The Problem of "Common Sense" Solutions

It's been a busy few days for budgets, finance, and government. Just over a week ago, negotiations between the House, the Senate, and the White House resulted in a tentative deal to keep the government operating for the balance of the fiscal year (although it wouldn't have passed the House without Democratic support). President Obama gave a wonderful speech on Wednesday clarifying some of his fiscal priorities. Yesterday the House passed the Paul Ryan Budget blueprint for 2011 with all Republican votes except 4. And of course, this weekend is the tax deadline (it's Monday because of an obscure DC holiday).

I've complained before about the rhetorical frame, "What the American people want" and no doubt will again. It's a selective argument that doesn't consider the diversity of opinion and sometimes, as Ezra Klein of the Post points out, doesn't pay any attention to popular opinion at all. In the case he describes, the "American people" want Medicare left alone.

My new complaint is "common sense solutions". This is a regular offering, particularly on the right. (The left would do well to stop over-engineering policy, but I'll address that another time.) Examples abound: make medical insurance portable across state lines, reduce regulations that inhibit business, put more money in the hands of the job creators. But I have two problems (at least) with these arguments. First, I'm currently reading a wonderful book titled, Everything is Obvious (Once You Know the Answer) by Duncan Watts. The subtitle is "How Common Sense Fails Us." Watts devotes the first half of the book to demonstrating why common sense does a terrible job of explaining, estimating, or predicting. It's all related to how well we can control variables. Without control, we wind up making ad hominem arguments. Since they are not testable, they wind up being statements of faith and not explanations.

For example, it's argued that regulations are inhibiting business innovation, stunting job creation, and forcing companies overseas. Why? Because companies that go overseas say so. But Watts wants us to consider the companies that thrive in regulatory environments as well. Perhaps the companies that go overseas simply had corporate cultures that looked for loopholes whereever they can find them (last time I wrote about GM not feeling obligated to Flint and about GE getting a tax refund). I could deconstruct insurance across state lines, malpractice reform, greenhouse gas control, and oil drilling in much the same way.

My second critique of the "common sense" argument stems from its "Colbert-like" sense of faith. The common sense critique of policy is strangely absent of any data or at the very least avoids a careful consideration of assumptions made or alternatives foregone. Watts has a great chapter describing Strategic Flexibility, a practice of discussing alternative scenarios to allow assumptions to be uncovered. But too much of the common sense proposals are simply assertions that sort-of work as talking points.  When you begin to explore those assumptions against real data, they don't wind up looking common nor do they make much sense.

Consider the claim: "We're broke!". By any indicator of national finance, we aren't broke. People get paid, services are provided, etc. What we face is a situation where our indebtedness takes an increasing proportion of our budget. What this claim really means is that if we continue in our current pattern and nothing changes, we won't be able to handle future debt payments. By the way, in business this is called "leverage" which is a practice of taking on short-term debt for long-term gain. As the movie Inside Job illustrates, in the decade before the housing bubble we allowed banks to increase their debt to asset ratios from 3 to 1 to 100 to 1. This is what the successful businesses do (you know, the ones so inhibited by regulations.) But there's a huge difference, even at the family level, between "we can't keep doing this" and "we're broke". For all those folks who've lost jobs and houses, it's an insult to use this rhetoric.

But isn't panic called for? Not if we look at the data. We're in this situation because of a number of factors. I'll name five: 1) the unbudgeted costs of the wars in Iraq and Afghanistan, 2) the Prescription Drug benefit that was passed with no offset, 3) the costs of the interventions in the financial sector to avoid a depression, 4) the increased impact on government services caused by the retirement of the front edge of the baby boom generation, and 5) the impact of the recession itself measured in suppressed tax revenue. Now, at some point #1 will end (or at least get budgeted), #4 will be a challenge for awhile but will get better if we control health costs as the baby boom is replaced by the generation following, and #5 will improve as the economy continues to grow. The Drug benefit gets absorbed in the Affordable Health Care Law and the misnamed "bail-outs" are not repeating expenditures.

Here's a very concrete illustration of where the common sense rhetoric fails upon examination. It is often claimed that the tax burden on the "job creators" prevents them from hiring new employees at a time when we need to boost the economy. The first challenge to this comes from looking at job creation prior to the Bush-era tax cuts. Job creation was robust because the economy was expanding in the late 90s (which is what created the surplus). But the second issue comes from breaking apart the logic of what is being claimed. The top-end tax cut was 3% (by the way, excuse a rant here while I point out that when these rates go back up, that was what the Republican administration passed in 2001 -- it's not a tax increase, it's a sunset clause as proposed.) Now, let's assume you are one of those folks worth $1,000,000 in taxable income (remember, that's after all your deductions). What's the impact of that 3% increase? It's easy math -- it comes to $30,000 per year. Like the bit that Amy Poehler used to do on SNL, REALLY? You aren't hiring new employees because you had to pay an additional $30K in taxes? Actually, it's puzzling to take that in the other direction. What are you, Mr. Millionaire, doing with your extra $2,500 per month? Another trip? At least the Republican budget cuts the top end rate down to 25% which would result in significant savings for those in the top brackets (with dramatic impacts on federal revenues).

Here's a related example: we often hear that we don't want to inhibit "small business, which is where the jobs get created." But when you look at actual data of who makes up a small business and whom is impacted by tax issues, they aren't the same people. Glen Kessler is the Fact Checker at the Post. Here's his take on the small business question. It's interesting that he manages to avoid calling people liars, only because they were so careful in how they constructed their sentences!

Here's a final example. It's "common sense" to hold federal outlays at some fixed percentage of the total revenue. Why? And who decides what number? Matt Miller wrote an interesting piece in the Post yesterday that shows how arbitrary both this position and the specific number used happen to be. In light of the wars and the baby boom, it makes sense to argue that we need a higher percentage of spending (by 2 or 3%) while we manage the transitions I described above.

As always, REALLY talking about these issues requires us to be more truthful about our assumptions about government and finance. If you believe that we have to get out of the entitlement business, the current (temporary) financial crisis provides cover to do that. (I'm still having a hard time figuring out what entity will pick up the slack after medicare funding is slashed but costs remain, but Ryan's is a philosophical position some find great value in). If I assume that our collective society is strengthened by looking out for "widows and orphans" and their contemporary equivalents as the Bible instructs, then we have to include that in our planning.

At the very least, we need to pay attention to the actual data, consider alternative scenarios (remember gas prices are high because of uncertainty and not lack of domestic drilling), and speak the truth.

The "Promise" of Choice

We face a possible government shutdown, with political parties unable to come to consensus on goals and strategies. There is much that could be discussed over the long run as we approach questions of the deficit, but our legislative maneuvering has forced a confrontation that was anything but urgent. There is absolutely no reason that this particular increase of the debt ceiling would mark our social demise. It's just an easy tool to use for political posturing.

In the midst of this posturing, Rep. Paul Ryan (R, WI) introduced some broad outlines of his proposed budget for 2012 that will be considered by the House. There are many sources of analysis one can read: some of his numbers are very unclear, the CBO disputes some assumptions, the Chairs of the Deficit Reduction Task Force think it puts too much burden on the poor, the young, and the elderly.

Yesterday on NPR, I heard the explanation that Ryan's approach to Medicare would be to give vouchers to future seniors (exempting those like me who are over 55) to allow them to shop for the plan right for them. Medicaid would be changed to a block grant program, giving a fixed amount to the states and letting them experiment with the best way to deliver services in their area. Both of these moves were described as valuable because they allowed people CHOICE.

Ever since hearing that comment, I've been thinking about the idea that choice isn't evenly distributed. One has to have a certain level of resources before choice can be properly exercised. As if to make that point for me, today's LA Times comics page included the following strip from Candorville (written by Darrin Bell):

There is a true temptation to think all the world is like my people. We generalize from our situation.

Yesterday I had another illustration of this same problem. I was watching Roger & Me, one of Michael Moore's earliest documentaries about the impact of GM plant closing on Flint, Michigan (where GM was founded) in preparation for relocating to Michigan and to spur some of my thinking on my Broken Stories project. Moore wanted CEO Roger Smith to go to Flint and meet with unemployed workers impacted by GM relocation, but GM was non-responsive. One executive explained how a business needs to be concerned for the bottom line and not in supporting a community's needs.

Folks were working at fast food places (WalMart greeters were not the rage in 1989). One woman was selling rabbits out of her home. When Moore approached her about her business, she asked if he was interested in rabbits "for pets or for meat".

The documentary shows President Reagan telling people to relocate to the Sun Belt because that's where the jobs were going (in what proved to be a stop-off point to overseas). At another time not in the documentary, he encouraged unemployed factory workers to get jobs as computer programmers. Celebrities Pat Boone and Anita Bryant, both of whom had be spokespeople for GM, encouraged people to "have a positive attitude" and things would work out.

Listening to Reagan, Boone, Bryant, and GM folks, I realized the limits to our naive belief in choice. There are significant segments of the American population who do not have geographic mobility. They lack resources, they have parents who need care, there are family members in institutions. Furthermore, they need to deal with complicated choices between programs, options, deductibles, eligibility, and the like.

I remember when the last administration passed the Prescription D drug benefit (which, by the way, was a bigger deficit challenge than even the tax cuts for the wealthy). When that first passed, senior citizens were inundated with materials informing them how to choose among the various providers. Many were simply not capable of working that out without help.

Of course, the middle class seniors had less to worry about. Companies showed up who would make the best decisions for you for a fee. You could maximize your choice just like those folks on the financial services television commercials (why are none of those folks concerned about how to keep grandma out of the home?).

The idea of choice lies behind some of the Tea Party fury. They argue, "it's my money" and not the government's (a ridiculous position articulated by GW Bush). They should have the say in what they do with that money. It's less clear what they'd propose for those whose money won't go far enough to allow choice. Of course, the more money one has, the better one can choose to keep it out of the government revenue stream. You do that by having tax lawyers who can help you avoid taxes. The most unbelievable example is General Electric, that got a $3 billion dollar TAX REFUND because of the excellent work of the nearly 1,000 tax attorneys in their employ.

But the lower part of the economy doesn't have these options. If you are not geographically mobile, don't have skills that translate to other industries, are unemployed, or elderly, or very young, you will choose between the options that you have. This most likely means lessened coverage, poorer health, inadequate nutrition, earlier mortality, and crime in the streets.

I'm not suggesting Rep. Ryan or the late Roger Smith are insensitive to workers and the unemployed. I am suggesting that they've made the mistake of building programs or corporate strategies based on what would work for them. They'd exercise rational choice to maximize outcomes.

But for the poor, the young, and the elderly, it's no choice at all.

Abraham Lincoln is the New President!

Three weeks ago tomorrow was Ash Wednesday, the first day of Lent. When Jeralynne asked me what I was giving up for Lent, I quickly answered "political media". It is something I spend a lot of time with and obsess over so I figured that going without would be a good act of discipline. After three weeks, I have realized that it wasn't a big deal. In fact, I don't feel deprived at all. Maybe I'll have to think of something else.

But it's more than that -- it's just not that I'm not deprived. I"M BETTER OFF.

I'm still reading the morning paper, scanning headlines and digging deeper if the story grabs me. And the opinion writers for the NY Times and Washington Post are folks I admire, so I keep up with what they're saying.

I've been pondering that a longer view of the news helps create a better sense of perspective. The incessant updates, concerns, opinions, and propagandas of the 24 hour news cycle seem to destroy perspective. Yesterday the story was that the rebels in Libya were rapidly advancing Westward. Today the story is that Kadahfi's forces have repelled the rebels. Yesterday, there was radioactive water in Japan and reports of 10 million times the normal level. By late in the day, that had been corrected to 1,000 miliverts per hour -- still high but nowhere near the original claim. The US budget impasse is going to cause a government shutdown one day. The next another Continuing Resolution has passed.

Add to that the problem of pundits, who feel obliged to share their views on everything whether informed or previously disproven. Katrina vanden Huevel, liberal editor of The Nation, wrote today about conservative pundits who trot out old ideas to inform current events. I'm certain the same claim can be made about liberal punditry.

So this is what I've been missing (not so much).

My attempt to take a "longer view" got me thinking about how news traveled before the modern era. Sure, we had telegraph lines to major cities, but sometime news simply took a long time. In looking into this reality yesterday, I came across an interesting piece of history from Port Townsend, Washington. Port Townsend is located at the Northwest tip of the Olympic peninsula and is on the Western shore of Puget Sound.

A Google search on news of Lincoln's election in 1860 turned up this wonderful little story in Wikipedia about a steamship, the PS Eliza Anderson, that operated out of Port Townsend in the latter half of the nineteenth century. Here's the entry about Lincoln:


In the early 1860s, there was no telegraph in Puget Sound, and mail carried by steamboat was the fastest way of transmitting news. Thus, on November 27, 1860, the Anderson brought to Port Townsend news that Abraham Lincoln had been elected president of the United States on November 4, 1860, even though the news had reached Olympia on November 22.

So Lincoln had been president for over Three Weeks when the residents of Port Townsend learned of his election. What did this delay change? Lincoln was still president. PT residents could cheer or jeer, as would be their preference, when they got the news. And their news wouldn't be colored by all the opinion leaders who were telling them what Lincoln's election might or might not mean for folks living in the Northwest.

I'm not willing to go to a three week rule as of yet, but taking the long view of still-developing stories has made me calmer and more circumspect. That's a good thing in any season of the year.

Maybe next year for Lent, I'll find something that really costs me. I know it's supposed to be coffee but my discipline isn't that strong yet!

2011 -- The End of American Nationo-centrism?

While I was distracted with trying to figure out what college classes might benefit our civil discourse and public policy, the world was experiencing tremendous figurative and literal shockwaves. Consistent with what I've been arguing here and elsewhere, we really haven't worked out the narrative for this new world.

Remember November of 2010? It was only four months ago according to the calendar but in other ways it feels like one of those alternative universe timelines they so enjoyed on Star Trek. No, the new year has been far more significant than simply hanging up a new calendar.

We've seen peaceful revolts in Tunisia and Egypt. We've seen peaceful revolts met with governmental and mercenary force in Libya and Bahrain. We've seen storms, earthquakes and flooding in Queensland and New Zealand. And, shockingly this week we saw earthquakes, tsunamis, and radiation leaks in Japan.

Pundits have felt free to challenge the administration on how quickly they responded to Egypt and how we want a government that is pro-western. The challenge in Libya is that we 1) are faced with human rights abuses that 2) are disrupting the normal flow of oil. What should we do to protect our way of life? What should our response be to Japan? When the Japanese auto industry shuts down due to power outages, how will that impact employees here in the states? When Japanese tourism falls off in Hawaii, how can we aborb the loss of revenue?

There was a time in American history when the oceans truly separated us from the rest of the world. For periods of time prior to the World Wars, we thought it best to stay on the sidelines. But global economics, governmental interconnectedness, ease of travel, and rapid technology have changed all that. We can no longer manage isolationist sentiment (in spite of what Ron Paul says).

But it is also true that we can't make things happen. We can't make Kadafi behave appropriately toward his people. We can't stop nuclear development programs by fiat. We can't guarantee a stable supply of oil to fuel our cars.

Take oil as an example. With the disruptions in the middle east, gas prices started to rise. And right away, folks were arguing for more drilling in ANWAR, more fracking in the Midwest, or plans for dipping into the Strategic Oil Reserve. Why? Because gas prices were hitting $4.00 per gallon! Now, whatever you believe about a depleting oil supply (it really is) or oil company profits (they're too high), everyone has to agree that supply and demand is a key factor in the price of oil. So a disruption, or even a state of uncertainty, will raise the prices. But without a disruption, prices are still going up because demand is increasing exponentially. The rapidly developing economies of China, India, and South Africa want the increased standard of living we've been promoting to them for decades. As they buy cars, improve highway infrastructure, and then buy more cars, the demand for oil will increase. It's not simply that we buy oil from countries that don't like us, as conservatives like to say. It's that other people are buying their oil as well. No amount of domestic drilling or despoiling of natural lands will change that fundamental equation. We will have to move to other fuel sources. But we will do that to compete with other nations (like China) who are already moving forward on that front. We'll try to catch up, if we can generate the political will to make that happen. But it's not up to us. We can't make things happen to meet our preferences (maybe we never could, but I'm suggesting that this combination of events will make that reality clear).

Oh, there are still those living in that alternative universe that was November 2010. This week Glenn Beck suggested that bad things were happening around the world because we aren't paying attention to the Ten Commandments. His call was for us to reflect on what we've done wrong as a society. But why would the Japanese have to suffer death, destruction, and radiation poisoning because of social currents? Not only is it really, really bad theology, it makes no sense to argue that the world suffers because of America's ills.

It's not about us. And we can't really do much to change things. We'll always be invited to sit at the table, but we just don't get the big chair anymore. The sooner we get our heads around this, the better off we'll be.

Wisconsin and Bureaucrats

One of the sites I have been following was begun by Wayne Baker, a professor at the University of Michigan. Called "Our Values", it is an attempt to model civil discourse by asking folks to reflect on what's important to us. Today's was about the situation in Wisconsin that has drawn our focus over the last several weeks. I put a comment on their website similar to what I wrote in the "civics" piece last week. I've copied their intro and my comment here:

Is Wisconsin's budget crisis just a 'Balloon Boy'?

Thursday, March 10, 2011 at 12:00AM

Yesterday, Wisconsin Republicans figured out a way to end the collective bargaining rights of the state’s public unions. They stripped this element out of the budget bill—and voted to approve it even though all Democratic representatives still are out of the state. So, did ending collective bargaining rights really have to do with reining in a budget deficit?
No. It turns out that Wisconsin was never really in deep economic trouble, according to the Legislative Fiscal Bureau, a nonpartisan service agency for the Wisconsin legislature. In a recent memo to the Badger State’s legislators, the Bureau projects a budget surplus by the end of the 2010–2011 budget biennium. An editorial in The Cap Times says:  “To the extent that there is an imbalance — Walker claims there is a $137 million deficit — it is not because of a drop in revenues or increases in the cost of state employee contracts, benefits or pensions. It is because Walker and his allies pushed through $140 million in new spending for special-interest groups in January.”
Gov. Walker claims that Wisconsin will soon have a $3.6 billion deficit. But, Wisconsin state legislator Mark Pocan, a Democrat, says this is just like the Balloon Boy: the hoax where two parents in Colorado released a large balloon in the air and said their young son was on it. “We found out yesterday after our briefing with non-partisan Legislative Fiscal Bureau,” says Pocan in his blog, “the $3.6 billion deficit in the next budget that Governor Walker and the media has been repeating is a MANUFACTURED CRISIS. The number is based on $3.9 billion in new spending requests by agencies, a 6.2% increase. I don’t think there is a member in the legislature that would vote for that. In fact, I asked Director Lang when was the last time we gave agencies exactly what they requested and was told he couldn’t think of one and he’s been here decades.”

What do you make of all this?

Is union busting the real goal of Wisconsin’s Republicans?

Tell us what you think about the Wisconsin crisis—or similar disputes in other states right now.
Please, take a moment and click to Comment below.
(Originally published at www.OurValues.org, an online experiment in civil dialogue on American values.)

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in Business, Economy, Politics

Required Classes for Civil Discourse: Fourth Course -- Personal Finance

A central talking point of the recent dialogues about the size of government, the nature of our financial situation, and what it means to be conservative revolves around certain images of the budget. Much has been made of the analogy of "belt tightening" like "American households have to do." Now, there are real reasons to question this analogy, as the New York Times pointed out last week.

It's amazing how much our rhetoric runs away with us. Let's explore some ideas related to the budget debates.

First, the notion that American households manage their budgets has largely been a myth. For two decades we have been debt dependent. We're a nation addicted to instant gratification. The best evidence on household finance is that spending has been down because the recession caused folks to pay down their high levels of debt. Where did that debt come from? It came from buying big-screen HD Plasma TVs as we were encouraged through constant manipulation of the airwaves. It came because furniture stores gave us "no interest until 2013 deals". It came because we had to have the new Cadillac that leases for only $529 per month! (I've argued for 25 years that it would be a great paper to estimate the percentage of the viewing public that can actually afford the cars advertised during football games.)

Second, when and if families DO tighten their belts, they take a hard look at their options. The first question to consider is whether this is a short-term problem or a long-term situation that disrupts their entire financial situation. If it's a long-term thing like losing a job, then downsizing in some significant ways makes sense. In those situations, family members help out, you drop the cable, and you get help where you can. There are always stories of folks who fail to adjust their lifestyle, as an amazing financial assistance story in the LA Times demonstrated a few weeks ago. But if it's a short-term hit, it may make sense to simply draw down savings for a little while.

So what kind of financial situation do we have as a country? Many economists like Paul Krugman have argued that we our economic situation is directly related to the slowdown in revenues since the Great Recession. This argument suggests that we should do what is necessary, including deficit spending, until the economy recovers and the existing tax rates create the revenue streams they have in the past.

Third, it's important to keep the long-run in focus. It may be tempting to imagine that you should stop paying your auto insurance, but should something happen you're at great risk. It's one thing to stop going out to eat and another to decide to feed your children nothing but Top Ramen two meals a day. You may be willing to do without cable but giving up your phone may make it difficult to find the next job.

What is currently going on in Washington (and in states across the country) is that we are cutting spending on precisely the things that will cost us in the long run. Less money for heating assistance or head start will result in catastrophic health care costs and prison populations over the long run. Too many of the proposed cuts by either party have been aimed at stuff they didn't like in the first place. Not that these cuts amount to much impact, but they help demonstrate to political supporters that they acted. The analogy here would be the family who thought that the newspaper had been late too many mornings so they canceled their paper. That small amount doesn't dent the family budget and runs the risk of not having want ads or cost saving coupons available.

Fourth, budgets need to plan for the future. If the kids are going to college, it's necessary to set some aside (or rely on the home equity line on grandma's house). Scrimp on that and you don't have a future (which makes it hard to "win the future"). And we really ought to be concerned about the college expenses of all the kids, not just the oldest.

Consider how hopeless our conversations are about social security. We know we need to do something about the needs of future generations (the youngest child heading for college) but we are focused on not doing anything to disadvantage the oldest child. Now obviously it would have been better to have planned for all the kids at once, but we didn't anticipate the future demands. But to suggest that we create voucher systems so that the kids can do their own planning is to create a new system that breaks faith with what we've promised in the past.

What this all means is that budgets are long-term projects, they get modified over time, and we adjust accordingly. But when we engage in tropes like "it's our money" and "no new taxes", it's just not a realistic approach to budgets. Imagine if the employers of the family members simply said "no more raises because the stockholders need their benefits". Okay, that's a bad example but you get my point.

I could continue this series with more classes. There's much that would benefit folks from knowing Shakespeare, from knowing Science, from knowing Anthropology (talking to you Rep. Peter King!). The most important thing is that we stop pretending that we don't have choices. It's what sociologist Peter Berger called Bad Faith and it's got no place in civil discourse.

Required Classes for Civil Discourse: Third Course -- Introduction to Civics

My previous posts in this series dealt with statistics and US History, both legitimate college courses. Unfortunately, while there are courses offered in American Government in many institutions, "civics" or the study of the responsible citizenry, seems to be a high school requirement to get out of the way.

But there are several lessons we should keep in learning about how we govern ourselves. To be careless with these lessons is to ask for trouble within modern society. I want to explore four questions we should all explore about the nature of government and citizenship.

1. What is Government? You know the old Reagan joke -- the eight scariest words are "I'm from the government and I'm here to help." Why does that get traction? Why is it that when we think of government, we only think of the federal government and then only of bureaucrats? Sure, there were problems with the way FEMA (the Federal Emergency Management Agency) responded to Katrina. But are we suggesting that those folks along the gulf were SORRY to see a federal response to a hurricane, a flood, or tar balls on the beach? Why do we focus on the cases of abuse as if all assistance were rife with fraud? For example, last month there was an article in the Huffington Post reporting that over 7,000 filings for gulf spill relief were fraudulent. But there were nearly 500,000 filings made. The error rate is about 1.5% and those weren't fraudulently paid, just filed. One more illustration of our unreasonable suspicion. How many times has the trope been repeated about waiting at the DMV as an example of government efficiency? First, that's not the federal level (more below) and second, it's a function of proper review of documents. It's why we wait in lines fairly patiently at the airport.

2. Where is Government? Here is a related idea: government happens at multiple levels. If you look at your W2 when preparing your taxes, you see a box for the federal government, a box for the state, and perhaps boxes for county or city government. Each of them has to deal with the balance of revenues to expenditures. (I'll deal with the issue of budgeting in my next post.) So when the crazy guy in New York runs for Governor on the "Taxes are Too Damn High" ticket, he failed to realize that the state doesn't handle rent control. But its also true that the lines between these levels of government are notoriously fuzzy. Michael Bloomberg pointed out that pension benefits are set by the New York State but paid by New York City. In California, the state government has been supporting public education (normally a local function) and funding enterprise zones for the cities instead. Much needs to be clarified here. But when Florida governor Rick Scott says he wants Federal Block Grants but with No Strings, you see some of our problems of government funding. It is true that many states are required to balance their budgets, but too many do so by using money from either cities or the federal level to do so. And it needs to be recognized that the two biggest drains on state finances today are medical costs and corrections. As those eat up the small discretionary reserves, it will get harder and harder for states to get to balanced budgets. And when ideologues refuse to consider taxes under any circumstances (like in California) it's hard to be optimistic.

3. How should government work? This is a critical issue that seems to have gotten lost in our never-ending battles over politics. Politics may be about winners and losers, but government is about pragmatic things. How do we care for the infrastructure, for public safety, for education, for development, for the general quality of life? These are all related to the successful operation of an economic model because jobs will follow quality of life. Texas has advertised itself as a mecca for business because of low taxes, but there are indications that deteriorating infrastructure and failing schools will make that short-lived.

The time horizon for government programs should be way longer than an election cycle. E. J. Dionne of The Washington Post recently observed that all government has a "temporary majority". One party may be in power right now, but one needs to be careful about the see-saw policies that result from the kind of rapid reversal of political fortune we're currently seeing. This would sugggest that even though the Democrats had the power to pass the Affordable Health Care Law, slower might have been better (if only the other side wasn't being obstructionist). The Republicans in Congress would do well to remember that they have a "temporary majority" and what they do in the short term will come back to visit them if that majority disappears.

The events in Wisconsin point out the challenges of pension negotiations with public workers. How did we get here? Not as political payback as some claim. It was a long process of two sided negotiation of benefits instead of salaries. The focus was on the next contract and not on the long term stability of those payments over time. Yes, there are abuses (many of the most prominent here in California) where a pension payment was extravagant. If I hear about the cities of Vernon or Bell in one more national conversation, I'll go nuts. Just like the fraudulent claims mentioned above, these things are rare. And to paint all public workers with that brush is just as unfair as it would be to treat all corporate workers based on the example of Enron executives.

4. Whom should government serve? This is the heart of the civics challenge. It even has it's own acronm: NIMBY. Not In My Backyard. People want to protect their own way of life. Too many of them treat government as an expression of personal interest. Fortunate enough to not live in a high crime area? Why do you need to pay for police? No kids in school? Why do you need to approve the school bond? But you can't know when you might need governmental services. You pay taxes to provide a potential response. The argument that the city should cut its services to the level can afford is a remarkably short term response. It may be that the fire department can close a couple of stations. But a fire in the uncovered area will do far more damage than the additional cost of having those services available if needed. This is similar to the Health Care debate. The individual mandate makes sense because you can't predict that you won't need health care if you don't have insurance.

I could go on to take about the moral imperative of caring for the poor and underserved who lack the resources to live in nice areas without crime or drugs or poverty or homelessness. It's got to equal the moral imperative that Speaker Boehner sees related to deficit reduction. And those served by government programs aren't future generations of citizens. They're the ones right here in our midst.

Next Time: "Personal Finance"