Hello, Pot? Kettle Here.

I accept that in politics people are just fundamentally going to see some things differently.  The difference could stem from philosophy, experience, interests or a number of other factors.  But, when that blindness is willful, and includes significant revisions to the past, that’s when accepting those differences just turns into bullshit.

For example, the whole hullabaloo about ‘right to work’ legislation that passed through a lame duck session of the Michigan legislature this past winter is a prime example.  The whole reason that it was taken up in the session was that the GOP majority was about to become smaller and that outgoing members would never again be subject to the wrath of the voters at the ballot box.  It was, at its best and worst, a hard-nosed calculus of what they could get away with.  It enraged much of the state, but it worked.  At the time, Michigan Republicans were called anti-democratic (note the lower case D), and that they were trying to subvert the will of the electorate, a charge that was later borne out in a spate of polls.

Now that we find public institutions adapting to the new reality of the law, it’s the turn of Republicans to be outraged.  Why?  Because state universities such as Wayne State and Ferris are attempting an end run around the legislation, which has not yet taken effect.  Those two schools have negotiated new long-term contracts that would take effect before the RTW legislation takes effect.  It is, in effect, an end-run around the law, a perfectly legal tactic, and clearly an effort to subvert the intent of the law.  In short, it’s just politics.

The Republicans are blinded by their own rage that their will is not being adhered to.  According to this report, a faction of legislators made the trek up to Big Rapids to convey the message that should they lock in new contracts (before RTW takes effect) against the will of the GOP, they would lose a portion of their funding.  And Ferris folded, fearful that the educational-industrial complex they’ve constructed for themselves would lose one of their biggest revenue streams with which they use to compensate themselves quite richly.  I doubt that should the same delegation come to visit Detroit, they will probably be chased out with torches and pitchforks, such is the outlook of Wayne State.

Republicans opened up Pandora’s box when they rammed this through in a lame duck session of the legislature.  They have no right to attempt retaliation at institutions who respond to in a completely legal fashion.  What these people are doing is nothing more than outright bullying.

____________________________

Another more troubling trend that is beginning to use our universities as political props.  From the fracas at Michigan State last year that mandated students have insurance because aggrieved Michigan Republicans thought it smacked a bit much of Obamacare, to meddling in internal policies when it comes to same-sex partner benefits, the state government is continuing a policy that as amoral as it is stupid.  This applies to both Democrats and Republicans.

Advertisements

Municipal Fiefdoms

Something odd about driving around metro Detroit is that you find yourself first in one city, two minutes later, another, and in another two minutes, yet another city.  Southeast Michigan, with its dense population, is a patchwork of lots of different municipal entities.  And while at one point, having lots of different municipalities probably made a fair amount of sense, there’s much more pressure now on municipalities to streamline their operations and merge as many functions as possible with neighboring entities.

Wayne County alone, at least according to my calculations, has at least 39 different police forces*.  That’s 39 different chiefs, 39 different payroll departments, 39 different HR departments, and 39 different of everything that a police department has.  If we considered all of the duplicative work that’s being done across agencies, the sum would be staggering.  Finding data on matters like this is somewhat challenging, so the precise scope of the financial savings that could be realized is hard to calculate, though, suffice it to say, instead of making further cuts in personnel, we could realize significant economies of scale by merging many of these departments into countywide organizations.

Municipalities have been having to do more with less for years.  The boom of the 1990s, with all of the accompanying tax revenues is  but a distant memory for a generation that has come of age amongst nothing but layoffs, closures and budget cuts.  Local governments, particularly in Detroit, have gotten to the point where further cuts isn’t cutting into the muscle, but the bone.  Consolidation of municipal services, be it school districts, libraries, police and fire departments, and a number of other services offered by local governments is the best possible method of putting local government on a sustainable fiscal basis.

Another upside of consolidation would be that in addition to saving money in the future, the opportunity could be used to make significant changes to the benefits and pension systems for retirees, which would also make them more fiscally sustainable, and they  needn’t consist solely of cuts or having to claw back benefits from workers and retirees.

But there’s going to be lots of problems with achieving this.  Opposition from the ranks of some public sector unions would inevitably arise.  There’s the racial dynamic at play, with municipalities such as Livonia or any of the Grosse Pointes probably being very, very hesitant to join forces with Detroit in anything.  And there’s the problem that the system we have in place right now, while not as efficient as it could be, isn’t in a crisis (yet) and is working relatively well (for the time being).  This is an issue that could be addressed with relative ease now, as compared to years in the future, waiting until the situation has reached the point of crisis, making the politics of all of it much more difficult.

_________________________

*Include also Wayne State University PD, Detroit Medical Center Police.

Leaving Cash on the Table

When you think about the budget meltdown taking place in Detroit, you would assume that the problem is spending that’s out of control. Particularly measured against how little value that spending delivers (either through incompetence, corruption or inefficiency), there’s a lot that we could do differently.  But a substantial portion of the problem is that Detroit has lost both the willpower and the ability to collect money owed it by citizens.

Last year, the city was owed $131 million dollars in unpaid property taxes. The 36th District Court in Detroit is owed $294 million in judgements.  Together, that totals $425 million.  The city’s annual budget deficit is $324 million.  Pause, for a moment, and consider the colossal stupidity of this.  Detroit, despite having a structural deficit that’s been around for decades, can’t be troubled to make sure that the way that the city takes in revenue is functioning.  Along with police and fire protection (other public services that seem to be in a slow-motion state of implosion) I can’t think of a more basic and fundamental role of what local government should do.

Property taxes are unreasonably high in Detroit.  There are three municipalities in Michigan that have the highest legally acceptable property tax rates in the state.  The first two are Ann Arbor and East Lansing, which have some of the best public schools in the nation and first rate city services.  The other is Detroit, where there is very little, if any, value for the taxes paid.  The schools are a disaster and city services are nearly non-existent (and likely to get worse before they get better).  While I recognize that the rates in Detroit should come down substantially, regardless of where they are, they need to be collected.  It’s not feasible that the city is going to be able to collect the total amount owed it in property taxes at the maximum legally allowable rates, but it can get a lot more of the cash than it’s getting now by switching to lower rates.  This seems counterintuitive, but lower rates spread across a broader tax base would actually yield more revenue.

As with property taxes, so too with the court: while it’s unrealistic to think that the court is going to be able to squeeze the full amount owed it out of the debtors, the court owes it, both to the city and to those who manage to pay their bills to the court, to go after those who owe it money in a far more aggressive manner, including garnishing wages, taking out liens on personal property and obtaining more judgements against those that are able to, but refuse to pay.

I am not one of those delusional Detroiters (like resident lunatic Joann Watson) that claim the state owes us money to the tune of nearly a billion dollars because of a long-ago abrogated revenue sharing agreement.  But to think that we have to solve this crisis through cuts, and cuts alone, is patently absurd. Imagine, an adequately funded city government that can also deliver core services in a cost-efficient manner.  The difference would be staggering, and we owe it to everyone in this city to aim precisely for that.

Picking The Fast Pony At The Tracks

Much has been made of the Michigan tax subsidies to the movie industry in the past few years.  As some issues tend to be, there’s not much of a middle ground with them.  People are either ardently for them, or vehemently against.  Having had them for a few years now, it’s pretty clear that we’re not going to have them in their current form for much longer.

There are a few states that realized if they  gave out tax breaks to the people who made them, that more of them would be shot in Michigan.  And for a while, it was popular for several reasons.  The first was that it wasn’t the auto industry.  Extending financial support to something that wasn’t going through the financial equivalent of terminal cancer was a nice change of pace for Michigan, as we’d been treated to nearly a decade of financial apocalypse from the Big Three and affiliated economic entities.  The second that it was sexy, fun, and new.  It didn’t involve acrimonious labor negotiations, or the prospect of bankruptcy, and everyone likes movies, right?  And the third was that it would bring jobs to Michigan and possibly foster a new industry that, again, would not be automotive in nature, taking one more Michigan egg out of the automotive  basket.

Now the scope of the tax subsidies is declining, and the reason for that is simple: it’s not clear that the financial gains Michigan or Michiganders have made with new projects being filmed in state have exceeded what we’re losing out on in tax revenue we’d otherwise be capturing.  And, frankly, I’m going to have to, for once, agree with Gov. Rick Snyder for making the first moves that will, in my opinion, likely end this program for good.

Some think that governments should not be in the business of picking economic winners, but global competition doesn’t really allow us the philosophical luxury of seeing if laissez-faire capitalism is really a tenable proposition.  So while I think that governments should strategically champion certain industries and companies, I don’t think it’s TV and film.  There’s two main reasons for this.

The first is that there’s nothing upon which we can build here.  Historically speaking, we do transportation design and manufacturing in the form of cars.   The film money could be better spent on bringing aviation and railroad design, testing and manufacturing jobs to Michigan.  We have the talent, the physical infrastructure, the experience and most of what you’re going to need in order to build a rail and aviation industrial players within the state already.  And just look at what’s happened over the past few years: once you even consider ending the subsidies, the producers bolt.  You can’t do that with a factory or testing laboratory.  Once it’s build, it’s there.

The second is the impact of growth.  The market for movies is pretty much at a saturation point.  About as many movies as people want to see are being made.  Not so with industries such as transportation (there’s about 3 billion people in emerging economies that are going to need more transit in the years to come) or basic and applied biomedical and life science research.  The profit margins on a new drug (however modestly successful) that was designed, formulated and tested at University of Michigan is a hell of a lot higher than on even the most successful movie.  If sustainable profits are truly the goal, healthcare delivery oriented research is a much better pick.

To sum up, if you went to the horse track, you would never go ahead and pick the horse that’s the prettiest one solely on that criterion.  You pick the fastest one that’s going to be able to beat the others, even if it isn’t the prettiest.  Movies are the pretty ponies, and transit and healthcare the fast ones.  Let’s not show, let’s win.

If Gambling Is Evil…

And evil is sin, sin is forgiven, so gambling is in.  Or something like that, at least according to the mind of government budget planners.  In the industrial Midwest, where steady streams of tax revenue have become increasingly harder to come by, local governments have relied ever more on taxes levied on casinos and the ‘gaming’ industry (not gambling, mind you, that’s just too tawdry, it’s ‘gaming’).

Yesterday, I had the chance to go to a casino in Detroit for the first time since moving here.  I didn’t go there for the purpose of gambling, as amongst my ever shrinking repertoire of vice, ‘gaming’ does not figure prominently.  My sister is getting married this coming fall and we had to go see a band play to make sure that they were the real deal.  I was struck  by the number of people that were in Motor City Casino on a random Saturday afternoon at 5:15 p.m.  Apparently people just go there for the afternoon.

Also, and I run the risk of coming off as an elitist and offending some, but these did not seem like the kind of people that have tons of disposable income.  As soon as I walked into the casino, I thought of the entire establishment as a giant vacuum cleaner that was wedged directly into everyone’s pocket, vigorously sucking as much hard, sweaty, greasy cash out until said pocket was completely empty save for car keys, lint, an empty pack of Marlboro Lights, and ATM receipts for cash advances off of credit cards.

‘Gaming’ decidedly has adverse affects on the financial health of your tax base.  As my father very accurately surmised, it also creates no new wealth.  It just takes it from the pockets of the marks, and deposits it directly into the accounts of the shareholders of the casinos.  Gambling always has, and always will, disproportionately adversely affect your average working (or not) Joe.  Yet, it prevails, and it does so for a several reasons, mostly, however, because there’s a ton of money to be made in it, and if you offer the government a sizable cut, then you’re golden.

The problem with that is that it’s so profitable that lots of municipalities want in on the gig.  To the point where the actual return on investment (and subsequently government revenue) begin to fall.  Basically, we’ve reached a point where there are so many casinos, there’s not enough gamblers to make them all profitable, and for every new casino built, it’s not generating new business, it’s just taking business away from another casino, and by extension, a local government’s coffers.  So, a business model that’s built on just taking money directly from its customers has reached the point where they’re just taking business away from one another.

And unlike an industry that actually creates a tangible product that has utility, the market for gambling is finite.  It’s as big as it is, and you can’t make it any larger (without making it so that the house doesn’t always win, which invalidates the point of building a casino).  Someone once told me that the idea that casinos would help with urban redevelopment was like saying a bandaid was an adequate treatment for a gunshot wound.  It’s probably time to start thinking about alternate avenues of municipal revenue, because the ones coming forth from the casinos are in trouble, and probably aren’t the best for the tax base to begin with anyways.

Reverting to the Mean

If you lived in America before 1913 and weren’t rich, you were paying a whole hell of a lot more in taxes, proportionally speaking, than the men and women who, for all intents and purposes, owned the country.  Through a system of excise taxes, tariffs and fees, the bulk of which fell disproportionally on the working, middle and agricultural classes, the government financed its rather limited aims.  Throughout most of the course of the century after 2013, American politics moved steadily towards a more progressive model of taxation.

It was nearly a century ago now, on February 3rd, 1913, that the Sixteenth Amendment was ratified and the federal government (and subsequently, the states) then had the power to directly tax income.  It was around this time that the country was beginning to want more government (a movement that, somewhat counterintuitively, was started by progressive Republican Teddy Roosevelt).  The federal government and most states, one by one, instituted an income tax.  This had the effect of both providing more money for governments to use as they saw fit (wars, healthcare, infrastructure, etc.) and also had the added bonus of taxes, for the first time in the US being apportioned according ability to pay.

And for years, that model worked.  The further up the income chain you go, understandably, the less popular it is.  Because the more money you earn, the more you pay in taxes.  And while nobody likes paying taxes, as Oliver Wendell Holmes acidly noted in an opinion from about a century ago, they’re the price we pay for living in a civilized society.  However, a trend is accelerating, one that began, I think in the 1980s.  Some states are looking to get rid of their income and corporate taxes entirely (or at least greatly reduce), and replace them with, you guessed it, sales taxes, user fees and a myriad of other charges that let the wealthy escape entirely undertaxed.

Their argument goes something like this: tax the job creators less, and we’ll have more jobs, more growth and more revenue, which means that we’ll have even more revenue, eventually.  The problem with this policy is that the country’s been trying it since it was first proposed by Ronald Reagan, and the revenue hasn’t materialized.  Statistically, mathematically, politically and economically, it just boils down to a massive tax break for those that need tax relief the least.  It’s the economic equivalent of hallucinations or paranoid delusion: magical thinking at its worst.

This is a mistake which comes at a particularly damaging time.  In the first place, the US is barreling towards a self-inflicted fiscal crisis, which, if ignored, will decimate our economy.  Republicans say we just have a spending problem, but as nobody seems to agree on what to do with those entitlement programs we ardently adore (Social Security, Medicare, Medicaid), and we’re not going to either get rid of those programs, or cut them to the point where they’re fiscally sustainable.  As a country, we’ve already decided that we’re going to keep the programs, which means as we’ve already decided what we want, means that we have a taxation problem.  And the second part of the problem is that if we revert to a program of taxation that falls disproportionally on the middle and lower classes, that’s just one more thing that they can look forward to, on top of spiraling grocery, healthcare, college and housing bills.  That’s bad politics, bad for the economy and it’s just wrong.

Let the Litigation Begin

From the moment Gov. Rick Snyder signed into law legislation making Michigan a ‘right to work’ state, it was clear that this law would not stand uncontested.  The precise issues on which to challenge the statute, however, was not known.  Well, it took all of one day to figure out that the bill may not actually have the sweeping powers that we thought it had.

Explicitly contained within the bill was language that specifically covered both state and local government employees in the legislation. Meaning, that they are covered, and that public sector employees are not to be compelled, either by law or collective bargaining negotiations, to join a union.

Not so fast, say some.  Though the Republicans managed to pass the bill into law, they may have lacked the authority to do so.  So who has the authority?  The Michigan Civil Service Commission.  And who is that?  Basically, it’s the body that regulates relations with state workers, and it’s stuffed to the gills with Democrats.  So what does that mean?  That if it has to go through an organization chock full of liberals, it’s not going to cover public sector employees in Michigan.  As Rick Perry would say, ‘Oops.’

The Democrats objected to the passage of the law in a lame duck session, and claimed that it wasn’t democratic.  Now, it’s going to be up to a bunch of unelected bureaucrats in Lansing to decide on the issue.  Meaning, we’re going to hear the same chorus of ‘It’s not fair and it’s not democratic!’ being shrieked again, but from Republicans this time, instead of Democrats.

And you may have noticed that in the course of this entire brouhaha, we didn’t hear any of the unions that represent government workers state that it wouldn’t cover government employees.  On the contrary.  It was government unions that were whipping up the absolute most hysteria over the entire undertaking to begin with.

I’m beginning to think that this entire fiasco, if it achieves anything at all, which is looking increasingly unlikely only a day after its passage, is that it’s going to make everyone in the state of Michigan who holds a modicum of power look like the greedy slobs that they are.  If you wanted a cautionary tale as to the dangers of democracy when adults begin acting like petulant children, look to the events of the past week in Michigan, and you have all the makings of a terrifying German fairy tale, but with consequences that stretch far beyond the individual.  Get it together people.