“Well written and an interesting perspective.” Clan Rossi --- “Your article is too good about Japanese business pushing nuclear power.” Consulting Group --- “Thank you for the article. It was quite useful for me to wrap up things quickly and effectively.” Taylor Johnson, Credit Union Lobby Management --- “Great information! I love your blog! You always post interesting things!” Jonathan N.

Wednesday, February 12, 2014

The Swiss Vote to Restrict Immigration: Direct Democracy in Action

On February 9, 2014, the Swiss voted in a non-binding referendum by a narrow margin (50.3%) in favor of immigration quotas and an end to “mass immigration.”[1] This result took the government by surprise; officials had been urging the people to vote no. So too had the Swiss bankers—only coincidentally of course. Just enough voters rebuffed the establishment of power and wealth for the referendum to pass. Johann Schneider-Ammane, the Swiss Economy Minister, suggested that a “culture of excess” in the pursuit of profit sometimes at the expense of the common good had discredited the political and business elite in the eyes of ordinary people.

Monday, February 10, 2014

Congressional Statements on Obamacare: A Crack in Representative Democracy

Even as democracy has many virtues, the political system is not without its own weaknesses. In times of economic crisis, such as Germany in the 1930s, stressors can “fan the flames” such that a few opportunistic people can exploit the vulnerability to the extent that the democracy itself collapses. The “rising phoenix” is often much worse than the original weakness. In this essay, I analyze how a congressional report on “Obamacare,” or the Affordable [health] Care Act, triggered a chain reaction that brought a weakness of representative democracy to the surface. Unfortunately, I do not believe many people thought it very serious (i.e., systemic implications); most Americans probably did not even notice the brief rupture on the skin of the U.S. body politic. For my “microscope slide” of the underlying “virus,” I have carefully selected a slice of the relevant “biomass” in which the pathogen can be most easily seen; it is hardly partisan in nature even though it tends to manifest as such. While you examine my “slide” below, I recommend that you ignore the partisan puss lest you miss the proverbial “fly in the ointment.” Once you have detected the rascal, you might want to ask yourself whether the lapse in representative democracy now rendered transparent is sourced in the people or their respective representatives.

On February 4, 2014, the Congressional Budget Office released a report that mentions in a “oh, by the way” fashion a novel twist in how Obamacare could be expected to impact jobs. Whether out of sheer gamesmanship or ignorance (of whom?), some of the public conclusions from Congressional leaders show more generally the gulf between what the public “is fed” by elected representatives and the actual content they claim is behind their interpretations.

Providing a succinct account of the “twist,” congressional budget analysts said that 2.3 million Americans “who would otherwise rely on a job for health insurance will quit working, reduce their hours or stop looking for employment because of new health benefits available under the Affordable Care Act.[1]

House Budget Committee Chairman Paul Ryan’s first statement on the report, however, concludes that the report proves that the health care law “will push 2.3 million people out of the workforce.”[2] At the time, many of Ryan’s Republican colleagues were making similar claims. I want to isolate the word push here, for it is logically incompatible with the report’s claim that people staying in a job only for the health-insurance benefit will no longer have to continue in the job to receive affordable health-insurance.

Notably, some influential conservatives were cautioning Republican members of Congress to be careful with their own nterpretations, lest constituents and even the public at large (domestic and even global) catch a glimpse of the proverbial “man behind the curtain.[3] Writing in POLITICO magazine on February 4th, National Review editor Rich Lowry notes that “we aren’t talking about jobs that are eliminated in the usual sense of discouraging employers from hiring, as some Republican talking points suggested.”[4] Yet this warning did not stop Rep. Lynn Westmoreland from referencing the CBO report on February 11th as Janet Yellen, the new chair of the Federal Reserve, faced a House committee. Adopting a factual tone, Westmoreland told the Fed chair that the Affordable Care Act "is estimated to cost more than 2.5 million jobs over the next decade." He then asked her whether she thought Obamacare would have an impact on "economic growth and job creation."[5] Lest I belabor the obvious, 2.3 million is less than 2.5 million, and, moreover, the report does not claim the jobs would be lost, as implied by "cost" and "job creation." 

Notice that Rep. Paul Ryan is using "props" (e.g., gray suit, button, flag, and the all-caps title) that add to the visual impression of authoritative fact rather than opinion, ideology, and interpretation. (Image Source: CNN)

Rep. Ryan had at least gone out of his way on February 5th during a hearing on the report to “clarify” his initial statement. “So just to understand this," he said, "it’s not that employers are laying people off, it’s that people aren’t working in the workforce, aren’t supplying labor to the effect of 2 and half million jobs in 2024, and as a result that lower workforce participation rate, that less labor supplied, lowers economic growth?” he asked CBO director Doug Elmendorf.[6] The easy pivot may have saved the Budget Committee chairman his credibility, yet Westmoreland's statement and question demonstrate that disinformation can have considerable staying power, even becoming the default, nonetheless.

I submit that the misinformation had been so glaring that even the general public, otherwise occupied with life, might notice the sheer distance between Ryan’s conclusion and what credible experts were saying of the report. Do we know what is really going on? If not, how can we make good judgments in voting?

In other words, the democratic premise of viable self-governance by a virtuous and educated citizenry may contain an inherent weakness in as much as the electors rely on their respective representatives for information translated for general consumption via interpretation. As the number of electors per representative increases (i.e., larger districts, especially if in an empire-scale republic of republics and citizens), the reliance increases, exponentially I suspect. For one thing, the constituents must rely increasingly on the media to transmit (and shape) their respective representative’s interpretations.

Furthermore, “official” misrepresentations by elected representatives can mask for many voters the value to the individuals who no longer have to work in a (second) job they hate, the companies for whom motivated employees are an asset, and even society itself (happier people). To be sure, a lower labor-force participation rate in a particular job category means higher wages (to attract potential workers), other things equal. Some employers may find that the increased commitment is not worth the more tangible monthly cost.

In fact, Obamacare may not even be the primary culprit behind relatively fewer people seeking employment.  According to The Washington Post, CBO’s analysis points out that “the upward pressure on [the labor participation] rate from improvements in the economy will be more than offset by downward pressure from demographic trends, especially the aging of the baby-boom generation.”[7] By implication, the downward pressure from Obamacare come in second, at best. As part of her congressional testimony on February 11th, Fed chair Yellen did not even mention the Affordable Care Act as a factor in the downward pressure; rather, she pointed to the aging population as the main contributor in the downward trend, with structurally and cyclically unemployed giving up playing a secondary role.[8]  

That the 66% participation rate held from 2004 to 2008 suggests that sustained increases in GDP can counter the huge aging factor as the unemployment rate falls. However, as shown in 2010-2012, both rates can fall concurrently, suggesting an impact from the long-term, or structurally, unemployed losing unemployment compensation and even finding further job-hunting to be futile.

Lest business managers fear a spike in wage rates, the report projects that the unemployment rate will decline only gradually, not dropping to 5.8 percent until 2017 and 5.5 percent in 2024. “Factors such as obsolescent skill-sets and the spread of automation that have fed into the persistently high long-term unemployment are expected to have diminishing effects on the unemployment rate after 2017.[9] We can expect, therefore, that the positions freed up by demographic changes and Obamacare will not go vacant for long; as pointed out above, it is not as though the positions themselves are to be sacrificed on the altar designated by the O-god.

In short, Ryan’s initial statement suggests not just that elected representatives are capable of putting out blatantly false “information” on a policy or new law (this is hardly a revelation), but also that electors may make electoral and public-policy judgments on the false assertions. Especially in a large, empire-scale republic like the U.S., the E.U., or India, the citizenry may have to rely so much on media-shaped sound-bites that the pronouncements are instantly stamped not only with legitimacy, but also as the default. In other words, an interpretation said into a microphone and then broadcast by the media enjoys the presumption of being true even if it is blatantly false. Falsity as truth coming from elected officials is not necessarily checked, since no other quarter in the public discourse has so much authoritative status. Furthermore, the media no longer speaks with one voice, so any “truth correction” may be eclipsed by rhetoric or assumed to be mere partisanship. In terms of representative democracy itself, the representatives may be able to exploit the inherent informational-difference that exists between them and their respective electors.

1. Zachary A. Goldfarb and Amy Goldstein, “Health-care Law Will Prompt over 2 Million to Quit Jobs or Cut Hours, a CBO Report Says,” The Washington Post, February 4, 2014.
2. David Nather, “Both Parties Keep Cherry-picking CBO Report,” Politico, February 8, 2014. See also "ObamaCare Could Lead to Loss of Nearly 2.3 Million Jobs, Report Says," Fox News, February 4, 2014.
3. This reference is to the Wizard working the controls behind a curtain in the film, The Wizard of Oz.
4. Zachary A. Goldfarb and Amy Goldstein, “Health-care Law Will Prompt over 2 Million to Quit Jobs or Cut Hours, a CBO Report Says,” The Washington Post, February 4, 2014.
5. "Economy & Monetary Policy," U.S. House Financial Services Committee, February 11, 2014.
6. Zachary A. Goldfarb and Amy Goldstein, “Health-care Law Will Prompt over 2 Million to Quit Jobs or Cut Hours, a CBO Report Says,” The Washington Post, February 4, 2014.
7. Ibid.
8."Economy & Monetary Policy," U.S. House Financial Services Committee, February 11, 2014.
9..Zachary A. Goldfarb and Amy Goldstein, “Health-care Law Will Prompt over 2 Million to Quit Jobs or Cut Hours, a CBO Report Says,” The Washington Post, February 4, 2014.