Archive for March, 2007
People have long complained about porkbarrel spending - and it continues largely unabated. An editorial in the New York Times today describes all the porkbarrel spending included in the $103 billion supplemental appropriations bill that Congress just passed (and Bush is expected to veto).
But this old-fashioned form of porkbarrel spending (roughly $20 billion each in the House and Senate Bills), as much as it needs to be controlled, is now being dwarfed by the new Bush version of patronage: outsourcing. As an article in this month’s Vanity Fair describes, this new form of patronage is not just tens of billions but hundreds of billions. This makes it’s scale totally different from ordinary porkbarrel projects:
To get some idea of the scale: contractors absorb the taxes paid by everyone in America with incomes under $100,000. In other words, more than 90 percent of all taxpayers might as well remit everything they owe directly to SAIC or some other contractor rather than to the IRS.
You undoubtedly have heard of Halliburton which, according to Congressman Waxman’s committee, has received contracts valued at an estimated $25.7 billion for its work in Iraq - and which is now moving its headquarters from Houston to Dubai. But have you heard of SAIC (Science Applications International Corporation) which has a workforce of 44,000, has been awarded more individual federal government contracts than any other private company in America (currently 9000), and has more than a hundred contracts worth more than 10 million apiece? Prior to the war, SAIC was awarded seven contracts, together worth more than $100 million, without competitive bidding.
But the issue is not simply the waste of money. There is also the danger that the federal government has allowed internal government experience to waste away in the process. As described in an editorical in today’s Wall Street Journal, “the number of private federal contractors has soared to 7.5 million, four times bigger than the federal civilian work force itself . . .” As anyone who has hired a consultant knows, even when consultants are honest and knowledgeable, they cannot make up for a lack of in-house expertise.
Political conflict between individuals, interest groups and political parties is as old as politics and government. For much of the history of the United States, in fact, this conflict has been essential to social stability, serving as a means of avoiding more dangerous forms of conflict.
In the past few decades, however, the public has become increasingly impatient with partisan politics - for good reason. While politicians have been attacking each other, fighting highly emotional battles over symbolic issues of little real substance, undermining or reversing whatever progress had been achieved by the other party, they have been doing little to address a mounting list of serious long-term problems that face this nation. These problems - which include declining economic competitiveness, an educational system that is failing our youth, a mounting national debt, exploding health care costs, a trade deficit, a growing technology deficit, and global warming - remain ignored or inadequately addressed because such problems require political agreement and long-term cooperation, two things that our current system of politics cannot provide.
A New Economic Environment That this is happening now is no accident. It follows from the fact that we have just passed through one economic era (based on mass production) and entered another (driven by innovation and rapid technological change). Under mass production, companies used high volume production of standardized products to compete based on price within national economies. During this period, the public was focused primarily on material goals and advancing the nation’s standard of living while the primary role of government was to regulate the economy and settle disputes between interest groups over material resources. Within this role political conflict was not particularly harmful - in fact, it was used as a means of sorting out who should get resources. Those individuals, interest groups or political parties that pushed the hardest for their interests were rewarded with economic resources in the form of government programs, legislation and/or tax breaks.
Under the new economics, however, all this has changed. Instead of using mass production to compete nationally based on price, companies now use innovation to leapfrog their global competitors with new or essentially new products. This means government has a much different role to play. Continue reading ‘Why We Need A New Kind of Politics’
The U.S. has finally come to accept that something needs to be done about global warming. The question now is how to do it. The fact that we don’t know how much of a reduction in emissions is necessary or how much a given reduction will cost makes the choice very difficult. Although the cap-and-trade has become the mechanism of choice in the United States and is the clear favorite for curbing greenhouse gases (eg. the Environmental Defense Fund supports cap-and-trade), there are still doubts. For one thing, as Samuelson says “no plausible ‘cap and trade’ program would significantly curb global warming.” For another, with quantity-based systems, there is no yardstick for determining equity among countries. Since the main reason the United States gave for refusing to ratify the Kyoto Protocol was that undeveloped countries were not asked to do their fair share, this is no small problem.
In theory, using a price-based mechanism like a carbon tax would be better 1) nationally because incentives could be set at an affordable level and the market used to find cost-effective solutions and 2) internationally because having every country control to same marginal cost would be a good basis for equity. But politically the carbon tax is impossible and any politically acceptable tax would be insufficient to have much impact.
It is to resolve this impasse that a feebate makes perfect sense: it uses prices to drive reductions in greenhouse gas emissions but it does so without collecting any net revenue.
Continue reading ‘A Feebate for Greenhouse Gases: Better than Either a Cap-and-Trade or a Carbon Tax’
