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Saturday, April 16, 2011

The Contending Health-Care Social Contracts in the U.S. House of Representatives: A False Choice?

On March 21, 2010, the U.S. House of Representatives approved “a far-reaching overhaul of the nation’s health system on Sunday, voting over unanimous Republican opposition to provide medical coverage to tens of millions of uninsured Americans after an epic political battle that,” according to The New York Times, “could define the differences between the parties for years.” The vote was 219 to 212. “This isn’t radical reform,” the U.S. president said, “but it is major reform.”  House Speaker Pelosi said, “Today we have the opportunity to complete the great unfinished business of our society and pass health insurance reform for all Americans that is a right and not a privilege.” While Obama was referring to the bill’s reliance on extant private insurance companies, absent even a public option, Pelosi made explicit the change to the American social contract—access to health-care would henceforth be a right for all citizens rather than a benefit to be conferred to those able to pay from their own wherewithal and insurance. The basis of this new right was undoubtedly the human right to life, as in the right to life, liberty and the pursuit of happiness.

The closeness of the House vote suggests that the people were divided on whether the new right ought to be conferred (and/or whether it should be conferred by the U.S. Government rather than decided on a State by State basis). Sure enough, the pendulum did indeed shift.  On January 19, 2011, the U.S. House voted 245-189 to repeal the health-care law. Then, on April 15th, the House voted 235 to 193 for a budget  that “would significantly scale back federal domestic programs and cut $5.8 trillion over the next decade.  Medicaid would be a set amount sent as a block grant to the States for them to use for their poor (the States or the poor having to make up for any shortfall), while Medicare would be subsidies sent to the elderly for use in their health insurance premiums. Neither the poor nor the elderly would be guaranteed access to health care. According to The New York Times, "(a) Congressional Budget Office review of the Ryan proposal predicted that retirees would pay more for their health care under it than they would under traditional Medicare. The agency also said the Ryan plan to convert federal Medicaid spending into block grants for states would most likely end up reducing benefits for those enrolled in the program." The bill would also reduce the top tax rates for individuals and corporations. Democrats “accused Republicans of promoting a morally skewed vision of America by taking savings out of medical care for older Americans and the poor while supporting tax breaks for corporate America and the affluent.” 

In effect, the Republicans in the House were rejecting the change to the American social contract passed the previous year with respect to there being a right to health-care.  Furthermore, the House Republicans were redoing the social contract with respect to the Great Society programs even before the passage of the health-care right because Medicaid and Medicare would be a fixed amount and transferred to the States (in all but funding), and limited to a fixed subsidy, respectively, rather than being open-ended commitments of the U.S. Government. The poor and retirees would have to pay more than what had been the case even without "Obamacare." In other words, the Republicans were pushing to change the social contract in the other direction with respect to the extent of the federal government's obligation, rather than merely undoing the creation of the right that occurred in 2010.

In short, two visions for a social contract pushing the House in opposite directions more or less simultaneously. Even more significant than the electoral pendulum swing in November of 2010, the existence of two different visions for a social contract contending at the same time was evident.  All of the House Republicans had opposed the health-care law in 2010 while all of the Democrats opposed the Ryan budget in 2011. Two distinct social contracts were in a tug-of-war. The assumption was that only one could be enacted, or a compromise that could only result in a third that neither vision wanted. I contend that this is a false choice--that we are making the problem harder than it need be, given our governmental system of federalism. 

The two social contract visions differ not only with respect to redistribution and the extent to which government should secure the survival of its citizens, but as to whether federalism is at all relevant.  Whereas the Democrats wanted the general government of the union to be the governmental agent in the contract, Republicans sought either a mixture of federal and state involvement or, perhaps ideally, a state by state basis on the government side of the social contract. 

Having some federal involvement would allow for a minimal governmental obligation as part of a social contract spanning the union, while involvement by the state governments would enable various social contracts such that both visions could be realized with respect to rights and obligations.  Lest “minimal” actually be “maximal,” a one-size-fits-all social contract would stymie the two mutually exclusive visions. At the same time, leaving the entire matter of social contract to the states would deny a floor of human rights for all Americans. Social contract itself is complex in the United States, as per the nature of a union of states wherein governmental sovereignty is divided between two systems of government (state and federal).  

That the debate had been allowed to funnel into a “one social contract” only scenario at the federal level essentially truncated the union into a consolidated system, as if Congress were only a national legislature, or a state legislature. In his book, Gov. Rick Perry of Texas writes that the federal system of government, "if respected, allows people of varying beliefs to live together united as Americans." (Perry, p. 26). He notes that "we can tailor solutions to our own values and perspectives rather than trying to create national one-size-fits-all policies" while agreeing "that there are certain things we must do together." (Ibid.)  While Perry views activities of union as only those that the republics in the union cannot accomplish, union could also involve a floor of governmental obligations in keeping with what each generation determines as due Americans simply in being Americans. Yet such a criterion is vulnerable to a slippery slope so the floor feature must be safeguarded by governmental or federal design.

In conclusion, there need not be one choice between the Republican and Democratic proffered social contracts wherein only one of them exists in the United States; the Republican variant could be the law of the land in Texas, for example, while the Democratic alternative could be the social contract in Massachusetts. The only thing to be compromised would be a minimum “floor” of rights for all Americans by virtue of what it means to be an American. Such a matter of compromise would enable us to get past the false dichotomy that presumes a one-size-fits-all decision must be made. In other words, both the Democrats and the Republicans can have what they want--just not U.S.-wide.  To have their respective visions enacted somewhere in the United States means giving up the objective of seeing all of the United States in their own image. 


Robert Pear and David M. Herszenhorn, “Obama Hails Vote on Health Care as Answering ‘the Call of History,” The New York Times, March 22, 2010, p. A1.

Carl Hulse, “House Approves Republican Plan to Cut Trillions,” The New York Times, April 16, 2011, pp. A1, A12.

Rick Perry, Fed Up! Our Fight to Save America from Washington (New York: Little Brown, 2010).

Wednesday, April 13, 2011

Achieving Balance in American Federalism: On the Crusade of Texas’ Rick Perry

As the governor, or head of state, of Texas, Rick Perry has been on a crusade to reinvigorate American federalism. Referring to the efforts of officials in the U.S. Government to secure the Mexican border, Perry said, “It is part of that frustrating paradox where Washington neglects their responsibility for areas clearly within their purview, while interfering in other areas in which they’re neither welcome nor authorized.”  The chief executive was pointing to a little-noticed point concerning the expansion of the domains in which the federal government is active.

The complete essay is at Essays on Two Federal Empires.

Tuesday, April 12, 2011

On the Cruelty of Gadhafi's Libyan Troops from a Nietzschean Perspective of Strength and Weakness in a Will to Power

Gadhafi, or any tyrant who violates the human rights of citizens, can be reckoned as weak rather than strong from a Nietzschean standpoint. Such an analysis could embolden (i.e. awaken) protesters around the world who remain under the subterfuge of a ruler's enforcement of his or her assumed dominance.

USA Today reports that “(t)roops loyal to Moammar Gadhafi may be torturing and executing rebel prisoners.” This is according to human rights workers and physicians near the front lines. Such treatment would constitute war crimes under the Geneva Convention. Physicians said the bullet wounds on one man's body weren't meant to kill, but to torture. "When you put a gun to his head, that's execution," said Mohammed Hussain, the head of intensive care at a hospital near the front lines. "When you shoot him here and here and here, that's something else. That's torture. They want him to feel the pain." This last remark struck me as particularly revealing.

What sort of mentality derives a feeling of pleasure from perceiving another person in pain? To what extent is it the other person feeling the pain that is pleasurable to the person watching? Alternatively, the inflicting of the pain could be pleasurable. The inflicting pleasure for the inflictor might involve the pleasure of having power, as in having control of another person against the other person’s will. Such a will to power is a principal motivator, according to Nietzsche. He avers that human beings are primarily motivated to feel the pleasure that comes with exercising power. Yet such pleasure is in the exercise of one’s strength rather than in cruelty itself.  It is the weak, who, in being driven to dominate beyond their innate strength, delight in cruelty as a means to enforce their domination. In other words, the weak who have an irresistible urge to dominate have to instill (or inflict) their dominance because they are not strong and thus naturally to be respected as powers.

Therefore, the troops loyal to Gadhafi were displaying their condition of weakness rather than their strength by devoting time and energy to being cruel.  With the strong, damage is incidental to the charge rather than intended; the strong relish their experience of strength in conquering and therefore they are not interested in cruelty.  That is to say, harm is a byproduct of the vanquishing by the strong, as the latter conquer out of their overflowing confidence of strength. This can perhaps be thought of in terms of stepping outside in the cold after building up a sweat from exercise—the excess heat radiates outward from one’s body such that one does not even feel the cold air. What is the cold to me?  Similarly, what are the parasites to me who fall by the wayside as I take the village?  Any intent to be cruel to a parasite would be a waste or diversion from the strong vanquisher’s self-confident feeling of power that naturally issues out in his or her strength. Only weakness with a relentless instinct to dominate would be oriented to cruelty as a means, for the feeling of pleasure of strength is not available or realizable.

For example, "Col. Gadhafi's militias are brutal," said Mustafa El Gheriany, media liaison for the Transitional National Committee according to USA Today. "They did that probably on purpose to scare our young men, to show them that they are not taking prisoners.” This motivation would be an alternative to simply wanting to inflict pain or to see another person feel it. Even so, the use of cruelty as a means is ultimately to impose one’s dominance, which means that the person’s strength is not sufficient. In other words, the person using cruelty to send a message has an urge to feel more pleasure from power than his or her weakness can proffer in itself.

Essentially then, human rights advocates point to the tactics whereby the weak who suffer from a hypertrophic drive to dominate seek to enforce, or take, beyond their native pith. This investigation can lead to the following questions. Why is it that certain persons of weak constitutions seek to dominate nonetheless, rather than simply to be content with whatever pleasure naturally issues from the power in the strength they do have? Furthermore, is dictatorship as a form of government a weak form in that autocrats do not simply lead, but are almost invariably oriented to efforts to enforce their dominance by intentionally inflicting pain on protesters?  It would be ironic were unarmed protesters in the streets stronger than the rulers whose dominance is being questioned or repudiated.  Indeed, such repudiation strikes at the core of the effort of the weak to dominate; hence such violence as was evinced by Gadhafi should be no surprise.

To the weak who are driven to dominate, the refusal of others to acknowledge the imposition or enforcement of their claim must be utterly intolerable. “How dare they!” the weak dominator is apt to exclaim even though the strong naturally rebuff the pretentions of the weak.  In fact, Nietzsche thought it remarkable that the weak are able to hoodwink the strong into taking the autocratic enforcement mechanisms seriously.  In the case of the mass protests, enough fortitude among enough unarmed protesters could simply overflow the boundaries invented by the tyrants. Were the people itself mobilized, the autocrat might realize that were the entire populous killed, he would have no one to dominate!  There would be no feeling of pleasure in exercising power over a dead city. The strength in the people as a whole lies in simply being able to say no, yet this strength is typically hid from the strong by the weak who benefit from the subterfuge.

Source: Greg Campbell, “Libyan Doctors Suspect Brutal War Crimes,” USA Today, April 12, 2011, p. 6A.

On Nietzsche applied to business, see: On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available at Amazon. 

Monday, April 11, 2011

Labor-Management Relations: Starving Workers as a Childish Tactic

Before the industrialization in the nineteenth century, nothing "intrinsic or permanent separated those who hired from those who hired out" because "many laborers could hope to ear and saven enough to become their own employers." (1) That is to say, the employee/employer distinction was not overlaid with connotations of disparate distinctions, such as child/parent and subject/ruler. Relatedly, the two parties to the economic agreements bearing on labor in exchange for money had roughly equal bargaining power. As the United States industrialized, however, a distinct working class developed as industrial workers found their upward mobility cut off by rising start-up costs and other barriers to entry. Additionally, the advent of the monopolies (and oligopolies) swung the balance of power in contract negotiations strongly in favor of the corporations. With the added leverage came pretensions going far beyond what could be justified by the relation of labor and capital in a commercial contract. The case of the first transcontinental railroad, which was completed in 1869, demonstrates just how distended the pretensions on the corporate side had become.

The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available in print and as an ebook at Amazon.

Tax Avoidance at GE: On Corporate Income Taxation

In spite of $14.2 billion in global operating profit ($5.1 billion on U.S. operations) in 2010, GE paid no corporate income tax to the U.S. Treasury that year thanks to offsetting prior losses by GE Capital (i.e., bad loans).  In spite of that unit having received TARP funds from U.S. taxpayers, the corporation was able to avoid paying any income tax. This seems like Rousseau's social contract run amuck: corporate welfere in exchange for nada.  Such a modus operendi is in line with the corporate mission: to economize in the sense of maximizing (or satisficing) what is taken in while minimizing what must go out.  In other words, a corporation aims to turn itself from a productive, lean throughput to a concentration of capital in its own right.

In terms of U.S. corporate income taxation, the extent of resources that corporations devote to minimizing what they owe the U.S. Treasury is money that could be better spent, or invested, in productive enterprise. For example, G.E. files returns in 250 jurisdictions and has a staff of 975 working in the corporation's tax department. Even if those people pay for themselves and more by reducing the company's tax liability, the company could eliminate that entire department and orient its global operations in terms of efficiency rather than taxation were income tax applied only to individuals.  The legal person "doctrine" aside, corporations are not citizens; rather, they are groups of citizens. 

Robert Samuelson suggests that the top corporate income tax rate be reduced from 35%, which is one of the highest in the world. He argues that the 15% rate in individual income taxation on dividends and capital gains should be increased. The effect would be regressive, for the top one percent receive two-thirds of all the capital gains and dividends. At the very least, the 15% is relatively low in the individual income tax system and most of the taxpayers subject to the tax could afford a higher rate.

In my opinion, Samuelson does not go far enough, for even with a lower top corporate rate companies would retain their tax departments and steer profit into countries with low tax rates (for there would still be differentials between countries). Theoretically, it does not make sense to tax both corporate income and dividends.  Furthermore, corporate income taxation treats companies as end-points rather than as throughputs. The implications of taxing individuals rather than corporations are staggering not only for more efficient productive investment, but also for attracting foreign direct investment to the U.S. In addition, public accounting firms could eliminate their tax departments and focus all of their attention on auditing--an endeavor made all the more important on account of the misleading financials on Wall Street leading up to the financial crisis of 2008.  Rather than getting headaches over the intracacies of tax rules, public accountants could devote more attention to whether it is enough to follow GAAP in giving an unqualified opinion.

In short, taxation ought not to have so much gravity in orienting corporate America.  Instead, business would do much better in focusing more on building better mousetraps. Individuals who benefit financially from the productive enterprise would be taxed, perhaps even without all the deductions that enable them to avoid being taxed. Imagine a tax-returnless system of individual income taxation involving a fixed low rate applied like a fee on any income taken in, whether from wages, salary, dividends or capital gains. Ironically, by simplifying taxation, more of it could be collected even as businesses are left to do business.

Click to add a question or comment on GE and corporate income taxation.

Source: Robert Samuelson, "The Real GE Scandal," Newsweek, April 11, 2011, p. 21.

Sunday, April 10, 2011

The Nineteenth-Century Eclipse of Democratic Governance by Capitalism. Part I: Jacksonian Democracy over Capitalism

I contend that a trajectory wherein capitalism came to eclipse or capture democratic governance occurred in the nineteenth century in the United States. President Andrew Jackson’s actions in the early 1830s can be viewed as a benchmark wherein government officials were still willing to relegate the interests of capitalists for the good of the whole. 

According to Brands, “Andrew Jackson embodied the democratic ethos, by both his humble origins and his reverence for the people as the wellspring of political legitimacy. Jackson waged political war on the pet projects of the big capitalists of his day, smashing the Bank of the United States, vetoing federal funding on roads and canals, and beating down tariff rates.” (1)  Actually, Jackson’s object was not to reduce the capitalists of his day; rather, he was attempting to protect the balance between the general and state governments in the federal system.

For example, President Jackson vetoed federal funding for the Mayville road because it was confined to the territory of Missouri. That is, the road did not cross state lines, so it did not involve interstate commerce directly. The state itself had jurisdiction. Had Jackson not vetoed the funding, then interstate commerce “regulation” as spending would have opened the floodgates to Congressional power. Jackson was also rejecting the argument that spending for the general welfare goes beyond the enumerated power domains. In refusing to fund the public works project, Jackson was not acting in the interest of the potential private construction bidders. Hence as a byproduct the president was standing up to capitalists in his effort to contain federal power from encroaching on the state governments.

Second, Jackson feared that having a bank of its own would give the general government in Washington too much power relative to the state governments. For example, the Second Bank of the United States could conceivably print an unlimited number of bank notes to fund its government’s spending “for the general welfare”—eviscerating the enumerated powers in the process. Jackson refused to fund the bank before his re-election. Thus he risked having the financial sector turn against him in an election season. The long term viability of the American federal system was worth more to him than his own continuance in office.

Notably, Jackson was willing to cross Wall Street (something notably absent in President Obama’s financial “reform” law) for the good of the republic’s governance system. Put another way, the president’s protection of the system of democratic governance wherein governments check and balance governments in federalism trumped the particular financial interests of capitalists. By the time of Lincoln’s tight re-election race in 1864, capitalists would find a president willing to use (and defraud) the government to benefit them financially.  The balance of power between capitalism and democracy had already shifted.

1.      Henry W. Brands, American Colossus: The Triumph of Capitalism 1865-1900 (New York: Doubleday, 2010), p. 5