Category: Economics

Trust (III)

“Trust is what makes the world work.” Right now, the world is not working for too many people in America. There is widespread distrust of government. Only the ruling class benefits when political gamesmanship takes the place of statesmanship: people busy with their lives, people trying to make ends meet, have neither time nor inclination to analyze the reasons; they know only that their needs are not being met, they tune out the politicians, and they don’t show up at the polls. The ultimate consequence of this systemic voter suppression is to make nearly every seat a safe seat; and so the pols respond not to the real needs of their constituents but to the loudest voices: those who exercise their voting rights. And though it might serve the elected officials well, by keeping them in office — lifetime sinecures, really — it amounts to the death-spiral of democracy by discouraging ever larger numbers from bothering to vote.

Trust makes the world work: in education, in commerce, in finance, in government. If we can’t trust our institutions to do their jobs, they fail us and all future generations. Cronyism and baksheesh are the ways of desert tribes and banana republics, not the beacon of the free world. In the United States today we see that virtually no one trusts government institutions: if it isn’t a deep distrust born of police excesses, systemic injustices, and income disparities that affect every aspect of life; then it is wild conspiracy theories about vaccines, school curricula, voting rights, and climate science. The market for tinfoil hats has never been stronger.

As I write this, reality has finally caught up with the reality-show president. After six months of denying the threat, doubting the science, denigrating public health professionals, Trump has tested positive for Covid-19. It is surprising that it has taken this long given his refusal to take the basic precautions recommended by public health officials around the world, as if an acknowledgement of vulnerability to disease (by wearing a mask, for example) is a sign of personal weakness. “I learned a lot about Covid,” he says glibly. “I learned it by really going to school. This is the real school. This isn’t the let’s-read-the-books school. And I get it. And I understand it. And it’s a very interesting thing and I’m going to be letting you know about it.” So ten months after the first warnings from our national security apparatus we are supposed to believe that he “gets it” because he has the disease. Warnings weren’t enough; briefings weren’t sufficient; 210,000 American deaths (and over 1 million worldwide) made no impact. As he has his entire adult life, Trump sees himself at the center of everything. Unless he is sick, a global pandemic has no real meaning.

We have gone from a government that many simply didn’t trust, to government that no one can trust. The reasons for past mistrust of government are many and varied, and help explain (in part) how we came to our present predicament. The reason nobody can trust today’s government is quite simple: when it is impossible to know whether anyone is speaking the truth it is safest to assume that none of them is. Some of the lies are obvious; some are outed as falsehoods soon after they are uttered; and still others might not be known until days later when they are flatly contradicted by the next statement of alternative fact.

The problem, of course, is that this is real life. We find ourselves now living not in the world where “up” and “down” are clear directions; instead we inhabit the conspiracy-driven dystopia of a Thomas Pynchon novel. It’s good entertainment but an abysmal alternative to science and the rule of law.

Trust (II)

Democracy cannot function without trust in government: people must know that their elected officials are working for the collective good, not for private gain nor for the limited benefit of (let us say) wealthy donors. This is the fundamental compact of democracy: Governments, Jefferson wrote, “are instituted among Men, deriving their just powers from the consent of the governed.” The citizens of this nation live for this ideal and many have died for it; but too many people now believe themselves powerless in the face of a government that does not operate in their interest. Simply put, they do not trust their elected representatives.

And why should they? These same (“Trust me! I alone can fix it!”) elected officials, and their appointees, have failed the most fundamental tests. In a crisis — a worldwide pandemic, a health crisis that has claimed over 200,000 American lives and nearly a million around the globe — they have failed in every imaginable way: from literally throwing out the NSC manual on dealing with a pandemic; to pitting states against each other to acquire protective gear; to denying the seriousness of the problem; to pretending that it has already passed, even as the daily number of new cases outstrips the rate of March and April.

“We have serious problems in this country and we need serious people to solve them,” says President Andrew Shepherd in the 1995 movie, “The American President.” We did, we do.  And we do need serious people to solve them: people dedicated to an ideal, people who will work for the greater good. These are not the people currently in the White House or the Senate majority. Indeed, it is difficult to imagine a gang less serious about solving your problems — they would much rather line their own pockets or amass power simply for its own sake. It’s easier than working, and apparently more rewarding.

In the last six months we have seen our government yawn at those 200,000 unnecessary deaths; release tear gas on citizens exercising their First Amendment rights; vow to revoke the health insurance of 21 million Americans during a pandemic; and call into question the results of a future election. The chief executive has called soldiers fallen in battle “losers” while he hides from protesters in a bunker. 

Serious people to solve our problems? Hardly. The people nominally in charge are the serious problems we face. While the House of Representatives continues to do its work, as best it can, the United States Senate — the self-styled “World’s Greatest Deliberative Body” — perfects its transformation from functioning legislature to legislative graveyard, where bills supported by a majority of voters go to die. The Senate majority leader can’t be bothered, in the face of a pandemic that is on track to kill over a quarter million before Election Day, to bring a relief bill passed by the House in May to the floor for debate and a vote; but he will rush through a Supreme Court nomination — a nomination which has yet to be announced. Just what are the priorities here? Doing the People’s business has taken a back seat to entrenching a jurisprudence rejected by a solid majority of those same People.

No wonder Americans have lost faith and do not trust their government. They believe their government does not operate in their interests and feel powerless, unable to issue any corrective. What power, after all, does a single vote have? They are not wrong, but neither are they right: we have seen how just a few votes in the right places can swing an election. (That this has much to do with the Electoral College, itself a vestige of America’s original sin, is a topic for another day. For now the point is simply: every vote matters as we know from the painful experiences of 2000 and 2016, not to mention 1888, 1876, and 1824.) That feeling of helplessness is encouraged by established power structures and the incumbents who support and benefit from them: a poll tax is not the only voter-suppression tool, nor is it necessarily the most effective.

In the long term, big structural reforms will be needed; in the short term, the best corrective is the simplest: Vote.

Trust (I)

Every once in a while an idea is presented so strikingly that it forces you to look at things in a wholly different way. Sometimes the insight comes from a teacher; sometimes a friend, or a parent, or a coach; sometimes a peer or coworker. Sometimes it’s a random encounter on the street, or even one of the clucking heads on Fox — everyone is allowed the occasional, if unintentional, flash of brilliance. Frequently the new insight becomes, in hindsight, obvious: how could I have missed that? And often the answer is: because earlier proponents were simply not as articulate, or perhaps so blinkered by their own perceived brilliance that they struggle to communicate their ideas.

So it was that I attended, about thirty years ago, a panel discussion on public key cryptography. One of the speakers — whose name is on one of the critical pieces of that now-critical infrastructure — began by explaining the principle of trust. Asymmetric encryption — in which there is a public key known to the world and a private key known only to the holder — is important to electronic commerce because it assures the parties to the transaction that they are who they say they are. It is a trust mechanism: not an enforcer, but a reliable conveyor of fact. A message encrypted with the recipient’s public key can only be deciphered by her private key — ensuring message integrity; a message encrypted with the sender’s private key can only be verified using her public key — proving identity.

Well, yes, I was thinking, even then. But so what? “Trust,” said my panelist, “is what makes the world work.” And there it was. Simple. Obvious. And rarely articulated so starkly or so clearly. Trust that you are who you say you are; trust that you own what you say you own; trust that you will deliver on your promises to pay or to perform. The public key infrastructure (PKI) assures the first of these (identity) and goes a long way to assuring the second (truthfulness). It does nothing to assure the third — the kind of trust that is earned (reputation).

I mention all this because the Trump era presents a particular problem of trust: trust in government, trust in institutions, trust in the mechanisms that protect our liberty and propel our national and individual success. Americans no longer trust their government to keep them safe, help them thrive, and ensure that their children grow into a better world than they received from their own parents. Ironically, the solution for a very vocal minority has been to repose trust in a man who is utterly untrustworthy, who never tells the truth (except perhaps inadvertently), whose appalling and bottomless need for validation is his only motivation. He is incapable of empathy — and for that reason alone he cannot be trusted: he will never act for the common good because his personal benefit is the only thing he is capable of seeing.

Trust — like its fraternal twin, Respect — is earned. Without that foundation a leap of faith is a headlong plunge into the abyss. And yet: “Trust me. Believe me. I alone can fix it.” These words ring hollow to most people, but strike a chord with just enough of our compatriots whose faith in government was already so broken and battered that they opted for the grinning autocratic mountebank rather than the charmless competent technocrat.

Popular culture is full of references to the notion that America is not a country, it is an idea: the American Experiment, we call ourselves. The foundational document of our republic speaks of “a more perfect union”: the experiment is always evolving, always changing, always growing. This is — quite literally — progress. There have always been those who want to arrest it, or at least slow it. This idea finds spectacularly clear expression in the penultimate scene of “The American President”:

We have serious problems to solve, and we need serious people to solve them. And whatever your particular problem is, I promise you Bob Rumson is not the least bit interested in solving it. He is interested in two things, and two things only: making you afraid of it, and telling you who’s to blame for it. That, ladies and gentlemen, is how you win elections. You gather a group of middle age, middle class, middle income voters who remember with longing an easier time, and you talk to them about family, and American values and character, and you wave an old photo of the President’s girlfriend and you scream about patriotism. You tell them she’s to blame for their lot in life. And you go on television and you call her a whore.

Decades have passed and this speech is stunning not just for its clarity, but for its prescience. “He is interested in two things, and two things only: making you afraid, and telling you who’s to blame.” This is the Trumpian tactic; this is McConnell at his cynical and dishonest worst. Replace “whore” with “anarchist socialist who wants to destroy America” and we are in the present. This is not the language of statesmen or problem solvers; it is the sentiment of men interested in power for its own sake, not for its use towards the common good and a common goal.

The question we all should be asking — and the press should be leading the way on this — is also simple: Why do you think that American citizens want to destroy America? What, exactly, is the reason for that? How do they benefit? And if you can’t answer that question, why are you saying such things? Why, in short, if you so claim to love America, do you so obviously hate your fellow Americans? Why do you not grant them the same courtesy, trust and respect you demand?

This is a nation of divergent and often opposing views. Democracy assumes that compromise will be reached in the back-and-forth of the legislative chambers. The winner-take-all view of today’s Republican Party does not acknowledge the possibility that theirs is not the only legitimate vision for America and its people; it takes instead the autocratic position that might makes right. “Trust us,” they say. “We know best.”

Trust and respect are earned every day; they are never given as of right. Electoral outcomes do not repose unfettered confidence; they are a signal that the winner should, instead, proceed to prove his case. That is the American way — and we stand on the precipice of forever losing it.

A National Strategy Requires a National Government

Like so many Americans, I find myself envying nations that have a national government, and all that implies: A national sense of purpose; a national strategy for testing and tracing; a national plan for a public health crisis. There was a time when the United States had purpose, whether it was defeat of the Axis or putting a man on the moon. “We’re going to win!” is neither a goal, nor a strategy for achieving one. And, “We’re going to win so much, you’ll be tired of all the winning!” What does that actually mean? It is tautological, nonsensical, risible. “Winning” in this telling is undefined and lives (if it lives anywhere) beyond the looking glass, where words are just sounds with no actual meaning:

“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”

“The question is,” said Alice, “whether you can make words mean so many different things.”

“The question is,” said Humpty Dumpty, “which is to be master — that’s all.”

 Lewis Carroll, Through the Looking-Glass

It’s a sure bet that Donald Trump hasn’t read the book, nor would he understand the exchange. Irony, as they say, is not his long suit. At least, not intentionally.

Any dream of a national purpose must wait for another day; the pressing need, today, is for a national strategy: the novel coronavirus is among us and is not leaving any time soon. The national response has been botched — because in truth there was no national response. We had, instead, fifty state responses, some more successful than others but all of them at risk: the weak responses in a very real sense threaten the stronger ones. Our constitution guarantees freedom of movement, and while the governor of (for example) New York can require travelers from Texas and Florida to self-isolate for two weeks after arrival, it is only a matter of time before someone decides to make a literal Federal case out of a very real and very practical exercise of the state’s police power. Health and safety be damned, because this is America!

Meanwhile, in the real world: over 30 million people are unemployed; over 5 million have contracted Covid-19; over 160,000 have died from the disease, and 1,000 more die each day. (Our infection rate has been doubling about every six weeks; at that pace, by May or June the entire nation will be Covid-positive, a stunning achievement. If “winning” means, “create a nation of lepers”: mission accomplished.) And the United States Senate, the self-styled “world’s most deliberative body,” can neither deliberate nor negotiate nor even formulate legislation that might help  American citizens survive — pay the rent, buy groceries — until the pandemic subsides and the jobs actually do come back. Bear in mind that formulating legislation is the actual job of senators: it is their primary responsibility, enshrined right there in the job title: “legislator, upper body.”

For anyone who might be persuaded by the argument that “the House refuses to negotiate,” please bear in mind that the House actually passed legislation in May. The Senate (and the White House) chose to wait until the expiration of the March bill (July 31) before even beginning negotiations, evidently in the hope that Democrats would be persuaded of the urgency of passing anything and would thus accept whatever weak last-minute tea the Republicans brewed. (The Republicans, for their part, can’t even agree among themselves what to ask for or try to pass. So much for their legendary party unity.) It has taken a generation, but the Democrats — and Speaker Pelosi — have gotten wise to this game and aren’t having it.

Meanwhile, the Senate Judiciary Committee — under Lindsay Graham’s “leadership” — grills Sally Yates about the spooks under the bed. (Ms. Yates wasn’t having it, either, and deftly put the majority in its place.) Writing legislation is the Senate’s primary job, but by all means let’s ask more questions about Hilary’s emails, eight years after the fact. Changing the subject is a time-tested method of distracting attention from your failures, collectively as a legislative body as well as individually.

By most accounts the American people aren’t buying, not this time. There is an actual plague in the land, and the federal government isn’t doing anything to control the spread or mitigate the effects. We’re on our own, until we’re able to put people in government who are actually interested in doing the hard work of governing.

Small Government and the USPS

Grover Norquist likes to say that government should be small enough that he can drown it in the bathtub. With the possible exception of Stephen Colbert, nobody has asked the obvious followup questions: And then what? Will you drown it? Why is that a good idea? How does that serve the American people? Republicans and libertarians are fond of talking about small or even tiny government, but the former are so lost in their rhetoric that they don’t know what it means; and the latter (for the most part) aren’t so delusional to believe that we can function without a government and be anything but a failed state. Almost everybody wants lower taxes for themselves (Warren Buffet is an admirable exception); few people want to have the more difficult conversation about what they’re willing to give up in exchange.

Government does have a purpose. There are some problems only government — big government, in fact — can solve; but for now let’s stick to small government. How small? There are four essential things a government must provide:

  • a national army
  • a national currency
  • a national road system
  • a national postal service

These (and a few other things) are all enumerated in Article 8 of the United States Constitution. This is about as small as government gets, and without these things no nation can properly call itself a functioning state. To lower your tax bill, please consider:

  • Will you give up the national defense? Do you have an alternative jobs program for the soldiers you’re throwing out of work?
  • What happens when we return to a system of private money, where banks issue their own currency?
  • Are you willing to stop complaining about potholes even while highway tolls increase under private ownership?
  • USPS is required to serve every single address in the United States. Private carriers like FedEx and UPS are not. (They’re not required to carry the junk mail, either.)

During the pandemic the postal service has proven to be an absolutely critical piece of infrastructure, a literal lifeline for millions of people who cannot leave their homes. The USPS is not without its problems, even before considering how the overnight delivery services have eaten into its market share and eroded its profitability. But there is a much bigger picture here.

Essential infrastructure must serve every business and every household. Telephone (land line) service and electric utilities are state-regulated and are required to reach every corner of their service areas no matter how remote or inconvenient. Cellular phone and broadband Internet should have reached that threshold years ago but regulators have so far failed to require universal service, arguing that robust competition among carriers will solve the problem. It has not, and it will not. Basic mail delivery — letters, packages, and bulk mailings — is, likewise, an essential part of a functioning democracy.

To threaten the existence of the USPS (and that is what is going on, though not quite so overtly) at a time when it is more necessary than ever betrays an open hostility to the basic functions of government. So let’s call it that instead of dressing it up in the usual fetish-objects of “competition” and “market forces.” Not every ill can be cured by open markets or by privatizing the functions of government. History tells us that those remedies are far worse than the disease (and they are almost always more expensive, too). We should stop pretending otherwise.

The Markets and Obi Wan

The markets are tumbling again this week, apparently on Tuesday’s testimony of Drs. Fauci and Redfield before the Senate Health Committee. They warned that the coronavirus is far from contained and that a too-rapid easing of social distancing and stay-at-home restrictions will likely trigger a second wave that could be even worse than the first.

The New York Times reports:

The comments appeared to rattle the markets, driving the S&P 500 down as investors weighed the potential of a second wave of infections against Mr. Trump’s promises that the economy would bounce back once stay-at-home restrictions were lifted.

Seriously? The financial markets are skittish because someone contradicted Trump’s assurances? Trump is a raging narcissist, a pathetic little man whose bombast and lies do not (as he intends) glorify him but starkly highlight the absence of his soul, the smallness of his mind, and the pettiness of his character. Since assuming office he has lied over 18,000 times. One might reasonably begin the count with his inaugural speech, where his language, tone, and “American carnage” imagery were at odds with every measure of objective reality.

The talking heads on television and cable news outlets, especially those which aspire to be information platforms for business, always come back to one word: predictability. “Markets like stability and predictability,” they say. Meaning, the financial markets don’t much care who is in office as long as policy isn’t changed on a whim and without warning. Meaning, the financial markets might be spooked for a moment when a Democrat is elected — on the presumed fear of regulation — but these brief periods of volatility soon smooth out and the markets go on as before. Because they like predictability.

The truth is, the financial sector really shouldn’t like deregulation: it’s the anything-goes, anything-can-happen, nobody-is-accountable temperament of the Wild West that roils markets; its unpredictable nature is by definition unknowable and its consequences unforeseeable, opaque to even the best crystal ball. If we learned anything from the 2008 financial sector meltdown, it was (or should have been) that deregulation begets instability, and that even the best computer models are as clear as mud when it comes to really predicting the future. It’s looking more and more like we didn’t learn that lesson, or any other; just as the 2008 crisis echoed the 1986-1995 S&L debacle. The echoes of history reach all the way back, and after each recovery we take two steps forward and then, when things stabilize, at least one deregulatory step backwards.

Trump wallows in unpredictability; he boasts about it; he sows chaos wherever he goes. It is his briar patch. Burnout is a well-known consequence of working in the White House pressure cooker but Trump’s administration churns personnel at an alarming rate. (Insert joke here about the ten-day period of employment known as a Scaramucci. Oh, you were there a month? Three whole Scaramuccis?)

Financial markets aren’t the only institutions that appreciate stability. Diplomacy might be an art, but it requires some level of predictable behavior and rationality: it’s difficult to negotiate if you have absolutely no idea how the person across the table will respond. (Trump believes this is his strength, that being unpredictable is the art of the deal. To the rest of us it’s a sign of serious mental illness and instability.)

The markets like stability; they want order; they crave predictability. Trump is a known, compulsive, congenital liar whose only objective is to stroke his self-image. To that end he will say anything. With his reelection prospects (already slim, as I discuss here) in tatters he makes assurances nobody should believe about the pandemic being past while Dr. Fauci, the Director of the National Institute of Allergy and Infectious Diseases, tells the Senate and the nation that the virus will be with us for some time yet. Indeed he has been telling us all along that a resurgence in the fall is likely.

All of which brings me, finally, to Obi Wan Kenobi, whose Jedi wisdom might be the most appropriate answer to anyone taking action of any kind on the strength of Trump’s promises and reassurances. Who is more foolish, the fool or the fool who follows him? And if you’re invested in those markets: caveat emptor.

Mr. Herbert Spencer’s Social Statics

Though the phrase survival of the fittest is often used to convey the gist of Darwin’s theory of natural selection and evolution, it was Herbert Spencer who first coined the phrase; and by it he intended the kind of winner-take-all mentality that seems embodied in today’s GOP: in a word, social Darwinism.

In the context of civil society the idea that the strong should clamber over the weak is repugnant. It is not even a sound economic and business principle, for if competition ensures innovation and lower prices (both good for society), then in any given market — let us say, for example, for widgets — the logical and eventual outcome of unfettered cutthroat competition will be monopoly or, at best, a duopoly.  Competition of the kind pro-business politicians usually say they mean cannot exist without strong antitrust enforcement; it should be noted, then, that these same politicians usually want to weaken the antitrust laws.

But in a civil — and civilized — society, the notion that the fittest will survive and the weaker elements of society will wither, fall away, and die, is as morally repellent as it is antithetical to the foundational belief that all men are created equal.  “The Fourteenth Amendment does not enact Mr. Herbert Spencer’s Social Statics,” wrote Justice Holmes, dissenting in Lochner v. New York, 198 U.S. 45 (1905), a case decided upon the — ahem — libertarian notion, resurgent in our era, that government has no authority to interfere in any economic aspect of the individual citizen’s life.

It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which we, as legislators, might think as injudicious, or, if you like, as tyrannical, as this, and which, equally with this, interfere with the liberty to contract…. The liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth for some well known writers, is interfered with by school laws, by the Post Office, by every state or municipal institution which takes his money for purposes thought desirable, whether he likes it or not.

198 U.S. at 75

More recently it was argued that government cannot compel the purchase of health insurance, that individuals should be permitted to decide how to spend each of their hard-earned dollars. Freedom! Freedom of contract, in Lochner; or the “freedom” to self-insure against catastrophic illness.

Very well; we will grant you the right to refuse health insurance if you will permit us to refuse you entrance to the Emergency Room when your appendix bursts, or when you suffer a heart attack, or when your carelessness in the kitchen threatens a digit. After all, you took the risk and assumed that you would not need health insurance; now you want the rest of us to pay for your ER visit, your cardiologist, your orthopedic surgery. In fact you assumed no risk at all, betting that the rest of us would backstop your bad decision. This is freedom defined through a looking-glass and exercised at the expense of others: exactly what laws and government are intended to prevent.

If you find this line of argument — you decided to roll the dice so man up and take your lumps — offensive: you should. But it is not the inverse of the libertarian freedom-of-contract, freedom-to-self-insure argument; it is the identical logic applied and imposed from the other direction.

The Fourteenth Amendment does not enact Mr. Herbert Spencer’s Social Statics, and the Constitution and the laws and social structures that rest on it do not constitute a suicide pact. So, please, Michigan militiamen: your desire to “liberate” your state from “tyrannical” social-distancing orders is an unconstitutional affront to your neighbors’ desire, their right, to continue living without the unnecessary threat of disease and death that your liberation would impose on them.