The Balanced Budget Amendment Fallacy

Not much, if anything, would be worse for all of us than a balanced budget amendment. Never mind how you feel about government, taxes and spending. Forget about the politics. Simply, the effing thing can't work.

Budgets are devices that allow people to plan. In government-speak, however, a balanced budget law mandates that an entity not spend more than it collects. Fine! Anyone who lacks credit knows all about not spending more than what's in the till. (Can you spell "Got any spare change?") So what's wrong with telling government it cannot spend more than it has?  Lots, if what you're doing involves more than simply expressing the notion that borrowing lots of money you don't have may not be a hot idea!

Most governmental bodies budget for fiscal years, whether they run from July to June or November to October. A few budget for two years at a time, but let's stick with the more common approach. Suppose a governmental body thinks it will collect $2 trillion per year. That money comes from taxes, fees, income from national parks, etc. Smart people estimate the revenues by making assumptions. No problem so far, but if $2 trillions is the estimate, planners should not plan for more than $2 trillion in expenditures. Still no real problem. Truly, and I'm pretty liberal! Congress and the President will have to suck it up and tell people they can't have this or that, and they will need to raise tax rates on the most financially successful Americans to reach equilibrium, but none of that should seem impossible? Really! Go back to the 1990s and study up a bit. President Bill Clinton and Democrats in Congress, with no help from Republicans on the income side and some more than gentle prodding on the spending side, pulled it off, and for more than a moment or two. So, to those who are really after less borrowing, an amendment to the venerated Constitution need not pass the Senate and House by two-thirds majorities, and need not be ratified by the legislatures of 38 states.

If a Constitutional amendment need not be passed to accomplish the worthy goal of borrowing less over a long period of time, what's the problem with passing one? It's really very simple:  When the government adopts a budget, it makes educated guesses about income and expenditures. In a $16 trillion economy, how likely is it that all of those numbers will end up spot-on? Not very!!! (How close do you get to estimating how much you'll spend during a vacation day at the beach?) And no one knows, for the year, how things will turn out until the year ends. Forecasting lets the people in charge make corrections along the way, but if we're talking about the federal government, just exactly how does that work. "Revenues are off this month, so close down the FAA; if things pick up, it can reopen next month." "That hurricane last week was a doozy. No health care payments for awhile."  Etc.

Governments cannot function without a cushion to smooth things out. And, when any enterprises lacks an adequate cushion, it loses its ability to make good judgments and often its costs increase. Laying people off and rehiring them is expensive and, in many instances, will result in revenue losses. (When the Republicans shut down the FAA last week, the government stopped collecting airline taxes--the airlines, in the main, are pocketing those sums--and airport projects have stalled. When they start again, damaged equipment will need to be replaced, work will need to redone, etc.)

That all sounds pretty bad, and I've spared you the bad examples, like not maintaining the military, not paying Social Security or Medicare bills, and stuff like that there. But there's more, and this is the really bad part. Who will decide, if revenues do not cover appropriated expenditures, who gets paid? The Amendment says nothing about this issue, except for provisions that allow the Amendment to be ignored if a declaration of war is in effect, or--or is it and, as the Amendment is ambiguous--when the country is involved in a military conflict. Presumably, only the courts can resolve these issues. Congress cannot act, and the President has no power. It's hard to imagine the House of Representatives, with a Republican majority, wanting the hated, unelected, undemocratic autocracy that is the federal judiciary deciding how money should be spent. Who else, though? The gang of this or that many? Some Congressman who knows it should be this way or that? (One friend of mine suggested across the board cuts. So we'll have a federal judiciary on half-pay, a plan that violates the Constitution. Prisons half-staffed. One pill per day, so old people will die, but not as quickly. Really?)

People are frustrated, and the comment I hear most often is "at least they're trying something." F for effort, for often the best solution is "don't do something, just stand there." The nation's problems can be solved, but the solution requires an acknowledgment that the problems are not simple, that they are long in the making and, therefore, will take years to solve, and that we all have to be part of the solution, not just "those lazy-ass people who are sponging off of ME!"

The Balanced Budget Amendment is a lazy, poorly thought-out attempt to solve a problem, so that its authors and proponents can kick some ass and feel good about themselves.

Lessons From Highway Driving

I get most of the highway driving duty in my family. I guess we're a pretty traditional trio, and within our milieu driving long distances is "men's work."  We never go very far:  Round trips to Phoenix are the norm, and there's a very occasional excursion to San Diego or Orange County. Thank goodness!

As a young driver I learned a few rules of the road. One that stuck was "stay to the right." Drive in the right lane on the highway, move to the left lane to pass and, then, move back to the right lane. Simple and sensible! And the law, as well, as it is set forth in Title 28, Section 721, Arizona Revised Statutes.

So why do so many people, mostly in Arizona, place their cars in the left lane and leave them there? My wife says it's random, but her theory falls apart when the facts confront her. At any given moment there may be a line of 10-20 vehicles in the left lane and, in the right lane, there's us, three or four pokey-ass semi-trucks, maybe a pickup truck loaded up with everything a family may own and perhaps, a really old car with an even older driver.

So what's the answer. I'm pretty sure I know, but I thought I'd test my theory and, perhaps, generate some commentary on this frustrating aspect of life.

I think the American psyche, writ larger than usual in Arizona circa 2011, explains the lawbreaking behavior. If you're an Arizona citizen--there's actually no such thing, as citizenship is a national concept, while residency is a state-law thing--you have a God-given right to be certain no one can or will move ahead of you in the line, even if that means everyone is driving at about 58 miles per hour. Here in the Grand Canyon State, our people are committed to the notion that if working together will let us all arrive at our destinations more quickly, and if being ahead of the other guy means we're all on the road a while longer, Choice No. 2 is the right choice and the other choice is for Obama-loving Socialists! None of that "village" stuff we got from Madame Secretary in her prior life, no sirree. That's for lib'ruls!

And the real lesson:  Jane should be our new highway driver! Nothing will change the behavior of our fellow travelers, but when she gets a dose of their driving habits, there will be peace in the valley!!!

A Father's Day Thought

I'm reading The Social Animal by David Brooks. (Yes, that one!) It's sort of a work of fiction about an imaginary couple and, so far, their son. I've followed the relationship between Julia and Rob and have observed their son Harold from birth through, so far, his senior year in high school. Throughout, Mr. Brooks provides a ton of information about how people relate to one another and, in the process, learn and love.

So yesterday, I'm sharing with my wife how much success in life depends on the bonds we have with parents, other relatives, teachers, etc. Jane asked, if that's so, how do we scale up when so many people don't have these relationships in the right doses in their lives? A very good and very fair question, and one I pondered during my 90-second sojourn into the convenience store to buy a bottle of iced tea while we were hurrying to the movie.

The answer was evident as I opened the car door. We--Americans--do too much on the "one size fits all" plan. We make rules, we fund programs and we measure results. When we don't get the results we expect, we blame someone and move on to the next approach or, as often as not, to the next problem. Never mind the fact that there may never be a reason to believe our approaches might work; that's how we roll! (Congress is judged by how much it spends on an issue. Thus, people can blame Congress for not supporting health care for seniors because Medicare reform eliminated $500 billion of wasteful spending. Better, perhaps, to waste the $500 billion over 10 years and prove to old folks that you're on their side?) We have a template for addressing problems, and that's that and that's all!

Of course, the other element we cannot ignore is that fact that the problems many people deal with simply don't affect the powerful, wealthy, achieving class. Our elites go to schools where teachers can give their students the attention they need. The powerful among us are not holding down two and three jobs, so they have the time--and money--to enrich their children's lives. These people, when someone is ill, do not have to pass on mortgage payments to buy medicine. Thus, the power class can take comfort in the fact that their children learned in public schools and assume others are lazy or dumb. Etc.

None of what I've written will shock most anyone who knows me. That said, the epiphany for me was the fact that as we ignore our problems we are destroying our future, and that it's not only about money. Our children need us, mindful of their mental, physical AND emotional development, if we want them to be successful. Yes, we need to focus more financial resources on our people and their needs, but we cannot buy solutions. We get solutions when we invest ourselves in others!!!

Happy Father's Day 

Creative Thinking About Healthcare

Here's an interesting perspective on a significant problem with our health care delivery system. In our "free market" system it's hard to imagine the concept ever being implemented, but the notion is worth considering.
Why Medical School Should be Free

Lower Tax Rates = More Jobs?

I’ve been an employer for about 30 years. “But you’re an attorney,” you say. “Yes, of course I am, but I’ve always had a secretary, and the firms with which I have been affiliated have had associates, contract attorneys, legal assistants, bookkeepers, files clerks, etc.” So, directly and indirectly, I’ve been employing people for three decades.

My practice focuses on business and real estate issues. My clients are employers, large and small, in many, many different industries.  I’ve represented my clients in times good and bad, and often talk with them about employment issues.

My point? Never, not once, have I decided to hire someone because I–or my firm–had extra money lying around. And never, not once, has a client of mine told me he or she hired someone because they had some extra money in the bank.

We–people who hire employees–hire them when we have work for them and think we will earn more money on account of the work they do. No mystery here; it’s really that simple!

So I get a little nutty when I hear about the Republicans’ job creation scheme. Lower marginal tax rates for the highest earners, they claim, and small business owners will have more money and, thereafter, start hiring. Rubbish, and here’s why:

Assume I own a business. I have employees.  We generate gross revenue of $500,000, and I net $250,000 after paying all expenses. My income tax bill (federal) is about $45,000, leaving me with after-tax income of $205,000.

Now, assume all of the same facts, but change the highest marginal tax rate on my income from its current 33% to 25%. When the math is done, I’ll have an extra $10,000 in my pocket. Cool, but the extra money gives me no reason to hire someone else. After-tax income of $205,000 or $215,000 changes nothing about how I run my business, as we’re still focused on the sweet spot, where I am maximizing revenue and minimizing expenses.

I know, I know, if lots of people all have an extra $10,000, they’ll buy more stuff and maybe, just maybe, they’ll buy it from me. Then, I’ll need to hire more people because demand for what I sell will actually increase.

True, but what if I decide to save the $10,000, or use it to pay off debt? In fact, with an income of $250,000 there’s not much I need. Maybe I don’t appreciate the consumer culture–I, of course, don’t have a credit line of $500,000 at Tiffany, like a certain “regular guy” who’s running for President–but the notion that, somehow, high-earners who pay less to the government will spend their tax savings and cause employers to hire people is just as silly as the old supply-side canard that if we lower tax rates enough tax revenues will increase. There aren’t that many high-earners, and there’s only so much “stuff” we can buy.

If people want lower tax rates, fine. Let’s be honest, though, about two things: First, lower rates means government collects less, which means government must borrow or do less. And, second, putting extra money in people’s pockets does not cause employers to hire more workers unless the extra money increases demand, which won’t likely happen if we focus on demand generated by our highest earners.

Note: The opinions offered here are mine, and mine alone, although they happen to be supported by the Congressional Budget Office and lots of other groups that know this stuff much better than I do.

A Little Truth, Part 1

A Little Truth, Part 1, is the first post of what I hope are several more, identifying falsehoods in our discourse that don't get challenged.  I hope you enjoy these brief encounters with reality, that they make you more critical thinkers and better citizens, and that you tell your friends.

So, it's a given that people live longer than they used to and, therefore, the United States of America must raise the retirement age for Social Security to save us from ourselves.  Right?  No, wrong, although I'm sure those people who argue for increasing the retirement age will quibble with my characterization of their main argument in support of their position.  To them I say, get your own damn blog!

So, wrong?  Why?  Let's stick with white males, only because I am one and, surprise, the life expectancy tables start with white males. A boy born in 1850 would be expected to live, on average, for 38.3 years. A boy born in 1950 would, on average, be expected to live for 67.55 years, almost 30 years longer. That's a lot of extra years.  Hmmm.  Still wrong?  Yes.

Let's look at how long 1850 boy, if he lived to be 50 years old, would be expected to live.  20.76 more years, all the way until 1920.  And 1950 boy in 2000, when he turns 50?  He'd be expected to live for another 28.2 years.  So over 100 years the average 50 years old's life expectancy lengthened by less than an eight years.

To recap, at birth lives lengthened by almost 30 years over a century, while at 50 years old the same century only gave us middle-aged white guys an extra eight years.  Why the discrepancy?  That's easy; it's all about surviving childbirth.  When a generation lives longer lives than its predecessor generations, but its older people's life expectancies are not significantly greater, mathematics tells us it's all about people dying before they get older.

What does all of this have to do with the Social Security retirement age?  Soon after Social Security came into being in the mid-1930s, 60 year old men were expected to live for about 15 years when they retired.  And now, 75 years later?  About 20 years.  Not very much longer, and certainly nothing worthy of "people are living longer, so we have to raise the retirement age."  I'm no expert on Social Security, but I do know this:  When you talk about people living longer in the context of Social Security, overall life expectancy matters not at all!  Instead, it's about how long people will live once they receive benefits.  And the little truth is that over the past 75 years, retirees aren't living all that much longer.

So, when you hear noise about people living longer, find out who the people are who are living longer, how much longer they're living, and ask yourself, Does this matter?

Random Thoughts On The Tucson Tragedy

I've been quiet until now. "Mostly quiet, " to be totally truthful. We did have a dinner party on January 8--the food was ready and the friends close, so we saw little reason to cancel--and, at about 9:30 and with a snoot full of wine in me, I answered the phone. A reporter from JTA, an international Jewish news service, was calling from Washington, wanting a referral for an article he was writing about the shooting. (Long story about why he was calling me.) I told him I'd get him Jonathan Rothschild's number in the morning. Jonathan is my law partner, a dedicated Democrat, an active member of the Jewish community (and, most likely, the next Mayor of Tucson.) I must have said more than "I'll get you Jonathan's number in the morning," however, as the story that was released on Monday identified me as a Tucson-area lawyer (right) and a Democratic Party activist (huh), and quoted me thusly:  “You have a vice-presidential candidate for a major party who runs ads with targets saying ‘remove Gabby Giffords’ and a young man with issues. You're going to spend a long time convincing me it doesn't have something to do with it.” (My partner was more temperate, but he spoke with the reporter in the morning!)

I promised random thoughts. First one. If you've met Congresswoman Giffords, she's your friend. I've met a fair number of politicians over the years, but never one like Gabby. No pretense, and lots of fun and funny. (And she must have a photographic memory for faces and names.) Plenty smart and strong, but I've never seen her proving her smarts by putting someone down or building herself up. Just a really nice person. (BTW, it takes a certain amount of confidence to be a young woman in what is still a man's world, slight in stature, and call yourself, and let others call you, Gabby!)

Big deal? Yes, as I believe Gabby's personality plays a significant role in our reaction to the horrid events. Of course, I can't be proved right or wrong, but if Tucson was represented by someone who more closely fits "central casting" for a Member of Congress, our community's reaction might be different. (Nothing about Judge John Roll, the other prominent victim, changes this theory. Another exceptional person, totally approachable and friendly, albeit in a way very different from Gabby's.)

Second one. About the criticism of the memorial service:  Get over it, critics. Everyone mourns differently. The Right Wing owns this tragedy no more than it owned 9/11 (despite its claims to the contrary), and if the service at McKale Center on Wednesday didn't suit someone's taste, all he or she had to do was leave or, more likely, turn off the television set. Yes, if weird is a synonym for unfamiliar, the opening by Dr. Carlos Gonzales was weird. Of course, weird is not a synonym for unfamiliar! Dr. Gonzales is an American with a non-Anglo Christian heritage--like so many people in Tucson, Arizona--and, like Christians, Jews, Moslems and others, he follows a tradition that he knows. That he shared it with tens of millions is very cool. That a few people found this weird--yes, you, Brit Hume, among others--is very sad.

Third one. About the tone, and all that. I heard no public official blame the shooter any less because of the intemperance we've all experienced over the past two years. (Yes, the Sheriff of Pima County is a public official--and not a very liberal one at that--and no, he did no such thing. Read what he said!) One group in this country has gotten very good at taking what other say, amping up the words and, then, screaming about the unfairness of it all. In my workaday world we call this a "straw man argument." Throw something out there, blow it down and call it a day! It's crap in a courtroom, and it's crap on cable, too.

On the same issue, I am reminded of Hamlet and "The lady doth protest too much, methinks." Yes, campaign is a political term with origins in the language of war. Yes, Democrats have run ads with bullseyes. Yes, sometimes people associated with Daily Kos and other liberal blogs forget every mother's adage:  "If you don't have something nice to say, be quiet."

Agreed, politics is a tough game. But there's a difference between a bullseye and what's seen through a rifle scope. (And no, Sarah Palin, the surveyor's scope bit won't sell!) And when a candidate in Florida shoots at a target with with the initials DWS (for Congresswoman Debbie Wasserman Schultz), that's not OK. Nor is candidate Jesse Kelly holding an event that gets promoted in this way:

Get on Target for Victory in November
Help remove Gabrielle Giffords from office
Shoot a fully automatic M16 with Jesse Kelly

It wasn't OK when it happened, and it can't be OK after January 8, 2011. We're all better than this! Really, we are! And as for Daily Kos, does the Far Right really want to compare some blogger with many of its elected leaders and its propagandists. I mean really, some guy posts something and you all want to liken him to Glenn or Rush or Newt or Sarah? (In passing, on the Jesse Kelly event, who gets off on shooting an M16? I'm sure I'd feel like a fool, hanging out with a bunch of guys and being all macho with guns!)

Fourth one. Last thought. The Tea Party crowd swears by the Constitution, but I cannot recall another election cycle in which we heard more chatter about amending the Constitution, all of it offered by Tea Party candidates. They suggest doing away with the 16th and 17th Amendments (taxing authority and direct election of Senators, respectively), the 21st Amendment (which repealed the 18th Amendment, which instituted Prohibition), and those portions of the 14th Amendment that make people citizens if they're born here and subject to our jurisdiction when they're born. For a crowd that thinks the Constitution is Biblical in its import, they seem to have issues!

I have an issue, too. My issue is the 2nd Amendment. Why is it so sacrosanct? In fact, courts have routinely allowed for reasonable restrictions on the right to bear arms, but with the National Rifle Association in control of state legislatures, Congress and the U.S. Supreme Court, the notion that any legislative body would adopt the most minimal of restrictions seems unimaginable. Yet, we have a problem that seems obvious:  More guns than any other developed nation and more gun deaths. We can't fix the problem because of the 2nd Amendment, so we need to repeal the 2nd Amendment. Fat chance, of course, but why is the 2nd Amendment not worthy of thought, when those who swear most loudly their adherence to the Constitution want so badly to rewrite it?     

I could say much more, about so many other things, but I think I've said all I need to say, save one thing. Be kind to your children, your spouse, your friends and others. If we all learned anything from what happened last week, we now know a quick trip to the grocery store, a visit with a friend or any other daily activity can turn everyone's world upside down.