Government on the Cheap

It should be obvious that public policy often fails as governments at all levels don’t have the resources to do the job professionally. There are multiple mindsets that seem to make this inevitable. First is the tax-cut mindset, a fundamental Republican position, supported with less enthusiasm by Democrats. Then there was the Russell Long (former Louisiana Senator) description: “Don’t tax you, don’t tax me, tax that fella behind the tree.” Taxes are okay as long as someone else is paying. Governments are run by budgets. Moneys aren't spent until budgets are approved, often a messy process. One way to look at budgets is to consolidate all spending needs, then figure out how to fund them through taxes and other revenue sources. Or, visa versa. These are the taxes; what do you want to fund? The problem is that either way, funding is usually adequate for those programs that have support—read elite support. The groups with campaign funds, lobbying, influence by other means get the money. Despite Eisenhower’s warning of the “military-industrial complex,” defense gets well-funded.

Departments that “pay for themselves” often get poorly funded. The Internal Revenue Service (IRS) collects billions in taxes owed. If you want to manipulate (avoid) taxes, this is where the budget should be cut. Those of us who are willing to pay what’s owed (“losers” and “chumps” according to the tax cheaters) support a fully-funded IRS. IRS audits bring in far more money than their costs. A similar case for the Securities and Exchange Commission (SEC). The SEC was established during the New Deal after wide-spread corporate fraud from the 1920s, to provide financial reporting and transparency. Transparency is a fundamental requirement not only for corporate honesty, but democracy itself. The SEC has the power to issue civil penalties (the proceeds going to the Treasury) and refer criminal cases to the Justice Department. Increased funding means more penalty funds collected (like the IRS, SEC reviews pay for themselves) and better financial reporting. The SEC typically gets adequate funding only after financial catastrophe (like after the Enron collapse and other massive frauds). Note that after periods of reform like the New Deal, the other party returns to power. Because newly created agencies usually are effective, the strategy is to cut funding rather than kill the agency. An agency has difficulty maintaining effectiveness without adequate resources. For example, the SEC failed in its evaluation of Enron, allowing decades of abuse and fraud.

Infrastructure has been lagging. That’s fairly obvious given the current conditions of roads and bridges. It also impacts multiple departments, from emergency management to healthcare. Also the Post Office, another complex story. The 2020 stimulus was simplistic, in part because the IRS and other agencies did not have the computer infrastructure to handle more sophisticated payments. That infrastructure spending would have been more productive (and therefore money well spent), but that requires forward thinking. American politics has difficulty with forward planning. After elections, politicians start planning for the next election in two years. Effective long-term government does not assist the next election.

We have multiple local, national and global crises that are worse than necessary because lack of long-term focus and proper funding. Consider two interrelated crises that overlap into other areas: mental health and drug addiction. My daughter recently had a homeless woman who was obviously mentally ill camp out by her business. She called multiple non-profit and other organization to get help for this woman. Not one would provide support. She had to call the police, who provided temporary (presumably expensive) help. She was back on the streets in a few days. Long-term, this meant more resources spent for virtually no benefit and the poor use of police. Let me point out the police did a commendable job in an area they shouldn’t have to deal with.

Public mental health facilities have been shut down and public health underfunded. Less than half the people suffering from mental illness receive treatment (estimated at 43%). Defunding of government mental health hospitals started in the 1960s (when “deinstitutionalization” was considered a good thing). A similar story for drug addiction (an estimated 20 million with drug or alcohol addiction). This is generally treated as criminal activity, rather than a public health emergency. Again, a waste of resources for arguably negative results. Lack of funding for these needs; vast sums spend on prisons and the “warehousing” of people in prison (worse when compared to almost anywhere in the world). Simultaneously, the police are dealing with this issue rather than public health and social service professionals. Restructuring and increased funding seems required.

Let’s talk education. This was my career for most of my professional life. College was affordable when I went through school. My wife and I both received advanced degrees thanks to the combination of reasonable tuition and the GI Bill—what we considered “enlightened” government programs. At the time, states were primary contributors to higher education. This fell by the wayside as “more pressing needs” drove state funding away from universities and, in its place, tuition increases and student loans were institutionalized. We hope to have the resources to partially fund our granddaughters through college, which will be a challenge. They need education, not a mountain of debt. Reasonable future tuition and fees don’t seem likely. We can only hope that talented kids from “poor families” (defined here as most of us) can get scholarships and tuition waivers.

Then there is K-12. The US doesn’t measure up that well. Results like testing scores are average for the developed world. Teachers in other countries typically get more respect and better pay and support—and stay on the job longer. The current pandemic reinforces that. Teachers are struggling more than usual, often without the empathy and support of the leaders (or parents). Certainly, without the needed resources. Economic downturns mean falling revenue, while state and local governments have balanced budget requirements. Federal funds should be flowing into the system, currently a political sticking point. Funding for public health and education is particularly lacking.

Let’s return to taxes. Eisenhower is arguably the best post-World War II president. During his tenure, the top income tax rate was 91%. The country prospered, the interstate highway system was started, and wars were avoided. The 1960s brought us lower taxes, war, inflation and then stagflation. The 1980s ended the stagflation (mainly because of the Federal Reserve’s monetary policy under Volcker); the Reagan Revolution and giant tax cuts followed, along with staggering budget deficits. It became really great to be among the 1%, with extremely low taxes and giant incentives to increase incomes—which they mostly took full advantage of. Reagan claimed that government was not the solution, but the problem. Voters seemed to think that programs favorable to them should be kept—so much for a balanced budget through spending cuts. Part of the answer was still government spending on the cheap. Bill Clinton temporarily “solved” the big deficit problem, with tax hikes and generally keeping government on the cheap (remember the Enron failure by the SEC). That blew up under Bush: recession, tax cuts, wars, even less spending on government programs—except for the gigantic military war spending. Deficits again exploded. Obama seemed to be for more government, but proved not to be effective (Mitch McConnell had something to do with that). Trump is all in on tax cuts and government on the cheap, especially for social programs.

Healthcare seems the biggest public policy failure. We spend the most on healthcare anywhere in the developed world, resulting in poor outcomes and a large portion of the population uninsured or under-insured. The US has a strange hybrid system, seemingly devised to maximize inefficiency at the highest price possible. Attempts at reform are immediately castigated as “socialism,” seemingly using the same logic that faced Teddy Roosevelt over 100 years ago when establishing national parks: “socialism!” Britain’s National Health Service is government run and therefor socialist. (As is US military and Veterans Administration healthcare.) Most other countries have various forms of government funding—not provide healthcare, but paying for it. This is what Medicare does. Right now, government pays about half the cost of our healthcare at a price that should cover everyone (based on the example of the rest of the developed world). We don’t “underspend” as a matter of public policy, but as some combination of ideology-gone-wrong and incompetence.

What is the solution? As a moderate, I think it’s important to consider the various sides. I assume most people would like competent public policy (the federal government actually audits for “economy, effectiveness, and efficiency; large state and local governments have similar reviews). Cherry picking, exaggeration and outright lies are not useful. This is not one-sided, although it should be obvious that Republicans do more of it (they are also better at marketing: “bumper-sticker-speak” is easier than thoughtful consideration of complex issues).

Consider just police departments. Police have a difficult job. Starting from scratch and redefining the job could be useful. Camden, New Jersey did roughly, eventually with some success. There are close to a million police in the US, with various problems, levels of training and relative funding. What are the police good at? What do they do a poor job at? Are other professionals better equipped to handle these or work with the police to do that? What do communities want from the police? (And to what extent does this vary by community or region?) What additional training is needed? What oversight is reasonable? How can all the needed resources be adequately funded?

The US spends less on government and has lower taxes than most developed countries. That would seem to be part of the problem. Government functions are necessary and have to be paid for. More productive public goods and services require more funding. Getting to a reasonable compromise proves difficult here, less so in other countries like much of Europe. Much of government spending is misdirected, like the previously mentioned prisons rather than public and mental health, and healthcare in general.

It would make sense to solve the interrelated problems simultaneously, but this is unlikely. The country is polarized by party. A major problem is corporate money in politics; public financing of elections may be necessary before much in the way of reform happens. The median voter model is currently dead. Public funding may bring it back. In the meantime, partial solutions like improving the Affordable Care Act and moving toward universal healthcare is doable. Call it Abbott-Care in Texas.