HOW THE GOVERNMENT CAN SUPPORT THE ECONOMY AND WORKERS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Effective governments are critical components of our societal infrastructure. They are needed to combat public health threats such as the coronavirus, to keep people safe, and to provide a safety net for workers and families in economic hard times, among other things. Government programs and actions can provide important supports for our economy and its workers. Economic growth and workers’ pay and employment are inextricably linked as consumer spending, i.e., workers spending their pay, is what drives our economy, representing about two-thirds of all economic activity.

My previous two posts (here and here) focused on efforts to undermine and weaken government. They outlined negative effects of weak government infrastructure and of privatization of public sector work. This post highlights the benefits of government action.

The “Biden Plan,” as the President calls it, uses aggressive federal government action to combat the coronavirus and to stimulate the economy. The first piece of it was an aggressive effort to get people vaccinated along with other steps to reduce the impact of Covid on people’s health. The second major piece, the American Rescue Plan (ARP), was passed in March 2021 and provides $1.9 trillion to combat the pandemic and its harmful effects on workers, businesses, and the economy. It strengthens our healthcare system; provides funding for schools, housing, small businesses, and local governments; and supports low- and middle-income workers by extending unemployment benefits and providing monthly support checks for families with children.

Given the popularity of the American Rescue Plan (75% of voters like it) and support from local and state governments (including a number of Republican governors), it wouldn’t seem to be a partisan issue, but every Republican member of Congress voted against it. Every President, Democrat or Republican, from WWII to 1980 used government actions to support the economy and workers, and to ensure that the rising tide did indeed lift all boats somewhat equitably. [1]

However, since 1980, Republican ideology has opposed such government action, taking the position that government action is unnecessary because the private sector, stimulated by tax cuts, will meet society’s needs even in the face of crises and economic recessions. This ideology claims that cutting taxes, particularly for wealthy individuals and corporations, will stimulate the economy, generate growth that will more than make up for the revenue lost due to the tax cuts, and that benefits will “trickle down” to workers.

Republican Presidents Reagan, George W. Bush, and Trump all cut taxes and in every case the economy did NOT boom, tax revenue did NOT grow, and workers did NOT benefit, but the deficit DID grow substantially. Republicans’ concern about the federal government’s deficit seems to only apply to Democratic initiatives. Moreover, Republican President George H. W. Bush promised not to raise taxes when he ran in 1988, but when the previous Reagan tax cuts led to dramatic growth of the deficit, Bush raised taxes to reduce the deficit – for which he was basically disowned by the Republican Party.

According to Republicans, the American Rescue Plan and any government actions like it will (supposedly) kill economic growth and job creation, leading to high unemployment and growing deficits.

However, recent economic data show that Republican predictions have NOT come true. Rather, the data show growth in the number of jobs, falling unemployment, increased pay for workers, a growing economy, and a falling deficit. This provides solid validation for the government actions President Biden and Democrats in Congress have taken in response to the pandemic and its negative effects on workers and the economy. By the way, economic and job growth also occurred after Democratic President Clinton raised taxes. Moreover, the resultant increase in revenue and economic growth made the deficit disappear! Both the current experience and that under President Clinton clearly debunk Republican fear mongering about tax increases, a strong safety net, and government intervention in the economy.

Perhaps convinced by these data, 19 Republicans in the U.S. Senate (out of 50) along with all 50 Democrats voted for a $1 trillion infrastructure bill that will make major government investments in roads, bridges, railroads, mass transit, water systems, pollution clean-up, and high-speed Internet access among other things. This spending over the next ten years is projected to create 3 million jobs.

However, Republicans are still unified in opposition to an additional $3.5 trillion infrastructure bill that would address climate change and more directly support workers and their families through funding for education, health care, housing, paid family leave, elder care, early education and child care, and making the temporary child tax credit of the ARP permanent. This last provision alone is projected to cut child poverty in half – disproportionately benefiting children of color – and would keep families with children from slipping back into poverty if the temporary ARP child tax credit were allowed to expire. The climate change investments in clean energy and reduction of carbon emissions are likely to save trillions of dollars in damages and mitigation measures that would occur if climate change continues unabated.

In response to Republicans’ concerns about the costs for the infrastructure bills, Treasury Secretary and former Chair of the Federal Reserve Janet Yellen said: “My largest concern is not: What are the risks if we make these big investments? It is: What is the cost if we don’t?” [2]

I encourage you to let your U.S. Representative and Senators, along with President Biden, know that you support government investments in our infrastructure to support a strong economy, and workers and their families as well.

You can find contact information for your U.S. Representative at http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1] Richardson, H. C., 8/10/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/august-10-2021)

[2] Richardson, H. C., 8/10/21, see above

WE NEED SOLID GOVERNMENT INFRASTRUCTURE Part 2

Governments are critical components of our societal infrastructure. Effective governments are needed to deliver the services, supports, and public amenities that Americans want and need. For 40 years, small government advocates – led by Republicans but with the acquiescence or assistance of many Democrats – have successfully shrunk and weakened government infrastructure and capacity. (My previous post focused on the targeting of public employees.)

One reason for the attacks on government infrastructure has been to privatize government functions so the private sector can make profits by performing work previously done by public employees. This has always been justified by the claim that the private sector will do things more efficiently and save taxpayers money. However, numerous real-life experiences have shown that this is often not the case.

The Internal Revenue Service (IRS), the nation’s tax collector, is a classic example of the harm that results from privatizing and weakening public infrastructure. In 2004, President G. W. Bush privatized the efforts to collect hundreds of billions of dollars owed to the IRS, claiming the private sector would do a better job. The private collectors brought in $86 million from the easy to win cases. The IRS then brought the work back in-house and its agents collected about $140 million in just a few months from more difficult cases that the private collectors had skipped over. This experience demonstrated that privatizing the collection of owed taxes was inefficient and a waste of money. [1]

Nonetheless, the Republicans persisted in slashing the budget, staff, and enforcement capacity of the IRS. From 2010 to 2018, the Republicans slashed the IRS’s budget by 20% and its staff by 22%. The number of audits of taxpayers with over $1 million in income dropped by 72% and money collected from audits dropped by 40%. Now, President Biden is proposing increasing funding for the IRS and its enforcement activities, which will more than pay for itself in increased tax collections. (See my previous post on the IRS for more details.)

Other examples of privatization that have been problematic include:

Privatized prisons and detention centers are less safe, less secure, and more costly than government-run facilities. (See my previous posts on this here and here.)
Disaster response to hurricanes Irma and Maria in Puerto Rico was privatized by the Federal Emergency Management Administration because of insufficient staff. The results were substantial delays in the delivery of critical supplies, cost overruns of $179 million, and another $50 million in questionable costs.
Paying bills, monitoring quality of care, and transmission of funds to states for Medicaid and Medicare have been privatized leading to a labyrinthian maze that is challenging to navigate when problems or questions arise.
Housing for refugees arriving at the Mexican border has been privatized resulting in an unresponsive amalgamation of contractor-run shelters.

With privatized services, quality problems and cost overruns are frequent, but it’s the government that gets blamed. A classic example is the problem with the Affordable Care Act (aka Obama Care) website rollout. The problems stemmed from the 62 contracts with private firms that were hired to build the website. The government’s failing, beyond perhaps the decision to privatize this work, was that it didn’t have the capacity to effectively manage this complex set of private contractors.

Good management and oversight of contractors requires time and skill, which costs money. Privatization deals rarely provide for this because the focus is on cutting costs. So, the government can end up with private contractors managing other contractors. Contractors also end up writing policies – that sometimes benefit themselves. Private employees under long-term contracts end up sitting in the same offices and doing the same work as government employees, often at significantly greater cost. Members of the public dealing with the government have no idea whether they are interacting with a government employee or a contractor, but if things don’t go well the government gets the blame.

The number and complexity of privatization arrangements and a lack of transparency about some of them (often very intentional) mean that the number of private, contracted personnel and their cost to taxpayers are impossible to accurately aggregate. The effectiveness and efficiency of their performance is also often impossible to determine.

Reversing the trend toward privatization will be difficult for multiple reasons, but partly because companies with federal contracts are active lobbyists and campaign contributors. A 2011 study found that of the 41 companies making the most in campaign contributions over the previous 20 years, 33 had federal contracts.

I encourage you to let your elected officials at all levels, particularly the federal and state levels, know that you support strong government infrastructure as an essential component of a well-functioning society. We need President Biden and Members of Congress to support the rebuilding of government infrastructure and capacity, and to oppose privatization of core government responsibilities. The importance of this has become particularly evident during the pandemic, when the capacity of government public health agencies was essential to keeping people safe, through everything from economic assistance to eviction moratoriums to the distribution of vaccines and personal protective equipment. As Bob Kutner wrote in a recent blog from The American Prospect, “Face it, the only way to keep relatively safe is to elect people to run the government who believe in the government, and who operate it competently and relatively free of corruption.” [2] In other words, the only way to have the effective government that we need is to have solid, well-run government infrastructure.

You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1] Kettl, D. F., & Glastris, P., 7/1/21, “Memo to AOC: Only you can save the government,” Washington Monthly (https://washingtonmonthly.com/magazine/july-august-2021/memo-to-aoc-only-you-can-fix-the-federal-government/) This blog post is primarily a summary of this article.

[2] Kuttner, R., 7/2/21, “The Condo, the Inspector, the Market, and the Government,” Today on The American Prospect blog (http://americanprospect.activehosted.com/index.php?action=social&chash=61b4a64be663682e8cb037d9719ad8cd.839&s=6009966078bda0f5056f960a346ead8a)

WE NEED STRONG GOVERNMENT INFRASTRUCTURE

Governments are critical components of our societal infrastructure. Effective governments are needed to deliver the services, supports, and public amenities that Americans want and need. As I noted in my last post, an important reason that massive unemployment insurance fraud occurred during the pandemic was that government infrastructure wasn’t up to the task of effectively administering expanded benefits. State computer systems and personnel didn’t have the capacity to accurately enroll and pay the wave of new beneficiaries. And law enforcement lacked the capacity to identify and punish fraudulent applicants.

For 40 years, small government advocates – mostly Republicans but with the acquiescence or assistance of many Democrats – have successfully pushed to shrink government infrastructure and capacity. President Reagan (a Republican) asserted in 1980 that government was the problem and not the solution – a claim that went unanswered by Democrats. This marked the beginning of a concerted effort by Republicans to downsize the federal government – except for the Defense Department – in terms of number of personnel, regulatory capacity and responsibility, provision of a safety net, emergency response and public health capacity, scientific and policy analysis expertise and data, etc. President Clinton (a Democrat) in 1992 declared the end of the era of big government and of welfare as we’d known it – supporting and furthering the weakening of government infrastructure.

One component of this attack on government infrastructure has targeted public employees, both to reduce their numbers and to denigrate them. One reason for this has been to discredit government by claiming that its employees are inefficient, incompetent, and overpaid. Another reason has been to undermine unions, which today are strongest in the public sector given the very successful efforts by corporatists and oligarchs to undermine private sector unions. (The percentage of private sector workers represented by a union has fallen to 20% of what it was 60 years ago – from over 30% to under 7%.)

Federal civilian employment is a little over 2 million, roughly the same as it was in 1966, despite a quintupling of federal spending and a population that has grown by 68%. The government has added agencies in that time such as the Environmental Protection Agency, the Department of Homeland Security, and the Department of Energy. In these new agencies and others, the government’s roles and responsibilities have grown and have also become much more complex. Nonetheless, the number of federal employees has not grown to meet these needs. Moreover, under the Trump administration, employment at the Department of Labor declined 11%, 9% at the State Department, and 8% at the Education Department, although their workloads were not declining. Scientists were a particular target of the Trump administration. For example, the Agriculture Department had 50% of its research jobs vacant under Trump. [1]

To maintain the services that Americans want and the functions government must perform (such as tax collection) with a limited number of federal employees has required a dramatic increase in the number of consultants and contractors working for the government. This has become big business for many companies including some of the well-known consulting companies such as McKinsey and Booz Allen. Booz Allen now gets 96% of its revenue from federal government contracts.

There are now over twice as many private contractors working for the federal government as there are employees. The Government Accountability Office has warned for years that the extensive use of contractors was eroding the government’s ability to govern, including the making of important policy decisions. President Obama worked diligently to reduce the number of contractors, having noted that they are “often unaccountable and often less efficient than government workers.” His administration succeeded in reducing the ratio of contractors to employees from 3.38 to 2.34. Trump reversed this trend and the contractor workforce grew by about 1.4 million people in his four years as President.

A 2010 study by the Project on Government Oversight examined 35 government job categories and found that for 33 of them government employees were less expensive than private contractors even when federal fringe benefits were included. For one job category, contractors were almost five times more expensive.

As a result of the weakening of the federal government’s infrastructure and the extensive use of privatization and contractors, the rate of highly visible failures of government services as risen from 1.6 per year in the 1980s to 4.3 during the Trump administration.

My next post will more closely examine the privatization of government functions and its effects.

Note: In addition to personnel, computer systems are another essential component of government infrastructure. Many government computer systems, at the federal and state levels, are out-of-date, if not antiquated, due to a lack of investment over the last 40 years. As a result, many government computer systems can barely perform essential functions, are difficult to update, and are unable to share data with other systems. This is a story for another day and another post or two.