Normative Narratives


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Equality of Opportunity, Invention and Growth: The Next President’s Fiscal Policy

Equality of Opportunity and Economic Growth

In case you’ve been living under a rock, it is election season in America. Both candidates have laid out their vision for America’s future, and they differ on many issues.

But on some issues the candidates agree. One example is taking advantage of low borrowing costs to invest in America’s aging infrastructure. Such a plan would create jobs, stimulating short-run growth while making America’s economy more efficient in the long-run. But with policy, the devil is in the details. Even on this area of agreement, the candidates proposed policies are very different. As has often been the case, Trump’s plan is short on specifics and is not fully funded, casting doubts on its effectiveness while increasing the deficit (more on this later).

But another piece of the economic puzzle, one that is as important to America’s long-run growth as infrastructure, is also sorely underinvested in. I am referring to human capital (education, healthcare). There are many ways to promote investment in human capital–more on the how later. First, lets examine why investing in human capital is important.

Simply put, investing in human capital is a key driver of invention, and invention is the main driver of long-run growth. This is a purposefully general statement–I do not have to know what the next paradigm shifting invention will be in order for this statement to be true.

Some people may counter that most inventions are technological in nature, and automation is leading to job loss. To that, I would say we cannot fear progress. Rather, our leaders need to figure out how to balance the need for economic growth with peoples need to be employed–how to “re-couple” the social and economic functions of the labor market. This may require some sort of large-scale guaranteed government / subsidized private sector jobs program–another debate for another day.

Back to invention. While there is no “formula” for discovering great inventions, invention does tend to flourish in certain contexts. Both the public and private sectors can spur the inventive process by investing in research and development. Strong property rights and judicial independence are needed to protect inventors, or else the incentive to invent is not there. A sound financial system is needed to match funding to good ideas, and various forms of infrastructure are needed for production and distribution.

But most importantly invention requires a well educated people, free to explore their novel ideas. The security that comes from decoupling health insurance from employment–as the ACA has done–also helps, by removing some of the risk of leaving one’s job to pursue an invention.

America has most of these things in spades. But one area America can do better (other than infrastructure) is promoting investment in human capital, particularly at younger ages and lower wealth brackets.

America’s top Universities are some of the best in the world, and we have a decent system for matching the most talented low income applicants to them. But research shows that earlier intervention is needed to truly promote equality of opportunity. The “lifecycle” approach to development states that much of the human development needed for people to realize their potential–including their innovative potential–occurs well before college. This is not to say the government should not prioritize making college more affordable. I am a proponent of free community college for low-income applicants with strong academic credentials. But college is only a part of the equality of opportunity equation.

For not only do we not know what the next great invention will be, we also do not know who will invent it. Therefore, it is the job of our government to create the largest possible base of potential future inventors. While the overwhelming majority of people will not go on to discover great inventions, well targeted investments earlier in life still benefit society by helping people maximize their future earnings (and tax bills), reducing poverty and crime (and future government spending on welfare programs and the criminal justice system).

You may be thinking, “this is all well and good in theory, but how will we pay for it all?” Aside from the higher tax revenues and savings resulting from such investments in the long-run, more immediate action should be taken to get the Federal government’s fiscal house in order.

NEEDED: Tax Then Entitlement Reform

Should interest rates on U.S. debt rise, interest payments would consume a large portion of government spending. While there is no guarantee the interest rates on U.S. debt will rise, given the global nature of contemporary investment and America’s status as a “safe haven”, it would be prudent to reduce the deficit if it can be done in a way that does not compromise economic growth and pose undue hardship on America’s poorest citizens.

Every taxpayer dollar spent servicing debt is a dollar that cannot be spent on something beneficial (human capital investment, infrastructure, defense, anything). It is in no ones interest to see this potential future come to pass, as almost everyone (except possibly Libertarians) believes there is something productive taxes could be spent on.

Responsibly closing the deficit requires both comprehensive (corporate and personal) tax and entitlement reform.

“Entitlement spending” consumes a large percentage of government spending, and for good reason–it meets important societal needs, often more efficiently than its private sector counterparts. Private sector pension coverage fell from 28% to 13% between 1993 and 2011, and private sector health insurance costs have historically risen faster than Medicaid. Due to the effectiveness of Medicaid and Social Security, they should arguably be expanded if we can figure out how to properly fund them (expanding the “public option” would help fix Obamacare, and there is a strong argument to be made for expanding Social Security to make up for the drop in people covered by private pension plans).

As a Nation, in order to have a meaningful debate about how much we can afford to spend (and on what), we have to know how much tax revenue we can expect to take in. Comprehensive tax reform endures for a long time–the last major tax reform was passed 30 years ago. Passing comprehensive tax reform would allow for meaningful revenue projections for the foreseeable future (exactly how long depends on how vigilantly Congress guards the tax code against unnecessary loopholes). Therefore, comprehensive tax reform should precede entitlement reform.

HOW to Promote Equality of Opportunity

Greater investment in human capital can be achieved in a number of ways. It can be achieved directly through new social programs, a few of which I proposed earlier, but in recent years such ideas have been political nonstarters.

With more money people will spend more in the short-run–promoting short-run growth–and invest more in themselves and their children–promoting long-run growth. But how do we get more money into peoples’ pockets without politically contentious social programs (i.e. redistribution)? A more politically viable (if admittedly less targeted) approach involves increasing the incomes of America’s less well-to-do through the labor market.

A market-based approach would include some combination of a higher minimum wage and an expanded earned income tax credit (EITC). These policies would be even more effective if paired with human capital investment programs that recognize the “lifecycle” approach to development. Both candidates claim they want to help low and middle class people, but upon examining their proposed policies, only Clinton’s would move this country the right direction.

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Economic Outlook: Guaranteed Income vs. Guaranteed Employment

Dr. Martin Luther King Jr., a man whose understanding of social justice was unrivaled, knew the importance of gainful employment in achieving his goals. In his day, Dr. King advocated for (among other things) good jobs for African Americans who had been systematically discriminated against for centuries. This was largely something the private sector could provide, if racial discrimination was sufficiently deterred.

Today, it is not an individual race that faces barriers to gainful employment, but a whole socioeconomic lower class. With corporate profits at an all time high, and interest rates at historic lows, the past few years would have been the perfect time for corporations to ramp up hiring. However, due to forces such as globalization and automation, it appears the private sector alone will not provide the number of well-paying jobs American’s need–it simply does not have to in order to maximize profits (at least in the short-run).

A recent Brookings blog advocated for guaranteed income (i.e. welfare) in the face this reality:

The labor market continues to work pretty well as an economic institution, matching labor to capital, for production. But it is no longer working so well as a social institution for distribution. Structural changes in the economy, in particular skills-based technological change, mean that the wages of less-productive workers are dropping. At the same time, the share of national income going to labor rather than capital is dropping.

This decoupling of the economic and social functions of the labor market poses a stark policy challenge. Well-intentioned attempts to improve the social performance of the labor market – through higher minimum wages, profit-sharing schemes, training and education – may not be enough; a series of sticking leaky band-aids over a growing gaping wound.

As Michael Howard, coordinator of the U.S. Basic Income Guarantee Network, told Newsweek magazine: “We may find ourselves going into the future with fewer jobs for everybody. So as a society, we need to think about partially decoupling income from employment.

…the answer for American families is an old idea whose time has come—a universal basic income.

While an interesting idea, I think having the government act as an “employer of last resort” is a better way of achieving the goals of “universal basic income”, in a way that would be more politically viable. Aside from the economic benefits of employment, there are numerous social benefits as well, including: less crime, improved self-esteem / mental health, and experience / skill building (making people more desirable to private sector employers).

Government jobs could work in many sectors, at lower average wages (so people look for private sector work first), but with more of a training component to promote eventual private sector employment.

Below are a few potential areas for government jobs–areas that are severely under-invested in, and have strong positive “externalities“:

Infrastructure:

The most often cited example when discussing greater government employment is infrastructure. America’s roads and bridges are largely neglected, costing billions a year in lost economic output and putting people’s safety at risk.

Community Development: 

New evidence suggests that where a person grows up has a significant impact on their chances of being successful later in life. Those who grow up in poorer areas find it much harder to “get out” and live productive lives. This is, of course, a huge hindrance to social mobility.

Community development initiatives include mentoring programs (which can mitigate the effects of bad parenting), and “after-school activity” type programs (which can steer young people towards constructive hobbies which often become the basis of employable skills, and away from destructive behavior). Community centers could also offer affordable / free daycare services for younger children.

Parent(s) determine both “who” raises a child, and “where” (since adults make the choice of where they raise their kids)–winning or losing the “parenting lottery” should not be such a strong determinant of future success. While it is impossible to separate the genetic link between parents and their child (the “nature” side of human development), the “who” and “where” (“nurture” side of human development) can be impacted by investing in community development.

Mental Healthcare:

The ACA ensures mental health parity, but not everyone gets the help they need.  To close this gap, government work could increase the “supply” of mental healthcare workers. What I propose is a Mental Health Corp, featuring a new job type–something akin to nurse practitioners taking on more of a doctor’s duties to reduce healthcare costs–in the mental healthcare field.

One does not need a PhD or MD to provide meaningful help to someone struggling with mental illness. There will always be demand for the best trained mental health professionals from people with the means to afford their services, but for those who cannot, surely some care–even if it is not “the best”–would be greatly beneficial. Such care could help people overcome issues that make them unable to find/hold a job and/or lead to criminal activity. 

Feel free to disagree with me on any of the fields mentioned above. The point I am trying to make is that government employment need not be “digging holes to fill them back up again”.

Robust analyses are needed to compare the costs of our current welfare and criminal justice systems versus the cost of a guaranteed employment program. Not all criminal justice or welfare costs would be eliminated with guaranteed employment (criminal justice reform and a livable minimum wage are also needed) but a significant portion would. It is possible a guaranteed jobs program would not cost much more than what we currently pay to combat the symptoms of unemployment, with much greater benefits. 

While on the topic of welfare, guaranteed employment would remedy one of the major holes in the otherwise sound work-for-welfare requirement of the 1996 welfare reform act. After this reform, those unable to find a job also found themselves without a safety-net, falling into “extreme poverty” (which has more than doubled since the reforms were passed)There is a common saying that a nation should be judged not by how well off its wealthiest are, but by how well off its poorest are–with guaranteed employment for those who want it, America would be doing much better on this count. It is past time to plug this obvious hole in welfare reform.

While no one would get rich from government employment, they would be able to live a comfortable life and provide the resources needed for their children to realize their full potential, fulfilling the promises of equality of opportunity and social mobility that America is built upon.


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Economic Outlook: Business Tax Reform is a Social Justice Issue

Since President Obama’s SOTU address, the term “middle class economics” has penetrated mainstream political discourse. These were not all new ideas, but rather a catchy phrase to sum up the priorities of the Obama administration and provide direction for the Democratic party going forward.

Of course, in a functioning democracy, broad based growth is not (or should not be) a partisan position. A recent NYT news analysis article highlighted how the G.O.P. has, in recent years, attempted to re-brand itself to be more appealing to low and middle class Americans (i.e. engage in “middle class economics”).

One potential avenue for such re-branding is compromising on a long overdue overhaul of the American tax system (the last major overhaul was in 1986). According to a recent Al Jazeera America poll, a majority of self-proclaimed Democrats (79%) and Republicans (68%) are “somewhat” or “very” willing to have their congressional leaders compromise on taxes.

Fortunately, bipartisan support for tax reform is not limited to the general public. Both the Democratic party and the G.O.P. have powerful voices in the Federal Executive and Legislative branches (respectively) advocating for compromise on tax reform:

G.O.P Stance:

“Though there are disagreements on the details, there is bipartisan support for tax reform in Congress,” said Orrin Hatch, Republican chairman of the Senate Finance Committee, at a conference for tax lawyers, analysts and economists.

“Members of both parties have expressed their support for a tax overhaul. And, I believe there is real momentum to get something done on tax reform this year, if we remain committed. And, believe me, I’m committed,” he said.

The U.S. tax code has not been overhauled thoroughly in 28 years. In that time it has become riddled with loopholes. As a result, tax avoidance is a growing problem.

At the same time, tax experts also generally agree that the system is so complex and often contradictory that compliance costs are excessive and economic productivity is harmed.

Hatch has laid out basic principles for reform. At the conference, he said he has the impression that Democratic President Barack Obama might be willing to do a deal on business tax reform alone, setting aside individual income tax issues.

“We need to lower corporate tax rates and transition toward a territorial tax system,” Hatch said. A territorial system is one that would exempt all or most of the foreign profits of U.S. corporations from the corporate income tax.

Democratic Party Stance:

Let me (Secretary of Treasury Jacob Lew) say at the outset that our entire federal tax code needs to be overhauled.  It has been almost 30 years since we last rewrote it, and since then, the tax system has become heavily burdened by loopholes and inefficiencies

I continue to believe that the best way to achieve reform today is to start with pro-growth business tax reform that protects and strengthens the middle class, lowers rates, simplifies the system, levels the playing field, and eliminates unfair and inefficient loopholes.

The fact is, there is a growing bipartisan consensus in Washington on how to achieve business tax reform, and we have a unique opportunity now to get this done.

On paper, we have one of the highest corporate income tax rates in the world, but in practice, there is a wide disparity in effective corporate tax rates.  Some corporations pay little or no income tax at all, while others pay the highest rate in the developed world.

Moreover, our business tax system is far too complicated — particularly for small businessesOne estimate suggests that a small business, on average, devotes hundreds of hours plus spends thousands of dollars, to comply with the tax code.  We can and must reduce this burden.

Our business tax system actually skews business decisions in ways that make it harder for the economy to grow.  Too many investment decisions are shaped by tax considerations when they should be driven by what will best enhance productivity and growth.  Our tax code should favor the best businesses that create the most economic value — not those that are best at taking advantage of tax deductions.

The international tax system is often looked at in terms of either what is known as a territorial system, in which a company located in a particular country only pays taxes on income earned in that country, or a system like that of the United States, in which that company must pay tax on worldwide income, regardless of the country where it is earned.  The President’s proposal strikes a sensible balance, and would move us towards a more hybrid system.  What that means is we would create a new minimum tax on foreign earnings and make it simpler for a business to bring income back to the United States.  It would also tighten the rules so that companies cannot use accounting techniques to avoid paying taxes, such as shifting profits to low-tax countries (inversions).

Of course, there are tax expenditures that make sense and that need to be protected — like the New Markets Tax Credit, expensing for small businesses, and the Research and Experimentation Tax Credit.  But these tax incentives cost money and need to be paid for to maintain adequate revenue levels.  And we cannot apply a double standard, as some have proposed, where we permanently extend business provisions without paying for them, without permanently extending critical improvements to the EITC, child tax credit, and college credits that help working families at the same time.

Secretary Lew laid out the five pillars of the administration’s proposal for a new business tax system:

1. Lower rates and close wasteful loopholes.
2. Build on the resurgence of manufacturing in the United States.
3. Reform the international tax rules that encourage companies to shift income and investment overseas.
4. Simplify and reduce taxes for small businesses.
5. Fix “our broken tax code and increase investment in a way that maintains current revenues.”

Sounds like both parties want many of the same things.

However, “revenue neutral” business tax reform does not go far enough. Looking at the Federal OMBs Historic Tables (p34-35) tells the story. Since 1934, individual income taxes have consistently made up 40+% of government receipts, while corporate income taxes have varied from as high as 30% to around 10% of receipts in recent years.

True this declining share is partially due to rising Social Security taxes, but since those are split evenly between employers and employees, it is clear that the burden of financing our government has shifted from corporations to people and small businesses. Looking at contributions as a % of GDP (p36-37) further supports this narrative.

These meager contributions by corporations are symptoms of an outdated and unfair tax code, and should not be enshrined in a new one.

Lower tax receipts skew the debate over how to invest in America and her people. Operating from a position of high debt and primary deficit, it is easy to drum up fears that accommodative economic policies will result in rising borrowing costs, ballooning deficits, and [hyper]inflation (despite the fact that America is facing the opposite–historically low borrowing costs, a shrinking deficit, and a very strong dollar).

Implementing business tax reforms would help push America into primary surplus, changing the context of this national debate.

I do not claim to know the exact amount or proper allocation of resources between public goods (education, infrastructure) and welfare programs needed to achieve greater “equality of opportunity” / social mobility. But I can say with confidence that more resources need to go to these causes, as the status-quo has long failed the vast majority of Americans.

The sooner we can have a clear-eyed debate on what policies are needed to promote broad based, sustainable American growth, the better. Holding back this debate, aside from uncompromising politicians, is a failure to overhaul our tax code.

In the interest of balance, work also needs to be done on individual tax reform, to fix high marginal tax rates affecting people who benefit from welfare programs. However, the importance of this issue has been, in my opinion, overblown by those on the political right.

Lastly, the Congressional Budget Office’s use of “dynamic scoring”, as it as been pushed through by the G.O.P. dominated congress (using it for tax proposals but not for spending bills) is another impediment to achieving social justice through tax reform and fiscal policy. 

Van Hollen (D-MD) added that while the bill requires the CBO to run dynamic analyses on major bills, it specifically excludes appropriations bills. He said that exemption shows that Republicans want to downplay how federal spending on education, infrastructure and other areas can also help the economy.

Ryan replied by saying that exemption is there because subjecting all spending bills to dynamic scoring would create significantly more work for the budget office. Rep. Gerry Connolly (D-Va.) proposed an amendment to include major spending bills, but the House rejected it 182-214.

Ryan’s argument is unfounded and offensive to the talented people employed by the CBO. It is a weak attempt to defend wealthy interests, while downplaying the awesome potential of the American people.

Ideally, this method would be implemented for both tax and spending proposals. If that is not possible, dynamic scoring should not be used at all.


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Economic Outlook: Time To Raise The Gas Tax

gas prcies tax

black lines represent significant increases in gas tax

Due to a number of factors, mainly the explosion of natural gas “fracking”, global oil prices have fallen steeply over the past 5 months. As highlighted in a recent NYT analysis, this is predominantly a good thing:

The plunge in oil prices — to about $66 a barrel from over $107 in late June — has many pundits wringing their hands. They have cited the risks of falling prices and social and political unrest overseas, not to mention the economic threat to the booming mid-American oil basin, running from Texas to North Dakota and Alberta.

“Every time you get a sudden move in oil prices, people say, ‘This is it, we’re finished,’ ” said Daniel Yergin, the author of “The Quest: Energy, Security and the Remaking of the Modern World,” and vice chairman of the energy consulting firm IHS. “People seem to forget that oil is a commodity, and like other commodities, its price moves in cycles set by supply and demand.”

While circumstances are never exactly the same, and the impact of cheap oil can be difficult to isolate from other economic factors, the broad consequence in each of these instances was the same: They stimulated global economic growth. Dr. Yergin estimated that global economic output would grow this year by an additional four-tenths of a percent with oil prices at $80 a barrel. If oil stays below $80, he said, “We may revise that to five-tenths.”

This year, the precipitating factor has been the waning of threats of disruption from Russia and the Middle East, slowing economies in Europe and Asia and, above all, a surge in production from the United States and Canada. “This time, the innovation is fracking,” said Philip Verleger, president of an energy consulting firm and former director of the Office of Energy Policy in the Treasury Department. “The sudden surge in U.S. oil production has profoundly changed the dynamics of the markets. The oil exporters have lost a third of the market they thought they’d have in 2014.”

OPEC met on Thanksgiving, but shocked markets when its members didn’t even pay lip service to the need for production cuts or price discipline. The price of oil, traded on international markets, fell about 6.5 percent that day. “Their strategy is to let prices fall and squeeze out the higher-cost producers,” Mr. Verleger said. “It’s a battle for market share.”

The time is ripe for raising the federal gas tax. I know what you may be thinking: if low oil prices increase consumption and spur economic growth, raising the gas tax will squander this economic boon. This is a classic growth killing tax!

But historically speaking, the last 3 major increases of the federal gas tax have not had a significant impact on consumer gas prices (see picture above). How is this possible?

A recurring theme here at Normative Narratives is the disconnect between industry rhetoric and market realities. Oil industry execs and lobbyists would have you believe than any increase in the gas tax will have to be passed on directly to the consumer–the reality is more nuanced.

Gas companies must compete amongst themselves–the industry realizes sizable profit margins (which can take a hit in the name of maintaining / increasing market share), and have seen a major dip in the price of their primary input, crude oil (true profits from selling American crude will also fall, but since America is a net oil importer, overall lower prices benefit American gas companies). Any gas company that tries to pass on the tax in the form of higher prices risks pricing themselves out of the market.

What are the benefits of raising the federal gas tax you ask? The gas tax feeds into the Highway Trust Fund, which in recent years has teetered on the brink of insolvency, relying on stopgap funding from the general treasury to finance highway construction and repairs.

Not surprisingly, there are huge economic costs associated with underinvestment in America’s highways:

Targeted efforts to improve conditions and significant reductions in highway fatalities resulted in a slight improvement in the roads grade to a D this year. However, forty-two percent of America’s major urban highways remain congested, costing the economy an estimated $101 billion in wasted time and fuel annually. While the conditions have improved in the near term, and federal, state, and local capital investments increased to $91 billion annually, that level of investment is insufficient and still projected to result in a decline in conditions and performance in the long term. Currently, the Federal Highway Administration estimates that $170 billion in capital investment would be needed on an annual basis to significantly improve conditions and performance.

The Highway Trust Fund once financed one of the most ambitious and economically beneficial public works projects in American History–the interstate highway system. But because of how the gas tax was structured–as a flat excise tax–the fund is now unable to adequately maintain our interstate highways.

The amount the gas tax should be raised is open to debate (previous increases of about 5 cents per gallon have had no discernible effect on average gas prices); the graphs below provide a potential benchmark. The costs of raising the tax would fall largely on major corporations (not consumers), while an improved interstate highway system would benefit everybody.

Update:

Thomas Friedman of the NYT has an interesting Op-Ed where he discusses Climate Change and the Gas Tax:

But what if Verleger is right — that just as the cost of computing dropped following the introduction of the PC, fracking technology could flood the world with cheaper and cheaper oil, making it a barrier to reducing emissions? There is one way out of this dilemma. Let’s make a hard political choice that’s a win for the climate, our country and our kids: Raise the gasoline tax.

“U.S. roads are crumbling,” said Verleger. “Infrastructure is collapsing. Our railroads are a joke.” Meantime, gasoline prices at the pump are falling toward $2.50 a gallon — which would be the lowest national average since 2009 — and consumers are rushing to buy S.U.V.’s and trucks. The “clear solution,” said Verleger, is to set a price of, say, $3.50 a gallon for gasoline in America, and then tax any price below that up to that level. Let the Europeans do their own version. “And then start spending the billions on infrastructure right now. At a tax of $1 per gallon, the U.S. could raise around $150 billion per year,” he said. “The investment multiplier would give a further kick to the U.S. economy — and might even start Europe moving.”

I am not advocating for such a steep increase in the gas tax, as such a plan would amount to regressive taxation on consumers and would be a political nonstarter.

But the article does raise the valid point that lower gas prices could hamper the global push to reduce GHG emissions.

Update (1/8/15):

Good news everyone!

Today Reuters published an article proclaiming that raising the gas tax has gained some congressional support.


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Transaprency Report: The Real “Bridgegate” Scandal

Original article:

More than 63,000 bridges across the United States are in urgent need of repair, with most of the aging, structurally compromised structures part of the interstate highway system, an analysis of recent federal data has found.

The report, released on Thursday by the American Road and Transportation Builders Association, warned that the dangerous bridges are used some 250 million times a day by trucks, school buses, passenger cars and other vehicles.

Overall, there are more than 607,000 bridges in the United States, according to the DOT’s Federal Highway Administration, and most are more than 40 years old.

The Transportation Department routinely inspects bridges and rates them on a scale of zero to nine. Bridges receiving a grade of four or below are considered structurally deficient, and now account for more than 10 percent of all bridges.

“The bridge problem sits squarely on the backs of our elected officials,” [chief economist at the American Road and Transportation Builders Association Alison Premo] Black said. “The state transportation departments can’t just wave a magic wand and make the problem go away.”

The American Society of Civil Engineers, which separately produces a report card on U.S. infrastructure every four years, gave it an overall “D,” or poor, grade. Bridges received a “C+” grade for mediocre.

The U.S. needs to invest $20.5 billion annually to clear the bridge repair backlog, up from the current $12.8 billion spent annually, the ACSE has said.

The civil engineers’ group estimates that the U.S. will need to invest $3.6 trillion by 2020 to keep its transportation infrastructure in a good state of repair.

America the short-sighted, America the reactionary.

In Washington’s Snohomish County, local governments OK the building of houses in areas where mudslides are inevitable, resulting in 41 deaths. Why? because bringing in taxpayer dollars and jobs looks good now, forget the potential negative consequences, those will be someone else’s problems.

We squabble over small (if existent) healthcare premium increases associated with Obamacare, unmindful of expanded access to mental healthcare and subsidies to the poor; at the same time we bounce from avoidable tragedy to avoidable tragedy, shaking our heads and asking “what could we have done differently?”

And we let our infrastructure fall into disrepair, setting ourselves up for who knows how many avoidable deaths (not to mention the economic arguments: high unemployment and low borrowing costs beg for stimulus spending, the long term economic costs of failing infrastructure). Nobody wants to be remembered as the person who “wasted” money on a bridge, and there is no accountability for allowing avoidable incidents to occur due to political inaction.

Subsidize for-profit corporations for doing what they would need to do anyways to maximize profits? Sure that brings in jobs. Prevent a bridge from collapsing? Ehhhhh let that be the next guys problem.

It is telling that investors around the globe seemingly believe in America’s growth and ability to repay our debts more than our own lawmakers do. America’s strength is derived from it’s people, our ingenuity and work ethic. If we continue to under-invest in our people and our infrastructure, we are undermining the very things which made America a global superpower (and “safe haven” for investment) in the first place.

This is not to say that we should not pursue tax reform, and demand oversight / review to ensure programs run efficiently and effectively. But America must more fully embrace the concepts of fiat money and Modern Monetary Theory; past debt cannot be a reason to forgo our current needs, or in the future we will not even have the option of affordable deficit spending. The U.S. Federal government has, in essence, a “blank check”, so long as it is used responsibly; systematic under-investment in the American people and infrastructure is irresponsible and shortsighted.

Issues like this remind me of a favorite Abaraham Lincoln quote: “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.” Of course Lincoln was referring to Civil War, a more immediate threat. America seems to be able to deal with immediate/obvious threats. It is responses to impending threats to American prosperity that remain elusive, which is at the same time understandable and infuriating.

We wait for tragedy to strike, lament the dead and point fingers, instead of acting preventatively. Some tragedies are truly unavoidable; this truth should not be used as a free pass for saying all tragedies are unavoidable.

 


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Transparency Report: Notification, You Have 5 Billion New FB Friends; The Human Right To Internet Access

At the beginning of my internship at the UNDP, I was lucky enough to get the chance to volunteer at and then attend the ECOSOC Partnerships forum. I was assigned to write a few blogs for the event, among a number of other blogs I have written about events at  the UN which for some reason I have never shared on NN. Perhaps someday I will release the rest of the “lost UNDP blogs”, but that day is not today. Here are notes from the event Policy Dialogue: “The Changing Face of Technology and Innovation” (full blog):

The second policy dialogue at the ECOSOC youth forum focused on how technological innovations in recent years have helped bridge the “digital-divide” between developed and developing countries. While the gap has not been fully closed, partnerships between the private sector, governments, non-governmental organizations and civil society groups have helped identify challenges and opportunities in the developing world. By creating differentiated products at lower costs, private companies can gain access to new markets while simultaneously empowering the people in those markets.

Internet access is considered one of the great technological advances of our time. Internet access empowers people; the possibilities are constantly evolving and literally endless. It is an essential component of “E-Governance”, which includes the dissemination of information and a more inclusive and democratic government agenda-setting process. With a greater push for accountability and inclusiveness mechanisms in the Post-2015 Development Agenda, internet access, bolstered by innovations in mobile technology, has become an increasingly important tool for achieving sustainable human development.

But not enough has been done to make internet access affordable for a large portion of the world’s population. According to Mr. Tuli, 3 billion people have mobile phones but no internet access. This is not because of a lack of electricity or communication networks (as evidenced by the fact that they do have cell phones), but because they are priced out of the market. Mr. Tuli went on to call basic internet access a “human right”, to resounding applause from the hundreds of participants in the ECOSOC chamber.

While mobile technology was originally thought of as an educational tool, it has since evolved beyond that (although mobile education is still a proposed root for overcoming education deficits in Least Developed Countries (LDCs)). E-Governance can help disseminate information and promote inclusive governance, creating an enabling environment for sustainable human development. Healthcare providers can connect to information and expert advice in ways that can save lives. E-Finance can help provide capital in a much cheaper and convenient way to previously isolated groups, unlocking the entrepreneurial spirit in the developing world (and making such endeavors potentially much more profitable). Even people who are off traditional power grids (the least developed places in the world without basic infrastructure), mobile renewable energy generators and wireless internet capabilities can help bring ICTs virtually anywhere in the world.

Mobile technology penetration can be very rapid. Competition between private sector actors can drive prices down to affordable levels, and in some cases subsidies can help. Mr. Ogutu told the story of mobile phone penetration in Kenya; 5 years ago there were 20,000 users, today there are over 30 million users. This was made possible by M-Kopa, a company that utilized E-finance to provide pay-as-you-go mobile solar powered electricity to poor people who are not on a conventional power grid. Financing—secured through PPPs—allowed the founders of M-Kopa turn their vision into reality.

The narrative on bringing internet access to the least developed areas of the world continues a few months later. Not surprisingly, behind the initiative is a large-scale public-private partnership, with publicity magnet Facebook at its core (original article):

Mark Zuckerberg, chief executive of Facebook, announced the launch of Internet.org Wednesday, a project aimed at bringing Internet access to the 5 billion people around the world who can’t afford it. The project is the latest initiative led by global-communications giants to combat market saturation in the developed world by introducing the Internet to remote and underprivileged communities.

“The goal of Internet.org is to make Internet access available to the two-thirds of the world who are not yet connected and to bring the same opportunities to everyone that the connected third of the world has today,” Zuckerberg said.

“There are huge barriers in developing countries to connecting and joining the knowledge economy,” he added. “Internet.org brings together a global partnership that will work to overcome these challenges.”

The project will develop lower-cost, higher-quality smartphones and deploy Internet access in underserved communities, while reducing the amount of data required to surf the Web. Other founding partners include Samsung, Qualcomm, Ericsson, MediaTek, Nokia and Opera.

Facebook and other tech giants, of course, have a significant financial stake in expanding in the developing world. With tech companies reaching market saturation in the United States, countries in Latin America and Africa, for example, offer a big opportunity to attract a steady stream of new users, whose data can be mined by advertisers.

Connecting more people globally has important implications for how people organize their lives, said Patrick Meier, co-founder of the Harvard Humanitarian Initiative’s program on Crisis Mapping and Early Warning. Social media has become a lifeline to people affected by earthquakes, floods and conflicts in the developing world, he added.

In places where the state is limited, Meier added, the Internet becomes a way to make up for services the government fails to provide. “When the state is not there, when you talk about limited statehood, you get a void,” he said.

In addition to acting as a substitute for the state in the context of “bad governance” / conflict / crisis environments, mobile technology should be a tool utilized by the state to promote inclusive and indiscriminate human rights based governance for sustainable human development. ICT connects people, enabling social accountability (people claiming their rights) by overcoming collective action problems. There are also myriad standard of living benefits associated with bringing ICT in the developing world–micro-financing, healthcare, education, media, etc. (OK maybe I am a little biased, I want those 5 billion readers too 😛 ).

Furthermore, by utilizing open-source technology and the collective will and creativity of 5 billion people facing similar problems, innovations in one part of the developing world can be adapted to the local needs of other developing regions. This would further expedite the global development process–open-source technology should be a core feature of the global internet connectivity push.

The possibilities are literally endless, as the utility and functions of the internet continue to evolve at ever faster rates. It should also be noted that new technological capabilities in LDCs will necessitate new policies, laws and oversight mechanisms to ensure gains are shared fairly. However, since these technologies are only new to certain regions, digital accountability mechanisms already exist for these regions to build on.   

I cannot stress enough how important bringing mobile ICTs to least developed countries is for sustainable human development, nor can I know how the technology will evolve in the future. Providing access to mobile information and communications technology empowers people, creating an enabling environment for a multitude of interrelated development objectives. These positive forces will naturally synergize, empowering people to challenge power-imbalances and hold powerful groups accountable for their human rights obligations.

ICTs are a natural fit for a large scale public-private-partnership (PPP). Companies can provide most of the start-up capital and technical know-how. Governments can create an education campaign about the benefits of ICTs and how to use them, while also guaranteeing companies market access and security of any capital / infrastructure installations (extremist groups will not like this idea as closing government service gaps will restrict their ability to buy goodwill and recruit new members). As ICTs help sustain the development process, new markets will emerge for communications companies to sell their products and services. This means more profits for companies, more tax revenue for governments, and a higher standard of living for people in LDCs. Not to suggest vested interests will not try to play spoiler (my regular readers by now know this is not the case), but overall a this is a win-win-win partnership.

Due to the indisputable importance of ICTs for sustainable human development, internet access should become an internationally recognized human right. Human rights obligations are primarily the responsibility of the state; in this case however, it seems that states have a willing and capable partner in the private sector. I will continue to keep the NN community up-to-date on this potentially-world-changing initiative.