THE CART AND THE HORSE

In business we learn that looking at other industries and companies, what they do, how they do it and what tools and processes they use, can provide inspiration and stimulus for improving the performance of your company. This does not require industrial espionage. Companies that find ways to ‘do it just right’ attract the spotlight and get written up, their top executives are getting interviewed and invited to business forums and seminars. Many of them are proud of their contribution to business development and are willing to share the ingredients of success with others, particularly if the others are non-competitors. The term for this process is ‘best practices sharing’. The thought behind it is that we don’t necessarily have to reinvent the wheel all the time in order to find the path to durable success. Sometimes the solutions to our challenges are hiding in plain view.

You would think that what is good for the goose is also good for the gander and that our public sector would look at the private sector to find better ways to run the business of the people. But if that happens at all, it happens far too rarely and not at all when it comes to big ticket issues. Case in point the U.S. taxation system. The U.S. has in one generation’s time (my lifetime) accumulated a national debt of more than 18 trillion dollars, which is more than the size of the total American economy. This has happened, because year in and year out the federal government has spent more than it has collected in taxes. If the U.S. public sector was a business it would be bankrupt many times over. But, also, if it was a business it would have never gotten to this point.

In the public sector we are willing to put the cart before the horse. Rather than first deciding what needs to get done, then calculating what it is going to cost and determining how to pay for it, the federal government just seems to run its operations and programs and if the bill for all that exceeds the income, the deficit gets added to the national debt. This is in part because we have made a mockery of our budgeting system with the two parties so far apart on national priorities that we can never agree on what needs to get done (or get done differently) and always end up just doing more of the same. And because raising taxes (or changing the tax system) has become the third rail of American politics that nobody wants to touch. It is mind boggling to me that Washington fails to investigate if it is not primarily the inefficiency with which taxes get levied and collected that causes the revenue side of the ledger to continuously fall short. Are we taxing the right transactions and activities? Are we taxing the right entities (people and companies) at the right (fair, equitable) rate? And are we collecting the taxes we are owed? The answer in each case is no, but our public sector is doing nothing about it.

Most Americans hang on to the belief that running perpetual deficits is ‘the other party’s’ doing and that a resounding electoral defeat is required to solve the problem. The record proves otherwise: deficit creation is practiced on both sides of the aisle, by the Democrats mostly through spending increases and by the Republicans mostly through tax cuts. It has a momentum of its own and is virtually immune to changes in the balance of power in Washington.

If politicians had the courage (and the free reins from their campaign donors) to break with deleterious precedents and traditions and take their cue from best practices in the private sector, they would be giving up on the current practices in public finance and be pushing for two new constitutional amendments:

1.       Calling for the adoption of a national strategy that sets priorities to be achieved along a five and ten year time horizon and that would transcend administrations.

2.       Calling for the passing by Congress and the President of multi-year balanced budgets that are in compliance with the implementation of the adopted national strategy.

The rationale for these two constitutional amendments is that, together, they would provide the political shield required to have our federal government (congress and the President) put the horse back before the cart by mandating a complete restructuring of the U.S. tax system to the effect that the national priorities can be achieved and financed without increasing the national debt.

If politicians have a vision of what needs to get done at the federal level they should also have the courage to make sure that enough tax is getting collected to pay for it. It is high time that through a combination of adjustable consumption taxes, user fees, income taxes and franchise taxes the federal government creates a new age revenue collection system allowing Washington to make certain that the national objectives are achieved and the bills get paid without printing new money.

It is time to move the horse in position to pull the cart and establish a simple public finance rule that the federal government first determines what its priorities are, what needs to get done over what time period, then calculates the cost and ultimately set taxes at a scope and a level required to cover the cost of running the people’s business. That’s how the private sector operates and there is no shame in best practices sharing and borrowing a chapter from someone else’s book.

NOVEMBER 9, 2016

Popular dissatisfaction with the way our existing political system works—or, rather, does not work— explains the traction that political outsiders like Donald Trump, Carly Fiorina and Ben Carson get in the campaign for the 2016 White House election. It has to be evident to any student of civil studies, as it is to the people who are at the receiving end of the political process, that the current system is fatally flawed in spite of the fact that it is built upon the revered fundament of the U.S. Constitution and its amendments. It simply does not produce the results that the nation needs in the competitive race for global leadership and that its people are looking for and deserve.

I wrote about this in my book ‘NEITHER HERE NOR THERE, A First Generation Immigrant in Search of American Exceptionalism’. Unfortunately the book has drawn no attention from the national media or the political establishment.

Given the level and breadth of the dissatisfaction with Washington, it should come as no surprise that initiatives to drive for change in the political system pop up everywhere. They all have something in common in that they pick a limited focus on one aspect of malfunction that for their constituency epitomizes the problem. Examples of such initiatives are the drive for open, nonpartisan, primaries; electoral districting reform; campaigns to root out corrupting influence of big money in politics; automatic voter registration; and easier and unfettered access to the polls. All of these initiatives have merits and potential to contribute to a better working political machinery but they all are limited in scope and purpose.

Organizations like ‘No-Labels’, the ‘Independent Voter Network’, the ‘Bipartisan Policy Center’, ‘Common Good’ and ‘Third Way’ all contribute to the presentation of proposals for implementation of these  improvements of the political system, but it all seems to be piece-meal and presented from a narrow single focus perspective on what’s wrong. I will argue that a comprehensive approach to the problem requires the identification of all of the flaws in the existing system, the building of a consensus on how to eliminate these flaws, a prioritization of the steps to be taken in the amelioration process, and a plan for implementation of the chosen solutions.

The current American culture of instant gratification works against an orderly process of dealing with the shortcomings. Our election cycles are very short and if something cannot be achieved before the next election, it is unlikely to get a lot of effort. Yet, to turn the battleship around will require cooperation of every institution of our political system and—consequently— a lot of time. There clearly is no single silver bullet. The way our political system functions has been built, on the fundament of the Constitution, over centuries by tradition and regulation and is not easily reversed or undone.

The flaws that I detect in our current political system all fall into one of four broad categories:

1.       The influence of ‘big money’ and ‘special interest groups’ in politics

2.       The two party system

3.       The election system

4.       The absence of a ‘national strategy’ requirement in the Constitution

In my book I elaborate on each of these four categories and I propose solutions for each of the perceived shortcomings. The space provided in this column does not allow me to repeat these here. I refer you to my book.

One thing is clear: the campaign for the White House that has now been the topic of the day in the media for about as long as we can remember, with more than a year to go before it will be decided, will not resolve any of the systematic problems. The President of the USA simply does not have the powers he/or she would require to tackle any of the systematic problems. So, if the supporters of Bernie Sanders think that his election would make a decisive difference, they will be sorely disappointed if he, against all odds, would make it into the White House. And so will the supporters of Donald Trump, Carly Fiorina or Ted Cruz.

I will admit that it makes a difference for many of us who will be the next occupant of the White House, but the difference will mostly be in how we feel about the President, not in what we can expect from the President when it comes to unshackling and reviving the American political system. As long as we have only two parties who pretty much cancel each other out and are both supported and kept in power by big money; as long as we keep sending our elected officials back on the campaign trail as soon as they have been elected; as long as we don’t have term limits, open primaries and a constitutional requirement for a national strategy; we can only expect tinkering at the margin, no breakthrough change in effectiveness of federal governance.

Someone will emerge triumphant from the 2016 national elections on November 8, but when the flag waiving will have subsided and the confetti has been swept up from the floor, the winner and his/her supporters will quickly find themselves frustrated by the intransigency of the existing political system.