Category Archives: Politics and Economics

On the Question of Demand

Many economists have been arguing that demand is a major contributor to our woes in the economy. I doubt that anxiety over the deficit or the myth of excessive government spending as so-called conservatives would have people believe has much to do with it.

The fallacies over the debt ceiling mount.

On Fallacy, Politics: or Is the Government a Mugger?

I’ve been reluctant to post here as I’ve been busy at mediaplay and the 100days project but it’s a good time to put in some thoughts.

There are a couple of critical terms current at the moment: debt ceiling, jobs, compromise, revenue, and, yes, government. The latter has become the strangest, in my opinion.

There are a couple of problems to remark on. Our troubles appear big and it’s hard to find a context that doesn’t sound or read trite. At this moment a Google search counts 25,900,000 hits for the term debt ceiling. LexisNexis is a hoard as well. But let’s develop some political context. In a very recent International Herald Tribune article, Grover Norquist, the president of Americans for Tax Reform and self-proclaimed “issues management expert,” expresses his defense of the ATR pledge in the face of pledge misinterpreters. He writes:

. . . there is some confusion these days about what the pledge does and doesn’t mean, and numerous people have tried to reconfigure its intent to somehow allow its signatories to support tax increases. But in fact the pledge has not changed – indeed, fiscal conservatives must stick to their commitment to oppose tax increases and fight to reduce the size of the federal government.

Politically this is all very interesting and will lead us into a sort of bizarre logic having to do with what I call the misappropriation of the notion of “conservative,” and, ultimately, the definition and context of government and how that word serves ideologues (by this I mean people who take intransigent positions even in the face of reasonable evidence against those position) in our current times.

In his first effort to summarize his efforts, Norquist writes

There have been four main challenges to the pledge and what it means. The first is to charge that it gets in the way of a deal to allow a debt ceiling increase. But that’s not the case at all. John Boehner, the speaker of the House, has repeatedly stated that the House would grant the president a debt ceiling increase of $2.5 trillion if Mr. Obama would sign a deal to reduce government spending from his planned levels by the same amount or more.

This seems fair enough. Back scratch stuff. Obama can have his “debt ceiling,” which is just something he wants and doesn’t need, for something Boehner wants but may or may not need, which is, of course, unclear. It would appear that this might be the way deals are made but not really, as there is a difference between the debt ceiling and government spending reductions in terms of their equitable value. When I go to the local market and barter, I barter with things of equitable value. The shop person with whom I currently barter for cows never says: give me your house and I’ll give you two cows and that’s my final offer.

What is Norquist’s description of the current problem? He writes

The problem to be solved is not the deficit; it is overspending. Federal spending in the 2008 fiscal year was $2.9 trillion, and Washington will now spend $3.8 trillion in the fiscal year that ends on Sept. 30. Raising taxes is what politicians do instead of reforming and reducing the cost of government. Advocates of larger government prefer to talk about deficits rather than spending. Why? Because there are two solutions to a deficit problem: spend less or raise taxes. The issue, in other words, isn’t the pledge; it’s Washington’s inability to deal with its own overspending. There is only one fix for a spending problem: spend less.

There are several rhetorical issues here. Norquist’s use of the term “cost of government” is interesting. He presumes that the 900 billion difference between fiscal 08 and 2011 is a large number. He fails to provide a microeconomical equivalent, such as the difference of cost between my oil bill in fiscal 2008 and fiscal 2011. The math is pretty simple: it would be the equivalent of a three trillion dollar difference. In addition, Norquist never explains what he means by the cost of “government.” The cost of government is somewhat more complex than the cost of heating my house. House here, to use a Snickety sort of phraseology means, the thing I live in. But I also live in the USA, which is a body of government. “Cost of government” is an often tossed phrase that’s rarely defined within the context of federalism, which should be a concern of “conservatives.”

Additionally, Norquist presents a case dependent on the begging the question fallacy, as he assumes prior to proof the truth that the problem is overspending. In good argumentation, one should always prove that the problem to be solved is indeed the problem. This fallacy leads to questionable conclusions, such as: “Raising taxes is what politicians do instead of reforming and reducing the cost of government.” The writer here creates an image of devious people all around the country cooking up schemes to raise taxes because they think it’s fun. It may indeed be fun for current employers in Connecticut to start paying interest on unemployment benefits back to the Fed, but I doubt it. This leads to a recomplication to Norquist’s poor attempt at simplifying the meaning of government. According to Matthew Sturdevant of the Hartford Courant, there are about 120,000 people in CT getting unemployment assistance. The “cost of government” to them can be life line. The other fallacy here is the either/or fallacy known also as the false dilemma fallacy, which is a fallacy of limited choices designed to fool people.

Advocates of larger government prefer to talk about deficits rather than spending. Why? Because there are two solutions to a deficit problem: spend less or raise taxes.

Economist provide a whole host of solutions to deficits, some having to do with monetary and tax policy and increasing demand. There are more than just two solutions, and, indeed, neither of these two solutions is as simple as Norquist presents them. But, yes, indeed, raising taxes is a solution. The problem for Norquist, in my opinion, and for Congressional Republicans, is that a no tax pledge requires an equivalence between revenue (if any) and spending (if any): you can only spend what you make and if you can’t make more then you can’t spend more. I would love to live by this principle but free market people probably wouldn’t as the principle itself requires profitability but then eats the notion of profitability. Unfortunately, winter snows will come soon and I will “need” to pay the oil company. The oil company will not reduce the price of oil to a level commensurate to my current pay. I could certainly stop buying food in order to make up the difference but that would be impractical.

Government as a problematic object for Norquist is an easy mark. Since it’s difficult to define, it can be easily rendered into an object of scorn, ridicule, and inaccurate metaphor. Norquist writes

The theory is that any dollar the government failed to take from you in taxes had in fact been given to you in a spending program. By this reasoning, the deduction-killing Alternative Minimum Tax is not a tax hike — a cruel joke on the millions of Americans who get hit by it every year. When a mugger passes you on the street leaving you unmolested, he did not in fact give you your wallet.

Here “government” is a “mugger” and “molester.” But Norquist doesn’t present a set of arguments for why the AMT is an act perpetrated by a mugger or a molester. If he disagrees with the tax he should present effective reasons why he thinks it’s horrid. Some of the history would be nice too. Indeed, if effective, people should be provided with the chance to agree or propose counterclaims. There are many things about the tax code people don’t like. It’s worthy debate material but simply issuing a blanket restriction on tax hikes and taxes in general doesn’t make for intellectual inquiry because it diminishes the act of inquiry itself.

Conservatism should not be about diminishing the act of inquiry.

On Demography and the Future of CT

Seems interesting appropriate for the Composition II student:

Connecticut’s leaders are understandably obsessing over the state’s fiscal crisis, but a prominent economist warned Monday that the bigger and more difficult challenge to its long-term economic health is anemic population growth and an aging workforce.

Barry Bluestone of Northeastern University told a Hartford audience that the state must continue smart-growth zoning policies that encourage denser, less expensive housing–a key factor in attracting a younger workforce.

While politicians often focus on taxes and a regulatory environment, a chronic labor shortage is ultimately more destructive to a region’s business climate and its fiscal stability, Bluestone said.

“Demography is destiny,” he told a forum organized by the Partnership for Strong Communities: “How the States Will Fight for Young Workers and Economic Growth.”

But we also shouldn’t forget about the seasoned workforce.

Bad Writing

You know you’re in trouble when a politician begins an essay this way:

Skyrocketing energy prices have left most Americans with pinched wallets and anxiety about how to make ends meet. To address this problem, Democrats and Republicans must work together to find real solutions to our energy problem.

The last part is one of those sentences yanked out of a hat of prefabricated clauses. The first part diminishes the human costs to “pinched wallets” and “anxiety.”

The politician then goes to potential solutions:

There are many steps that the government can and should take now to help Americans stretch their hard-earned dollars during this difficult time. I will support measures to investigate the record profits of oil companies, introduce added competition to the oil market, protect consumers from price-gouging, increase transparency in energy trading markets, support a temporary gas tax holiday and delay deposits to the strategic petroleum reserve.

The trick here is to say that one “will support” in a sneaky future tense when the writer could propose something tangible, such as supporting a bill that would put the country into “infrastructure rebuilding” and converting all government buildings to solar power, which would negate the need to “investigate” anything other than a real solution.

Of course, you know you’re in trouble when a blog post begins “You know you’re in trouble when . . . “

The Politics of Sameness

The NYT asks an easy question:

What if at the end of Thursday, the three leading Democrats — John Edwards, Senator Hillary Rodham Clinton and Senator Barack Obama — are separated by a percentage point, or even less, leaving no one with the clear right of delivering a victory speech, or the burden of conceding? A number of polls going into the finals days that of have suggested that after all of this, the Democratic caucus on Thursday night will end up more or less as a tie.

And the answer–there really is no difference between them–doesn’t matter.

No innovation for real choice.

DOT, Contracting, and the Wonders of Road Work

I’ve been following this story in various areas of this weblog and the news has perhaps spread widely now on the I-84 imbroglio. Edmund Mahony of the Hartford Courant reports:

The transportation department paid the now defunct L.G. DeFelice construction company about $52 million to build the redesigned, 3.5 mile stretch of I-84 in Waterbury and Cheshire. The state paid The Maguire Group, a private consulting engineer, another $6 million to inspect the DeFelice work.

The audit by J.R. Knowles/Hill International concluded that DeFelice did millions of dollars of work incorrectly or not at all, that Maguire failed to inspect the work or ignored incorrect work and that the state paid for the work “without following proper procedures including field verification and signoffs.”

Sounds pretty complicated to me. Nevertheless, the results of incompetence will be felt for years to come and projects that would have been good for the state will probably feel the pain. How to trust any budget then that has gone through any sort of prioritizing. Whose priorities? Against what standards?

Mahony continues:

Although transportation officials have said nothing to indicate that there is any immediate hazard, the Federal Highway Administration is concerned that failures in the highway drainage system may be creating underground washouts that could lead to road collapses.

While placing most of the blame for the problems on the contractors, Rell said the audit also shows a “cultural failure” by the transportation department because it “did not anticipate or expect that deficient work of this magnitude by the contracting and inspection firms could even occur.”

The audit confirms one fact that has been known for months: that the redesigned roadway’s drainage system is a nearly complete failure. Other experts have estimated the state may have to pay anywhere from $20 million to $30 million to correct the drainage failures alone.

In addition to the FBI investigation, state Attorney General Richard Blumenthal is looking into the project. “This audit reveals outrageous and far-reaching failures at every level in the I-84 expansion project,” he said Friday.

What does that first sentence mean? “Although transportation officials have said nothing to indicate that there is any immediate hazard, the Federal Highway Administration is concerned that failures in the highway drainage system may be creating underground washouts that could lead to road collapses.” Let’s parse this: “Although transportation officials have said nothing to indicate that there is any immediate hazard . . .” The problem with this statement is that it’s written in prepositional status yet doesn’t link to a subject. It should’ve been cut from the paragraph. The paragraph should begin: “The FHA is concerned that failures . . . ” What does it matter that “transportation officials” either confirm, deny, or say nothing about . . . Was there a question?

Thousands of people drive I-84 everyday. Do the “officials” have some newfangled spyglass that can see under ground and into a “complete failure”? What does complete failure mean, by the way? If I build a structure and it’s pronounced a complete failure does this mean it would last a windstorm? Underground washouts. Governor Rell wants to change the culture of the DOT and reform the agency, but how does one reform DOT? I suggest that government hire people who can actually do inspection work themselves. The governor also wants DOT Commissioner Carpenter to “take action against any workers who have performed inadequately on the I-84 project .”

What does “inadequately” mean? Does the audit not answer some of this?

So many holes.

Future Design

A couple of depressing items in the paper this morning, both having to do with hypertexuality. The first has to do with I-84 in Connecticut and the corruption of road building. The FHA will be withholding 5m in highway aid until CT comes up with a plan to fix whatever problem needs fixing near Waterbury. Here’s some gist:

Although transportation officials have said nothing to indicate that there is any immediate hazard, the Federal Highway Administration is concerned that what experts call “stunning” failures in the highway drainage system may be creating underground washouts that could lead to road collapses.

“The type of things that might be worthy of immediate action are any cavities being developed underneath the pavement due to the drainage deficiencies,” Bradley Keazer, administrator of the Federal Highway Administration’s Connecticut office, said in an interview. “We need to have those identified and fixed so that we don’t have pavement subsidence on the interstate facility or the ramps.”

Judd Everhart, spokesperson of ConnDOT, responded this way:

“The department was surprised to receive this document, and Commissioner Carpenter will be in touch with the [Federal Highway Administration] regarding it,” spokesman Judd Everhart said. “We were puzzled by the request for a `comprehensive risk assessment’ for this project because we believe that the safety issues of immediate concern have been identified and corrected.”

Not much help here. What does ” . . . we believe that the safety issues of immediate concern have been identified and corrected” mean? But there’s more context, in terms of the legal and criminal proportions orbiting around the business:

Some industry experts say Keazer’s letter may be a sign of growing federal impatience over contracting irregularities at the state Department of Transportation, an agency that receives $400 million a year in federal subsidies for highway projects.

Last year, state prosecutors accused a half-dozen state transportation employees in connection with an alleged scheme to rig contracts to repair highway cracks. So far, one employee has been acquitted, one returned to his $135,000-a-year job after getting a special form of probation on reduced charges, another was convicted and three more are awaiting trial.

The Federal Highway Administration also has demanded the return of $9 million of the $12 million it agreed to give the state to subsidize the crack sealing.

In a separate case, later in 2006, two more transportation employees were convicted in federal court of rigging a contract to renovate part of New Haven’s train station, a program that involved federal mass transit, rather than highway, subsidies.

On the I-84 project, government and industry sources are complaining about delays in correcting the problems – delays they say are at least partly attributable to Gov. M. Jodi Rell’s promise to fix the highway at no additional cost to state taxpayers. Rell has said she wants to pay for I-84 repairs with money obtained from the parties she believes to be responsible – the state’s highway contractors and the insurance companies that guaranteed their work.

The targets here are insurance companies, the Maguire Group, and the original contractor DeFelice. The article also informs of further lawsuits to come. The questions about the I-84 project get stickier and more complicated. Last I checked, if you are coming from New York, I-84 is a pretty good way of doing it. The fix-it project has been a bang-up job.

But there’s more, too, this having to do with energy and power contracts. Mark Peters reports on some new power plants slated to beautify the CT landscape:

Power plant projects in Middletown, Stamford and Waterbury were selected to receive contracts worth more than $300 million through a ratepayer-funded program designed to promote construction of new plants.

A 620-megawatt plant proposed for Middletown was the largest of four projects awarded contracts Monday by the state Department of Public Utility Control. The natural gas-fired generator planned along the Connecticut River by Kleen Energy Systems would produce enough electricity for 550,000 typical homes.

Here people are not referred to as consumers or taxpayers, but “ratepayers” involved in public service. Here are arguments for:

Regulators and power plant developers have said the capacity contracts will ensure that badly needed new plants are built. The new generation facilities would help keep up with rising demand for electricity on the hottest days of the year and displace older, inefficient plants, which are dirtier and more expensive to operate. They also would reduce the penalties the state faces for not having enough generation to meet federal standards, the DPUC said.

“This is a significant and concrete step in transforming Connecticut generation facilities from old, expensive and dirty generation to new, clean and efficient facilities that will help to drive down electric prices,” said Donald Downes, the DPUC’s chairman.

He estimated the cost to ratepayers for the new contracts, which run for 15 years, at more than $340 million. However, the savings during that time would average more than $500 million, according to DPUC estimates.

I read those last few bits above and just had to chuckle. Part of the problem has to do with objections to these arguments on the part of Blumenthal and others, that energy upgrades provide no guarantee of reducing or providing “reasonable” rates to “ratepayers.” This is trivial because, of course, “ratepayers,” a special breed of consumer, will not be provided with “reasonable” anything, not even roads. It’s an odd formula. An agency or group can begin building a redundant machine, ignoring alternative sources for spinning or riding, and have the “ratepayer” pay for it without any guarantee that the thing will even spin or that the roads will even ride.

Public works. Poor design. This is a fantastic way to sell Connecticut.

P.S. This is all written with fond memories of Palo Verde, the “hypertext” part.