in-fewer-hands

White House. (2021, July 09). FACT sheet: Executive order on promoting competition in the American economy. Retrieved July 11, 2021, from https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/

True Independence

July 4, 2021

by Steve Stofka

On this Independence Day holiday. I’ll add a few historical tidbits I read recently. Beginning in 1775, Americans fought with each other, with the British and Indians. It was our first civil war. Even the British were shocked at the atrocities that Patriots committed on other Americans. From New York to South Carolina, farmers who wanted to remain neutral were regarded as traitors, Loyalists who favored the monarchy. In their outrage, colonial militias pillaged farms and crops, burned homes and families. Farmers in New York fled to Canada.

In the middle of this civil war, the colonies published the Declaration of Independence. It was carefully edited so that it fit on one printed page and could be posted on tavern and courthouse doors. John Adams, who would become the second President of the United States twenty years after the Declaration, called it a “Theatrical Show” (Taylor, 2021, p. 160).

The mood for independence quickened at the publication of Thomas Paine’s Common Sense in January 1776. At the time of its publication, the author was anonymous and many thought it was Adams who had written it (McCullough, 2008, p. 83). Adams was rather critical of the Biblical claims made in Common Sense, but he recognized the emotional appeal of its plain spoken diatribe against monarchy.

A declaration on independence would give the colonies some legitimacy in the eyes of France and Spain, who might be able to help the desperate colonies. Unlike some of his peers in the Continental Congress, Adams thought the war against Britain might drag on for ten years. When British General Cornwallis surrendered at Yorktown eight years later, half of Washington’s army troops were French. The navy that closed off Cornwallis’ retreat was French (Taylor, 2021, p. 294). In the struggle of global empire, anything that weakened Britain was in the best interest of both France and Spain.

The majority of American colonists did not want independence. A third of the population were Loyalists who appreciated the Parliamentary order and military protection of British rule. A third of the population didn’t care. A  third wanted independence (Taylor, 2021, p. 212). As in the later civil war, many small farmers resented the big plantations owners who bought their way out of the war, paying a fee to avoid military service for themselves and their sons.

In 5th grade history class, we don’t learn many of the messy details of our history. The school boards want to avoid controversy; teachers want to avoid conflict between students. They prefer textbooks that emphasize the tragedy of war and praise negotiation to settle differences. After all, the teachers are repeatedly encouraging students to “use their words.” Even in high school, much of the ugliness and confusion is left out. In a full historical account, there are few clear moral lessons.

When we read some of these details as adults, some of think it is “revisionist” history because that information conflicts with the child’s view of history we were taught. In the 1992 movie A Few Good Men Jack Nicholson says, “You can’t handle the truth!” It’s true. We were taught a romanticized version of history, carefully edited to make sense to young people.

Some adults hold onto their cherished myths the way the Peanuts character Linus cuddled his blanket. They are today’s Loyalists – loyal to the monarchical rule and order of myth. Some of us declared independence from those myths and welcome the historical accounts, beautiful or ugly. We celebrate our independence from fanciful myth.

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Photo by Darix Garcia on Unsplash

McCullough, D. (2008). John Adams. New York: Simon & Schuster.

Taylor, A. (2021). American republics: A continental history of the United States, 1783-1850. New York, NY: W. W. Norton & Company.

A Bridge Between Us

June 27, 2021

by Steve Stofka

We are social creatures, our brains wired for comparing our situation with those around us. Children look only at the height of liquid in a glass and reason that the higher level is “more.” We understand tall and big and a lot. As our brains mature, our primitive understanding of equity evolves – a little. This week, a coalition of Senators reached an agreement in principle to spend money on infrastructure, a solution that has frustrated several presidents before Biden.

In 2007 the I-35W bridge in Minnesota collapsed. In March 2009, at the lowest point in the financial crisis, the American Society of Civil Engineers released their quadrennial report card on the nation’s infrastructure (2009). During the decade, infrastructure had slipped from a ‘D+’ to a ‘D.’ With millions out of work, the public and then President Obama hoped that the Congress could assemble an infrastructure bill. Couldn’t the government give money on a per capita basis to each state and let them spend the money on needed repairs and building projects? Less populous states argued against that idea. In the end, nothing happened.

In 1985, Congressman James Howard and Colorado Senator Gary Hart introduced versions of a National Infrastructure Act that died in the Committee on Environment and Public Works. In the decade from 1971-81, Howard noted that spending on infrastructure had declined by 50% (1985). Republicans held the Senate and Presidency; Democrats held the House. Other infrastructure bills have died in that same committee.

The U.S. built the nation’s interstate highways to deploy weapon systems in case of an attack from Soviet Russia. Without that direct threat, our elected representatives have been unable to coordinate unified action. Our federalist system promotes impotence, an antiquated political structure that will cause the U.S. to take a back seat on the global stage, according to China’s leader Xi Jinping. After fifty years of ineptitude, will the U.S. Congress and White House prove Xi wrong?

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Photo by Manny Ribera on Unsplash

American Society of Civil Engineers (ASCE). (2009). 2009 report card for America’s infrastructure. doi:10.1061/9780784410370

Howard, J. (1985, January 01). The national infrastructure act. Retrieved June 26, 2021, from https://cedb.asce.org/CEDBsearch/record.jsp?dockey=0043747

Bring Back Earmarks

June 20, 2021

by Steve Stofka

For the past decade gridlock in the Congress has often led the news, each side of the political aisle holding those in the other party responsible for the lack of bipartisanship. This week the two parties came together to make Juneteenth a holiday. In the House, a number of Republicans joined with Democrats to vote on a bill which would rein in the oligopoly reach of some tech giants like Google and Amazon. The public has become so accustomed to entrenched party positions that such collaborations grab headlines. How can the two parties reintroduce more bipartisanship? Reengage a practice that was formally but not actually discontinued a decade ago – earmarks for House and Senate members. Two powerful Democrats in the House and Senate have pledged to formally readopt the practice in 2022. House Republicans have agreed, but Senate Republicans have not committed to the renewal of earmarks (CAGW, 2021, p. 1).

Earmarks are persuaders, spending items inserted in a bill to gain crucial votes in the House or Senate. It helps incumbent representatives who compromise on  legislation resist a primary challenge from the more extreme wings of their party. With the gain of a spending earmark for their district, an incumbent appears as a smart political trader, not an unprincipled compromiser. For most of American history, earmarks were the bread and butter of practical politics.

Scandals surrounding earmarks contributed to the Democrats losing the House in the 1994 election. During their 40-year control of the House from 1954-1994, Democrats had used earmarks to hold the disparate elements of their party together. In the early 1990s, an investigation into Dan Rostenkowski, the powerful Democrat chairman of the House Ways and Means committee, brought too much attention to the political bargaining that took place in Washington. At the conclusion of the investigation into what was known as the Post Office Scandal, Mr. Rostenkowski was sentenced to almost two years in prison. Holding aloft his Contract with America and promising greater fiscal responsibility, firebrand Republican Newt Gingrich used the scandal to wrest control of the House from the Democrats in the 1994 election.

Despite his rhetoric Mr. Gingrich understood the role of earmarks. Like axle grease they were ugly and messy but reduced friction in the electoral machinery of Congress. They helped members fend off primary challenges, which were becoming more frequent after the Federal Communications Commission ended the Fairness Doctrine in 1987. Without the constraint to present balanced opinions, new media outlets gained attention and audience by taking strong positions on the topics of the day. The most successful of these was Rush Limbaugh who launched his show the year after the Fairness Doctrine was ended. People who wanted moderate voices could tune into traditional outlets. Those with strong conservative views  tuned into Limbaugh and other hosts who courted controversial opinions. Mr. Gingrich had played to these extreme elements in his bid to take the House but understood that earmarks were essential tools in governing a political coalition.

When John Boehner became the Republican majority leader in 2005, he pledged to curb the practice of trading earmarks for votes but they continued in the appropriations committees. In the eleven years since Republicans had taken control of the House, earmarks had grown tenfold (Bogie, 2018, p. 3). Two recent scandals involving members of the Republican Party had drawn public attention to the tawdry side of pork barrel politics. Mr. Boehner’s show of principle was calculated to help the Republicans retain their image as fiscal conservatives and continue their control of the House in the 2006 election. The public was tired of Republican missteps and profligate war spending and Democrats regained control of the House in 2007.

Under Nancy Pelosi’s Speakership, earmarks fell by half, but the financial bailout and the threat of big government spending under Obamacare sparked a Tea Party movement that helped Republicans take back the House in the 2010 election. Responding to public sentiment, Mr. Boehner announced a formal moratorium on earmarks and for two of the four years of his Speakership there were no earmarks (Bogie, 2018, p. 3). After his retirement in 2015, the earmarks continued. Hoping to bolster their chances in the 2020 elections, Republican Senators formally adopted a resolution against earmarks in 2019. In two crucial elections in Georgia, they lost control of the Senate anyway.

An argument for a reduction in earmarks has been prudent management of the public’s money. Good intentions, bad results. Instead of spending relatively small amounts to bolster an incumbent’s chance of re-election, a reduction in earmarks has contributed to an explosion in the deficit. In addition, the reduction has contributed to the polarization in Congress. The success of primary challengers rests on principle. The longevity of incumbents rests on pork, “bringing home the bacon” to their constituents.

Earmarks help those in the center hold the center. Without earmarks, the center has collapsed. Is it time to hold our noses and admit that a principled stand against earmarks has not stood the test of history? Can Democratic Senator Leahy and Congresswoman Rosa DeLauro overcome the bad optics of restoring earmarks? In the front room, politicians espouse grand principles. In the back room the ugly art of bargaining begins. Halos in the front room, horns in the back.  Like cleaning out sewer lines, politics is a dirty job. It’s about time someone unplugged the sewer lines in Congress.  

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Photo by McGill Library on Unsplash

Bogie, J. (n.d.). Earmarks Won’t Fix the Broken Budget and Appropriations Process (Backgrounder, Publication No. 3353). Heritage Foundation. doi:https://www.heritage.org/sites/default/files/2018-09/BG3353.pdf

CAGW. (2021, April 14). 2021 congressional Pig Book. Retrieved June 19, 2021, from https://www.cagw.org/reporting/pig-book

Safety Net or Trap?

June 13, 2021

by Steve Stofka

It has been 200 years since the cloth mills in Massachusetts instituted the “Lowell system,” employing young women and taking half of their pay for company provided room and board (Taylor, 2021, p. 234). 100 years ago, the states ratified the 16th Amendment, permitting the federal government to tax all income, including worker’s wages and salaries. 70 years ago, the government instituted payroll withholding. Today 145 million American workers receive salaries or wages, of which 30% is withheld by employers and sent to the federal government (Bird, 2021). Have we all effectively become government employees leased out to employers?

“Shan gao, huangdi yuan” is an ancient Chinese saying that reflected the attitude of many Chinese toward a central authority: “The mountains are high, and the emperor is far away.” Until the enactment of the 16th Amendment in 1913, most Americans felt the same. In Article 1, Section 8, the framers of the Constitution built a corral around the power of the federal government. The ink was barely dry on the document when Federalists like Hamilton argued for an interpretation of the Constitutional language that would give the federal government more power. In the next two decades, the Supreme Court headed by John Marshall, an appointee of Federalist President John Adams, did just that (Taylor, p. 54). During his 35-year tenure as Chief Justice, the decisions of the Marshall court effectively restated the Constitution.

Still, the federal government’s reach was limited enough that it took an amendment to that Constitution to permit the federal government to tax U.S. citizens directly. Richard Byrd, a delegate from Virginia and an opponent of the 16th Amendment, warned that “A hand from Washington will be stretched out and placed upon every man’s business; the eye of the Federal inspector will be in every man’s counting house . .” (Tax Analysts, 2021). He warned that the new amendment would feed the growth of a Washington bureaucracy remote from the interests of ordinary people. Many of those living today have great-great grandparents who voted for that amendment. Why did they consent?

When the 16th amendment to the constitution was ratified more than a century ago, the IRS enacted a system of withholding. Employers complained and the withholding provision was repealed a few years later in 1917 (Higgs, 2007). Most people who did owe taxes paid only 1% in quarterly installments the year after they incurred the tax burden. During WW2, the federal government wanted more revenue to support the massive wartime spending, and instituted withholding for income taxes.

The federal government employs almost 9 million workers (Hill, 2020), about 6% of the total workforce, but its effective reach is so enormous that employers today only borrow workers from the federal government. Each employer must abide by so many employment regulations that even a small business has to dedicate at least one person to administering regulations. The hiring of an employee initiates an implicit contract not between the employer and employee, but between the employer and the federal government. The employer faces stiff penalties for violating any provisions of that implicit contract. How has the tentacled reach of the federal government affected employees?

Like the young women at the Lowell mills, workers are not allowed to touch their pay until taxes, insurance and fees have been withdrawn. Some taxes are silent, withdrawn by lowering gross pay. After state and local taxes and the employee portion of health insurance is deducted, a worker today may be left with only half their pay. Unlike the women at the Lowell mills, the federal government does not provide room and board for most workers. As Richard Byrd warned a century ago, a federal government is only remotely concerned about those needs. Instead, it takes from the worker in the now and gives back to the worker in the future after forty years or more of work – a pension and medical care after retirement.

In addition to future needs, a worker’s taxes feed a bureaucracy that safeguards the security, wealth and needs of the upper 20%, and selected regional interests. Like the Chinese emperor, the $1 trillion spent on current military needs and past military promises seems far away from the daily security needs of most Americans. That spending  supports local economies in some regions and may be the key economic base in some rural communities who strongly support military spending to maintain a global empire. After all, their local economic security depends on such spending.

Larger than Amazon’s football sized warehouses is the largest warehouse in the nation run by the federal government. It is bounded not by walls but by a web zealously tended by lawyers and regulators, and inescapable for most employees and employers. The restrictions and harsh working conditions of the Lowell mills strike us today as paternalistic exploitation. The parents of the young women welcomed the discipline and extra money that their daughters earned. The hard work instilled moral character in the women before they returned home to marry a local lad.

Many of us today welcome the paternal oversight of the federal government as a safety net. The children of our children 200 years from now will certainly regard this age differently. Will they see the complex net of laws that bind employees and employers as a safety net or a trap?

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Photo by Fikri Rasyid on Unsplash

Bird, B. (2021, May 26). How much does the average American pay in taxes? Retrieved June 11, 2021, from https://www.thebalance.com/what-the-average-american-pays-in-taxes-4768594.

Higgs, R. (2007). Wartime Origins of Modern Income-Tax Withholding. The Freeman, (November). Retrieved from https://admin.fee.org/files/doclib/1107higgs.pdf. Also, see IRS history Timeline (2021) and LOC (2012).

Hill, F. (2020, November 05). Public service and the federal government. Retrieved June 11, 2021, from https://www.brookings.edu/policy2020/votervital/public-service-and-the-federal-government/

IRS. (2021). IRS history Timeline. Retrieved June 10, 2021, from https://www.irs.gov/irs-history-timeline

Library of Congress (LOC). (2012). History of the US income tax. Retrieved June 10, 2021, from https://www.loc.gov/rr/business/hottopic/irs_history.html

Tax Analysts. (2021a). The Income Tax Arrives. Retrieved from http://www.taxhistory.org/www/website.nsf/Web/THM1901?OpenDocument. For PDFs of original tax forms that your great-great-grandparents might have filed, see

 U.S. 1040 Tax Forms, 1913 to 2006. Retrieved from http://www.taxhistory.org/www/website.nsf/Web/1040TaxForms?OpenDocument

Taylor, A. (2021). American republics: A continental history of the United States, 1783-1850. New York, NY: W. W. Norton & Company.

Being Left-Handed

June 6, 2021

by Steve Stofka

This past week we recognized the 100-year anniversary of the massacre and destruction of an entire black neighborhood in Tulsa. We struggle to talk constructively about racial hatred and injustice, willing to look back in history but not look at those same forces in our current circumstances. Ongoing practices and attitudes favor some at the disadvantage of others, an ugliness of human nature that we want to keep imprisoned and invisible. Given that reluctance, I thought I would approach the subject from a different angle, one that readers can better tolerate.

Left-handers live in a right-handed world. Approximately 1 in 10 people are left-handed,  outnumbered by a majority of right-handers who make the design rules. If lefties cannot use scissors properly, they are clumsy. Here, let me show you how to do it, a righty says. China, the global leader in manufacturing, does not make left-handed scissors. All children are taught how to use right-handed scissors. In many Asian countries, people perceive lefties as aberrant so that left-handedness goes underreported (Kushner, 2013).  

Designed for right-handers, safety guards on cutting tools do not adequately protect left-handed operators and result in more injuries (Flatt, 2008). This reinforces the notion that there is something wrong with left-handers. They are not mindful. It is their fault, not a peculiarity of the machine’s design. Surgeons who are left-handed require a longer learning curve to adapt to right-handed stents, forceps and cutting instruments. Even those learning to shoot a rifle must make some adaptations that right-handers take for granted.

Lefty loosey, righty tighty seems like an easy mnemonic to a right hander, but difficult for a left hander who watches and mirrors a right-hander open or close a jar lid. At a family gathering, the family seats the kid with the left-handed arm at the corner of the dining table, away from the center of conversation. American teachers would force left-handers to write with their paper turned the same way as right-handers, forcing many left-handers to curl their wrist into the shape of an ‘f’ in order to keep their letters on the line. Left-handers are systemically marginalized and righties are blissfully unaware of the practice (Coren, 1993). Paul McCartney, one of the Beatles, played a left-handed bass. Who knew they existed? Most lefties were taught how to play a guitar the “proper” way, which was right-handed of course.

Decades ago, parents and educators in western European countries thought that a child’s handedness could be repatterned. Take the spoon out of the child’s left hand and put it in their right hand. When they use a play hammer to tap in wooden shapes, take it out of their left hand and put it in their right hand. Don’t let them salute the flag with their left arm. Make them do it with their right. A left-hander who could not retool their brain was regarded as stubborn or subversive.

The majority in a community feels an entitlement to have it their way, but especially so in a democracy where everyone gets a vote. The majority dominates and even persecutes the minority. Charles Darwin noticed that finches drive out those born with a different beak or plumage, the majority acting to preserve key distinguishing qualities. Humans use skin color, language, political and religious beliefs to separate “us” from “them.” Beliefs can change but skin color is hereditary and language or accent is embedded in us as children.

“Look, this is a right-handed world,” say the righties to the lefties. If the majority can be discriminative against left-handers, imagine how much worse it is for those with other hereditary traits. Like Darwin’s finches, the majority white population excludes black people from living in certain neighborhoods and treated black families with hostility when they were traveling on vacation (Burton, 2012). The majority withholds resources – credit and job opportunities – from black people because they have the wrong “plumage” or their “beaks” are  too large. Our brains have grown large but our primitive behaviors emerge from our bird brains. We must evolve and become human.

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Photo by Kelly Sikkema on Unsplash

Burton, Ph.D., N. (2012, July 12). How Did Blacks Travel During Segregation? Retrieved June 04, 2021, from https://cobb.typepad.com/files/root_green_book-1.pdf

Coren, S. (1993). The left-hander syndrome: The causes and consequences of left-handedness. New York, NY: Vintage Books.

Flatt, A. E. (2008). Is being left-handed a handicap? The short and useless answer is “yes and no.”. Baylor University Medical Center Proceedings, 21(3), 304-307. doi:10.1080/08998280.2008.11928414. Caution: some photos of hand injuries may be disturbing.

Kushner, H. I. (2013). Why are there (almost) NO Left-handers in China? Endeavour, 37(2), 71-81. doi:10.1016/j.endeavour.2012.12.003