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The Problem with Parties and Prostitutes

April 16th, 2012 . by economistmom

gsa-vegas-party-needs-your-taxdollars

(Cartoon by Rick McKee of the Augusta Chronicle.)

The headline stories in today’s papers about the GSA’s parties and the Secret Service’s prostitutes are unfortunate, particularly as they coincide with the federal tax-filing deadline.  One’s enthusiasm or just plain willingness to pay one’s legal tax liability is directly related to one’s trust of the government–the assurance that we “get our money’s worth” in the taxes we pay into the public sector.

These examples are egregious displays of the classic “waste, fraud, and abuse” that Americans fear permeates the government, yet both are very “small” compared with most of what the government does and most of what it commands and spends in our society’s resources.  In theory, these incidents should not affect our society’s ability to raise an amount of revenue adequate to pay for the size and shape of the government we all desire.  In practice, however, they no doubt will–because Americans, greatly encouraged by the politicians who serve them, love dwelling on the small, scandalous, and fleeting stuff, especially when it distracts away from the large, difficult, and persistent stuff.

(I’ll have more to say about the rich guy paying the taxes in the above cartoon, later today.)

27 Responses to “The Problem with Parties and Prostitutes”

  1. comment number 1 by: reflectionephemeral

    It is of course correct that mismanagement of funds is a bad thing, which must be stopped and, if possible, prosecuted.

    But I think you have the causal dynamic a bit off here, as to why people feel resentment toward the government.

    I had a back and forth with Bernard Finel on this a little while back. In his last post on the topic, “Okay, I’m Convinced,” he quoted my explanation of anti-government resentment:

    There didn’t appear to be all too much antigovernment resentment during the Bush Jr. presidency, as the GOP pushed for Medicare Part D, No Child Left Behind, the executive’s asserted power to wiretap and to detain & torture US citizens without charges or a warrant, surpluses turned into deficits, the right in Raich v Gonzales to imprison folks for activity legal under state law, and the invasion for bogus reasons & failed occupation of an arbitrarily selected Middle Eastern country.

    The cause of the receptivity to the talking points is the right wing’s efforts to gear up the resentment machine, which then trickles into the public consciousness. It’s not the result of anything that the government has done.

    From that thread:

    in a world where the GOP has abandoned all interest in policy, it doesn’t matter what the government does. Bill Clinton can spend his whole presidency trying to balance the budget and Reinvent Government, but the right wing will be talking about how principled militias are and shooting melons in their backyards to prove that the president murdered Vince Foster. They spent the whole 1990s demanding that we shutter the Department of Education, then spent the Bush Jr. era federalizing and centralizing education policy, and now spend the Obama era arguing that all federal policy is socialism. There’s no government reform that can diminish that unquenchable, irrational tribalism.

    In real life, this kind of “waste, fraud, and abuse” is negligible. But one of our two main political parties is premised on claiming that curbing it would solve all our problems. That is the root of the problem with our discourse on the matter.

  2. comment number 2 by: AMTbuff

    These examples are egregious displays of the classic “waste, fraud, and abuse” that Americans fear permeates the government, yet both are very “small” compared with most of what the government does and most of what it commands and spends in our society’s resources.

    The egregious examples illustrate the government’s poor stewardship of taxpayers’ money. Spending programs are created and continued without cost-benefit analysis or anything approaching the due diligence practiced in private sector businesses.

    By one measure Social Security is a model of government efficiency with minimal collection by ineligible recipients. Yet if you take a step back and consider its suitability to its stated primary purpose of eliminating elder poverty, it is wasteful beyond all reason. Like other fiscal issues, this one depends on what baseline you use.

  3. comment number 3 by: Jim Glass

    These examples are egregious displays of the classic “waste, fraud, and abuse” that Americans fear permeates the government, yet both are very “small” compared with most of what the government does

    And also far from the worst examples of the waste running on a far larger scale.

    Remember Milton Friedman’s taxonomy. When I spend…

    1) My money on me, I am very careful to both restrain spending to the amount I can afford and spend only on what produces a benefit for me that is worth the cost.

    2) My money on others, I am very careful about keeping to the amount I can afford. As to the benefit it produces for others, I am not the best expert on that, but as I don’t want to waste my money I do my best to have it produce some.

    3) Others’ money on me, I take care to spend it in a way that produces the most benefits for me. I don’t about whether they are worth the cost or the amount of spending, except for the more the better!

    4) Others’ money on others, I don’t care about the amount *or* whether it produces any benefits for anybody, or whether they are worth the cost or are pure waste. If I get credit for the spending, the more the better, period.

    The Vegas conventioneers at least were at Level 3. All that spending at least produced real benefits for them.

    The nation is spending trillions at Level 4.

    E.g., if it is so vital to raise taxes on “the rich”, what is the benefit of running up debt to keep making transfers *to* the rich. Warren Buffett said it is absurd that people like him get Social Security and Medicare. Where is “the Buffett Benefit Cut”? He gets a lot less benefit from Medicare than the conventioneers got from their partying.

  4. comment number 4 by: Vivian Darkbloom

    Jim Glass,

    There is no question in my mind that #’s 3 and 4 are universally true. However, with respect to #1 and #2, it is equally clear that the US is not a nation of Milton Friedmans. But, then again, it appears that he was talking about himself.

  5. comment number 5 by: Arne

    “if you take a step back and consider its suitability to its stated primary purpose of eliminating elder poverty, it is wasteful beyond all reason”

    I am not the only one who disagrees.

    http://www.nber.org/bah/summer04/w10466.html

  6. comment number 6 by: Arne

    Friefman left out the class of others spending my money.

    Good government oversight means finding someone who can see that making decisions about spending others money has an affect on how others spend my money.

    “The egregious examples illustrate the government’s poor stewardship of taxpayers’ money.”

    It is not hard to find examples of corporations poor stewardship of stockholders money, but it does not get the same level of publicity. As Friedman implies, it is part of the human condition. Scrutiny of government stewardship is simply more important because stockholders can choose to walk away whereas taxpayers cannot.

  7. comment number 7 by: Vivian Darkbloom

    Arne,

    If social security has reduced poverty for the elderly population, does that mean that spending on those elderly who are not in danger of being in poverty in the first place is not wasteful to that purpose?

    If the program concentrated solely on paying benefits to those elderly who are in poverty or near poverty, would that not even further reduce the percentage of elderly living in poverty?

    If we take a longer perspective on social security, wouldn’t it make sense that if the program concentrated on providing benefits to the truly needy, our financial situation would be better such that the program would be more likely to continue to meet its stated purpose?

    I don’t think the fact that social security may have helped reduce elder poverty is inconsistent with the assertion that it is “wasteful”. “Beyond reason” is subject to debate.

    AMT did not mention this, but I don’t think the stated purpose of social security is to eliminate elder poverty by increasing the poverty level for all the other cohorts.

  8. comment number 8 by: AMTbuff

    Arne, I said wasteful, not ineffective. Throwing money at the elderly indiscriminately does reduce their poverty level.

    It’s funny how progressives insist that tax cuts be targeted but that spending not be.

  9. comment number 9 by: Arne

    “does that mean that spending on those elderly ”

    Your question is faulty. The government does not spend the money. It transfers the money. The distinction is meaningful.

    The net amount transferred back to those not in danger of poverty is near zero when accounting for inflation. The net amount transferred back to those in danger of poverty is significantly more than they could expect from a retirement plan.

    It is effective and it is not wasteful.

  10. comment number 10 by: Arne

    “It’s funny how progressives insist that tax cuts be targeted but that spending not be.”

    Garbage. Spending should be targeted. However, SS is not spending.

  11. comment number 11 by: SteveinCH

    “The net amount transferred back to those not in danger of poverty is near zero.” This is quite a bit of sophistry and also false.

    So let’s start with the sophistry implied by “the net amount.” One presumes you are referring to the fact that SS benefits are taxable above the threshold and that the people above the threshold are mostly wealthy. But there are a few issues with this.

    1. The tax in question is not a FICA tax but a general revenue fund tax so the money flows to the general fund. Thus, the net outflow from a SS perspective is equal to the gross outflow.

    2. The whole notion of net spending is a bit silly on principle. We don’t describe net spending or taxation in other contexts. Why would we in this one?

    But now let’s come onto the point that the contention is also false. The average effective Federal income tax rate for top quintile of Americans is 14.4% so we’ll use that number so 14.4 cents on every dollar is returned. But how many dollars are spent on the wealthy? Well, about 20 percent of seniors have a net worth over a million dollars so let’s say they are not in danger of poverty, not imminently anyway.

    20 percent of SS spending is about $150 billion, 14.4% or about $22 billion of that flows back to the Treasury, leaving about $128 billion spent on benefits. $128 billion a year is pretty far away from zero in my opinion.

  12. comment number 12 by: Jim Glass

    I should have let Friedman speak for himself:

    http://www.youtube.com/watch?v=3Rg8RHphCnI

  13. comment number 13 by: SteveinCH

    Arne,

    What spending have progressives targeted outside of defense?

  14. comment number 14 by: Arne

    “I should have let Friedman speak for himself:”

    I found and listened to that exact video before commenting. His taxonomy would include others spending your money on you as the part of others spending money on others, but if you are involved in the oversight, the result will not be the same.

    Oversight by involved people puts government spending closer to Friedmans ideal.

  15. comment number 15 by: Arne

    “One presumes you are referring to the fact that SS benefits are taxable above the threshold ”

    Sorry if I was not clear. Net amount transferred is simply lifetime benefits minus lifetime taxes. The progressivity of the benefit structure makes net transfers higher (as a percentage of gross transfers) for people closer to poverty.

  16. comment number 16 by: Arne

    “What spending have progressives targeted outside of defense?”

    You are making this comment on a blog where the author has been working for years to make a point about tax expenditures being like spending?

  17. comment number 17 by: SteveinCH

    LOL so it’s a definitional thing then. Cutting spending = higher taxes. I would agree progressives do favor that form of lower spending as long as only tax expenditures are cut for the wealthy.

    The lifetime argument is an even worse form of sophistry since it’s predicated on the false premise that you are paying for your future self as opposed to someone today.

  18. comment number 18 by: Vivian Darkbloom

    “His taxonomy would include others spending your money on you as the part of others spending money on others, but if you are involved in the oversight, the result will not be the same.”

    It is hard to visualize an example of what you have in mind. It is even harder for me to imagine that this would come even close to “Friedman’s ideal”.

    First, why would I need (or want) others to be spending my money on me? The example that does come to mind is when a parent gives money to a child so that the child can buy the parent a birthday or Christmas present. Here, even though I’m sure a lot of money has been wasted on gaudy ties, etc, the economic waste is probably a “necessary evil” (Steve, I try to get these comments to tie together, ha ha). One could get more “involved” but that would spoil all the fun.

    Although technically, “you” might be included among both “others” in the equation “others spending money on others”, it would generally (other than my example above) be a miniscule part on the giving (taxpaying) end and potentially a very large amount on the receiving (spending) end.

    I’m guessing those GSA persons partying in Las Vegas qualify as “involved” but they were likely spending a fraction of a fraction of a penny of their own tax payments, but spending a very large amount of the collective “others” money on themselves. If this is the type of “oversight” you have in mind, I can guarantee you “the result will *not* be the same”. And, I doubt this comes close to Friedman’s ideal. Realistically, how many of the approximately 330 million Americans can be involved in the type of “oversight” you may be referring to? Arne, I don’t mean to be unfair, so perhaps you can give a good, practical example of what it is you have in mind. I have trouble visualizing, but it may be just my lack of imagination.

    Also, to be fair, the phenomena Friedman rightly identifies is not limited to government (nor do I think Friedman necessarily meant to limit it to that). When I read proxy statements and see how much of “others” money is spent by “others” (corporate boards) on “others”, Friedman is once again vindicated. And, realistically, my “involvement” and “oversight” in this situation is much greater than I could ever expect to have with respect to government taxing or spending. Choices often involve selecting the lesser evil as much as the greater good.

    Finally, while the taxonomy is a good generalization, not all situations fall neatly into one box or the other. For example, the “overseers” we have are largely our elected officials. When they decide how to spend “others money” on “others”, it is quite often not entirely altruistic. Like Hopscotch, they’ve quite possibly got one foot in box three and the other in box four.

  19. comment number 19 by: Arne

    To throw out a broad generalization about people who are not progressive, their inability to see that government spends their money on them seems to be part of their distrust of government.

    It IS difficult to be part of oversight at the national level, but not so at the local level.

  20. comment number 20 by: Arne

    “as long as only tax expenditures are cut for the wealthy”

    Again an odd comment to put on this blog. Diane has been advocating repealing all of the Bush tax cuts since before they became the Bush/Obama tax cuts. You clearly do not consider her a conservative.

  21. comment number 21 by: Arne

    “it’s a definitional thing then. Cutting spending = higher taxes”

    targeted spending is NOT defined as cutting spending

  22. comment number 22 by: Vivian Darkbloom

    “It IS difficult to be part of oversight at the national level, but not so at the local level.”

    Arne, this is very true. To throw out another broad generalization about progressives, they seem to fail to grasp that simple truth. Why would they otherwise favor broad expansion of federal power and diminishment of state and local power?

  23. comment number 23 by: SteveinCH

    Arne,

    Are you defining Diane as a progressive? I rather doubt she would self define that way but so be it.

    I note you carefully avoided any response to the sophistry about “net payments.”

  24. comment number 24 by: Arne

    “carefully avoided”

    I avoided it because I really don’t understand how you can think that what happens with the money between the time it is collected as payroll taxes and the time it is paid in benefits has any impact on the validity of a lifetime analysis. I suspect that just telling you you are wrong is not going to help.

  25. comment number 25 by: AMTbuff

    For one thing, Arne, assuming that benefits decades in the future will be paid as originally promised is unrealistic. Projecting current policy decades into the future indicates fiscal collapse, which is inconsistent with paying those benefits. “Pay as you go” has become “pay and pray”.

  26. comment number 26 by: Arne

    “assuming that benefits decades in the future will be paid as originally promised is unrealistic”

    The purpose of a lifetime analysis as I suggested it was to see that the program is progressive - that the insurance aspect is real. This will be true whether scheduled benefits are adjusted down to meet available income or whether adjustments are made on both sides.

  27. comment number 27 by: Arne

    “Projecting current policy decades into the future indicates fiscal collapse, which is inconsistent with paying those benefits. ”

    On the contrary, adjusting the benefits and taxes to be a balanced paygo program is entirely consistent with paying benefits. That is part of the point of sticking to paygo.