GOVERNMENT FUNDING AND DESIGN

By Roland Watson
Lessons in Democracy

The need for government is pragmatic. It is not something that people would normally choose to have. This is because it does not make a positive economic contribution.

Government is a non-productive economic sector, existing for the most part only to balance the negative aspects of human nature. With few exceptions, it does not supply the products or services that we need in our daily lives. Its basic role, of protection, satisfies a negative need. It does not give us what we want; it only protects us from losing what we have.

In addition, government has a tendency to be intrusive. Political leaders aspire to control and power, and these aspirations necessarily conflict with individual desires for privacy and simply to be left alone.

Furthermore, government is expensive. As the leaders expand its responsibilities, this costs more and more money, which the people must pay.

This leads to the conclusion that government should be as small as possible. The government budget is therefore another type of check and balance. If its funding is limited, this limits its power.

Government by definition should operate without any deficit. (The only exception to this is in time of war.) As such, its financial requirements must be closely monitored. We should fund all of our defense requirements, including for the new forms of aggression to which we are exposed, particularly corporate exploitation, but little else. Whatever functions of the government are not essential for these purposes should be eliminated.

As an example of the implications of this, the U.S. government will be properly funded not when the budget is balanced, but when the budget is balanced, the entire deficit has been repaid, the social security trust has been refunded, and the government itself has been streamlined of all its unnecessary functions. And, the first to go of these should be all of the “corporate welfare” programs that exist, all of the hidden and not so hidden business subsidies that the companies themselves should pay, and which also serve to bring the interests of business and government together, and against the people.

There are a number of ways to accomplish government restructuring and to end inefficiencies and control expenditures, the first of which is to bar the influence of special interests. The restrictions that are in place, e.g., in the U.S., are still far too weak. What we need is not just restrictions on financial inducements, but a ban on face-to-face lobbying. Individuals would still retain the right to address elected officials in person, but anyone who represents a group would not. There would still be communications, of course, interest groups could present their cases by mail or email, but traditional lobbying would be prohibited.

Accompanying this, lawmakers need to adopt procedural rules to forbid the addition of spending earmarks and riders to new legislation, and all government tender and bidding processes should be completely open to public inspection.

The government’s ability to incur debt also needs to be constrained. For instance, in many nations officials authorize the government to take on massive debt, a portion of which they then proceed to steal. This happens again and again. Whatever the projects to which the money is applied, the countries are never able to break even and repay their obligations.

Government is not all-powerful. It can be reformed. The greatest obstacle in this process, though, is not technical: determining what changes need to be made and how best to make them. Rather, it is to force the officials themselves to participate. For government to change, it must change itself, which the officials will resist doing. The only solution to this is that the people must demand change, by raising their voices to such a volume that they cannot be ignored.

Government expenditures are funded for the most part by taxes. The right of the people to demand accountability is implicit in the financial contract that is created by the fact that we pay taxes.

There are different types of taxes, each of which in turn has a foundation that is presented as reasonable. Income taxes are “progressive”: the wealthy pay more. The idea here is that since they are able, they should make a larger contribution. Also, they may consume a greater than average share of government services. Sales or value-added taxes (VAT) are a flat tax, in the sense that the same tax rate is levied on all items. They are progressive though, as well, as the wealthy buy more (and hence pay more tax). Some nations also have luxury taxes, where higher rates are applied for expensive goods and services.

One basic distinction is between the taxes that are used to pay for national government and those for state and local. In the U.S., both the federal and state governments levy income taxes. Sales taxes are for states. (The U.S. does not have a national VAT, as is common in Europe.) The federal government also levies the social security tax, and import duties.

In the U.S., local governments levy “property” taxes, to fund schools. Everyone who owns a house or an apartment must pay them, even individuals who do not have children. The argument for this is that the education of the young is so important that everyone should contribute. Now that overpopulation has become such a pressing problem, though, only parents should be required to pay school taxes. Furthermore, the taxes should rise the more children they have.

In fact, there are all manner of taxes. Government officials have used their ingenuity to levy taxes on virtually every possible good or service, e.g., “sin” taxes on tobacco and alcohol, as a means to ensure that they have the funds to support even the most profligate spending. Of course, as the widespread existence of deficit spending demonstrates, they can never get enough money.

The people in a democracy do not vote on the budget. This is arguably a failing. Instead, our only means of influence is to elect officials who say they will rein in spending, and then vote them out of power if by the next election they have not fulfilled this promise.

The other main source of taxes is business. Companies pay taxes on their income as well. A significant problem here though has been the ability of corporations, and also wealthy individuals, to avoid their obligations. As special interests, they contribute to political officials, who return the favor by enacting tax loopholes from which they benefit. The consequence for the wealthy is that they can reduce their payments to such a great extent that the tax structure is not progressive, and corporations similarly reduce their payments, shifting the bulk of the funding burden to individuals. (In the U.S., corporate tax payments as a percentage of total tax receipts has been declining since World War II, hitting a low of 7.4% in 2003.)

Much personal wealth is also incorporated. It is structured legally as a business, to take advantage of the tax breaks that companies enjoy.

These types of loopholes are further used to evade estate taxes, or the taxes on inheritances from the extremely wealthy. The justification for estate taxes is not only to prevent severe inequality; it is also a response to the fact that many great fortunes are established in the early stages of national development, through crime and corruption. Estate taxes are a means of justice for such crimes and corruption, after the fact.

The current situation, where wealth inequalities have reached an obscene level – the richest individuals now have more economic power than small nations – illustrates clearly that all of these loopholes must be closed.

In addition to the principle that government shouldn’t overspend, and that its financial burden should be fairly shared, there are other design issues that are critical to democracy as well. The structure and processes of government should be those which best enable it to fulfill its responsibilities, beginning with the protection of our rights, including against all forms of discrimination.

(While it is less common in societies that do not have rigid classes and limited class mobility, discrimination on the basis of wealth is widespread around the world. Few people would now openly discriminate against someone on the basis of his or her race or ethnicity, since to do so would lead to severe castigation, and also of course because it’s wrong. But many people have no problem with saying no to the poor, and in all manner of circumstances.)

Similarly, the design must allow the people to confront officials if and when they fail. In particular, the people must be able to defend the constitution, if the nation’s political leaders attempt to undermine democracy and turn the country into a dictatorship. They must be able to express disagreement with the leaders, and if need be stop them.

The first such design factor, therefore, is that the society must be open. You have to know that something is wrong, in order to fix it. There must be systems to prevent government cover-ups, the destruction of documents, and the punishment of whistleblowers.

All government decision-making processes must be clear and transparent. To accomplish this, all efforts by the government to control, manipulate and keep secret information about itself must be opposed. This extends from declarations of executive privilege, to the argument used by the military that its activities are a matter of national security, and therefore legitimately restricted only to people with a “need to know.”

This is a specious argument. In a real democracy, almost nothing deserves to be secret. For the people to make the best choices among election candidates, and then to hold those individuals accountable, they have to know everything that the government is doing. Also, even when secrecy is justified, this should only be for a limited – as short as possible – period of time.

Elected officials who do not embrace openness, and who designate one thing after another secret, are undemocratic and should be voted out of office.

The need for an open society illustrates the fact that elections are only the first step. Democracy requires continuous feedback between the people and the government (and society’s other institutions), and via many mechanisms. There must be open public forums, to ensure that all viewpoints are heard and that dissent is allowed.

Social institutions in general are opposed to openness, and such public communication. They seek to divert us from discussing the problems of the world, their role in these problems, and the existence of solutions to them. They seek to divert us from any course of action that would require them to change.

This is a clear test that can be used to group the nations of the world. Probably the most open nations on earth are in Scandinavia, where there are few secrets and where the people actively debate all issues. On the other hand, countries that restrict debate, including by censoring the Internet, are obviously undemocratic if not openly dictatorial. China falls into this group, and also Singapore and many other nations throughout Asia.

One problematic example is the United States. It presents itself as the leader of democracy, but the Bush Administration had a penchant for secrecy that borderd on obsession. (President Bush declared that the White House Office of Administration was not subject to the Freedom of Information Act.) In addition, American companies such as Google and Yahoo help nations like China impose their censorship. If the U.S. were truly supportive of democracy, it would forbid such business practices.

Related to openness is the issue of privacy. If you do not feel that you have the privacy to develop your thoughts and to share them with others, then the society is not open even if forums such as the Internet are uncensored. In practical terms, privacy can only be guaranteed if surveillance of the public is minimal. In the modern day, though, surveillance is so pervasive that personal privacy is at risk of extinction. Again, as with corruption and openness, if officials do not work to protect our privacy, from the intrusive tendencies not only of government but of society’s other institutions as well, we must remove them from power.

(As has been well publicized, the Bush Administration authorized the surveillance of criminal suspects without first obtaining a search warrant; spied on peaceful protestors opposed to the Iraq War; and spied on ordinary Americans through their financial and library records.)

A critical area of governance is problem solving. The government must be designed and managed such that good problem solving is facilitated. Complex issues need to be prioritized and then approached step-by-step, including with the development of contingency plans and the consideration of worst-case scenarios.

Giving officials multi-year terms enables the long-term perspectives required for good problem solving and planning. The officials in theory have the time they need to experiment with different approaches. A recurring problem, though, is that public (and media) scrutiny influences them to focus on short-term remedies. The officials have to resist this, and at the same time we, the people, need to exhibit patience and stop demanding immediate solutions.

Lastly, government must be flexible, to respond quickly to new threats, and it must have vitality, so there is a continuous injection of new ideas. The basic way this is guaranteed in a democracy, is through the periodic holding of elections. This allows the people to choose as leaders the most well qualified individuals from among those who makes themselves available; and, counter-intuitively, it forces regular changes in such leadership. This is the only way to ensure that the society has strong guidance yet at the same time does not become moribund.


© Roland O. Watson 2008