Government Part 2:
Representative Government: Not So Fast...
Apparently, the US has a representative government. One of the problems though, is that the representatives seem to have forgotten who they are representing. Much is made about campaign finance. Politics is an expensive game/occupation, it takes an ever-growing amount of money to stay competitive (or at least it seems that way, even grassroots movements seem to be well funded).
Sometimes in order to secure funding a politician has to align themselves with a specific group (a group who probably expects a degree of input in the decision process). In order to keep the money spigots flowing, they have to meet with groups during their time in office.
Another trend is strict partisanship. It seems you are voting more for the party line than the candidate (usually tied to funding). As a consequence, the representatives don't tend to deviate too far from the platform. So, between the party and the backers, it is hard to tell who the candidate is really representing. It is one thing to have a brand identity/platform (Republican or Democrat), but the slavishness is a new twist.
There is a problem with representative government that it seems to be winner-take-all. A congressman may win by .1% in an election but acts like it was 100% (more on this if i tackle the Electoral College). Maybe a party squeaks out elections for 10 seats in the senate, but barely. This is representation for those who voted for the winners (real or enhanced), but the people who voted for the losers are not really represented (though they may have another chance in several years, if their district isn't too far gone).
The usual (non-leadership) salary of a congressman is $174,000. Congressional salaries started in 1855. Apparently, congressman can get a fully vested pension if they serve 20 years. Where am i going with this? i think i have a method to my madness. i guess i am trying to show the type of money at stake here (though many strangely become millionaires at that salary).
Let's use the assumption of a 4-year term. That is essentially a $696,000 salary over a one term span (plus a better shot at additional terms). For normal people that is a large amount of money.
Unfortunately, it also encourages the career politician. This is one of the things i take issue with. i believe that part of the expensive cost of campaigning is that the salaries/benefits are too high (especially since most of the money spent is not by the candidate).
A career politician should be an aberration, not the norm. There should be no retirement and limited, if any benefits.
Debt and Irresponsible Spending
One of the big problems that fiscal conservatives like me have with the government is the levels of spending and waste. Whether it is bills loaded with pork, programs i don't believe should philosophically exist, vote buying, or unnecessary wars - there is no denying that the US government has a problem with fiscal responsibility. This may come up in future topics.
There is also the problem with debt. Philosophically, any government program financed by debt is irresponsible. Unfortunately, the US has turned debt financing into an art (more like dark art). So why is debt financing bad (outside corporate financing scenarios WACC)? Debt is instant gratification (spending) and paying it off later. It is kind of like people on the consumer side get into trouble with credit purchases. They get the benefits now for a greater cost later (including the extra cost incurred as interest).
Debt at the government level will incur an interest expense that will make things expensive (conveniently ignoring inflation). Eventually, the government will find itself in the position where it cannot optimize spending based on tax receipts (maximize results) because some of the money must be diverted to pay off the debt. Unfortunately, the US government decided it would pay off debt with debt. That is like paying off your MasterCard with your Visa (not exactly a sound strategy).
The national debt of the US is a mind bogglingly high number. Many people have a hard time with the concept of $1 million, never mind $10 trillion (that is a lot of zeros, 13 of them - 10,000,000,000,000). By the way it is $10 trillion and getting worse every day. [now $34+ trillion, originally written in 2011).
Debt financing can work in business (limited to something like 25%) due to several factors. The parenthetical statement in the previous sentence would be part of a capital structure (how a company is financed - ie x% debt, y% equity, z% whatever). The corporate debt (at least that in bonds) is mostly callable (can be paid off before the end date), i do not believe that to be the case with government securities (ironically labeled, i know).
Unfortunately, the US does not have a defined optimum capital structure limiting debt yet. There are reports of the US getting closer to 100% of the total structure. One factor is the debt is typically tied directly into some type of cash inflow. i like to think in terms of cashflow - an inflow is like getting your paycheck, a cash outflow (a negative cashflow) is money going out, like paying a bill.
The government is not that organized, and the specific inflow (tax revenue) goes into a general fund instead of being target to a specific program. Social Security and Medicare are examples of a more direct inflow/outflow system (though unfortunately both are expensive transfer programs).
So, what option does the government have to pay off this debt? More debt until the market will no longer bear it. Eventually, they will have to print money (further harming the value of the dollar and whatever savers have accrued).
Economic Transparency and Funding - You Spend More Than You Think You Do
This is a long title for a likely short section. The taxpayer does not really know where their money goes and even the amount they are really being taxed. Corporations produce quarterly reports. The government produces reports, but the quality is less than that of a business. It is also true that there tends to be more of a delay between actual data reports and collections than in the private sector.
What i really want to see is quarterly operating reports of cashflows of everything (nothing should be considered "off budget"). Then we could more accurately look at the reports and see where and how the government is perpetually spending more than it takes in. Congress and the CBO (garbage-in, garbage-out) needs to be absolutely open to what the cost of programs is.
Maybe they should come up with cashflow statements for every program (including start-up costs, transitional costs, any and all debt implications, worst case scenario and most likely scenario, yearly disbursement, potential cessation costs, and any other costs that directly relate to its financial viability). i know the government produces tons of data but am not sure they are producing the operational data that i really want.
Without the true data, it will be hard to tell exactly how much of your money the government is spending on a specific program and in general (no more rounding to the nearest billion)
The Balanced Budget Amendment
Part of the 2010 proposed "Contract with America 2.0" that the Republicans were going to push in advance of the midterm elections seems to be a balanced budget amendment (when did i actually write this?). This may be a step to ending debt financing (you can't spend more than you take in, cashflows in and out are essentially equal) and promoting fiscal responsibility. Similar programs have been enacted in several states, but they had problems with its execution.
i have no problem with cash outflows not being able to exceed cash inflows (tax receipts), however, a possible problem arises when cash (tax) inflows exceed current expenditures. This is what states seemed to have a problem with.
In good economic times, the states saw money coming in; unfortunately, they treated it like something that would last (despite the inclusion of rainy-day funds). When the economy took a turn for the worse, they were left with a bunch of unfunded or underfunded programs (which they shouldn't have instituted in the first place).
The real solution to the federal government would be a spending cap ($1 trillion per year, hopefully less) with an extra $1-10 billion a year being available only for paying down the national debt. One of the problems with spending programs is they tend to be "sticky" - congress will enact them, but really hates cutting them (resists it). i say cap the spending at a certain level and never allow it to be exceeded (regardless how good the economy is).
Also, no Keynesian style stimulus in bad times.
Broken System
There was a recent poll where 86% of the respondents said the US government was broken. There are serious problems with the government that need to be addressed. Chief among them are debts and ethics. The debt is a huge problem, and you are just seeing the tip of the iceberg. Of course, there are other problems (many at that).
There are ethics concerns, wasted money, forgetting that the government works for the people not the other way around, unsustainable spending, short-term action at long-term expense, ignoring the fact that spending can lead to serious problems, corruption, lack of transparency, a government that is too involved in its citizens' daily lives, and a growing disenfranchisement among its citizens.
One such problem is legislation itself. The attempt at the healthcare bill (really insurance bill) is a good example. Bills should not be long and complex (over a thousand pages of long meandering legalese that nobody has the time to actually read). Bills should max out at about 20 pages and be written in plain English and be limited in scope.
What is the world coming to when you have legislators pushing overly long and complex legislation in an attempt to push things through, since nobody in their right mind is going to fully read and comprehend all of it. i guess that is the moral peril when you have a country run by lawyers.
There are also some potential problems with the act of voting itself. There is so much opportunity and potential benefit to "rigging" elections. i cannot be sure that has ever really been an election that was fully above board in the US.
Voting and Related Issues (Previous view: the one where i sort of change my mind)
So how could voting possibly be a problem?
For one thing there is using "democracy" (no the US isn't a democracy) by one or more groups to take advantage of someone else (the tyranny of the majority). This is the Oregon tax increase scenario (abuse of democracy). Many have switched from the live-polling station to more of a mail-in ballot scenario (which is open to fraud).
Part of me wants the evolution of voting, on-line voting. This could lead to better real time tabulation and open up voting to a wider demographic. Sure there will be security concerns, but there has been for every voting method ever established. Whether it is a questionable hand recount where votes mysteriously appear, unethical vote harvesting, vote tampering or the pianos and dead voting in Chicago - there will be questions, it is inevitable.
There is a peculiar problem with the presidential elections. The problem is the Electoral College system. It is largely a winner-take all system that does not truly reflect reality (based off of the assumption that people should not directly elect their president.) It should not be all of the electoral votes in a state that should be given to the winner, it should be decided in every district. The value of the vote is not the same in every area with the Electoral College. i would prefer a straight popular vote, but that is not likely to happen.
Playing with numbers a while ago this is a bit misleading, views have somewhat changed. i am not sure anymore what i did to arrive at the numbers (and there may be typos). i have long since lost the Excel file.
Disillusioned: The Electoral College and You (dft-disillusioned.blogspot.com)
My Modern View
This one is where i changed my view. The vote is far less trustworthy than i initially thought. In ways Josef Stalin was right "It doesn't matter how many people vote, only who counts them". It is more partisan and less fair than i believed. That is not even mentioning the hyper-partisan media and big tech's oversized influence shaping views.
I still think a proportional Electoral College might be interesting. However, now i understand that the Electoral College is a better alternative than a nationwide "popular vote". That scenario short-changes the people of most of the states in the US, in any given presidential election, it seems as 8 or less states matter - the rest are throwaways. We really shouldn't want places like NY and CA running the countries (they suck at running their own states).
My initial view of the electoral college was that high population states were theoretically overrepresented. If only one person voted in each state, they would be overvalued (or small margins). Basically, if a state like WY, ID, AK, etc has no voice - what would be the point of still being in the US as a state (there is none).
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