A BASIC COMPONENT OF CIVICS

With the a new year upon us in a few days, I thought it would be a good time to write about one of the basic social relationships with which all nations – for that matter, all social collectives – must deal. According to Marxian thought, this relationship is the main one that societies must handle. That is the one between both a nation's wealth creation and distribution and the rest of its institutions; i. e., the function an economy plays in determining how the nation goes about its “business.”

I don't believe any blog needs to convince you that the role of the economy is central to the concerns of a nation. Our media gives this aspect of national life sufficient coverage to satisfy the demands of its readers and viewers to stay informed over the ins and outs of the world of businesses and job markets, investments and bankruptcies, savings rates and consumption rates, etc. We seem to be constantly concerned about whether the economy is growing toward a state of prosperity or whether it is mired in a sluggish recovery as it is now. At times, we have been in prolonged periods of downturns in varying degrees of recession and even depression. We are presently justifiably worried that pending tax raises will snuff out our anemic climb out of the dismal conditions that the 2008 crisis triggered.

Nobel prize winning economist, Joseph E. Stiglitz,¹ points out that, on a worldwide basis, governments are not doing what we should expect them to do when it comes to economic policy. He explains that we should expect them to put in place those policies that stabilize economic conditions. Yet, governments have allowed destabilizing levels of unemployment and underemployment to persist. By doing so, their polices (or lack of policies) have allowed under-utilization of resources – specifically labor resources – while, at the same time, sacrificing our commitment to fairness. In our nation, the interests of the 99 % have been advanced by their advocates claiming that, one, markets are not working correctly, two, markets are not efficient, and three, the political systems are not correcting the conditions that cause the markets to be dysfunctional. After all, under traditional market dictum, markets are supposed to be stable, but the crisis of 2008 amply demonstrated that they are not. For example, reviews of the behavior of bankers, the main culprits in the financial collapse, from commentators from both the left and right, have indicated that they behaved according to rational incentives – what market theory calls for. Given the inability of the markets to self-correct in the months leading to the debacle of '08, that would indicate that there were, and some fear still are, basic problems with the purity of related markets, such as the market for real estate.

Dysfunctional markets lead to conditions that defy basic economic laws such as demand equals supply. As wealth and income are skewed to certain upper segments of the population, there are huge levels of unmet needs. This is due to significant unemployment which in turn becomes a major cause for inequality. GDP might go up, but standards of living erode and that is the high price of extreme inequality. Why? Because the conditions that lead to less stability in our markets transform markets into becoming less efficient and, ultimately, this leads to less than optimal growth in the economy. As a result, all of these negative conditions come about and, by the way, we place our democracy in peril.

Dangers to our democracy can have many origins, but of basic concern here is what significant levels of inequality can lead to: a lack of legitimacy. Citizens, under whatever system of government or whatever set of governing principles is employed, must feel that certain standards of fairness are maintained. But when there is a large disconnect between the compensation some receive and the contribution to the society or economy those individuals provide, then the fairness standard is strained. This was the case when the economy imploded in '08. When we hear that bankers received large amounts of compensation in the form of salaries and bonuses despite the fact that the banks these individuals work for lost great amounts of money, the entire set of assumptions regarding how efficient the market for executive talent is is seriously questioned. We see and understand that the misdeeds that the culprits of 2008 perpetrated on the rest of us have gone mostly unaccounted for and this fact can be the basis for a lack of legitimacy in the system itself.

From the federalist perspective, the above conditions have several points that are disturbing. Most basic is that skewed wealth and income which we have experienced in the last decades are in itself troubling. Only the most naïve cannot see the instability such a condition causes. One does not have to feel envy to begin questioning the whole purpose of the system. When a system loses all sense of “we are all in this together” and instead adopts a feeling that one is only here to meet the interests of an obscure ideal or, worse, the interests of some advantaged group, then the rationale for our democratic project is undermined. And hence, the role of civics should be to not only describe and explain the economic conditions that are affecting the democratic quality of the governing system, but also to educate the youth as to their interests and the means by which to improve the status of those interests. It should do this if for no other reason than to help restore a more democratic society. One need not be a Marxist to see this basic relationship and demand that our educational efforts address its related concerns in establishing and/or maintaining a meaningful level of equality.

1The concerns expressed in this posting inspired from Stiglitz, J. E. (2012). The price of inequality: How today's divided society endangers our future. New York, NY: W. W. Norton and Company.

HIDDEN “LUMPS OF COAL”

The traditional way in which teachers of civics classes have taught how a bill becomes law has been much maligned. I'm sure most of you have seen the cartoon that depicts the process as “Bill” gets born and proceeds through the two houses of Congress. Our hero (the cartoon features a male voice for Bill) makes it through, but the journey is long and filled with hazards – many of his cohorts die in the process. The criticism is that the cartoon whitewashes the level of politics that law-making involves. A much more realistic version of the process, although the story involved is about proposing an amendment to the Constitution, is shown in the movie, Lincoln – a film all high schools should show their students. In that feature film, you get a real sense of what “sausage making”¹ is all about.

Why is the film's version more useful than the cartoon version? An obvious answer is that reality – the more real the better – gives students a better context, a better basis by which to build expectations for the possible, a more accurate ability to place accountable judgments and therefore, an ability to vote more effectively. So far, this is pretty obvious stuff. But transparency does not end with merely having a realistic view of the law-making process; it also goes to the substance of the laws that get through the process. Of particular import is how “submerged” provisions of laws and their resulting policies affect the welfare of citizens – often those who are the intended beneficiaries. These elements are important to look at if we want to make public policy more transparent.

Suzanne Mettler has a short book out that reports on her work on the issue of submerged policy.² She conducted what can be described as a “survey-based experiment” in which, through a set of questions, she (and her collaborator, Matt Guardino) determined if added information about a particular policy would change people's minds about a given policy. But before revealing what they found out, what do we mean by submerged policy? These are policies that because of what the law arranges, in its implementation, have components that are either difficult to understand, to trace, or to appreciate. Consequently, the average citizen is not aware of how the policy unduly benefits some and hurts others. Often these arrangements usually benefit third parties or favor parties that unduly secure resources from the way the policy works out. Oftentimes these incidents of less than transparent provisions are named “shadow,” “hidden,” or “camouflaged” policies. For example, our public health programs that pay third party insurance companies instead of paying health care providers directly, do what they do without a full appreciation of their effect. Or, the student loan program used to pay banks and other lending institutions instead of paying colleges or students directly amounts to a hidden benefit for those third parties, the banks. An example of a group of citizens unduly benefiting from a policy is the upper income people's benefit from the homeowner mortgage interest tax deduction.

What the researchers found was that if added information is given to those surveyed, the subjects change their opinions concerning those policies and they usually change in the direction that favors a more equitable distribution of resources. These changes usually involve money or are against business interests benefiting from policies that are meant to bolster opportunity for those not so advantaged. A review of the types of laws and policies that come under these concerns include tax expenditures, loans, loan guarantees, and contracts involving third parties – such as insurance companies. They also found that the changed views were not limited to policies that had hidden beneficiaries, but policies that are meant to help the poor. When given more information about the Earned Income Tax Credit, for example, respondents report a more positive view of such a program.

One related issue with this entire area is that if a set of policy makers wants to reform a policy that has “submerged” elements, those officials are subject to and often are the target of propaganda, sponsored by the benefited parties, that capitalizes on the very obscure nature of the policy area. We saw this in the propaganda blitz against the Affordable Health Care Act – Obamacare – in which such ludicrous charges of death panels and the like were rolled out. We heard the cry: “Do you want government making your health care decisions for you?” While unaccountable insurance companies are making a lot of our current decisions for us, we tend not to know this until the day comes when an insurance company is telling us or a relative that a particular procedure is not covered under the policy we or our relatives have. The fact is that while the charge that government was taking over our health decisions was and is overstated, we at least get to vote for those government policy makers who are setting up the programs while we have no say as to who sits in those executive suites that run the multi-billion dollar insurance companies. But facts like these are “hidden” or not fully appreciated or understood by many voters.

Under a civics curriculum that is guided by a liberated federalist outlook, classroom instruction would shine a spotlight on this type of problem since the emphasis would be on having stakeholders informed and active in the formulation of public policies. Of course, the issue has to be prevalent enough to justify class time, but Mettler's book illustrates how this angle to viewing public policy has unearthed a significant number of policy concerns. Her book does this by using a concept that portrays a non-federalist character in many of our laws and policies – an element that purposefully hides a “lump of coal.”

1Term is a euphemism for law-making.

2Mettler, S. (2011). The submerged state: How invisible government policies undermine American democracy. Chicago, IL: University of Chicago Press. This study came to my attention in a book review: Howard, C. (2012). Political Science Quarterly, 127 (3), pp. 480-481.