Debating Myself

Update: Just found out that Obama supported gas tax holidays too, although it was during his time in the Illinois state senate. Thanks to Buck Naked Politics for the info!

Just as Hillary Clinton is beginning to rise in the national polls thanks to a surge of momentum from her win in Pennsylvania she manages, like so many times before this campaign season, to shoot herself in the foot.

People may not be outraged about it, and it may not stir emotions like Obama’s current problems with Rev. Jeremiah Wright, but her recent proposal for a gas-tax holiday this summer (also proposed by John McCain–you might know him) has stirred up more than a little controversy. Top Democrats, like the Majority Leader in the House, have even lined up against the idea. Obama is enjoying telling voters that Hillary’s proposal will cost the government millions and save taxpayers only about $30 each.

Hillary’s side of the story seems to make sense at first, and I’m sure her campaign thought reasoning like what Buck Naked Politics’ D. Cupples summarizes here, would be very persuasive to middle class voters pinched by gas prices right now.

There’s just one problem: it won’t work.

Paul Krugman, the New York Times columnist, takes Hillary’s proposal to task in a recent article. The Washington Post’s Fact Checker has a great in-depth analysis of the economics behind the issue. If you take my word for it, here it is short and sweet: lower price = more demand and more demand will lead right back to higher prices because supply cannot be expanded. There simply isn’t enough oil.

The Machiavellian argument that Hillary knows it won’t be that effective, but it will win her more votes is okay with me, I support her and would like to see her win. But, that argument appears to fail as well. Fact Checker tell us that when a similar policy was tried in Illinois:

A poll by the Chicago Tribune showed that only 28 percent of motorists believed that they were actually paying less for gas as a result of the temporary suspension of the tax.

Not a significant enough part of the electorate to make a difference.

Across the Aisle features a great article by Brian Vogt discussing Hillary’s proposal and then suggesting some more sensible ways to deal with the gas price problems facing America. Essentially, inflate your tires properly (which will improve fuel efficiency by up to 10%) and let the government and private industry develop some long-term technological solutions that will reduce our dependency.

I agree, but I would argue that fixing the dollar crunch and managing the economy better to preserve consumers’ purchasing power would also go a long way to fixing this problem as well. A large rise in oil prices can be directly attributed to the falling dollar.

There is one aspect of Hillary’s proposal that people aren’t discussing that troubled me greatly (and Obama agrees with Hillary here). Again, from Buck Naked Politics:

That’s why I have called for making Exxon and other oil companies with record profits pay the federal gas tax this summer… I believe we should impose a windfall profits tax on big oil companies and use that money to suspend the gas tax and give families relief at the pump.

Now maybe it is just me, but windfall profits taxes always make me nervous. Sure, Exxon alone made over $40 billion in profits last year, but the market determines the price of gasoline, not Exxon. Exxon is simply the beneficiary of rising oil prices and the success of the OPEC cartel.

Here are some arguments against a windfall tax. My favorite:

The Tax Foundation’s Jonathon Williams and Scott Hodge remind us of more very unintended consequences:

… according to the Congressional Research Service (CRS), is that the 1980s windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil.

So here’s to Hillary proposing two policies that in all likelihood will sacrifice meager short-term relief ($30 over 3 months) in exchange for:

• A high likelihood of rising prices later
• Decreased oil production
• Weakened support for alternative technologies (in the short and middle term)
• Further dependence on OPEC oil
• No additional political support

I’ll keep my $30 Hillary (maybe even donate it to your campaign so you can hire a new economic adviser). Let’s try to find a more creative solution. I know you can, and have, done much better. As Paul Krugman writes:

I don’t regard this as a major issue. It’s a one-time thing, not a matter of principle, especially because everyone knows the gas-tax holiday isn’t actually going to happen. Health care reform, on the other hand, could happen, and is very much a long-term issue — so poisoning the well by in effect running against universality, as Obama has, is a much more serious breach.

This is part one of a multi-part series addressing the issue of free trade and the arguments used against it. In this section I take on the historical protection of manufacturing jobs by opponents of free trade. Future sections will address environmental concerns, concerns of 3rd world exploitation, and an honest appraisal of the evidence in favor of and against free trade.

The recent debate about free trade bubbling up in Montana politics is the perfect opportunity to discuss this highly misunderstood issue. Montana Gubernatorial hopefuls Don Pogreba and Jason Neiffer have criticized Max Baucus, Montana’s free trading senior Democratic senator, as supporting a policy of:

Enhancing the bottom line of multinational corporations who operate above the law and whose profits rarely make it to the hands of workers who produce them? Sane fiscal policy.

Though they criticize Senator Baucus for misrepresenting opponents to free trade, the above quote shows that their campaign has also misrepresented the arguments in favor of free trade as well as missing an opportunity to move the Democratic party forward in its thinking on this issue.

This is not surprising–ever election is marred by a consistent misunderstanding of free trade. Politicians on the left use American fears about job security, the environment, and exploitation of the 3rd world to frame free trade as an exploitative and hurtful practice–often favoring protectionism as a solution. At the same time the right unilaterally supports free trade arguing that pure free trade is the only trade policy to have on the basis of economic freedom–even if it is sometimes exploitative or imperfect.

Of course not all of those on the left are against free trade–Senator Baucus is a Democrat–and some bloggers on the left, Jay Stevens over at Left in the West in particular, are actually supportive of reopening the discussion of free trade and searching for a middle ground. I think all Democrats would be well advised to welcome a discussion of how to:

encourage trade, but… make sure our trade agreements are fair, that they benefit American workers and businesses, not just multinational corporations looking for cheap labor and a way to trample over workers’ rights and avoid environmental standards.

Before we can move forward in our thinking on free trade we need to look at the historical basis for the Left’s rejection of free trade. Pogreba and Neiffer trot out this historical justification that still drives left opposition to free trade today:

concern about stagnant or even declining wages for American workers who struggle to find manufacturing jobs

This objection is based on a vision of the world centered on human intensive labor and wide scale industrial production. The US Government publication “Outline of the US Economy” provides a really good description of the diminishing role of labor in the traditional manufacturing sense:

Manufacturing has declined in relative importance, and the service sector has grown. More and more workers hold white-collar office jobs rather than unskilled, blue-collar factory jobs. Newer industries, meanwhile, have sought highly skilled workers who can adapt to continuous changes produced by computers and other new technologies.

If you want numbers to prove it, enjoy:

Service-related industries accounted for 24.4 million jobs, or 59 percent of non-farm employment, in 1946. By late 1999, that sector had grown to 104.3 million jobs, or 81 percent of non-farm employment. Conversely, the goods-producing sector — which includes manufacturing, construction, and mining — provided 17.2 million jobs, or 41 percent of non-farm employment in 1946, but grew to just 25.2 million, or 19 percent of non-farm employment, in late 1999.

America is no longer a manufacturing economy. Manufacturing jobs are protected out of a nostalgia for the hayday of workers’ movements, and having been the focus of labor activism for decades, the compensation for these jobs is artificially inflated. Resorting to protectionism to hold on to this distorted version of the labor market is damaging for a number of reasons…

(more…)

You may or may not be one of the millions of Americans who receive junk mail daily. I personally am still young enough to enjoy the novelty of receiving mail every single day, even if it is only another of the countless pleas for me to apply for a United Mileage Plus Visa. Yet for many Americans these daily mailings are not only a nuisance, but wasteful and a potential privacy risk.

Some sensible people have created some grassroots movements in state legislatures to allow citizens to opt out of junk mailings through a “do-not-mail” list similar to the national “do-not-call” registry. Remember, they are not banning the sending of junk mail, just giving consumers the option to opt out of it…

It is fair to say I was shocked when I read in the Washington Post that:

Then came the pushback from the postmasters, who told Pearson and other lawmakers that “standard” mail, the post office’s name for junk mail, has become the lifeblood of the U.S. Postal Service and that jobs depend on it.

Yes, that is the United States Postal Service attempting to block some perfectly sensible legislation for the preservation of jobs that it claims only exist to pass on useless junk mail to consumers! So, we pay for the salaries of postal workers with our tax dollars in order to receive superfluous mass mailings directly to our mailbox every day? Now that’s government service for you.

The article is full of little nuggets of madness. Here are a few choice selections:

Barred by law from lobbying, the Postal Service is nonetheless trying to make its case before a growing number of state legislatures… The agency has printed 3,000 “information packets” about the economic value of standard mail, with specific data for each of the 18 states that have considered a Do Not Mail Registry.

The Postal Service is working closely with the Direct Marketing Association, the trade group that represents retailers and the printing industry, in its new campaign — Mail Moves America — which is designed to quash the Do Not Mail initiatives.

Right, this sounds nothing like lobbying…

So far, their efforts appear effective. None of the states where Do Not Mail legislation has been introduced since 2007 has approved a law. And no similar legislation is pending in Congress.

Let’s step back here and consider some of the bigger issues:

Government Jobs

Every government job should in theory, by virtue of it being funded through the tax dollars of all, provide a public service. In this case postal workers supposedly hold together a mail system that delivers us mail in a timely and orderly fashion. If the creation of a Do-Not-Mail list threatens some jobs, admittedly government jobs with strong pension plans, doesn’t that mean that those jobs really only exist to support junk mail? Yes. Is junk mail really a public good the government should be providing?

The Environment

Anyone who knows me knows that I am about as far from an environmentalist as they get–I’m much too lazy to recycle normally–but shouldn’t environmentally conscious people be able to reduce their environmental impact by getting rid of unwanted solicitation? Phone solicitation has no tangible environmental impact, but not only do the mailings waste paper, but they also lead to greater landfill usage and increased emissions and fuel costs from the transportation of that trash to landfills. Perhaps we should tax direct-mail advertisers to cover this cost instead of allowing people to opt-out? I’m sure if that proposal is made an opt-out by consumers will start sounding really appealing.

Economics

Local governments, as I have mentioned, are already stretched pretty thin… so why should they have to continue to bear the burden of hauling around this useless garbage? It may not be a huge cost, but with rising fuel costs every trip to the landfill becomes more and more burdensome.

Government and Lobbying

Is it really appropriate for the Postal Service to make such intimate ties with industry lobbying groups? The Direct Marketing Association gave a modest $800,000 to lobbying firms in 2007, but certainly is targeting specific individuals–including including $6,610 to Sen. Thomas R. Carper (chair of the Postal Services subcommittee).

Government agencies lobbying lawmakers constitutes not only a direct conflict of interests–by driving a wedge between voters’ interests and the actions of policymakers–but it also makes the government more inefficient. The Postal Service already enjoys a monopoly and by shaping legislation that controls the agency the Postal Service can prevent even reasonable democratic pressures from forcing it to become moderately more efficient.

Obviously impeding the ability of citizens to control branches of the government is particularly dangerous in an unwieldy bureaucracy where many decisions may already be made through processes that are far from transparent. The Postal Office may be a rather benign example, but if the Post Office is so efficient that only $250 million (just a guess) is wasted each year—why should we accept that?

The Bright Side

I’m stumped. This hurts everyone except a small number of postal employees who could probably find another job–even in today’s unstable economy. The big shipping firms always seem to be hiring and would probably gladly take workers with package handling experience.

So, I guess all that is left to say is that if we can’t get rid of our junk mail, we should all do something useful with it and raise up arms to make the government hear our demands for a “Do-Not-Mail” registry. Here’s a start–

Image courtesy of www.dellfreedomriders.com

Anyone who has been to a gas pump lately can attest to the impact of rising energy prices. The price of oil rising to record highs hardly qualifies as news, but it does beg the question–what are some of the wider effects we will see from rising gas prices?

Some of the biggest consumers of fuel are local governments. Metro systems, school buses, and police cars are just a few of the major sources of fuel expenditures that local districts face. The Washington Post published a great article a few days ago about the pressure local budgets are facing due to rising fuel costs. Despite not having to pay fuel taxes and creative ways of purchasing fuel to save money, some local governments are at a breaking point. As prices increase much more rapidly than the expectations of local governments, these governments are faced with hard decisions–reducing police patrols or bus service to disabled or the elderly. (Interestingly, private consumers may be being hit by a double-whammy as a lot of new roads being constructed in urban areas are toll roads–to reduce traffic congestion–as part of a new transportation philosophy championed by the Bush administration)

In the few areas local governments could shift to other modes of transportation, they will also face rising costs on air fare as well. United recently hiked air fares across the board up to $50 to deal with rising fuel costs of its own–a move speculated to be copied by airlines across the industry. In short, transportation will continue to eat up a larger portion of local governments’ budgets–continuing to exceed even the anticipated price hikes built into those budgets.

Aside from the obvious issues consumers face through increased fuel prices, lets look at a few less obvious ways that these higher fuel prices could affect government services and those that rely on them.

Fewer Police Patrols

Rising fuel costs mean that local governments will have to struggle to keep their police cruisers fueled. Aside from switching from gas-guzzling SUVs, police forces have little options open to maintain a police presence and expend less fuel. A particular problem may arise if police forces opt for reducing presence in areas with lower property values (aka poorer) in order to avoid leaving citizens responsible for paying higher taxes feeling unprotected. Of course lower police presence also could lead to a spike in petty crime–increasing insurance rates in some areas.

Decreased Bus Coverage

This could, paradoxically, force some people into driving in order to get to work on time. It could also lead to some people being unable to reach their job, or having to look for employment closer to home. Obviously this is particularly damaging for people dependent on buses, because they already have less financial flexibility.

School District Shifts

School districts that are particularly spread out and face large busing costs, and are typically already financially stretched, may have to start reducing other services within the school, freeze wages, and put off maintenance for school facilities to allow room in the budget for increased transportation costs.

Inflexibility

A major problem is that many of these local governments were already stretched thin, leaving them unable to shift toward more fuel-efficient transportation options. Purchasing more fuel efficient vehicles and optimizing current vehicles for fuel efficiency are capital intensive tasks, and local districts will have difficulties raising the capital to accomplish this.

Positives

There are some positive aspects of the increase in fuel costs. Local governments may feel the crunch, but they will be forced to become more efficient, while also taking steps toward reducing fuel waste. If price hikes are sustained for a reasonable amount of time (a year or so) even if prices come back down it is likely that governments would keep their expense reduction schemes in place to hedge against future price increases. This not only decreases the carbon footprint of local government (good for Mother Nature) but it also increases the fiscal efficiency of the local government (good for Joe and Jane Taxpayer).

Another glass-half-full way of looking at the crunch on local government funds due to fuel costs is that it may force local governments to be more innovative in the delivery of their services–for example by implementing some e-government services–and driving a more consumer oriented form of service delivery to their tax payers. E-government seems to be a place where local governments could see the most gains, and blogger Che Tibby has an interesting way to conceptualize the provision of e-government services online.