Deficit Reduction and Tax Breaks: Rhetoric and Priorities

Actions speak louder than words. A tree is known by its fruit. Where your treasure is, therein lies your heart. These three sayings each have at their root a value on integrity or authenticity that cuts through purported assertions designed to manipulate or otherwise mislead. Integrity here is consistency between word and deed. When members of Congress have cried that the sky was falling under the weight of the annual deficits and the accumulated debt of the U.S. Government, a person might ask by looking at the actual votes on legislation whether the representatives really considered the fiscal imbalances as so dire. If someone exclaims that her house is about to explode but does not act accordingly, such as in running out of the house rather than finishing dinner, it is reasonable to doubt that the person really believes that a blast is imminent. In protecting tax breaks even amid a deficit of over $1 trillion in 2011, members of Congress belied their own warnings concerning the American governmental debt crisis. The American people as a whole let their representatives get away with the Janus-like stances, and this in turn eventually allowed the U.S. Government debt to exceed $20 trillion. 

Generally speaking, a crisis truly acknowledged does not admit the luxury of granting the status quo a continuance. In other words, if the elected officials really did view the trajectory of deficits as unsustainable in 2011, then continuing the tax breaks would have been off the table. In prioritizing protecting constituent interests by tax breaks and by insisting that deficit-reduction is only to be accomplished by spending cuts, a member of Congress is actually saying that the deficit/debt problem is not really a crisis. 

So when the U.S. Senate Republican leader, Mitch McConnell said in 2011 that he was open to ending tax breaks for special interests yet without including those of his constituents, he undermined his insistence that the deficit must be significantly reduced.  He argued that the tax break that he had secured in 2008 for the owners of thoroughbred racehorses was essential for the protection of jobs in Kentucky. Of course, the financial interests of racehorse owners were not necessarily in line with—or reduce to—the protection of jobs. In political diction, the interests of capital hide behind those of labor even while going after those interests in private so as to maximize profit. That is to say, subterfuge may be the name of the game in the public square. The same can be said of Senator John Kerry, Democrat of Massachusetts, who claimed to want to eliminate tax breaks except for a proposal for a tax cut for small breweries, such as Samuel Adams in Boston. The deficits must not be such a big problem if the U.S. could afford additional tax cuts. At the time, mega-wealthy “operations like oil refineries, Hollywood productions and hedge funds have all profited” by tax breaks.[1] Tax breaks for industries in general added up to an estimated $123 billion a year—hardly chicken feed.

The “disconnect between the lawmakers’ words and deeds" reflected the hurdles that Congress and the White House faced as they looked to cut at least $1.2 trillion from the government's debt.[2] Talk of cutting tax breaks to raise money and reduce the debt had become a mantra in Washington, but it threatened sacred ground; "such breaks are a favorite tool among both Republicans and Democrats to reward supporters and economic interests in their home states.”[3] Given Fed chief Ben Bernanke's remarks on October 4, 2011 before the Joint Economic Committee of Congress that even reducing the debt by $1.2 trillion would not be enough, talk of protecting favorite tax breaks undercuts any claim that the public debt is a dire problem. To be sure, obviating another recession was also on Congressional minds. However, even as he was urging Congress to act in order to avoid a double-dip recession, Bernanke said of deficit-reduction efforts, "More will be needed to achieve fiscal sustainability."[4] That is to say, the U.S. Government could lose even its AA rating. Risking this by protecting local interests is short-sighted; it is like a biker accelerating down a hill while looking only a few feet ahead. We might save a few deck chairs for weary passengers, but what about that iceberg ahead? Is anybody even looking?

I contend that we, the electorate, ought to accord claims of crisis as valid only if sacred ground is given up. “Whether any of [the tax breaks] are scrubbed from the books may ultimately prove how serious Congress is about reducing the debt.”[5] It is the price of admission, as it were, to having a legislator’s claim of a serious problem being recognized as authentic rather than as possibly just hyperbolic, attention-getting rhetoric.

Without a verifiable indication of some actual give on a sacred cow, a legislator should be told, “prove it!” regarding his or her claim on the necessity to reduce the deficit. If no such sacrifice is proffered and made, then the politician ought to be ignored as if he or she were crying wolf. Otherwise, we enable two-faced Janus behavior that undermines public confidence in the government and misleads us into being too confident that the serious problems are being solved. The American electorates as well as the media companies are perhaps too accustomed to letting our elected legislators off the hook by taking their words at face value as if they were self-validating. In the case of the U.S. Government’s continuing deficits and accumulated debt, the United States can ill-afford other priorities (even in terms of presumed GNP and job increases) coexisting antithetically with the baleful platitudes of crisis if the imbalances truly are unsustainable and a danger to the American union and its republics. That is to say, given the magnitude of the problem, the members of Congress should be held closer to account in terms of deeds matching words. Priorities, the making of which is part of the job of a legislator, should match the rhetoric in front of the cameras.

1. Ron Nixon and Eric Lichtblau, “In Debt Talks, All Tax Breaks Are Not Alike,” New York Times, October 3, 2011. 

2. Ibid.

3. Ibid.

4. Jon Hilsenrath and Luca Di Leo, "Bernanke Issues Warning, Urges Action on Economy," Wall Street Journal, October 5, 2011. 

5. Nixon and Lichtblau. 

Weak Corporate Governance at UBS Amid a $2.3 Billion Trading Loss in 2011

UBS chief executive Oswald Gruebel resigned on September 24, 2011 over the $2.3 billion trading loss by one of the Swiss bank’s traders, Kweku Adoboli. Kaspar Villiger, UBS's president, said the board regretted Gruebel's decision but had decided to accept it. "Oswald Gruebel feels that it is his duty to assume responsibility for the recent unauthorized trading incident," Villiger was quoted as saying in the statement. "It is testimony to his uncompromising principles and integrity."[1[ In presumably not pushing for the CEO’s resignation because of the magnitude in the lapse of risk management in the system, the bank’s board of directors did not take the initiative in holding the management accountable. Accordingly, shareholders have reason to be concerned about the protection of their owner’s equity, at least in terms of corporate governance providing accountability on the management. The culprit may be corporate governance itself, which as structured may proffer too much power to the CEO.

In the case of UBS, the shareholders ultimately had to rely on Gruebel’s  integrity rather than corporate governance for accountability. To be sure, the resignation of the CEO does not necessarily mean that the management itself has been held accountable. Ethical leadership thus has its limits in this respect. Where a problem is systemic in a company and has been allowed to perpetuate itself by many people in upper- and middle-level management, the resignation of the CEO is not sufficient in terms of accountability. Had the CEO embezzled over $2 billion, the resignation would have been sufficient, but relying on the CEO’s integrity would be foolhardy in such a case.  

In short, the case of UBS suggests that corporate governance ought to be strengthened or fortified with respect to enforcing accountability on a management so as to protect stockholder interests. Villiger said Gruebel, who was brought in to help revive the fortunes of the Zurich-based bank, had achieved "an impressive turnaround and strengthened UBS fundamentally." But surely there must have been some lapse in Gruebel’s oversight of the bank’s system; for over $2 billion to be lost by one trader is itself a red flag concerning the bank itself and its management as a whole. Depending on ethical leadership at the top to step aside in the interest of the design and implementation of a new system does not go far enough.

1. “UBS CEO Oswald Gruebel Resigns Over Rogue Trading Loss,” The Huffington Post, September 24, 2011. 

Self-Delusion Enabled by Religion: Former U.S. House Minority Leader Tom Delay and Monopolist John D. Rockefeller

It is hardly news that religion, even one based on divine love reaching down to “love thy neighbor,” can be stretched or simply ignored as needed by the desires for power and money. When these two are both engaged, religious rationales may be attempted nonetheless. I have in mind here the cases of former U.S. House Majority Leader Tom DeLay (R-TX) and the monopolist John D. Rockefeller. Just in evoking their Christian faith to justify their sordid conduct in politics and business, respectively, these two men may be seen as astounding cases of the length to which adherents can go in using religion even in spite of obvious hypocrisy.

The full essay is at "Self-Delusion Enabled by Religion."

Weening the American Voters off Reliance on the Media in Selecting Candidates

How well do voters (i.e., an electorate) know and thus are able to assess people running for public office? As the proportion of people who know a candidate firsthand decreases, the importance of the campaign ads and debates increases. In other words, the candidate's marketing plays a greater role in who wins. At an empire-level, such as the U.S. Government, an overwhelming percentage of people in an electorate (e.g., voting in a U.S. Senate race, or that of the federal president) are significantly influenced by the candidates' respective media campaigns for lack of real knowledge. In a U.S. presidential campaign, financial contributions are vital in being able to orchestrate an empire-wide media campaign. Also, how a campaign manipulates the media coverage of the candidate is very important. The case of Sarah Palin, who ran as John McCain's running mate in 2008, illustrates the extent of distance that can separate what the public "knows" of the real person from the media-made candidate. When people learned of her shocking ignorance of government, the distance was suddenly transparent, and yet no electioneering reforms were subsequently put into effect. Americans still had to rely on presidential debates to get a glimpse of the "man behind the curtain." 

In the election of 2012, I had the sense in the second presidential debate that Barack Obama looked smug, even arrogant, as if he were running the debate in virtue of his office. His tone directed at the moderated seemed to say, "Ok Candy, you may proceed with that." Perhaps the two labels are unfair, though people who have had contact with the president in person tend to provide similar feedback. I suspect the average Joe (not necessarily "the plumber") voter is turned off by conceit. Watching the debate, I had a subtle sense that whispered in my ears, "American viewers might be reacting negatively to his personality, as if saying to themselves, 'now we see how he really is . . . hmmm.'" There is the brand and the man. In other words, apart from the speeches and the orchastrated ads, Barak Obame might not be someone we would necessarily want to get to know, after all. I wonder if this recognition or awareness was occurring for the American people only then, during the debates, as we observed Obama interact with a rival in real time. "So this is how he plays with others . . . hmmm."

In divining what prompts the electorate's leaning one way or the other in a given election, we would be wise not to leave out "comfort level" with seeing and hearing the candidate at issue. Mentality or attitude is relevant because we know that whoever is elected president will be a regular fixture in our lives, albeit vicariously through electronic means. I am not referring only to whether we like the guy; the matter extends to our comfort with his attitude. This is a very subtle thing. Personality and attitude can thus be understood to play a role, albeit a subtle one, in how a candidate for president is "evaluated." An election is not simply about policy, which is a reason why the latter should be included on a ballot separately. 

Of course, Obama's attitude was not the only one on display during the debate. I have in mind Romney's duplicity, even lying, in his claim, "I care about all Americans" during the debate after he had said in private that it would not be his job to worry about 47 percent of us if elected no doubt turned many people off (at least those of us who follow politics). As he looked straight into the camera and made his statement as though sincere, I wondered whether the highest politicians have such an astonishing ability to act. That is to say, the true gift of a politician could be the ability to come off as incredibly sincere when he or she is simply acting the part. "Wow he's good" was what came to my mind. Of course, the excellence of a skill is of little value if the skill itself is a vice. Perhaps what we are left with is a fleeting glimpse of how little we know about either candidate, and yet we presume we know so much about both. "Obama cares" and "Romney is compassionate" may turn out to be marketing-driven rather than real, yet we cannot be wrong about what we believe to be the case, right?

To offer a less sensitive example illustrating the distance between a person and his character on television, Andy Taylor, the nice, common-sense sheriff in The Andy Griffith Show, was easy for millions of viewers to like. From this viewing experience of  the character, many Americans doubtlessly felt a loss when Andy Griffith died in the summer of 2012 even though the man was reportedly not "good with people." He even fought with the actress who played Aunt Bee, a kind, motherly character (how many viewers could say the actress playing her was so nice?). The actor who played the sheriff was not as kind in person as is his character, yet people with just the character in mind mourned as if they had lost the man himself. This, I submit, is a problem that also impairs political elections. For some reason, the human mind is susceptible to viewing acting as if the actor were the character (i.e., no distance between them). In mourning President Reagan as his funeral was broadcast, the vast majority of Americans had only the actor's presidential character in mind, for they could not get to the man himself. How many knew that he called his wife, Mommie? Where most of an electorate do not get to meet the candidates in person, as in the case of the election for an empire-scale office such as the U.S. Presidency, the susceptibility is particularly strong because the contact comes only through the media and the candidates' own respective media campaigns. As debates can become unscripted, they are perhaps the best means of catching of glimpse of the real persons who would use judgment in office on some very important matters. To the extent that an electorate relies on the real people in offices so far away, getting to the real persons who mask as candidates is important, and yet little if any progress has been made in at least the United States. The European Union is a better construct for this, as more power in the E.U. resides with state-level office-holders. In general, less distance between the voter and a candidate is within states than at the empire-level (i.e., the Congress and the federal president). The sizes of the electorates for federal offices are a leap greater than those within the states. Less distance is involved in the latter, for the electorates are so much smaller. Hence it is easier for proportionately more of such electorates to know the "man behind the candidate." Other things equal, better candidates should be more likely to beat the bad ones. 

I suspect that in 2012 after the second debate, many independents (and perhaps even some Republicans and Democrats) had the sense that better people could have been selected as candidates. This suspicion was confirmed for me when I learned after the third debate that the candidates  to discuss took liberties in discussing domestic policy even though the debate was to be on FOREIGN policy. Such a lapse can itself be a red flag respecting boundary issues or problems with "keeping within the lines" (i.e., as in coloring books). At the very least, it evinces self-centeredness. In short, the debate gave the electorate a glimpse into the man behind the candidate--for both candidates, but should a democracy founded on popular sovereignty--the voters as a group--be satisfied with just glimpses?  They can trigger unfounded inferences, which in turn can lead a voter to use bad judgement in voting. At the very least, then, the American electorates should have better access behind the candidate. For example, release of President Trump's tax returns should have been mandated so voters could get a better sense of how he ran his company, as such an executive role is arguably related to how he would be the chief executive of the U.S. Government. Mandated disclosures could also have pointed to the man himself--his judgments and character. Generally speaking, the People should demand that their government require more along this line. Put another way, the People have a right to be informed even if it means that political media campaigns must deviate from their respective scripts and even have to play defense, losing control of the narrative.

Should Same-Party-Affiliation Exclude Investigations on an Elected Official’s Misconduct?

A survey taken in February, 2017 of 1,571 political scientists on democracy in America reveals a possible problem regarding the extent to which government officials are sanctioned for misconduct. More than half of the respondents believed that the United States only partly meets or does not meet this criterion, whereas about 80 percent of the scholars insisted that the criterion is essential or important to democracy.[1] I submit that partisanship is a major obstacle to performance being able to meet expectations.

When the survey was released, Congress was on a week’s recess. Representatives and senators alike were facing contentious constituents back in the districts and states, respectively. An estimated 1,000 people attended Rep. Jason Chaffetz (R-Utah) “town meeting.” Recalling the yelling and screaming, he later said, “I thought it was intended to bully and intimidate [me].”[2] Democracy is messy. Moreover, the making of law, which binds an otherwise free people, is inherently conflictual as different interests and ideologies contend for influence on the final legislative output. Given the delegated trust placed in elected legislative representatives, their misconduct should be subject to real sanctions.

Ideally, misconduct should be extended to placing party above integrity—that is to say, giving elected officials a pass on their misconduct simply because they are of the same political party. Constituents can be out in front of even veteran members of Congress on this point. In his “town hall,” Chaffetz heard a constituent insist that Republicans in the U.S. House of Representatives should investigate President Trump’s conflicts of interest for instances of impropriety.[3] Even though much of the federal conflicts-of-interest law does not apply to the president, the American people arguably should know of actual instances in which the president has or is exploiting the relationship between his governmental power and business interests. Party should not trump integrity as concerning the obligation of members of Congress to provide a check on the executive branch, including the president.

I suspect that the force of partisanship on members of Congress stems in part from the political atmosphere in Washington, D.C.—such that the role of partisanship is perceived as being more significant than it should be and is to constituents back home. Of course, the threats doubtlessly made from higher in the party “food chain” provides an impetus to members of Congress to look the other way concerning the possible misconduct of colleagues of the same party. That a constituent expects her elected representative to put integrity before party in regard to investigating misconduct shows just how decadent the inbred culture of a political elite can be, even in a viable democracy. In other words, it is telling when an angry constituent is the adult and her representative is the child.

Democratic theory holds just the opposite—namely, that an elected representative can withstand the momentary excessive passions of the moment that have no such check in a direct democracy, wherein people vote directly on proposed laws such as was the case in ancient Athens. Put another way, representative democracy itself is a check against mob rule. It is telling, therefore, when someone from an angry mob is the adult in the room.

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[1] Claire C. Miller and Kevin Quealy, “Democracy in America: How Is It Doing?” The New York Times, February 23, 2017.

[2] Andrew Kaczynski, “Rep. Jason Chaffetz: People at My Town Hall ‘Intended to Bully and Intimidate’ Me,” CNN.com, February 23, 2017.

[3] “Morning Edition,” National Public Radio, February 23, 2017.

Monti and Papadernos in the E.U.: Leadership in Technical Expertise or Democratic Deficit?

“The moment of truth has come.”[1] This was said by the head of state of the E.U.’s third largest state, Italy, in a televised address just after Berlusconi had resigned as the prime minister. Although the statement could be interpreted as referring to the need to reign in the Italian profligate system of public-sector patronage (which includes private contractors), Giorgio Napolitano could also have been referring to the credibility of his state at the E.U. level. “We need to restore confidence with investors and European institutions,” he continued before turning to the more tangible point that the state would need to refinance nearly 200 billion euros in government bonds before May, 2012.[2]

 Monti and Barroso (Thys/Agence France-Presse/Getty)

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

1. Alessandra Galloni and Christopher Emsden, “Italy’s Monti to Form New Government,” The Wall Street Journal, November 14, 2011.
2. Stephen Castle and Liz Alderman, “Under a New Prime Minister, Italy’s Star May Rise at the European Union,” The New York Times, November 23, 2011.