Category Archives: Politics

Can Congress Change Its Culture?

Cultural change is the recent theme here at Thoughtbasket; I discussed how a company might change its culture, and then how America might change some aspects of its culture. Today I want to look at a particular part of America: Congress. The U.S. Congress seems unable to solve any of the problems facing our country, and consequently has an approval rating of only 11 percent, which is the lowest ever. If a group is unable to complete the sole task it is given (governing, in this case) and thus is held in contempt by its bosses (voters, in this case), then that group probably has a culture problem.

The congressional cultural problem is that the entire institution values reelection instead of service (which is why incumbents are reelected more than 80% of the time). Power is more important than policy. Much like the corporation in my first post on this topic had a culture where everyone thought it was OK to be late for meetings, congress has a culture where everyone thinks that it’s OK to prioritize staying in office over doing the job you were elected to do, which is govern.

We can blame each individual congressman – and believe me, I do – but really, it is the institution and its culture that is truly to blame. Expecting some moronic ex-exterminator who only gets a two-year term to swim against a cultural tide of reelection is probably naïve. So, much like in my efforts to change cultural components in the US as a whole, we need a team approach. John Boehner + Nancy Pelosi = change?

I wrote last year about how John Boehner could be a hero by teaming up with democrats to pass substantive policy that would address the nation’s fiscal problems. Here is another opportunity for heroic action: he could rally all of congress, teaming with his arch enemies, to promote a culture of service instead selfishness.

Is Corporate Culture The Same As Country Culture?

I recently posted about corporate cultures, and how the only way a corporation can change its culture is from the top. Based on some of the feedback I received I’ve decided to expand my scope and explore a larger cultural change: how the United States might change some parts of its culture. For example, one aspect of America’s current culture that seems problematic is that we want all kinds of services (Medicare, Social Security, strong defense, good roads, etc.) but we want the lowest taxes possible. Those two desires are incompatible; a culture that emphasizes taking without giving will prove challenging in the long run.

In my prior post, I discussed that a change in corporate culture requires a CEO who is willing to push that change. In the case of a country, who might play that role? You would naturally think the president, but we know that won’t work. Plenty of recent presidents have talked about changing the culture, but none have succeeded. Hell, none of them could change the culture of a few hundred people in Congress, let alone a whole country. And that’s not really surprising; a country is not a hierarchical structure the way a company is, so people have no reason to necessarily follow what the leader says.

The president could try to lead by example, or by using the bully pulpit, but I can only imagine the furor  that would erupt  if a president (or governor, or senator, or mayor) announced that “OK people, your constant desire to get lots while paying little is complete crap; going forward we are all going to be more realistic.” No, that wouldn’t work at all.

What if all our leaders teamed up? Suppose a whole slew of politicians – national and local, democrat and republican, male and female – got together to announce an initiative aimed at realism. This could be risky, since taking a stand isn’t really what politicians do; they hate being out on limbs by themselves. But that is why they would team up with members of the other party. After all, as I noted in my prior post, cultural change requires leaders to actually lead. Then they could get business leaders on board; everyone from Warren Buffett to Charles Koch. Throw in some celebrities – nothing happens in America without celebrities – and then maybe we’d have something.

It’s possible that this is nothing but a pipe dream. Can we really expect politicians to team up in order to lecture voters? Probably it will never happen. But maybe we should expect more from our leaders.

The Myth of the “Job Creator”

A key Republican talking point is that the wealthy are “job creators” and that any tax on these job creators will cause them to fold their cards and go home, hurting the economy in the process. This is clearly ridiculous, and I have challenged before the concept that tax rates diminish incentives to build companies, but here is a great essay from an entrepreneur and investor (a successful one — he is clearly in the 1%) describing how people don’t create jobs, the economy does. And the economy is made up of regular folks — the 99% — who need to buy the products produced by the entrepreneurs. Without a successful consumer class, nobody will be a job creator.

Graphical Look at Federal Deficit

Courtesy NY Times

Democrats Need to Lead, or Lose

S&P downgraded US debt from AAA yesterday, knocking Treasuries from their perch as the safest debt on earth. We will see what happens to yields on Monday, but so far it’s not clear that the markets agree with S&P. After all, this is an agency that had AAA ratings on subprime mortgage-backed securities not that long ago.

But in the meantime, the GOP is using the downgrade to attack Obama, saying “look what happened on his watch.” The president doesn’t deserve all the blame, but I understand why the GOP has seized the downgrade as a bludgeon. And in the same way, democratic operatives are putting the blame on the tea party and its refusal to compromise on deficit cutting.

But you know who isn’t saying anything? Democratic leaders. The White House, Harry Reid, Nancy Pelosi — they are all keeping silent on this. They are trying to be the “adults” and not play the blame game. I appreciate that high-mindedness, but here’s the thing: the game is being played, with or without them. If they stay silent then they just let the GOP control the narrative. You know the Sunday talk shows will be full of Boehner and Cantor and Romney and the gang piling on Obama for the downgrade.

The Democrats have to realize that they are in the middle of a street fight and if they don’t fight back they will lose. And they’ll deserve to lose. If you are going to suck ass at politics, then you shouldn’t be a politician. Regular readers know that I mostly support Democratic policies (with some huge exceptions that I ought to detail one of these days), but I sure don’t support Democratic fecklessness. The Democrats got rolled on the debt ceiling negotiation, and now they are getting rolled on the downgrade. It’s pathetic. Or, to quote a senior democratic official: “if this White House showed a gram of leadership on the debt crisis we could have avoided this historic embarrassment.”

We All Get Government Help

OK, maybe not all of us. But a lot of us. Really a lot. Cornell political scientist Suzanne Mettler has an article in the Washington Monthly about what she calls the “submerged state,” or the massive amounts of money at play in various tax deductions (eg. the mortgage interest deduction) that benefit particular populations.

As the chart below shows, there are all kinds of tax deductions that many people take, but those same people continue to insist that they don’t get any help from the government. Mettler’s point, backed up by her survey data: despite their cost, these programs are invisible to the public, making the public more susceptible to claims that government is too big.

How Businesses Really Think

James Fallows posts a comment from a businessman on what really creates jobs:

“IT’S DEMAND, STUPID!…A few more customers and I’ll hire another worker. Look, guys, that’s what we do out here! Don’t worry about cutting my taxes, don’t concern yourself with over-regulating me, don’t fuss about the “death tax” depriving my progeny of the joy of running my business. That is all trivia! This is all about Demand Side Economics.”

Exactly. Businesses don’t base their hiring decisions on taxes or uncertainty. They invest (in people or machines) to meet demand.

Also in the economic vein, here is Joe Stiglitz on the failure of pure free market economics.

Ranchers to City Folk: Screw You

According to a recent WSJ article, each year ranchers from throughout the middle of the country take their cattle to Kansas to feed on the lush prairie grass that grows during the summer. As is often the case in plains and prairies, the grass is only lush if they burn out the brush, which the ranchers do each spring. This sends smoke with the wind, which sometimes takes the smoke to Wichita or Kansas City. As a consequence, those cities sometimes violate EPA clean air standards.

The EPA is trying to work with the ranchers on a way to avoid having their smoke drift over populated areas, primarily by only burning when the winds are travelling in the other direction. But the EPA is threatening stronger measures if the voluntary methods don’t work.

The ranchers are pushing back. They don’t want to change their ways. Why? Because it will cost them money. They are valuing their income above the health of strangers. Lots of strangers. Kansas City has more than 2,000,000 inhabitants.

Rancher Mike Collinge says “People in Wichita and Kansas City, they’ll complain a little. So will my wife. But I don’t think it’s causing huge air-quality problems.” He doesn’t think it’s causing problems. Of course, he doesn’t live in Wichita or Kansas City. He has no idea what it’s really like there. What he thinks is completely contrary to what the scientists say. That is what Stephen Colbert calls “truthiness.” In other words, and appropriate to this post, BS.

According to the article, the burning and subsequent lush grass gets ranchers about $40 more per head of cattle. Depending on how much cattle you have, of course that could add up. But let’s put it into context. The current market price for beef cattle is about $110 per 100 pounds. It’s unclear why they quote cattle prices in hundredweight and meat prices per pound, but that’s how it’s done. An average cow weighs about 1,200 pounds, which means it’s worth $1,320. That $40 savings is 3% of $1,320.

So these ranchers are willing to risk the health of millions of people, just to increase their income by 3%. That’s nice. Apparently the cowman and the farmer can’t be friends.

On Wall Street and Self-Regulation

Matt Taibbi has a new piece in Rolling Stone, using Senator Levin’s report on the financial meltdown to show that Goldman Sachs broke the law repeatedly. You have to take Taibbi with a grain of salt, especially when it comes to Goldman (here is the NY Times on the same report), but here is a stunning fact pattern on how prosecutions of financial crimes have gone steeply downhill in the past 20 years:

William Black was senior deputy chief counsel at the Office of Thrift Supervision in 1991 and 1992…. Black describes the regulatory MO back then. “Every year,” he says, “you had thousands of criminal referrals, maybe 500 enforcement actions, 150 civil suits and hundreds of convictions.”

But beginning in the mid-Nineties, when former Goldman co-chairman Bob Rubin served as Bill Clinton’s senior economic-policy adviser, the government began moving toward a regulatory system that relied almost exclusively on voluntary compliance by the banks. Old-school criminal referrals disappeared down the chute of history along with floppy disks and scripted television entertainment. In 1995, according to an independent study, banking regulators filed 1,837 referrals. During the height of the financial crisis, between 2007 and 2010, they averaged just 72 a year.

How Free Markets Should Work

If you really believe in the free market, you don’t think governments should bail out private entities. The whole essence of free marketeerism is the belief that markets will most efficiently allocate resources. Econ 101, and all that.

So why are so many “conservatives” defending too big to fail banks and pushing for Iceland to pay off investors in its private banks? Check out my friends at Baseline Scenario here and here for more investigation and analysis.