Some thoughts on… Building Bridges

Under President Biden’s administration so far, he has signed into law measures on Covid-19 Relief, addressing Asian American hate crimes, and making Juneteenth a Federal holiday.  But several major legislative initiatives are still being worked out in the House of Representatives and Senate, including revising immigration, supporting voting rights and rebuilding infrastructure.

 

Infrastructure bills have historically been non-partisan because they initiate jobs across the US primarily for non-college educated individuals and impact a wide swathe of the population regardless of political affiliation.  Biden’s $4.2 trillion infrastructure framework consists of two parts the  American Jobs Plan and the American Families Plan.  The framework is facing Congressional debate on two fundamental questions - what is considered infrastructure, and how the legislation will be financed.  Deferring discussion on the payment question, 

 

What is driving the disagreement on Biden’s proposals?

 

Infrastructure is recognized as the systems and services that households and firms use in a country in order to interact and make the economy function.  Examples include physical systems such as road and railway networks, utilities, sewage, water, telephone lines and cell towers, air control towers, bridges, etc., plus services including law enforcement, emergency services, healthcare, education, etc.  Without roads or law enforcement, firms cannot hire individuals, and households cannot get to work safely. 

 

In economics, the case for government involvement to finance infrastructure is nuanced because these items are typically neither pure private or public goods.  Governments have a clear mandate to step in and provide funds for public goods because they are non-excludable and non-rivalrous.  Once produced, a person cannot be excluded from using public goods, and one person’s consumption of the public good doesn’t affect another, examples include National Defense or streetlights.  On the other hand, private goods are both excludable and rivalrous – once a pizza is made, people can be excluded from consuming it, and if I do consume the item, it prevents your consumption.  The private sector is best suited to produce private goods – government intervention is typically not needed.

 

Many infrastructure items - roads, railways, bridges – are similar but are not pure public goods since they are non-excludable but can be rivalrous.  People aren’t excluded from roads and highways but use by too many people will affect others due to congestion.  Whereas some infrastructure items are excludable but non-rivalrous.  Once an electric grid or cell tower is built people can be excluded from using them, and my enjoyment of electricity typically will not affect other users.  The debate on infrastructure stems from the facts that for these hybrid cases there is not a clear government mandate to step in from an economics viewpoint.

 

The first piece of legislation, the American Jobs Plan ($2.3 trillion) has 6 components which include physical systems: 

1.     Rebuilding roads, airports, ports and transit systems (falls into hybrid: non-excludable but rivalrous)

2.     Deliver clean drinking water, a renewed electric grid, and high-speed broadband to all Americans. (falls into hybrid: excludable but non-rivalrous)

3.     Build, preserve, and retrofit more than two million homes and commercial buildings, modernize our nation’s schools and child care facilities, and upgrade veterans’ hospitals and federal buildings.     (More like private goods but these items address less served communities where government has typically intervened)

 

There seems to be bi-partisan support for these “hard” items.  The American Jobs Plan also includes services provisions to:

 

4.     Solidify the infrastructure of our care economy by creating jobs and raising wages and benefits for essential home care workers. 

5.     Revitalize manufacturing, secure U.S. supply chains, invest in R&D, and train Americans for the jobs of the future. 

6.     Create good-quality jobs that pay prevailing wages in safe and healthy workplaces while ensuring workers have a free and fair choice to organize, join a union, and bargain collectively with their employers.

 

In addition, the American Families Plan ($1.9 trillion) focuses on making education more affordable and expanding opportunities, providing economic security for families, and expanding tax credits that help workers and families.  Examples include $200 billion to provide free preschool to all 3- and 4-year-olds; $109 billion to offer two years of free community college to all Americans; $225 billion to subsidize child care for families and support child care workers; $225 billion to create a national family and medical leave program; Permanently increase tax credits for child care. 

 

From an economics point of view, the last three components of the American Jobs Plan along with the American Families Plan ($1.9 trillion) would not typically be considered public goods or hybrids, and are the crux of the disagreement on Biden’s proposal.  The main argument against funding these items is that they are social services which should not be covered by an infrastructure package. 

Although these latter items do not conveniently fall into the public versus private goods definition, they should still be considered infrastructure since they facilitate the interaction between households and firms which is what drives the economy.  Just like roads and airports, the new services economy of the 21^st century cannot function properly without provisions that ensure worker and family safety, training and the ability to organize.

 

At stake is a notion that to remain globally competitive, the US needs to help households engage more easily with employers.  The outcome of the package will depend on how effectively the White House can convince citizens and bi-partisan congressional representatives of the importance of shoring up these broader more expansive concepts of infrastructure.

 

In other words, Biden will need to build some emotional bridges before building the physical ones.

            

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Some thoughts on… Voicing a Perspective

Following the 2020 elections, over 43 states are introducing legislation to modify voting procedures.  Georgia’s recently passed legislation has caused Major League Baseball to move its Draft and All Stars Game away from Atlanta while Coca Cola and Delta Airlines have denounced the new laws.  This week, hundreds of companies posted a full-page ad in the New York Times denouncing limits in voting.  Some politicians have argued that companies should not get involved.  

 

So, should companies be voicing their perspective on political issues?

 

The conventional wisdom is that private sector companies should focus on the business of maximizing profits, i.e., both Republicans and Democrats drink Coke.  Economics shows that corporations are highly efficient at selling “private goods”, goods and services that are excludable and rivalrous.   Excludable means that Individuals can be effectively excluded from using them, and rivalrous means that the use by one individual reduces the good's availability to others. People cannot get a seat on a Delta flight without paying for it, and once that seat is taken, no one else can use it during the flight.

 

Government on the other hand are one of the few entities that can effectively provide “public goods”, goods and services that are non-excludable and non-rivalrous.  Clean air, street lighting, military defense, laws, are all examples of items that can be consumed without purchase and my use of them does not prevent others usage.  Preserving the ability to vote is a public good under the purvey of local, state and Federal legislation, companies typically should not get involved in the process.

 

Yet, private sector companies have been involved in the political process for some time, especially through financial lobbying.  The impact of lobbying became more pronounced in 2008 with the Supreme Court ruling on Citizens United vs. Federal Election Committee, allowed corporations and other outside groups to spend unlimited money on campaign advertising as long as they are not formally “coordinating” with a candidate or political party.  

 

The ruling reversed previous judicial precedent, and brought enormous spending by outside groups into political causes with money flowing through super-PACs.  The Supreme Court decision bolstered the argument that corporations are essentially people. An argument that was espoused and jeered down the political spectrum.  

 

Surprisingly over the past decade, companies have become more like people, or more precisely they are more willing to represent the voices of the people that they serve.  Historically, companies only focused on their bottom-line profits to satisfy shareholders, but now they are including perspectives of their employees, customers, and the positions of their executives.

 

With millennials an increasing voice the workforce, this cohort is expecting companies to take a greater stance on social concerns.  Whereas before companies may have been more tentative in expressing their opinions as they didn’t want to disenfranchise their core customer groups, now they realize that the core groups are expanding and customers are more diverse.  For example, Hermes, a luxury fashion company, has progressed from barring entry to Oprah Winfrey to having non-white people prominently shown on their ads.  The public is also more comfortable with companies speaking up on political issues.

 

Companies voicing their support for certain legislation is a logical and more transparent evolution from the practice of sending campaign financing to certain politicians.  As teachers, we encourage students to express their perspective.  We train them to make a strong argument and then voice it.  The Democratic party might be happier now that companies are acting more like people and expressing their voices.  But just as the Republicans have found, this could be a double-edged sword.  

 

We should encourage companies to express their voices, and recognize just like people that their perspectives may change depending on their community and financial situation.

 

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Some thoughts on… Setting an Agenda

About a third of the way into President Biden’s first 100 days, he has created more than 30 executive orders indicating his top priorities, including:

• Covid-19
• Rejoining the WHO
• Establishing a central pandemic coordinator
• Promoting masks on Federal property and flights
• Reopening schools
• Extending enrollment time for Medicaid/  Affordable Care Act
• Environment
• Rejoining the Paris Climate Agreement
• Placing a moratorium on activities in the Arctic
• Establishing a National Climate Task Force    
• Economy -Increasing federal spending to American companies       
• Social Issues
• Revoking the Pentagon’s ban on transgender people in the military
• Resuming funding to non-profits providing counseling on abortions
• Enforcing sex discrimination protection for Federal agencies
• Establishing a President’s Council of Advisors on Science and Technology  
• Immigration
• Revoking restricted entry for Muslim countries
• Deferring removal of undocumented children brought to US
• Halting construction of Border Wall
• Reunifying children separated at the border

 

The administration is also pushing through legislation for a $1.9 Trillion Covid-19 relief bill which would potentially provide $1400 checks to Americans.  It’s heartening to see an administration working to solve issues addressing the American populace instead of focusing on their personal needs and covering up scandals. 

 

But Executive Orders are temporary and many of them are reversing measures placed by the previous Administration. Lasting change requires instituting laws and bolstering government services. Yet, as a country, we have pared back government, introducing unforeseen challenges to running the country, since the Federal Government still performs critical functions like disposing nuclear water, feeding the poor and avoiding weather disasters.

 

In Michael Lewis’ book, The Fifth Risk, he demonstrates how removing expertise in three Departments – Agriculture, Energy and Commerce – has led to situations where the government is “responding to long-term risks with short-term solutions… Creating an existential threat… [from the] innovation that never occurs and the knowledge that is never created, because you have ceased to lay the groundwork for it. It is what you never learned that might have saved you.” Covid-19 has made even more prominent the faults in our social structures.

 

With a new Presidency, I am wondering where I would focus my agenda.  Following on Michael Lewis’ concept – what are areas i) that need long-term solutions, ii) that may lead to an existential threat of the democracy if not managed properly and iii) can be solved by good government.

 

·      Enabling Access to Voting.  The 2020 election demonstrated that mail-in ballots, early voting, and secure elections are a necessity for our republic.  In January, Congress introduced H.R.1. – For the People Act of 2021 to ensure future elections are also accessible.  The Act would have the Federal government work with States to modernize voter registration, strengthen early voting and mail voting systems, and Restore the Voting Rights Act.  Arguments against the Bill are that it takes away States rights and potentially leads to voter fraud.  The Bill can be revised to get bi-partisan support.  Without measures that protect voting access, prevent political intervention, and avoid voter fraud, the repression of American voters will aggravate social and racial tension pulling the country further apart.

 

·      Eradicating Government Corruption.  Since 1995, Transparency International, a global non-profit, has published the Corruption Perceptions Index, a global indicator of public sector corruption. From 2016 to 2020, the US moving from 18^th to 25^th place in the rankings dropping behind U.A.E. and Bhutan in corruption – a significant decline for an OECD country.  Congress should pass legislation that ensures tax returns are released for public officials before election, debts owed to Foreign nationals are revealed, or tax-payer money spent on personal gain is exposed. Without these ethics measures, citizens’ trust of the system is eroded threatening democracy.

 

·      Building Information integrity.  George Orwell’s 1984, describe a dystopian world where reality is slanted by the Government to keep people under control.  In our world, where “alternative facts” are encouraged by the advisors to the President, the existential threat is the US ending up as an Orwellian country where citizens cannot agree on the reality around us.  Ironically, Congress is needed to fix a problem that government officials perpetuate.  Partnership between the private sector and Federal policy is needed to flag and stop dishonesty, especially on the internet.  For example, misinformation on the 2020 elections dropped 73% when social media platforms suspended accounts of fewer than 10 people in January of this year.  Without measures to prevent dispersion of deception, voters can be polarized and misled.

 

Since the 1980’s, as a society we have deprioritized regulation.  President Reagan infamously said – “The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help.” The sentiment led to over 35 years of dismantling local, State and Federal government, leaving us with weakened regulatory structures. 

 

Rebuilding government infrastructure in meaningful areas could be the agenda of this Administration. Passing bold, imaginative legislation similar to the Civil Rights Acts passed in the 60’s during the social/ racial conflicts and the Ethics in Government Act passed after President Nixon’s resignation, could help heal the country and prevent erosion of our democracy.

 

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