People, government, and spending money

“The people know how to spend their money better than the government.”  Really?

A Minnesota politician was quoted last month stating some variation of this Libertarian statement, but I can’t find it in a search of the Duluth News Tribune or the Star Tribune.  This mantra keeps popping up when a Republican doesn’t like a particular program or a given tax.  Funny how they rarely apply it to the bailout of the big banks.  And it never applies to any government activity that they support.

Let’s start with the military budget.  Do the people really know how to spend their money on the military better than the government does?  Those who spout my introductory statement seem to want to throw even more money at the military budget.  Regardless of your attitude toward the military, it is in the Constitution that the government should spend money on the military: “provide for the common defense”.  I don’t think the signers meant for the government to take up a collection to support our numerous wars.  Wars are often strongly supported by those who make the claim about the people knowing best how to spend money.

If your house were burglarized, would you want to be responsible for paying for an investigation, a trial, and a prison term for the culprit?  Would you want to have to buy insurance to ensure the thief was brought to justice?  We buy insurance to cover the loss, but we pay taxes for a criminal justice system.  Who runs the criminal justice system?  The government.  Who runs on platforms of “tough on crime”?  Those who are first to put government down.

If your neighbor’s house catches fire, do you want to pay for your private fire department to ensure the flames don’t reach your house?  Government pays for and organizes fire departments that are a phone call away for taxpayers and tax dodgers alike.  Even when local fire departments are all volunteer, they seek support from local taxes and state and federal grants.

We complain about the condition of our streets and the congestion of our freeways.  If we know best how to spend our money, do we want to be responsible for the condition of the streets in front of our houses?  You pay for a nicely paved street in front of your house, and your neighbor leaves the street a muddy mess.  We need government to co-ordinate this so we don’t get our cars stuck in the mud.

We go to restaurants and buy groceries without giving any thought to the cleanliness or condition of the food.  Most restaurateurs and grocers are scrupulous about what they provide, but they aren’t in control of every step of processing the food or even have the time or means to give a thorough quality check.  Government provides some oversight with food inspections, for example, in meat-packing plants.  Many corporations complain about this government “intrusion”, but without it we would have many more food-borne illnesses.  Think about Upton Sinclair’s “The Jungle”.  Think about the City of Duluth closing a couple of local restaurants because of numerous health violations.  Would “the people” have all the resources to make these checks?

Corporations complain about the lack of “qualified” employees, but they complain about the taxes to train these “qualified” employees.  Industrialized countries invest heavily in public education supported by taxes.  And they provide a range of subjects that provide skills to learn more about technical subjects and about subjects that make for better informed citizens.  What if education were only supplied by parents, either directly or by paying tuition to schools.  First, few parents know enough about all the subjects to fully education their children.  Second, many parents don’t have the resources to pay tuition for professional teachers.  Think of the literacy rates in countries where parents must pay school fees.  Only the well-off in these countries are sufficiently literate.

Speaking of education, a parallel statement to the one about spending money is that “parents know best what is good education for their children”.  A close example is the sweeping generalization that “Parents know kids don’t need Common Core, so politicians should listen”, Ben Boychuk, republished in Duluth News Tribune, February 1, 2015.

We were involved in helping our children with schoolwork, but we didn’t even pretend to know how to teach them the various subjects they took.  Except for the six years we lived in Europe, we sent them off to the local public schools.  In Europe, we sent them to Anglo-American schools because we expected to be in a given country for only two years.  About the only curriculum shock I had was when our daughter showed us the catalog for American history.  Rather than an overview, she had to select one or two narrower subjects, such as Andrew Jackson.

My own education experiences were more self-directed or teacher-encouraged than parentally involved.  My mother encouraged my brother and me to do well, but I doubt she knew much about what we learned or how we learned it.  For the most part we went to schools in the neighborhood. However, we rarely stayed in the same neighborhood for more than three years.  When we moved after I started high school, I selected an out-of-area high school to be with friends who I had known before.  And as Robert Frost wrote, “that made all the difference”.

It was Mr. Rush, a math teacher who punctuated his remarks with “when you go to Case”.  Six of us in my class went to Case Institute of Technology.  It was Mr. Cameron, the assistant principal who recommended that I apply for a Huntington Fund scholarship, which paid full tuition my first year.

Thank you, government, for spending so much money on me to get to that point.

Also published in the Reader Weekly, 2015-02-05 at http://duluthreader.com/articles/2015/02/05/4777_people_government_and_spending_money.

"Government-made" billionaire

Hamdi Ulukaya, a Turkish immigrant, started making Chobani yogurt with the help of a Small Business Administration loan.  He bought a Kraft Foods factory in 2005 with the help of that loan, and he began shipping Chobani Greek yogurt two years later.  It is now the best selling yogurt brand in the U.S.  He is now estimated to be worth 1.1 billion dollars.

Of course, the government didn't make him a billionaire.  He and many other people had to do a lot of work to produce and sell all that yogurt.  But could he have started without the SBA loan?  Maybe if there had been a friendly banker who believed in him.  So, the government didn't make him a billionaire, but it certainly gave him a rung or two to start the climb to success.

See "The billionaire behind Chobani", Devon Pendelton, Bloomberg News, Updated 2012-09-25, via Star Tribune.

Something else to consider: was the SBA loan government spending or government investment?  Consider all the jobs that Chobani created and the taxes the employees pay.  Consider how much more taxes Ulukaya paid than if he hadn't been so successful.  Consider how those taxes in turn can be reinvested in education, roads, and loans to other fledgling companies.

Education - maybe we haven't got the lead out yet

I wonder how many people have considered how a poor environment has caused poor school performance and how the ramifications continue.

Consider these two statements from "Incognito: The Secret Lives of the Brain" by David Eagleman.

"The major public health movement to remove lead-based paint grew out of an understanding that even low levels of lead can cause brain damage that makes children less intelligent and, in some cases, more impulsive and aggressive."

"As a child grows, neglect, physical abuse, and head injury can cause problems in mental development."

So, a child grows up impulsive and aggressive and becomes a parent.  The now parent may also neglect and abuse his or her children.  Now these children may have problems in mental development. And so it continues through the generations, some children breaking the cycle, too many not.  "The sins of the fathers are visited upon the sons, yea, unto the seventh generation."

"But," you say, "lead paint was used everywhere.  Wouldn't all kids have been affected?"  Well, many children had the good fortune to grow up in houses where the paint was well-maintained.  Others had the  bad fortune to grow up in houses in which the paint deteriorated, chipped, and flaked.  If the kids didn't eat some of the paint chips, they might have inhaled some of the dust from the deteriorating paint.

The problem is not to get the "lead" out of "poor-performing teachers" but to get the "lead" out of "poor performing families".  That will take a lot more effort than too many are willing to spend.  And I'm not talking about unwilling teachers.

Is it time for new mascots for the political parties?

While reading some book or newspaper, I wrote this note: "Appropriateness of party symbols. Elephants lumber over everything to follow old paths (think of the movie "Elephant Walk"). Donkeys are docile and will follow whoever is jerking their chain, er, pulling their leash.

Maybe the Democrats should adopt a fawn as their symbol. When threatened they seem to roll up and hide in plain sight. See "Fawn hiding in plain sight".

Maybe the Republicans should adopt a hippo as their symbol, as in hippo-crite. They want to cut spending in other districts, but not their own, even when the projects are similar. See "Tea Party Pork Binge: Conservatives Brought Nation to Default & Ask for Govt. Handouts", Daniel Stone, The Daily Beast and Newsweek, 2011-10-30.  They even use some of the same arguments they derided when others used them. Hm! Both elephants and hippos wallow in mud.

The rich create jobs, but rich in what?

As a response to "tax the rich", many say that the "rich create jobs".  Hm!  How many jobs has Paris Hilton created?  Certainly lots of jobs for paparazzi and tabloid writers.  How many real jobs have the Wall St. manipulators created?

Today's Star Tribune had an interesting article on how graduate students are being affected the jiggling of grants.  See "Debt deal nicks grad students, not others", Jenna Ross.

Given the cuts in Pell Grants, Congress in its great wisdom cut grants for graduate and professional students.  Some will say that students shouldn't get "charity".  But if we limited education only to those who could afford it, would we have enough educated people to do the innovation that we need to sustain our economy.

Abou Amara is president of the Graduate and Professional Student Assembly at the University of Minnesota.  He was quoted as saying, "There's a disconnect here.  The narrative now is about jobs and innovation.  Well, people in graduate and professional school are the people who are going to be creating jobs.  We're the people who are going to grow the economy."  See "If you want to grow, you have to spend money for seeds."

In the rush to avoid "taxing the rich" and "cutting spending", many ignored that they cut jobs with government shutdowns.  The rich hardly noticed, but many small businesses noticed.  For example, highway projects were shut down, the contractors laid off workers, and the contractors had shut-down costs that they may never get paid for.  The laid-off workers had be be paid unemployment benefits and some had to pay more for their health insurance.  Isn't this increased spending and taxing the middle class?

I've seen several articles recently about immigrants starting businesses, especially in the cities.  I don't know what portion of new, local businesses are created by immigrants, but I sense it is out of proportion to their numbers.  If so, why might this be?

Some of them took risks to be here, and so the risk of starting a business is just one more.  They are not accustomed to having health insurance and other benefits, and so they don't consider lack thereof as an impediment to starting a business.  Finally, they often have large networks of friends and relatives from whom to draw financial support.

I have two ideas that could encourage more people to start businesses.

The first is universal healthcare.  Too many consider this a cost rather than an investment.  If more people were freed of the need for a job with "benefits", wouldn't more people risk starting a business?  If more people started businesses, wouldn't there be more jobs?  If there were more jobs, wouldn't there be more taxes and less costs?

The second is more neighborhood banks.  Not only neighborhood in the sense of being located closer to the customers, but neighborhood in being staffed by people from the neighborhood.  With the larger banks, one can never be sure who will be in the locally-sited bank from one month to the next.  If the staff were more permanent, they would develop closer relations with their customers.

I know this certainly helped me in keeping a business growing.  I ran around the track at a YMCA with the president of a local bank.  Never mind that it was owned by Carl Pohlad, a Twin Cities billionaire, as part of a small empire of banks; the people were the same month after month and year after year.  Because the president got to know me and feel he could trust me, he extended a line of credit to me.  I drew on it, I paid it back, I drew on it, I paid it back.  I never really succeeded in the business, but how many others who had similar, local treatment succeeded.

Then Pohlad consolidated his banks under one brand, and the personality went out of the local bank.  He probably got even richer, but the community was poorer for it.

In summary, it's not the rich in dollars who create jobs; it's the rich in experience and education who create jobs.

If you want to grow, you have to spend money for seeds

After I wrote the blog entry "We have met the enemy, and he is us", I reread a bit of David Weidner's article.  One thing that struck me was that Google was founded with the help of a federal grant!

I thought I would check a bit further, and found "National Science Foundation (NSF) Discoveries - On the Origins of Google".  The article was written long after the fact and I didn't try to dig out the original grant.  I do wonder if Page and Brin would have even been in graduate school without the grant.

I don't know the size of the grant, but think of the huge amount of income taxes paid each year by the 16,000 employees of Google.  Think of the productivity increases of many researchers in companies large and small thanks to Google.  I wouldn't be surprised if that one grant paid many times over for all the similar grants made at the same time.

Who caused the deficit? Let the facts speak

See "Obama's and Bush's effects on the deficit in one graph", Ezra Klein, Washington Post, 2011-07-25.

Republican spending vs. Democratic spending

Pete Langr wrote an interesting column this week on how the Republicans and the Democrats are looking at the budget, each from the wrong perspective: "Taxes aren't the problem: the real solution is to control supply costs".  As of my writing, the Duluth Budgeteer has not posted his article on line.  Watch for it at http://www.duluthnewstribune.com/event/tag/group/Budgeteer/tag/Budge%20Opinion/

My take is that the Republican goes to a certain restaurant every week and pays one dollar for his dinner and leaves a dime tip.  One dollar for dinner?!?  Yep, I could do that in the 50s when I worked at a grocery store.  Meat, potatoes, and a vegetable for one buck.

But the Republican refuses to spend more than that dollar for his dinner.  Over the years he gets less and less food.  After a time he refuses to tip because he isn't getting his "value".  Now he is lucky to get a half a cup of diluted coffee for his buck.

Meanwhile the Democrat orders the same meal and pays whatever is on the check.  The restaurant, appreciative of his business, gives him more food, of course charging more over time.  The Democrat is getting so much food that he needs "a box" for the extra.  But he never asks to get less food for a lower price.  Because the customary tip has changed from ten percent to twenty percent, he willingly includes that in his bill.  Now he is paying more than $36 for what once was $2.20 bucks worth of food.  And he is happy to do so.

Why do we have "out-of-control" government spending?

One reason is our state of permanent war.  Wars as envisioned by the bright minds of the Pentagon bureaucracy and the best Congress money can buy don't come cheap.

In 2009, The Washington Post reported that the war in Afghanistan was costing two billion dollars a month ("Obama Plans More Funding For Afghan War", Karen DeYoung, 2009-03-27http://www.washingtonpost.com/wp-dyn/content/article/2009/03/26/AR2009032602135.html).  Gosh, if Afghanistan has a population of 28.4 million, that means the U.S. could just give every man, woman, and child in Afghanistan $70/month or $840/year.  That's pretty damn good for a country with a gross national per capita income of $250/year (http://www.unicef.org/infobycountry/afghanistan_statistics.html).

Ironically, many of the deficit hawks are for a "strong defense", but against foreign aid and taxes.

A second reason is that we vote for Congressional candidates who will "bring home the bacon" to our districts.  Alaska is home to a large number of anti-tax people, but Alaskans get more per capita in federal money than in any other state.  Isn't bacon another form of pork?

Or maybe it is that not enough of us vote.  If 25-40% of the registered (or eligible) voters don't bother to show up, we are going to have candidates elected by a plurality rather than a majority.  And we are going to be left with candidates who either want to spend a gazillion on wars and pork or want to spend a gazillion on social programs and pork.