This week as Congress goes into session the Republican “Contract with America” will likely dominate the debate.
As an engineer I spend my time searching for solutions to problems. The approach is systematic and includes several key elements typically missing from political discourse.
- Assemble the facts. It is particularly important to pay attention to assumptions. Assumptions have the nasty habit of masquerading as facts.
- Identify key unknowns. It is said that what you don’t known can’t hurt you. The opposite is usually true.
- Design possible solutions.
- Define success. Without a careful definition it is difficult to decide if a possible solution works and is cost effective.
- Test. Typically, governments put a solution in place and then never look back. Testing any solution is critical to progress. New manufacturing processes typically go through two levels of testing. First, laboratory or bench scale testing. If that is successful then a pilot facility is built to test the process in the “real” world. Especially important is the willingness to abandon approaches that don’t work.
With these elements in minds let’s take a closer look at parts of the Republican contract.
1. THE FISCAL RESPONSIBILITY ACT
“A balanced budget/tax limitation amendment and a legislative line-item veto to restore fiscal responsibility to an out-of-control Congress, requiring them to live under the same budget constraints as families and businesses.”
THE FACTS
Pork is an inevitable consequence of representative democracy. Politicians do not win elections by proudly announcing their opposition to spending in their district. Cutting spending will require substantial courage on the part of Congress. Unfortunately, courage does not appear to be a common character trait.
The electorate believes taxes are too high. They also oppose any spending cuts on programs from which they benefit.
POSSIBLE SOLUTIONS
Line item veto and a balanced budget amendment. Will either solution provide courage to those in Congress? No, but they will provide ready excuses when they don’t “bring home the bacon.”
DEFINITION OF SUCCESS
Net savings. Calculating what spending would have been will be difficult but is essential to evaluate these measures.
RECOMMENDATION
TEST the line item veto for a limited period, preferably not ending during an election year. Renew if and only if a net savings is realized.
2. THE TAKING BACK OUR STREETS ACT
“An anti-crime package including stronger truth-in-sentencing, ‘good faith’ exclusionary rule exemptions, effective death penalty provisions, and cuts in social spending from this summer’s ‘crime’ bill to fund prison construction and additional law enforcement to keep people secure in their neighborhoods and kids safe in their schools.”
THE FACTS
Violent crime rates in this country are the highest among western industrial societies. The incarceration rate is now higher than other western societies. Although the crime rates are not growing there is greater public fear of crime. Significant prison building programs have had no discernible effect. Ever tougher crime bills have had no discernible effect. Recidivism is very high among those released from prison.
No studies have shown any relationship between murder rates and the death penalty. At least one study indicates that execution is more expensive than lifetime imprisonment.
A “get tough” policy and the death penalty in particular is perceived by the public as appropriate justice for violent crime.
ASSUMPTIONS
Increasing sentences and harsher prison conditions will eventually reduce crime rates. Unfortunately all available information disagrees.
RECOMMENDATIONS
With no solutions available precluding any option in favor of “get tough” policies that do not work would be a grave error. Now is the time to open up the search for solutions, TEST various options under careful trial conditions and find out what works and what doesn’t.
3. THE PERSONAL RESPONSIBILITY ACT
“Discourage illegitimacy and teen pregnancy by prohibiting welfare to minor mothers and denying increased AFDC for additional children while on welfare, cut spending for welfare programs, and enact a tough two-years-and-out provision with work requirements to promote individual responsibility.”
THE FACTS
Welfare has not turned out to be the short term assistance program it was envisioned to be. It has become a deep hole entrapping people. A variety of negative incentives discourage people from climbing out of welfare. The minimum wage is now less than it was twenty five years ago in constant dollars. Federal Reserve Board works to prevent further reductions in unemployment in order to keep wages low.
ASSUMPTION
Those on welfare are simply lazy. They can be transformed into productive citizens by removing the safety net.
RECOMMENDATION
Welfare reform is necessary. But we must go beyond getting tough and break down the barriers that entrap welfare recipients. We must remove the penalties for taking the first steps to independence. TEST a variety of possible solutions.
6. THE NATIONAL SECURITY RESTORATION ACT
“No U.S. troops under U.N. command and restoration of the essential parts of our national security funding to strengthen our national defense and maintain our credibility around the world.”
THE FACTS
Over the last fifty years military budgets were defined in terms of a single objective: to meet any threat from the Soviet Union. The Soviet Union no longer exists. The military strength of Russia is considerably weakened, its ability to compete in a technological arms race is at end. And yet there are steady calls to maintain or increase the budgets.
A major goal of any bureaucracy is the protection of its budget. It is therefore not surprising that the military leaders have been inventing new threats to our security to justify continued high levels of spending.
RECOMMENDATION
The real question goes well beyond the size of the budget. A thorough review of the military force structure is needed. Let’s be sure we have strength where we need it today rather than continue the staggeringly expensive arms race against the nonexistent Soviet Union.
8. THE JOB CREATION AND WAGE ENHANCEMENT ACT
“Small business incentives, capital gains cut and indexation, neutral cost recovery, risk assessment/cost-benefit analysis, strengthening the Regulatory Flexibility Act and unfunded mandate reform to create jobs and raise worker wages.”
ASSUMPTIONS
Capital gains tax reductions will increase production capacity, productivity, decrease costs and create jobs, all the good things. Government regulation is an unnecessary interference with business. Allowing businesses instead to be regulated by market forces will allow greater competitiveness in the international arena leading to greater job creation and resurgent standards of living.
These assumptions arise from simplistic models of modern capitalism.
The model of competition is taken from the medieval city state. Imagine a village with four cobblers each competing to provide shoes to the local populace. Some combination of price, quality and service allows some to thrive while others fail. The business world today is very different. Left to their own devices many businesses work hard to avoid such fair competition.
The role of capital is modeled upon the small manufacturer. Imagine a small shoe manufacturer. To further expand he needs money for new stitching machines. With the new equipment he can increase his production capacity and employ new workers. Most capital today doesn’t follow this model. It isn’t used to increase production capacity and create employment. It stays within Wall Street and is used to create great personal wealth.
RECOMMENDATION
We need to reevaluate the use of capital before considering any further tax advantages for capital gains. We need to acknowledge that not all capital provides benefits to the greater community. Therefore not all capital gains should be given special tax status.
9. THE COMMON SENSE LEGAL REFORM ACT
“ ‘Loser pays’ laws, reasonable limits on punitive damages and reform of product liability laws to stem the endless tide of litigation.”
THE FACTS
There is a great deal of abuse of the legal system. Lawyers have encouraged people to believe that any misfortune is actionable. The chief beneficiaries are lawyers.
RECOMMENDATION
We need to be very careful with a “Loser pays” law. It may ease the strangulation of the courts but it also provides another powerful tool for abuse. Instead we should attack abuse directly, and hold lawyers to a higher standard of conduct.