Category Archives: Government

IRS Should Just Hire a Bunch of Direct Marketers and Listen to My Mom

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During a show about how much tax revenue the IRS doesn't collect – 17% or $450 billion a year – the folks at Freakonomics talk about how a little-known unit of the British government called the Behavioral Insights Unit gooses the UK's tax collection efforts:

One of my favorite examples of this comes from a small unit in the British government called the Behavioral Insights Team.  What they do is experiment with all kinds of cheap and simple nudges.  For instance, sending out letters that appeal to the herd mentality in all of us. Here is the unit’s director, David Halpern:

David HALPERN: So what we do is we simply tell people something, which is true, which is 9 out of 10 people in Britain pay their tax on time. And by putting that single bit of information into the top of a letter, it makes people much more likely themselves to pay the tax on time.

GARDNER: So it’s peer pressure?

DUBNER: That’s exactly right — we like to run with the herd.  They also tried another super simple trick, which was just handwriting a message on the outside of the tax envelope.  This message would just say simply that the contents are important, but it’s written in hand.

HALPERN: Of course people are like ‘oh my God, but how can that possibly be practical?’ Well we’ve now just got the results in. It turns out that for every pound or every dollar that you spend on getting, you know, someone to write on the envelope, you get $2,000 return.  A one to 2,000 return. So it’s a nice simple illustration of these small things and how consequential they are.

Anyone who's spent even a week working as a direct marketer could have told you this would work. The IRS should just hire a bunch of laid off direct marketing folks and they'd pay for themselves in no time.

Later in the podcast they talk about an idea from a behavioral psychiatrist at Duke:

Dan Ariely, a behavioral psychologist at Duke, has a nice idea: to let taxpayers direct a small portion of their tax money to the parts of the government that they most care about:

Dan ARIELY: So I’m not sure what’s the right percent — five percent or ten percent.  But what if we got people to have a say about where some of the taxes go? All of a sudden you’re not looking at it as you against the government.  You’d have to look carefully at all that the government is doing for us — building libraries and roads, and education and military and so on and so forth and say, what do I care about?

My mother made this same argument when I was a kid. Her argument was that if she could earmark even one or two percent for any program/department of her choosing she'd feel better about paying her taxes in general. She also made another interesting point: taxpayers would be able to indicate with their dollars which programs they felt were most important. In essence we'd be able to tell which programs were truly valued by us, the taxpayers, and not have to trust politicians to divine what we wanted. That's why I figured it would never come to pass, and I haven't been wrong yet.

They’ve Got B.O. and Heartburn and Gas

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Former Republican US Senator Alan Simpson, quoted in an interview by the LA Times in reference to "tea party-inspired Republicans":

He reserved his greatest contempt for the tea party-inspired Republicans who equate compromise with capitulation and view obstruction as progress. "Some of them," he said, "are as rigid as a fireplace poker, but without the occasional warmth."

He leaned forward, stabbing a bony finger into a wood conference table. "Let me tell you something, pal: If you are a legislator and you can't learn to compromise an issue without compromising yourself, get out of the business. In fact, don't ever get married, either. You don't want any part of that."

Compromise is the only way anything has ever gotten done, he went on, going back to the Declaration of Independence and the Constitution, both of which amounted to more give than take. "They don't like that," he said of the tea partyers’ unwillingness to bargain. "They get nasty. They smell bad. They've got b.o. and heartburn and gas. They're seethers."

HT to Fec for the link.

No Holding and No Folding

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In poker knowing when to hold or fold is a critical skill. In North Carolina the legislature has decided that some people can't be trusted with knowing whom to hold (that would be a reference to the ban on same-sex marriage) or when to fold (that would be a reference to a proposed law that would require a two year waiting period and compulsory counseling for any married couples pursuing a no-fault divorce). Combine that two year waiting period with loosened gun regs and you have yourself a recipe for some interesting situations don't you?

Hidden Costs

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One of the interesting changes we're seeing in the US is the different behavior of health care consumers when they are actually allowed to act like consumers. From the Wall Street Journal:

Last fall, two big employers embarked on a radical new approach to employee health benefits, offering workers a sum of money and allowing them to choose their health plans on an online marketplace. Now, the first results are in: Many workers were willing to choose lower-priced plans that required them to pay more out of their pockets for health care.

The new online marketplace, operated by consulting firm Aon AON -0.29% Hewitt, a unit of Aon PLC, was used by more than 100,000 employees of  SearsHoldings Corp.  SHLD -0.86%  and Darden Restaurants Inc.,  DRI +0.43% as well as Aon itself, to pick plans for 2013. The employers gave workers a set contribution to use toward health benefits, and they could opt to pay more each month to get richer plans, or choose cheaper ones that might have bigger out-of-pocket fees, such as higher deductibles.

"When people are spending their own money, they tend to be more consumeristic," said Ken Sperling, Aon Hewitt's national health exchange strategy leader.

Go figure. When people are given pricing options and asked to consciously weigh costs/benefits and risks/rewards they make "consumeristic" decisions. Forget for a moment all the details about "Obamacare" and your feelings towards it, and instead ask yourself these questions: Can any health care reform program succeed if it doesn't allow people to behave like a logical consumer? How can a logical consumer exist in a market where pricing is obscured? To that end, the next time you go to the doctor's office try this exercise: ask them what your appointment is going to cost before they do anything. They likely won't be able to tell you because they simply don't know – the cost depends on what kind of insurance you have and the rates your insurer has negotiated with the doctor's network. Craziness, huh?

Changing gears, but sticking to the hidden costs theme, have you ever wondered why we it's been so difficult for people to grasp the true costs of the wars in Afghanistan and Iraq? It's because the bill has shown up in the form of an exploding deficit and not a "War Tax." Deficits are like credit card debt: you know they're bad and that they can be a drag on your financial well being, they are hard to get overly excited about because your daily life doesn't change much until you run out of credit and the bills come due. On the other hand if you're paying cash – or a War Tax – the cost of your action is immediately clear and you're far less likely to be so sanguine about whatever you're doing. 

So here's a rule of thumb we need to teach our children: if the cost of something is hidden, or if you aren't asked to pay for it up front, it is likely much higher than you think so you should really think hard before making that purchase decision. There should also be a corollary: if it's a politician doing the selling then you should probably just walk away or be ready to spend 100x whatever you think the cost is (see War, Iraq).

$22 Trillion Here, $22 Trillion There

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The GAO was tasked with studying the impact of the Dodd-Frank financial reform law to help determine what it's economic impact would be. So what did they find?

The 2008 financial crisis cost the U.S. economy more than $22 trillion, a study by the Government Accountability Office published Thursday said. The financial reform law that aims to prevent another crisis, by contrast, will cost a fraction of that…

The report, five years after the collapse of mortgage-focused hedge funds in late-2007 set off a yearlong banking panic and a deep recession, was published as part of a cost-benefit analysis of the Dodd-Frank financial reform law of 2010. The GAO tried to determine if the benefits of preventing a future economic meltdown exceeded the costs of implementing that law.

"If the cost of a future crisis is expected to be in the trillions of dollars, then the act likely would need to reduce the probability of a future financial crisis by only a small percent for its expected benefit to equal the act’s expected cost," the GAO concluded.

Obviously the banksters disagree.

Land of the Free, Home of the Afraid?

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On Facebook a friend recently shared an article from The Atlantic titled "A Repbublic Demands Courage From Its Citizens" that essentially calls into question most Americans' perception that America is indeed the Land of the Brave. The piece focuses on our willingness to set aside the values that have largely defined our society for generations – basically we're against torture and for civil rights – in reaction to threats that aren't really as bad as we perceive them to be. From the article:

We have suffered several thousand casualties from 9/11 through today. Suppose we had a 9/11-level attack with 3,000 casualties per year every year. Each person reading this would face a probability of death from this source of about 0.001% each year. A Republic demands courage — not foolhardy and unsustainable "principle at all costs," but reasoned courage — from its citizens …. To demand that the government "keep us safe" by doing things out of our sight that we have refused to do in much more serious situations so that we can avoid such a risk is weak and pathetic. It is the demand of spoiled children, or the cosseted residents of the imperial city. In the actual situation we face, to demand that our government waterboard detainees in dark cells is cowardice…

Look at it this way. 

There were almost 10,000 drunk-driving fatalities in 2011 alone. That's the equivalent of three 9/11s in people killed, plus many more seriously injured, every year. Is a majority of Americans ready to lower the blood alcohol limit to 0.01 and to mandate breathalyzers on all ignition switches? Nope. That would be an onerous government intrusion on liberty. I'm fine with that. But it vexes me when the same citizenry faces the significantly lower risk that terrorists pose, spends far more on prevention, and still insists that targeted killings in Yemen and Somalia can't be constrained, because taking more care to save innocents would threaten us. 

These concerns are very real. Simply ask yourself this question: If Canada's  Security Intelligence Service were to fly drones into Michigan and fire missiles at well-armored SUVs that they had strong evidence were carrying gun runners who were directly responsible for the deaths of hundreds of Canadian citizens, and in the process they accidentally killed four American families who happened to be traveling in the vicinity on their way home from a church picnic, how would you as an American feel about it? Horrified? Terrified? Incensed? You bet. Now ask yourself this: After an episode like this how would we Americans react to Canada insisting that we do something to take care of our gun problem? Would we see the Canadians as a well-intentioned society trying to be the world's "good cop" or would we see them as vigilantes willing to suspend any semblance of due process and recklessly endanger innocents in an effort to protect its own citizens? 

The point is that many of America's practices during its War on Terror have eroded our moral standing in the world, and while our "hawks" would like us to believe that our practices convey an image of strength to the world the reality is that our society is exhibiting cowardice.  Don't confuse that notion with the notion that our armed forces are perceived as weak – to the contrary they've exibited a great deal of courage and fortitude over the last decade after being put in some very tough positions – but our society can only appear weak when we overreact to a threat that is not as great as it's perceived and when we abandon core principles that have always defined our society.  As the first paragraph in the excerpt makes clear it's not that we shouldn't fight back against terrorists, it's that we should do so in a way that's proportional to the threat and without sacrificing our principles. 

In a nutshell we need to grow some you-know-whats and we should demand our elected leaders do the same.

Standing on Principle

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Winston-Salem city councilman Dan Besse is taking a bit of a political hit for his stance on an issue before the council. From Yes! Weekly's editorial about the matter:

The Winston-Salem city councilman took a stand last week against a proposed resolution by the city to oppose the Supreme Court’s 2010 Citizens United decision, which equated money with free speech and enabled corporations and unions to make unlimited financial contributions to the political process…

But the time is being spent regardless of Besse’s opposition, largely at the behest of his political allies and constituents…

Surely there would be no harm to Dan Besse’s political future by backing down on his stance and throwing in with the opposition groups. It’s an election year, after all, and though Besse’s Southwest Ward seat seems safe, he will surely face a Republican opponent in the General Election.

The editors then provide two quotes from Besse that I think should be printed and hung on the walls in the chambers of every city/town/county council in the land:

“I strongly believe that as a good-government issue, that local governments should focus on the good things we can do — services and infrastructure that we are responsible for — instead of serving as an adjunct public debating society on issues over which we have no jurisdiction,” he said.

and

“If you can’t act on what you believe is the right thing to do, then you shouldn’t be in office,” he said.

Councilman Besse also pointed out that he is an activist on many issues like assault weapons bans, the Affordable Care Act and environmental quality, but he is active in other more appropriate venues. His point – that being a member of city council doesn't preclude him from advocating for any issue on his own time, but when he's wearing his councilmember hat he should be focused on the city's business – is spot on. 

Battle of the Unpopulars

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Who do you hate more: your municipal government or your phone/cable/internet company? The answer to that question probably depends on which one failed you or which one's bill you most recently grumbled about paying, but after reading about a battle in the NC legislature over the ability of municipalities to provide high speed internet, you might be surprised at how you feel about your local government. From "The Empire Lobbies Back":

After a city in North Carolina built a Fiber-to-the-Home network competing with Time Warner Cable, the cable giant successfully lobbied to take that decision away from other cities.

The city of Wilson’s decision and resulting network was recently examined in a case study by Todd O’Boyle and Christopher Mitchell titled Carolina’s Connected Community: Wilson Gives Greenlight to Fast Internet. The new report picks up with Wilson’s legacy: an intense multiyear lobbying campaign by Time Warner Cable, AT&T, CenturyLink, and others to bar communities from building their own networks. The report examines how millions of dollars bought restrictions that encourage cable and DSL monopolies rather than new choices for residents and businesses…

Big cable and DSL companies try year after year to create barriers to community­‐owned networks. They only have to succeed once; because of their lobbying might, they have near limitless power to stop future bills that would restore local authority. North Carolina’s residents and businesses are now stuck with higher prices and less opportunity for economic development due to these limitations on local authority.

The report, which details industries efforts over the years that eventually resulted in the 2011 legislation that effectively banned municipal netorks, can be found here – and yes it's fairly biased, but still raises some really good points. One excerpt:

Far from providing a "level playing field" the Act has stifled public investment in community broadband networks and no one anticipates a local government building a network as long as it remains in effect. This reality should trouble all in North Carolina, as it cannot be globally, or even regionally, competitive simply by relying on last-generation connections from Time Warner Cable, CenturyLink, or AT&T.

Cities near the border of North Carolina, including Danville, Virginia; Chattanooga, Tennessee; and Bristol in both Tennessee and Virginia all offer gigabit services via municipal utilities. Chattanooga's minimum network spped of 50 Mbps both downstream and upstream dwarfs what is available from DSL or cable networks. Many east coast communities outside of the Carolinas have access to Verizon's fiber optic FiOS, which also dramatically outperforms cable and DSL services. Services from AT&T, Time Warner Cable, and CenturyLink cannot compare to the services offered on modern networks.

Sounds like we in the Carolinas are doomed to live in a digital backwater for the foreseeable future. Perhaps municipal networks aren't the answer, but in this era of intense competition between states/cities to recruit new businesses wouldn't it be nice if our municipalities had kick-butt networks in their economic development quivers? And if the private sector can't provide it do we really want our cities/towns hamstrung by the inability to provide it themselves?

Poop Management

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You probably think that the day-to-day business of running a municipality is boring – zoning hearings, council meetings, utility commission hearings, etc. – and for the most part you're right. But boring stuff is often important, and when it's no longer boring you probably have a problem. Take, for instance, Kodiak, Alaska's "Fecal Cliff":

The city has turned to composting as its solution, but a composting plant in Middle Bay has been hotly opposed. A competing plant design to be housed at the landfill will not be ready for several months.

In the meantime, [officials] have come up with a tentative agreement. Sludge will be stockpiled at the landfill until a temporary composting plant can be set up. This temporary facility cannot create garden-safe compost, but it can solidify the sludge to a point where it can be safely disposed of in the landfill.