In these states, parties can translate ideology into policies virtually unimpeded.  An examination of these policies allows us to get behind the name-calling and 30-second sound bites and discover the remarkable difference between the two parties on fundamental issues.

Contrary to popular wisdom, the fundamental difference between Republicans and Democrats is not on the size of government but the purpose and goals of government.  Both parties believe in taxing heavily and spending lavishly when it comes to protecting our nation from external attack.  Both parties fervently embrace the Declaration of Independence’s insistence that among our “unalienable rights” are “life, liberty, and the pursuit of happiness”.  But their conceptions of security and liberty differ radically.

Democrats believe that governments should not only secure our borders but also advance our personal security.  As reflected in recently enacted state laws, that belief translates into policies extending health care access to as many as possible, raising the minimum wage and expanding unemployment insurance. Republicans vigorously oppose this use of government.  They insist we should not be compelled to be our brothers’ keeper. Of the 13 states that so far have refused the federal government’s offer to pay 100 percent of the costs of expanding health care coverage to millions of their residents, for example, Republicans dominate 12.  All six of the states that are leaning that way are Republican controlled.

What Democrats see as steps to enhance security Republicans view as steps that restrict liberty.  They assert that government-created health exchanges interfere with the right of insurance companies to manage their own affairs while the requirement that everyone have health insurance constitutes an act of tyranny.  Minimum wage laws interfere with the economic liberty of business and the freedom of the marketplace.

Republicans argue that taxes, especially those that tax the rich at higher rates than the poor, interfere with our liberty to pursue happiness by amassing unrestrained wealth.   In the last legislative session Democrat-controlled California, Maryland, Massachusetts and Minnesota raised the income tax rate on millionaires while in the last two legislative sessions, Republican-controlled Kansas reduced such rates by 75 percent and legislators in Kansas as well as in North Carolina and Nebraska are openly pushing for the complete elimination of the income tax.

It is important to note that these Republican actions often result less in a tax reduction than in a tax shift from income taxes to sales or property taxes that burden lower income households most heavily.

When it comes to personal liberty, however, Republicans believe in big government. As former Republican Senator and Presidential candidate Rick Santorum observed, “The idea is that the state doesn’t have rights to limit individuals’ wants and passions. I disagree with that. I think we absolutely have rights because there are consequences to letting people live out whatever wants or passions they desire.”  Even if their wants or passions do not harm others.

This legislative session Rhode Island, Delaware and Minnesota joined 9 other states and the District of Columbia in extending the freedom to marry to include those of the same sex. Meanwhile, of the 25 states with constitutional prohibitions on same sex marriage, 22 are completely controlled by Republicans.  None are Democrat dominant.

Of the 17 states that have enacted medical marijuana laws, 10 are Democratic and only two are Republican. (The rest are not controlled by a single party.) As if to put an exclamation point on this difference, the same day last November that voters in Washington and Colorado approved the legalization of marijuana, voters in Arkansas handily defeated a proposal to allow the drug to be used for medicinal purposes with a doctor’s prescription.

Gun control is an issue that for Republicans and Democrats affects both liberty and security. For Republicans the ability to own unlimited numbers of guns and carry them whenever and wherever one wants with a minimum of government oversight, constitutes an essential part of freedom while allowing the owner to protect herself from physical harm.  For Democrats widespread gun ownership significantly contributes to physical violence inside and outside the gun owner’s household; thus in this case unrestrained liberty must give way to regulation.

In this legislative session while Democratic states like New York and Connecticut and Maryland tightened gun laws, more than a dozen GOP states scaled back their already minimal gun laws. Statistician Nate Silver insists, “Whether someone owns a gun is a more powerful predictor of a person’s political party than her gender, whether she identifies as gay or lesbian, whether she is Hispanic (or) whether she lives in the south…”

For both Democrats and Republicans liberty means being able to participate in influencing the political decisions that affect our lives and futures.  But here again their conception of liberty differs significantly. For Republicans it means the liberty of money, allowing individuals to spend unlimited amounts to elect candidates and lobby legislators while restricting the liberty of people by making voter access more difficult.  For Democrats it means the opposite.

Recently Colorado, Delaware and Maryland have enacted laws making it easier for people to register and vote while Arkansas, Indiana, Nebraska, Tennessee and Virginia have made it harder. Nine of ten states that have voter photo ID laws are Republican dominated.

One could hope that in 2014 the stark evidence emerging from state capitols about the difference between the parties can lay the foundation for a nationwide debate on the purpose of government and the ends to which collective authority should aspire that goes beyond the are-you-for-it-or-against-it attitude that contaminates and diminishes that debate.

In 1970 Congress stripped the post office of its cabinet status and stopped providing public funding.  The new quasi public corporation was urged to adopt a more business like attitude.  Its name, the U.S. Postal Service, reflected a circumscribed mission statement.  No longer was it to be a tool to check the predations of the private sector.  Its sole mission would be to deliver the mail.

The USPS used its new flexibility and ability to borrow to dramatically increase productivity.  By the 1990s, despite the elimination of a public subsidy that in 1970 had accounted for 25 percent of its total budget the USPS was generating a consistent profit.  But to USPS management the mandate to operate in a more businesslike manner was viewed as a mandate to operate more like a private business, improving its internal balance sheet at the cost of weakening the balance sheet of the communities it served.  Again and again Congress had to step in to prevent USPS management from pursuing actions that would have inflicted harm on the nation:  stopping closing Saturday delivery, closing rural post offices willy-nilly.

In 2006, in an accounting maneuver I’ve discussed in more detail elsewhere Congress forced the USPS to pay $5.5 billion a year to do what no other public agency or private corporation does—prepay 100 percent of its future health insurance costs. As the Postal Regulatory Commission (PRC) later observed, these payments quickly “transformed what would have been considerable profits into significant losses.”  Today the USPS deficit has reached $20 billion.  Headlines constantly use the word “bankruptcy”, conveying the message that the post office is an antiquated institution doomed to irrelevancy in the age of the internet, but 80 percent of this huge deficit has been caused not by a decline in first class mail but by this human contrived financial burden.

The debt may be contrived, but its impact is real. USPS management is cutting its “deficit” by eviscerating the institutional commons it oversees.  By closing rural post offices the USPS is delinking the institution from the community.  By closing half of its processing centers, the post office is eliminating local overnight delivery of the mail, a severe burden on weekly newspapers and undermining another sense of geographic community.  In 2012 the USPS announced that first class mail delivery would take at least one more day.  USPS is selling off dozens of magnificent buildings constructed during the New Deal that have served as testaments to a time when the very design of public buildings was seen as part of the commons.  Tens of thousands of workers with the most experience have taken early retirement, resulting in an increasingly less knowledgeable and lower paid workforce.

Today, at the local post office, three clerks have become two, and if you visit during the lunch hour there might only be one.  A five minute wait can become a 15 minute wait or longer.  Unaware of what is behind the cutbacks, those on the line now grumble about the incompetence of “government.”

The anti-commons strategy is clear.  Reduce the post office’s presence in thousands of communities.  Reduce the number of personal interactions with one’s letter carrier.  Reduce service.  Remove the post office from our everyday lives sufficiently so we will acquiesce to its conversion to a private service supplied by profit making firms.

With both political parties demanding the evisceration of the post office, an extraordinary albeit inchoate grassroots movement has arisen to defend this most public of all public institutions.  In 2011 the USPS announced it was going to close 3400 local post offices in the next year but the resulting outcry led Congress later that year to impose a 12-month moratorium.  When the moratorium ended USPS management retreated from its decision to make rapid wholesale closures although it continues to stealthily shutter many local offices via a number of backdoor maneuvers.

In early 2013 the USPS announced it would stop delivering first class mail on Saturdays, although tellingly it would continue to deliver bulk mail (i.e. junk mail).  The resulting uproar led Congress to prohibit such a development.

The post office remains a world-class institution and a remarkable bargain.  It still delivers almost 25 percent of the world’s mail.  A first class letter in the United States cost 20-75 percent less than in countries with a fraction of our geographic area, such as Austria, Germany, Norway, Italy and Great Britain.

But the privatization wolves are circling.  They have openly declared their desire to privatize virtually all parts of the post office.  Except its last mile delivery infrastructure, which no private company wants to duplicate.  Which is the private sector’s acknowledgement that the post office’s universal infrastructure could give it immense leverage if it were allowed to truly compete.  Which may be why the 2006 law that has forced the post office near bankruptcy also hobbled its ability to generate new revenue. The law explicitly banned it from offering a product that would “create an unfair or otherwise inappropriate competitive advantage for the Postal Service…”

When Internet shopping took off, the delivery of packages to individual households should have resulted in a dramatic increase in USPS business. But most parcel shipments were generated by large organizations and the USPS was forbidden by law from lowering prices to get more business.

The post office, first and foremost, creates a commons in every community. It is remarkable and infuriating that when the USPS does a cost benefit analysis to decide whether to shutter a local post office it is not required to take into account the cost to the local community!  It does not have to take into account the increased out of pocket costs for people who have to travel longer distances, often on dangerous roads in the winter.  The only cost benefit analysis that did bring these community costs into the equation, done by students at the University of Wisconsin, concluded that the out of pocket costs to the community almost always exceed the internal savings to the post office.

The unquantifiable benefits of the post office to a community are equally ignored. In rural areas, the post office may be the only remaining community-gathering place, a place to meet one’s neighbors and share truly local news.  In a nation where more than one in five votes are cast by mail and in some states mail ballots have to be received by the close of polls, closing post offices can significantly burden some groups.

Closing post offices and delaying the delivery of mail places a significant burden on the most vulnerable of us for example, delivery of prescription drugs.  In a number of communities the postman and woman who usually know everyone on their route watch out for the elderly.  If the mail is not picked up the letter carrier knocks on the door and if there is no answer notifies the police.

Tragically, the post office no longer has a visible national champion.  USPS management is increasingly acting like the management of a private firm.  The media echoes the conservative meme that the post office deficit is an inexorable result of technological advances.  Grassroots effort have managed to stave off execution, but the post office is dying from a thousand cuts even as a new generation comes of age who wonders what the fuss is all about.

(Photo by NJ Tech Teacher under a Creative Commons license from flickr.com)

Seventeen years later I fully expect a Republican Governor or two to declare in their state of the state address, “the era of small government is over”.  For again and again, Republican governors and legislatures are preempting and abolishing the authority of communities to protect the health and welfare of their communities.

Earlier this year Wisconsin passed a law eliminating the authority of cities villages and counties to require public employees to live inside city limits and voiding any existing requirements.

A few weeks ago Kansas passed a law prohibiting cities, counties, and local government units from requiring private firms contracting with the city to provide leave, benefits or higher compensation than the state minimum wages.

The Florida House recently voted to preempt local governments from enacting “living wage” laws and “sick time” ordinances.  If signed into law, the bill would also overturn counties like Miami-Dade and Broward that have “living wage” ordinances that require companies that contract with the county to pay wages higher than the federal minimum wage, and sometimes provide certain benefits.

According to the Institute for Local Self-Reliance, 19 states currently severely restrict or outright abolish the right of local governments to build their telecommunications networks.  Cities began building their own networks after years of begging private phone and cable companies to upgrade their inadequate infrastructure, moderate their continual price increases and improve their customer service.  After cities proved serious and successful competitors telecommunications firms, rather than respond to the competition, went to state legislatures to abolish it. Last year North Carolina became the latest state to join the ranks of those who refuse to allow communities to make their own decisions about their own affairs.

Several years ago the federal government abdicated responsibility for regulating fracking. The Safe Drinking Water Act mandates federal regulation of underground injection activities in order to protect groundwater sources. In 2005 Congress amended the definition of “underground injection” to specifically exclude “the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.”

In November 2010 Pittsburgh became the first city in the nation to ban fracking within city limits.

In February 2012 the Pennsylvania legislature responded by passing Act 13, a law that allows fracking in all parts of the city, including residential neighborhoods, in essence abrogating the right of cities to exercise traditional zoning powers used to protect residential neighborhoods from noise and odors and industrial dangers.

In mid 2012 Longmont, a suburb of Denver made more restrictive its oil and gas regulations.  The Colorado Attorney General filed a complaint in court.  In response activists successfully got the question put on the ballot.  In November 2012 the ballot was approved with almost 60 percent of the vote.  The AG sued.  And Democratic Governor John Hickenlooper announced the state would sue any and every city or county that followed the lead of Longmont.

In each of these cases one could argue about whether communities should legislate.  In hundreds of communities over the past decade such arguments have taken place, vigorous debates about the appropriateness of residency requirements, or living wage ordinances or fracking restrictions.  Communities have gone both ways on these issues.  But I would argue that they should have the right to make the decision. For it is at the local level where those who feel the impact of the decision get to make the decision.  Certainly when it is a question of how to spend local taxpayers money, or what kinds of commercial activities to allow within residential areas of a city, the community itself should be the locus of decision making and state legislatures should whenever possible respect the outcome.

The U.S. Constitution specifically discusses the authority of the federal government and the states.  It does not mention municipal corporations.  For that matter, neither does it mention private corporations.  Yet after the Civil War, as businesses became more powerful courts gave corporations personhood and dramatically expanded their rights in the face of local and state regulation.  At the same time the courts severely redefined cities as mere appendages of the state and restricted the authority of the municipal corporation to govern its own affairs.

For many courts, John Forrest Dillon’s 1872 book Municipal Corporations remains a guidebook for judicial decisions.  In an 1868 case, Judge Dillon famously declared, “Municipal corporations owe their origin to, and derive their powers and rights wholly from, the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so may it destroy. If it may destroy, it may abridge and control.”

Hundreds of U.S. court decisions to the present day have employed the Dillon Rule to determine the scope of municipal powers and rights.  In 1907, for example, the U.S. Supreme Court upheld the power of Pennsylvania to consolidate the city of Allegheny into the city of Pittsburgh, despite the wishes of the majority of Allegheny residents.

Beginning about 1920, increasing citizen dissatisfaction at their communities’ servile legal status led states to amend their constitutions to include home rule provisions that broadened the power of cities to govern their affairs.  In 1961, for example, the Kansas Constitution was amended to provide that “cities are hereby empowered to determine their own local affairs…”  It remains to be seen whether Kansan courts will conclude that deciding how to spend local taxpayer’s money is a “local affair”.

The U.S. Supreme Court has rarely come down on the side of local authority.  The 1996 Telecommunications Act was justified by Congress as a way to increase competition.  The law specifically allowed the federal government to preempt state and local regulations “prohibiting the ability of any entity” to provide telecommunications services.  In 1997 Missouri passed legislation that prohibited cities from providing telecommunication services.  The Missouri Municipal League asked the Federal Communications Commission to nullify the state law.  The FCC refused to do so because it viewed municipal governments much the way John Dillon did. In 2004 the Supreme Court, by an 8-1 decision, upheld the FCC’s ruling that municipalities “are created as convenient agencies for exercising such of the governmental powers of the State as may be entrusted to them in its absolute discretion.”

Last August a Pennsylvania court went in the other direction by overturning Act 13 in a 4-3 decision that found the law in violation of the state constitution by invalidating many existing municipal zoning requirements The Pennsylvania Attorney General has appealed.  The Pennsylvania Supreme Court is reviewing the decision.

Local government is the most accessible of all governments, the most responsive to the popular will.  Alexis De Tocqueville described local government as “the great school of democracy”.  If we don’t like what our city council or county commission does we can throw da bums out.  And kicking them out is not very difficult. Most local elected officials serve for only two years. Running for local office is within the means of many, unlike running for federal or even statewide office.

There is a clear case for higher level intervention is when a community’s majority tyrannizes its minority. Constitutionally protected civil liberties demand intervention.  But when it comes to how a city spends its money, or what kinds of commercial activities it allows within its borders, the burden of proof should rest heavily on the state to explain why it should be allowed to intervene.

Republican lawmakers defending their bill preempting local minimum wage and living wage laws as a way to prevent the state from having a “patchwork” of laws in its 67 counties. ‘This bill provides consistency with regards to benefit packages across the state,” said Rep. MaryLynn Magar (R-Tequesta). “It levels the playing field.”  But consistency is a poor excuse for undermining a fundamental principle of democracy.  Indeed, one of the compelling reasons for allowing local control is the resulting diversity of practice and the innovation and learning experiences that result.

Intervention protecting communities against the predations of private corporations should be the easiest to defend.  For the more remote the decision maker is from the community affected by the decision the more unequal is the public-private power balance.  Large corporations have a much easier time persuading higher levels of government where money not only counts but is often determinative.

Corporations are legally prohibited from putting the interests of the communities they serve above the maximization of their profits.  And within corporations the number of votes is determined by the number of shares owned, unlike in a political democracy where one person has only one vote.

There has been much written about the federalist nature of the American political system.  But virtually all of it focuses on the rights of states vs. the federal government.  At this historical moment, where the last bastion of true democracy is at the local level, we need to extend the debate to include the rights of communities vs. the states.

Photo used by permission. ©Shane Henderson.  All Rights Reserved

February 22:  After a major public outcry, the Office of Science and Technology Policy (OSTP) directed federal agencies to make published results freely available to the public.  Director John Holdren declared, “Americans should have easy access to the results of research they help support.”

The announcement by the Obama Administration came after 65,000 people petitioned the White House to make publicly supported research available to the public and 6 weeks after the suicide of Aaron Swartz who was facing up to 35 years in prison for freely distributing nearly 5 million scholarly articles from a privately owned digital archive.  The death of Swartz, whose 2008 manifesto declared sharing information a “moral imperative” and the “privatization of knowledge” a curse, became a rallying cry for those who wanted to honor his legacy by changing a federal bias toward the privatization of public information first adopted by Ronald Reagan.

March 3:  By more than 2 to 1, Swiss voters approved the “fat cat initiative”, a Constitutional amendment that bans big payouts to new and departing managers, gives shareholders the right to veto executive compensation and makes prison the penalty for executives who defy the new rules. All 26 Swiss cantons approved the amendment.  A few weeks before the vote the nation was both outraged and energized by the $78 million payoff offered to the outgoing Chairman of Novartis even as the firm was cutting jobs. The vote reflected a deep-seated public sense “that company managers have been ransacking the coffers at the expense of society”, noted one Zurich newspaper.

March 21:  The European Right to Water Initiative announced it had gathered 1.3 million signatures on a petition to demand the European Commission stop mandating or encouraging the privatization of water utilities.  To be formally recognized by the European Union, the petition needs not only a million signatures but also a sufficient number from 7 EU member states.  Currently 5 states have exceeded that level; several more are close.

April 10:  The US Postal Service reversed its February 6^th decision to end Saturday mail delivery as of this August.  The Postal Service blamed Congress for requiring six-day delivery in a continuing budget resolution in March, but the culprit really was the groundswell of public opposition to its decision.  Indeed, the leading advocate of privatizing the Post Office, Representative Darrell Issa (R-CA) Chair of the House Oversight and Government Reform Committee declared, “Despite some assertions, it’s quite clear that special interest lobbying and intense political pressure played a much greater role in the Postal Service’s change of heart than any real or perceived barrier to implementing what had been announced.”

Truth to tell several of these victories come with significant caveats.  Obama’s directive for public access was given grudgingly and only after more than three years of stalling. The final announcement was precipitated in part by the introduction in Congress of a much stronger bill only a few days before.  The OSTP policy only applies to agencies that oversee $100 million in research. Agencies can petition to be exempted from the requirement.  Agencies can wait a year after publication before making research public. And in what can only be construed as a post-mortem middle finger to Aaron Swartz the OSTP memo states, “Agencies plans must also describe, to the extent feasible, procedures the agency will take to help prevent the unauthorized mass redistribution of scholarly publications.” who spend more than $100 million on research

The European water initiative also faces a recalcitrant administration.  In May 2011 several dozen organizations sent a letter to the European Commission asking it to “stop demanding the privatization of municipal water systems in countries receiving rescue loans in the context of the sovereign debt crisis.” The organizations asserted that such demands of EU members like Portugal and Greece violated European Union treaties that require neutrality on the issue of public and private ownership of utilities as well as the right to access to water.  Their letter pointed to recent empirical studies that found water privatization damaging and to the growing wave of remunicipalization efforts as European cities that had privatized their water systems reversed their decisions after seeing significant price increases and service problems.

The EC took almost a year to respond and did so only after the groups threatened to complain to the European Ombudsman.  Its very brief communication insisted, “The Commission believes that the privatization of public utilities, including water supply firms, can deliver benefits to the society when carefully made.”

The groups responded with amazement and anger. In a follow up letter they pointedly asked “what evidence you have to support your position”.   Unsurprisingly, the European Commission refused to respond.

Which led the groups, in late September 2012 to launch the first ever European Citizens Initiative, a formal process available only since April 2012.

If the Initiative succeeds it gains the groups the right to present their case in a public hearing to the European Parliament and to receive a formal response from the European Commission.  The Commission is not obliged to change its position.

As for the post office, the end of Saturday delivery is off the table, at least for the next few months.  But the USPS continues to operate under an increasing debt burden created by the Congressional requirement that it pay $5 billion a year to prepay 50 years of health benefits in 10 years, a requirement borne by no other public agency nor private corporation.  Until that Congressionally imposed mandate is lifted the USPS will continue to slash staff, reduce hours, close local post offices and processing centers and continue to press for the end of Saturday mail delivery.

But then, as my always wise wife says, we need to celebrate small victories, these days more than ever.  So lift a glass to the good citizens of America and Switzerland and Europe for standing up to ever more concentrated private power and insisting that the common good be served.

For the post office the end game is on.  This year the post office will close half its processing centers.  By late spring a first class letter will take 1-3 days longer to arrive at its destination. By the end of this summer Saturday delivery is scheduled to end.  Over the next year the Post Office plans to close over 3000 local post offices while slashing some 220,000 of the its 650,000 employees.

How did we come to this place?  In retrospect, it is easy to distinguish three discrete stages in the 221-year life of the Post Office.

Stage 1:  The Post Office Has a Broad Public Mandate

The first stage began in 1792 when President George Washington signed legislation making the United States Post Office a Cabinet level Department. It was a public institution with a clear mandate:  to enable universal low cost access to information.   In its early years this led it to initiate free and low cost delivery of newspapers and eventually, to offer a special rate for periodicals and books.

The post office helped tie the country together physically as well as intellectually.  Post roads were essential to the early development of the country.  Rural free delivery established in the late 19^th century, spurred improvements in roads and bridges since the post office would not offer service where roads were bad.  In the 20^th century mail contracts underwrote the embryonic aviation industry

In the 1820s, when private companies began charging a handsome fee to deliver information faster, enabling cotton speculators to make a killing on the difference in prices at the docks of New York and the plantations of Alabama, the post office responded by establishing its own express mail service.  The private sector complained.  A Congressional investigation concluded “(T)he Government should not hesitate to adopt means…to place the community generally in possession of the same intelligence at as early a period as practicable.

In the 1840s, when the private sector began siphoning off the most profitable mail routes, leaving to the post office only money losing routes, Congress gave the post office a monopoly, enabling it to dramatically reduce the price of postage and initiate free door to door delivery in cities.  In 1858 the first mailboxes appeared on street corners.

At the end of the 19^th century, when private parcel companies began treating their customers badly, the post office introduced parcel post.  The competition resulted in reduced prices and improved customer service.

In the 1890s and early 1900s financial panics and the closures of hundreds of banks led the post office to introduce postal savings banks.  At its peak after World War II postal banks had over 4 million accounts and deposits exceeding $3.3 billion.

Stage 2:  The Post Office Becomes a Public-Private Institution

But after World War II the Post Office’s inability to borrow money and invest long term coupled with the dramatic increase in the volume of mail put an increasing strain on its system.  In 1966 the mail system in Chicago literally collapsed under an avalanche of mail. Which led LBJ to appoint a Commission to study the future of the post office.  The Commission’s Chairman, retired CEO Frederick R. Kappel, envisioned a more corporatized post office. .  Indeed, in testimony before Congress Kappel revealed his ultimate goal, “if I could, I’d make (the post office) a private enterprise…and the country would be better off financially.  But I can’t get from here to there.”

In the l950s low paid postal workers often moonlighted to make ends meet.  It took 21 years for an entry-level worker to reach the maximum wage level. Strikes were illegal.   Workers demonstrated, lobbied and even held prayer services to publicize their plight.

In 1970 Congress voted itself a pay raise while stalling postal wage increases, sparking a wildcat strike by letter carriers in New York City.  Other postal workers honored the picket lines and the strike spread throughout the nation.  President Nixon sent in 25,000 National Guard and Army troops to attempt, unsuccessfully for the most part, to sort and deliver the mail.

The Postal Reorganization Act of 1970 was a compromise between management and labor.  Unions were given the right to collectively bargain over wages and hours and working conditions for the first time.  Wages increased significantly.  For the first time, postal work became a middle class job for hundreds of thousands, many of them minorities.

For management the Act gave the new quasi-public corporation now called the United States Postal Service (USPS) the right to borrow money and make long-term investments.  In return Congress eliminated taxpayer subsidies, which amounted to 25 percent of the budget in 1971 (about $18 billion in current dollars) and demanded the USPS act more like a business.

Largely as a result of huge capital improvements, productivity soared. In 1966 Fortune Magazine credited USPS with improving its service more than any other company or agency in America.  In 1997 audits by Price Waterhouse found on time delivery at 92%.  The postal service was by far the most popular public agency.  And between 1995 and 1997 postal operations produced a surplus of $4.6 billion.

But the tension between the public mission of the post office and the demand that it act more like a business, continued to grow.  Management tried to close post offices and raised the possibility of ending Saturday service as early as the 1980s, leading Congress to pass laws forbidding the latter and significantly restricting the former.  Under President Clinton, the Postal Service began contracting out services.  Today contracts comprise about 20 percent of its operating budget or $12 billion.

In 2000 the USPS began a formal partnership with FedEx and later UPS. FedEx provides air service for USPS parcels domestically as well as providing international logistics. In 2011 Alan Robinson Executive Director of the Center for the Study of the Postal Market determined that the USPS delivers 30.4 percent of FedEx ground shipments.  The USPS Fed Ex partnership is known as SmartPost.  The USPS UPS partnership is known as UPS Basic or UPS Mail innovations.  These may be the fastest growing parts of their businesses.

Stage 3:  The Dismantling of the Post Office

The third and current part of the life of the post office began in 2006 with the passage of the highly misleadingly titled Postal Accountability and Enhancement Act.

A bit of background is necessary to understand this historic piece of legislation.  In 2001 the GAO placed the Postal Service on its High Risk list because of concerns about its economic future given the poor management labor relations and increased competition from electronic mail. At the request of Congress and the GAO the Office of Personnel Management (OPM) conducted a review of the Postal Service’s liability to the Civil Service Retirement System.  Almost everyone expected OPM to discover huge liabilities.  Instead, it concluded the USPS had overfunded its pension plan by more than $70 billion. In 2003 the GAO raised the estimated overfunding to more than $100 billion.

In a sane world the USPS would have been able to use these funds to expand services, pay down existing debt, and invest in new technology.  But Washington is anything but sane.  The USPS is considered part of the unified budget used for scoring purposes to estimate any legislation’s impact on the deficit.  If the USPS were to tap into its surplus funds it would increase the overall federal deficit.  For three years Congress debated what to do.  Finally, in 2006 it passed a law that requires the Postal Service to pre-pay its health insurance fund by depositing an additional $5 billion a year for the next 10 years into the insurance fund to offset for the phantom accounting deficit under the unified budget.  No other public or private agency is required to do anything remotely comparable.

In 2007, unsurprisingly, the USPS suffered a $5 billion deficit.  Today that deficit is over $20 billion and is used to justify the death of the post office by amputation of its work force, its processing centers, and its local offices.

The 2006 law also specifically prohibited USPS from offering new products that would create “an unfair or otherwise inappropriate competitive advantage for the Postal Service…”

Elaine C. Kamarck of Harvard Kennedy School of Government has observed the essential contradiction in Congress’s attitude toward the post office from the very beginning of its new life as a corporation.  “Congress wants it to be self-sufficient but doesn’t want it to make money.”

For example, in the mid-1970s the post office was told to remove copy machines from post offices under pressure from lobbyists representing office equipment stores who feared that USPS was taking away its business. Later when the USPS initiated a “Pack and Send” service, the outcry from Mailboxes Etc. and other private packing stores successfully challenged the service. Years later, when Internet shopping took off, the delivery of packages to individual households should have resulted in a dramatic increase in USPS business. But parcel shipments were generated by large organizations and the USPS was not allowed to negotiate discounts and thus lost business. It was forbidden by law from lowering prices to get more business. This resulted in the entirely incredible situation in the 1990s where the United States Government negotiated an agreement for the delivery of U.S. government package services with Fed Ex because the USPS was not allowed to negotiate for lower prices!

Today the strongest force in shaping the future of the postal service, aside from Congress, is the bulk mailers.  Indeed, bulk mailers are formally represented in the USPS through the Postmaster General’s Mailers Technical Advisory Committee.  Bulk mailers don’t care about post office closings because big mailers present their mail at Bulk Mail Entry Units.  Saturday delivery is not a major concern either because advertising mail would do fine with even three day delivery.  Nor do they care about having a blue collection box on every corner, half of which have disappeared in the past 20 years.

What bulk mailers do care about is price. They receive huge discounts for pre-sorting that is far in excess of what the postal service saves by receiving mail pre sorted.

Where do we go from here?

So here we are, at the end game.  Few any longer are even talking about saving the post office as is.  Fewer still are talking about resurrecting the post office as an institution with a broad public mission.  The debate now focuses on how many parts of the post office we can lop off.

Kevin A. Hassett then director of economic policy studies at the American Enterprise Institute has written, “The Postal Service owns or operates 33,000 facilities nationwide and owns 219,000 vehicles.  If we were to auction it off to private investors, the bids would likely be enormous.”

Tad Dehaven of the Cato Institute insists, “The one size fits all model where you have six days delivery to every home in the country at a fixed price just doesn’t make any economic sense.  What I envision is eventually consumers and customers dictate what they want and entrepreneurs figuring out how to satisfy those wants and needs.”

The National Academy of Public Administration will issue a report this spring on what its calls a Thought Leader proposal submitted in January.  The 8-page paper urges the post office to be engaged only in last mile delivery and pick up.  All other parts of the post office would be sold to private companies.  Among the four signatories to the paper, astonishingly, is the Director of Advocacy of the Atlas Institute, dedicated to promoting the writings of Ayn Rand

The post office can and should be saved, but doing so will require a massive grassroots and lobbying effort. It is an effort that could cut across class and race and geography, cutting across rural Republican and big city Democratic districts.  Such an effort could educate the American public about five key issues.

First, savings from cutting back postal services are largely illusory, even if we use the narrow cost-benefit analysis used by the USPS.  In 2008 the GAO found that the USPS had no way to measure savings from contracting out.   Ending Saturday delivery will not save nearly the amount of money the USPS predicts.  There are alternatives to closing processing centers that achieve comparable savings.

But we should argue for a wider cost-benefit lens.  Remarkably, the post office does not need to take into account the actual cost to the local community of closing a local post office!  It does not have to take into account the increased out of pocket costs for people who have to travel longer distances, often on dangerous roads in the winter.  The only cost benefit analysis that did bring these community costs into the equation concluded that the out of pocket costs to the community exceed the internal savings to the post office even in the worst-case scenario.

Second, the deficit is illusory.  Over 80 percent of the deficit is a result of a phantom accounting system that imposes on the USPS an unprecedented, unparalleled and unfair financial burden.

Third, the post office remains a world-class institution and a remarkable bargain.  A first class letter in the United States costs 20-75 percent less than in countries a fraction of our size, like Austria, Germany, Norway, Great Britain, Italy.

Fourth, the universal infrastructure of the post office is of enormous value and could be the foundation not only for it to provide increased services but also to compete with the private sector if it were allowed to do so using the same marketing and pricing tools the private sector uses.

Fifth, the post office plays an important unquantifiable part in American life. In rural areas, the local post office may be the only community gathering place remaining, a place to meet one’s neighbors and share truly local needs and news.  In a nation where more than one in five votes are cast by mail and in some states mail ballots have to be received by the close of polls, closing post offices can significantly burden some groups.    In Nevada, for example, about half of the 27 Indian tribes rely heavily on the post office to register and to vote and the closure of a post office can effectively strip them of that right.

Closing post offices and delaying the delivery of mail places a significant burden on the most vulnerable of us.

William C. Snodgrass, owner of a USave Pharmacy in North Platte, Nebraska, talked about the end of next day first class delivery to local areas. His store mails hundreds of prescriptions a week to residents in mostly rural areas of the state that lack local pharmacies. If first-class delivery were lengthened to three days and Saturday mail service also were suspended, a resident might not get a shipment mailed on Wednesday until the following week.

“A lot of people in these communities are 65 or 70 years old, and transportation is an issue for them,” said Snodgrass. “It’s impossible for many of my customers to drive 100 miles, especially in the winter, to get the medications they need.”

The Post Office can still be saved.  But the grave has been dug.  The coffin has been built.  And funeral music is in the air.  Only the most aggressive effort by the AARP, the NAACP, Consumers Union and other affected constituencies can save this most public of all public institutions.

The Court’s ruling left existing policy, under which remote retailers must collect sales taxes only in states where they have a physical presence or other tangible “nexus,” unchanged.  But the Court explicitly invited Congress to revisit the policy. “The underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve” the Court wrote.

Today, software and related tax services have largely eliminated any remaining difficulty in calculating and remitting sales taxes for the country’s many state and local jurisdictions. Yet Congress has so far failed to extend sales tax collection to online retailers.  The result is a public policy with at least three pernicious impacts:

• It disadvantages local businesses.  Exempting online retailers from having to collect sales tax, as regular stores must, gives these companies a 4 to 11 percent price advantage over local stores — a sizable competitive advantage in retailing.

• It undermines state and local governments by reducing tax revenue for schools, police, and other services.  This revenue loss that will only grow as internet sales continue to displace in-store sales.  Currently, 45 states assess sales taxes, from which they receive about 25 percent of their total revenue each year.  A 2009 University of Tennessee study estimated that uncollected sales taxes on e-commerce cost states $7.7 billion in 2008 and projected annual losses of $11.4 billion by 2012.  That figure grows to $23.3 billion when catalog phone and mail order sales are included.

• It makes a regressive tax more regressive, because only those with internet access, a credit card, and a home or workplace where they can accept daytime deliveries are able to take advantage of the tax exemption.

(It is important to note that, while remote sellers are not required to collect sales taxes, the tax is still owed by the individual who made the purchase.  Individuals are supposed to keep track of these purchases and pay an amount equivalent to the sales tax as a “use” tax on their state tax returns.  Less than 1 percent of people do, however, and the use tax is almost impossible to enforce, which effectively exempts these purchases.)

The Marketplace Fairness Act

There are two primary strategies that states are pursuing to move toward a level playing field in which all retailers are subject to the same sales tax requirements.

One involves persuading Congress that collecting sales taxes for numerous state and local jurisdictions is no longer a burden for remote sellers.  As noted above, software makes complying with state and local sales tax rules much simpler than when the Supreme Court issued its 1992 ruling.

The Marketplace Fairness Act, introduced by Senator Mike Enzi, would authorize states that have simplified and aligned their sales tax rules to require large online and catalog retailers to collect sales taxes.  (Small online and mail order retailers with less than $1,000,000 in out-of-state sales would still be exempt.)

In order to meet the bill’s requirement of a simplified sales tax system, states must either 1) enact legislation implementing the provisions of the Streamlined Sales Tax Project (SSTP) or 2) implement minimum specifications outlined in the act, including the provision of free software for sellers, and pass legislation explicitly stating that the state will exercise its authority with regard to remote sellers.

The SSTP, launched by the National Governors Association, is a multi-state effort to simplify and align state sales tax policies. As of January 2013, 44 states and the District of Columbia had approved an interstate agreement that establishes uniform sales tax rules and definitions, and 24 states had taken the next step of passing implementing legislation. Those 24 states are: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.

Under the SSTP legislation, states and cities still have the authority to determine what goods are taxed at what rate, but must adhere to rules governing such things as how and when they can change tax rates, as well as uniform definitions (e.g., whether marshmallows are considered food or candy for tax purposes).

Clarifying Nexus

The second strategy states are pursuing does not rely on Congressional action, but instead uses existing state authority to clarify what constituents “nexus” for the purposes of sales tax liability.  (Under the Supreme Court’s ruling, only retailers that have a physical presence, or nexus, in a state must collect sales tax on purchases made by that state’s residents.)

In the past, many national chains, despite having nexus in every state by virtue of their stores, claimed their e-commerce sites were distinct legal entities, unrelated to their bricks-and-mortar stores and therefore were exempt from collecting sales taxes. This practice is known as “entity isolation.”

State action in recent years has sharply curtailed the number of so-called “clicks-and-mortar” retailers using entity isolation to skirt collecting sales taxes on their online operations.  In 2001, California became the first state to issue an administrative ruling against the practice of entity isolation when its Board of Equalization ruled that Borders.com was not a separate entity, but the online extension of the chain Borders Books & Music and therefore must collect sales taxes on sales to California residents.

In the following years, several states amended their sales tax laws to clarify that the e-commerce arms of national chains still have nexus and that entity isolation does not absolve them of their obligation to collect sales tax.  (Below we include policy examples from Arkansas and Indiana.)

Increasingly concerned about the threat of court action by states and the potential liability, as well as the complexity and inefficiency of attempting to treat the e-commerce side of their operations as a separate company, in 2003 most national chains cut a deal with the states in which they were forgiven all of their back taxes in exchange for collecting sales taxes online from that point forward.   Although most national chains now collect sales taxes on online orders, there remain a few that do not.

In 2008, New York became the first state to further extend the definition of nexus to cover some web-only retailers, including Amazon.com. The legislature passed a bill, accompanying its budget, that said that web retailers have nexus in New York and must collect sales taxes if they have sales affiliates in the state that generate a combined total $10,000 a year or more in revenue for the retailer.   (Sales affiliates are individuals or organizations that are paid commission for linking to the online retailer’s web site. Amazon.com has thousands of sales affiliates nationwide, as do many other online retailers.  In all, more than 30 companies are covered by New York’s provision.)

On November 4, 2010, a New York state appellate court ruled that New York’s law does not violate the commerce or due process clauses of the U. S. Constitution. The case was brought by Amazon.com and Overstock.com, which argued that the state did not have the authority to require online retailers to collect sales tax based on the nexus provided their in-state sales affiliates. The court did say that two of the online retailers’ claims could be reinstated for further review. The claims dealt with the question of whether the retailers’ affiliates solicit sales or are simply advertisers. The court said that there was not sufficient evidence in the record to make a determination on this question. However, the rest of the ruling suggests that Amazon.com and Overstock.com are unlikely to succeed on these points during further proceedings.

Six other states — Rhode Island, North Carolina, Illinois, Arkansas, Connecticut and California — have followed New York’s lead, adopting similar laws that require online retailers with sales affiliates based within their borders to collect sales tax (scroll down for details on each state). California’s law also extends the obligation to collect sales taxes to online retailers that have subsidiaries or affiliated companies in the state.  (Amazon has a technology division in California that developed the Kindle.  It maintains divisions in several other states where it currently does not collect sales tax, claiming that its e-commerce operations are a separate company.)

South Dakota and Colorado have also passed laws requiring online retailers to notify their customers that they owe the state’s use tax on purchases in which sales tax is not collected.

(Last updated: March 25, 2013)

More:

• The American Booksellers Association has created e-fairness action kits for nearly every state.

• Check out this interactive map to see how much of your state’s budget gap could be eliminated by requiring online sellers to collect sales taxes.
• One pager on the Marketplace Fairness Act.

• Why Does Congress want me to Shun my Local Bookstore and Shop Online Instead?
  by Stacy Mitchell, Feb. 1, 2010

• Amazon’s Arguments Against Collecting Sales Taxes Do Not Withstand Scrutiny
  by Michael Mazerov, Center on Budget and Policy Priorities, Nov. 16, 2009

• New York’s “Amazon Law”: An Important Tool for Collecting Taxes Owed on Internet Purchases
  by Michael Mazerov, Center on Budget and Policy Priorities, July 23, 2009

• State and Local Government Sales Tax Revenue Losses from Electronic Commerce
  by Donald Bruce, William F. Fox, and LeAnn Luna, University of Tennessee, April 13, 2009.

The frequency and cost of natural disasters is rapidly increasing. Since the 1980s the number of billion dollar natural disasters in the United States has tripled from two to six.  In 2011 there were 14 separate $1 billion plus weather events and losses topped $60 billion.  This year Hurricane Sandy alone will exceed that total.

As costs have exceeded the ability of insurance companies, individual homeowners, businesses and communities to pay, some states have created statewide pooled risk funds.  After Hurricane Andrew in 1992, for example, Florida created the Florida Hurricane Catastrophe Fund.

An increasing federalization of disaster relief has been occurring since the 1988 passage of the Stafford Act that required Washington to assume at least 75 percent of the costs of federally declared disasters. Predictably, the number of such declarations has increased dramatically, from 53 in 1992 under George H.W. Bush to 110 in 1999 under Bill Clinton, to 143 in 2008 under George W. Bush.  In 2011 President Obama set a record by declaring federal disasters 242 times.

But as Hurricane Sandy has demonstrated, natural disasters are exceeding even FEMA’s expanded financial capacity, leading to the need for additional ad hoc Congressional appropriations.  This has given a boost to efforts to create a natural catastrophe insurance fund that would pool the risk nationally, similar to the terrorist catastrophe fund we put in place immediately after 9/11 with the passage of the Air Transportation Safety and System Stabilization Act.  The fund created by that Act eventually paid out about $7 billion to more than 7400 victims.

In 2002 Congress passed the Terrorism Risk Insurance Act. The program is triggered if losses exceed $100 million and cost to an individual insurance company is more than 20 percent of premiums paid. When the program is triggered, the federal government pays 85 percent of insured terrorism losses in excess of individual insurer trigger/deductibles while the insurer pays 15 percent.  The program is capped at $100 billion per year.

But national natural catastrophe insurance has proven a hard sell.  In 2008, when Congress debated a form of national catastrophe fund called the Homeowners Defense Act, presidential candidate Senator McCain of Arizona argued that since the natural disasters that it was targeting occurred primarily in the south and southeastern part of the United States, the risk should be pooled regionally not nationally.  In a 2009 report the Heritage Foundation agreed, although it might have undermined its case with its example, “a catastrophic hurricane could hit New York and Connecticut, but such an event may not happen for many years, if at all.  Therefore individuals living in those states cannot be held to be placing themselves at risk of such a low probability event.”

Despite the lack of progress on a national catastrophe fund and the refusal of the Republican House to quickly approve federal assistance to the victims of Hurricane Sandy, the principle that we are all in this together does seem widely accepted.

Which brings me to last November’s Doha Conference on Climate Change.

The sad truth is that the poorest countries on the planet will be hit first and hardest by climate change. In the last decade it is poor counties like Honduras, Myanmar, Nicaragua and Bangladesh and Thailand that have been most battered by the climate storm.

In the 1990s global climate conferences focused on greenhouse gas reductions.  In 2010, at Cancun, governments began to focus on adaptation and mitigation, pledging $30 billion in “fast start” funding for 2010-2012 and $100 billion annually by 2020. (The latter is the annual cost of adaptation to a 2-degree C. warmer world as estimated by the World Bank.)

At Doha the 195 participating countries went a step further.  For the first time the phrase “loss and damage from climate change” made it into an international legal document.

U.S. and U.K. negotiators made certain that neither the word “compensation” nor any other term connoting legal liability was used in the final text. But for the first time richer countries seem to have accepted their moral obligation to offer aid given their outsized contribution to the problem.

True, Doha is only an agreement in principle.  No money was committed nor was a mechanism established to dispense the aid. The issue will be revisited at the next climate conference in Warsaw this year.

Where will the money come from?  Many worry that it will come from existing foreign aid budgets.  And that is exactly what happened when the U.K. created the adaptation-oriented International Climate Fund with money transferred from existing aid commitments.

The signs are not promising about our willingness to help.  A month after Hurricane Sandy struck the U.S. coast, typhoon Bopha struck the Philippines, the fourth major natural disaster in as many years, devastating the economy and leaving as many as 2000 dead.  The current estimate of the total cost is $839 million. The Philippines requested $65 million in immediate assistance. Currently it has received only $12 million. U.S. AID gave $100,000. (USAID maintains it has provided about $11.7 million in disaster response assistance to the Philippines over the past five years.)

The United States ranks near the bottom in terms of countries that give foreign aid. U.S. foreign aid constitutes only 0.19 percent of our GDP. The international leaders, Sweden, Denmark, the Netherlands and Norway give from 0.80 to 1.2 percent of their GDP. Most other European donors give between 0.38 and 0.50 percent.   And for most Americans even this is too much.   A recent USA TODAY/Gallup poll found that 59 percent of Americans favor cutting foreign aid.

Moreover, the vast proportion of U.S. foreign assistance is given for geopolitical and military considerations, not for humanitarian aid.  Indeed, last March, Representative Ileana Ros-Lehtinen (R-FL), Chairman of the House Foreign Affairs Committee questioned the priorities on U.S. foreign assistance to the Western Hemisphere. She wanted funds directed more towards counter narco-trafficking efforts and security assistance and not to offset climate change impacts insisting, “With limited resources, we must ask if this best meets our U.S. national security interests.”

Pooling climate change risk nationally is now widely accepted by U.S. policymakers.  At Doha 195 countries, including the United States, accepted the premise of a global pooling of risk.  What might be the governing principle for such a global pool?  Perhaps the Bible could give us guidance. When famine was predicted the Bible notes, “Then the disciples, every man according to his ability, determined to send relief unto the brethren which dwelt in Judaea.”(Acts 11:29. King James Bible)

Hurricane Sandy hit the richest section of the richest country on earth.  Connecticut is by far the richest state. New Jersey ranks third and New York fourth.  Connecticut has a per capita income of $56,000.  The Philippines has a per capita income of $2,000.  That stark disparity argues for the Mid-Atlantic States to generously join in helping the Philippines even as they ask the other U.S. states to help them.

Just as the Stafford Act was intended to stop the ad hoc financial response to natural disasters, an outcome of the upcoming Warsaw conference might be to create a comparable international mechanism and agency.

How will such a mechanism be funded? From a tax on greenhouse gas emissions. Such a tax is both fair and strategic. It will impose costs commensurate with the damage generated while at the same time providing a market signal that will reduce future damages.  In the United States a tax of $10 per ton of CO2 would raise about $60 billion annually, sufficient funds to pay for adaptation, mitigation and assistance for at least for the foreseeable future.  An additional $10 per ton paid by the richer nations alone would provide sufficient funds on an international scale to pay for adaptation and compensation, although all nations should be required to pay something in catastrophic insurance premiums.

Much needs to be worked out both on a national and international level.  Who should dispense the money?  What formula should govern the funds disbursement (i.e. what percentage of the costs should the national or international fund cover)?  How do we assess the actual damages?   Are funds available to cover only the costs of climate-induced natural disasters or for broader natural disasters such as earthquakes and volcanoes?

The conversation will be hard and loud.  But the confluence of the devastation wrought by Hurricane Sandy and the agreements at Cancun and Doha by richer nations to help pay for adaptation and mitigation as well as assist the victims of climate change has brought to the United States and the world the centrality of the question.  Who will pay the costs of climate change?

There is a case to be made for charitable deductions.  Regrettably, this isn’t it.

Shiller offers three arguments.

First, giving is a fundamental part of who we are.  He cites anthropological research by Marcel Mauss and Karl Polanyi that contends reciprocal gift giving ”has pervaded healthy human society from its Neolithic beginnings.”  And he points to recent brain imaging research revealing, “reciprocity is supported by fundamental structures in the brain.”

But Shiller misreads this evidence and its implications.  Reciprocity is the key word.  Polanyi and Mauss, and more recently, Lewis Hyde have argued that socially obligatory gift giving was the glue that held many societies together.  It was the material expression of cohesive relationships.

Polanyi and Hyde made clear that market economies have undermined the concept of reciprocity, made relationships more impersonal, severely injured the culture of sharing and caused grievous social harm.  In a review of Hyde’s 1983 book, The Gift, Detroit librarian JoAnn Schwartz notes the fundamental difference between a market economy and a gift economy.   “In a market economy, one can hoard one’s goods without losing wealth. Indeed, wealth is increased by hoarding— although we generally call it ‘saving’.  In contrast, in a gift economy, wealth is decreased by hoarding, for it is the circulation of the gift(s) within the community that leads to increase— increase in connections, increase in relationship strength.”

Our declining sense of reciprocity is not an argument for subsidizing charity but for reducing the dominance of market thinking.  Not surprisingly, Professor Shiller does not pursue this argument.

Why do we give?  Undoubtedly there is an element of compulsion.  What will my granddaughters think if there is no gift from pop under the Christmas tree? But as Arthur Brooks of the American Enterprise Institute has noted there is another and possibly more powerful reason for giving. It makes us feel good.  Sharing makes us happy.  “A number of studies have concluded that giving affects our brain chemistry,” he observes.  “People who give often report feelings of euphoria, which psychologists have referred to as the “Helper’s High.”

If we give because our brains are hard wired to give or because we are happier when we share, then why subsidize giving?  After all, the National Retail Federation estimates this Christmas season we will spend $545 billion on gifts, almost three times as much as we will give to charitable causes, without any tax breaks for doing so.

Indeed, a tax deduction does not appear the determining reason the vast majority of people give to charitable causes nor would a reduction in the subsidy significantly reduce the amount given to charity. Overall, about 40 percent of contributions are not tax deductible, according to Joseph Cordes of the Urban Institute. Only about a third of people who file tax returns itemize their deductions.  Even among households earning over $120,000 per year, about 60 percent do not itemize their deductions.

A 2006 survey by the Bank of America found that over half of high-net-worth donors said their giving would stay the same, or even increase if the tax deduction for charitable gifts fell to zero.  Jack Shakely who ran the California Community Foundation for 25 years has noted that while the top tax bracket for individuals has plummeted from 70 percent in 1980 to 35 percent today charitable donations have remained almost constant, hovering between 1.7 percent and 1.95 percent of personal income per year.

Arguably those that give the biggest contributions do so primarily for non-monetary reasons.  As author Judith Warner wrote in the New York Times, giving by the 1 percent “was mostly directed to other causes—cultural institutions, for example, or their alma maters—which often came with the not-inconsequential payoff of enhancing the donor’s status among his or her peers.”  Having a building or scholarship program named after you may be worth much more than a tax deduction.

Shiller’s second argument is simply preposterous. “Undoubtedly, charitable giving can substitute for a good part of the things that the government would otherwise be doing itself, a factor that is rarely intruded into budget calculations,” he writes.

In its original definition, charity meant helping the needy.  This year individuals will give about $30 billion to help the poor.  Government will give close to 100 times more.  Indeed, voluntary giving can’t even keep up with government cutbacks let alone substitute for government spending.  The Food Bank for New York City,  for example, has been forced to deliver 11 million fewer meals this year because of cuts government spending.

For those who give the most, those that have the least are rarely the recipients.   One recent analysis found that of the individual donations of $1 million or more made in New York State so far this year, little has gone to enriching the lives of the less fortunate.

Of the top five donations totaling $190 million, one was made to Columbia University’s business school, another to the Metropolitan Museum of Art. Third on the list is Joshua P. Rechnitz’s $40 million contribution to the Brooklyn Bridge Park Corporation, made specifically for the purpose of building an indoor cycling track.

Much of the giving by the very wealthy is done through foundations.  Foundations account for about 13 percent of all giving, about $40 billion a year.  Foundations may help the needy but they rarely advocate for them. “At a time when America is having a debate about the social contract, philanthropy is silent,” Emmett D. Carson, president of the Silicon Valley Community Foundation recently told the New York Times. “We are silent about the depths of the problems of homelessness, joblessness, foreclosure, hunger, and people are starting to believe that philanthropy is irrelevant to the core needs of their communities.”

There is one sector in which Shiller’s argument does hold true:  religion.  Voluntary contributions are the key to churches’ existence.  Nationally, 32 percent of charity goes to churches.  But this is not a sector where we should, or constitutionally can, provide significant government support.  In any event, the majority, possibly the vast majority of those contributing to churches don’t even make use of a tax deduction.  Moreover, we should be clear that a contribution to a church is not a contribution to the needy.  Virtually all religious contributions are spent to sustain and expand the institution.  Little goes to the poor.  Churches spend a small portion of their revenue helping the needy. Some spend a vanishingly small portion.  By one estimate the Mormon Church spends less than 1 percent to help the poor and needy.

There is one other sector largely dependent on charity:  the arts. Federal and state governments spend only a little more than $2 billion on the arts while charitable contributions to this sector may total $40 billion this year.  One could make the argument that individual giving to the arts is superior to government giving because it results in a more diversified sector that responds to local tastes.  On the other hand, the dependence of an increasingly desperate arts sector on individual giving may argue less for an increased tax deduction than for increased government spending.  The Germany government, for example, spends about 15 times more than U.S. governments on the arts and culture.  And public spending is more efficient.  Of the $40 billion in charity given to the arts this year, as a result of tax subsidies society loses about $12 billion that could otherwise be used to bolster the public sector.

Shiller’s final argument in favor of subsidies for charity may be his strongest but also his oddest.  “Unfortunately, there is good reason to suspect that American income inequality will grow further in coming years,” in maintains.  “Preserving and strengthening the charitable deduction will help thwart the resentment and social unrest caused by that inequality, while reinforcing generosity as a national value.”

Does Professor Shiller really want to go here?  It smacks of the advice Ivy Lee gave to John D. Rockefeller after the massacre of men, women and children in Ludlow, Colorado by a company owned by Rockefeller led to a nationwide uproar.  Rockefeller had by that time amassed more wealth in real dollars than that of Bill Gates, Warren Buffett and the Walton family Rockefeller combined.  Rockefeller hired Ivy Lee, a pioneering public relations man, to repair his reputation. Lee suggested he hand out millions of shiny silver dimes. Which for years he did.  And indeed, it helped do the job.

I would have hoped Professor Shiller would have argued for policies that would reduce income inequality rather than argue for policies that would subsidize giving by the richest of us all as a way to reduce our resentment toward them.

To the Editor:

The New York Times, Dec. 15, 2012:

Page A1: “Gunman Massacres 20 Children at School in Connecticut.” Twenty children shot, 20 died.

Page A9: “Man Stabs 22 Children in China.” Twenty-two received knife wounds, 22 survived.

National Rifle Association claim: Guns don’t kill. People do.

Case closed.

JOHN ISRAEL
. Decatur, Ga., Dec. 16, 2012

Most progressives have long embraced a clear alternative to the conservative story that prosperity flows best from a “free market” unfettered by government regulation and taxes. The standard progressive response: government incentives and spending are essential to spur the creation of jobs, and unions and regulations can make them “good jobs.”

President Obama’s re-election by a surprisingly healthy margin (he won by 3.5 million in the popular vote and by 126 in the Electoral College) confirmed substantial support for this overall approach to the economy. Despite deep economic suffering throughout Obama’s first term, the public validated his advocacy for more progressive taxes, his ideas about the positive role that government must play in regulation, and his call for public investment in training, education and research. All of this adds up to a significant defeat for the free-market ideologues who lined up behind Mitt Romney.

But here’s the catch: while Obama’s policies have the short-term potential to improve the lives of many Americans beleaguered by the economic slump, the approach he champions is insufficient to tackle the long-term problems we face. To secure a safe and prosperous future for subsequent generations, efforts to reduce unemployment and curb inequality must be considered alongside urgent threats to the environment and democracy. These crises present a compelling argument for systemic change.

Just a week before an election in which both candidates largely ignored the environment, Hurricane Sandy devastated the East Coast and put climate change at center stage. Who would have imagined Bloomberg Businessweek with a cover trumpeting “It’s Global Warming, Stupid,” as the magazine did just days after the storm? Climate chaos is at the core of our environmental crisis, but the problem also includes dwindling supplies of potable water, the destruction of forests and oceans, and the depletion of the planet’s biodiversity. Simply put, jobs that threaten the environment cannot be considered good jobs.

The assault on democracy by growing corporate control of our workplaces, our politics and our economy presents another deepening crisis. Roughly $6 billion was spent to influence and distort the political process in the 2012 elections, with a huge portion of this staggering sum coming from Wall Street and the wealthy. This dire situation demands that we put a premium on alternative forms of collective ownership and a shift from giant corporations and banks to smaller enterprises rooted in communities.

To address these multiple crises, we need broader metrics to measure progress and new paths to get there. What many progressive advocates are calling a “new economy” framework emphasizes not just new jobs but also new policies that simultaneously create a fair economy, a clean environment and a strong democracy. As a movement begins to coalesce around these issues, one of its toughest challenges will be to persuade more political and business leaders, mainstream journalists and economists locked in an outdated Keynesian worldview to take its ideas seriously.

What would a new economy look like? When it comes to promoting fairness, environmental sustainability and democracy, Walmart jobs, for instance, are triple offenders: they are nonunion poverty-wage positions, they support a corporation with a climate footprint half the size of France and they undermine community jobs on Main Streets all over the world.

For a positive example, consider what could be done to transform the waste management industry. Most of our trash goes into landfills that leach toxins into the soil and water, or into incinerators (often in inner-city neighborhoods) that belch toxic fumes. Rising asthma rates in urban communities of color and increasing greenhouse gas emissions are among the results. Yet according to a Tellus Institute study, the United States could create more than 2 million jobs by 2030 by transforming our waste management from incinerators and landfills to recycling and composting. Many of the jobs could shift from large private corporations to municipal unions. As groups like the Global Alliance for Incinerator Alternatives and the Institute for Local Self-Reliance stress, this shift would tackle the environment, equity and racial justice all in one shot.

…snip…

Read the full story here.