Tag Archives: Adam Smith

How Disastrous is the NYS Budget? Why Can’t the Governor/Legislature Follow the Federal Model?

If this was a normal year the education community would be focused on the race to the April 1 budget deadline. For months advocates and legislators have been dueling with the governor: Will the Foundation Aid formula be adjusted to benefit the lowest wealth aka, the poorest districts? Will the governor acknowledge the $3 billion plus dollars owed to school districts as a result of the CFE lawsuit decision? How will the differences in proposed school aid (governor: 800M, the Board of Regents 2B) be resolved?

Additionally, non-budgetary items may or may not have been added to the budget by the governor: possibly legalization of marijuana, rolling back bail reforms, easing the voting restrictions, etc.

We’re in a new world.

This year’s budget is unique: the governor will have almost total authority to allocate the budget dollars in slices, “tranches,” monthly or perhaps quarterly; as the year progresses slices of budget dollars may increase or decrease.

As I write, midday on April 1 the governor and the legislative leaders are still entangled in creating a budget.

The impact could be drastic cuts in school funding, perhaps layoffs.

Why can’t the state allocate endless dollars to avert economic calamities as the federal government has done?

Washington can issue as many dollars as they please, through the Federal Reserve they can raise or lower interest rates and increase and decrease the amount of currency in circulation. Federal debts are backed by the “full faith and credit” of the government. In other words the feds can print money and borrow money (selling bonds); there are no constitutional limits on federal debt.

States cannot issue currency and must have a balanced budget; they can only borrow dollars for capital projects.

For centuries governments abided by a “laissez faire” economic policy. Depressions and prosperity, booms and busts, were guided by an “invisible hand,” an almost religious belief in the power of the marketplace.

Adam Smith (1776), wrote,

Every individual necessarily labors to render the annual revenue of the society as great as he can … He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention … By pursuing his own interests, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

 Milton Freedman, a Nobel Prize economist moved the marketplace model to education, schools should compete, the origin of the belief in charter schools and vouchers. Adam Smith lives on in the minds of far right and a few of the wealthiest.

Beginning with FDR’s response to the Great Depression John Maynard Keynes has been the guiding force driving economies.

 Keynesian theory allows for increased government spending during recessionary times, it also calls for government restraint in a rapidly growing economy. This prevents the increase in demand that spurs inflation. It also forces the government to cut deficits and save for the next down cycle in the economy.

 In our neo-Keynesian world even Republicans, well, most Republicans, follow Keynes’ philosophy, as evidenced by the $2 trillion pushed into the economy, cash payments, enhanced unemployment insurance, delayed mortgage payments, small business grants and loans, dollars that will be spent; hopefully, to kick start the faltering economy.

Until the coronavirus pandemic is stabilized the economy is unlikely to resuscitate in the short run and it may continue to deteriorate. Unemployment may reach levels unknown since the Great Depression, airlines grounded, hotels and restaurants empty. Once a treatment and vaccine is created the economy, the world’s economy will be revived; it may take years to return to pre-pandemic levels.

Why does Cuomo have almost total control over the New York State budget?

 The reasons are two-fold, the state constitution and the judiciary.

 The New York State constitution was amended in 1927 giving the governor responsibility for submitting an annual comprehensive and balanced plan of revenues and expenditures, and, prohibits the Legislature from acting on other spending measures before acting on the Executive Budget.

 The legislature may not alter an appropriation bill submitted by the governor except to strike out or reduce items therein, but it may add thereto items of appropriation provided that such additions are stated separately and distinctly from the original items of the bill and refer each to a single object or purpose.

In January the governor submits a budget with a set amount; the legislative can “strike out or reduce items” and can only add items “separately or distinctly” from the governor’s budget.

In the 90’s Assembly speaker Silver challenged the application of the amended section of the constitution; if you want to go into the weeds read a discussion here.

The Court of Appeals, the highest court in the state, in a convoluted decision (Pataki v Silver) denied the appellants and upheld the budgetary power of the governor. In 2005 voters turned down an attempt to amend the constitution and restore equality to the process.

Critics of the executive budget system point to a fundamental imbalance between the governor and the Legislature. They’re right: when it comes to shaping the annual state budget, the executive and legislative branches are not co-equal.  In financial terms, the budget is supposed to be balanced—but the budget-making process decidedly is not.

 The budgets are no longer fought out on the floor of the legislative bodies; they are fought out in the media as advocates appeal to voters. In a normal year lobbyists would be pounding hallways of the Legislative Office Building (LOB), on Tuesdays, hundreds of advocates would flood into to Albany to plead their case to local legislators. E-Mails would fill legislators’ e-files by the hundreds.

The governor would weigh the impact of the opinion of the public, not the views of the legislative bodies. Governor Cuomo became an artist at balancing the needs of communities across the state. In some ways a modern day Machiavellian figure, more feared than loved.

The coronavirus crisis has brought out the best in Cuomo, as Trump spins the crisis, appealing to his tribe, Cuomo has been straightforward, portraying the crisis as a threat to humanity and truly taking charge; his daily briefings are spellbinding, frightening in painting a possible dystopian future and warm in his portrayal of his family.

More on the impact of the budget after final passage.

Signup for the John Hopkins Center for Health Security daily updates here, the best source for expert analysis and facts.

Exercise, meditate, communicate with friends and family (at a distance), the dangers are not only the virus; the dangers are your own mental health.

Listen to Carole King, “You’ve Got a Friend”

https://www.youtube.com/watch?v=qde5NMy7WTU

Why do Trump, Pence, DeVos and Republicans Support Charter Schools, Education Vouchers, “privatizing” Social Security and Medicare/caid? What Does Supporting “Small Government” Mean? And, Will Trump Build a Statute of Ayn Rand on the Washington Mall?

Almost all the people I know are shocked and appalled at the election of Trump. I will not rehash the autopsy, the deep analysis and commentary parsing the election. I will examine why Trump, Pence, Secretary of Education nominee Betsy DeVos, Speaker Paul Ryan and many of their wealthy supporters believe they have the true path.

Adam Smith, an 18th century Scot, political scientist and economist wrote The Wealth of Nations, often referred to as the “bible of capitalism.”  Smith coined the term, “invisible hand,” that somehow by “pursuing his own self-interest” the rich benefit all of society.

The rich…are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society …  Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.                                                                                       

Couple the writings of Smith with German Sociologist Max Weber, The Protestant Ethic and the Spirit of Capitalism  who examines the theosophy of John Calvin, the concept of predestination, the concept that economic success is proof that you are one of the select, chosen by God for salvation.

Historian R. H. Tawney wrote,

Adam Smith …  saw in economic self-interest the operation of a providential plan… The existing order, except insofar as the short-sighted enactments of Governments interfered with it, was the natural order, and the order established by nature was the order established by God.

Tawney, a Christian Socialist reviled what he saw as a perversion of religion,

A society which reverences the attainment of riches as the supreme felicity will naturally be disposed to regard the poor as damned in the next world, if only to justify itself for making their life a hell in this.

For centuries wealth melded with religion.

At the other end of the spectrum is Karl Marx, the antithesis of Adam Smith. (Read a comparison of Smith and Marx here).

The European depression of the 1920’s and the Great Depression began with the stock market crash of 1929 challenged long standing economic theory. The “invisible hand” did not reach down from the heavens,

FDR, assuming the presidency in 1933, in the very depths of the depression vigorously intervened; federal program after program to put the nation back to work. FDR was viewed as a savior, elected four times, who led us out of the depression as well as our leader during World War Two.

Keynesian economic theory, the government has a crucial role to play; deficit spending to create demand and put us back to work was not universally accepted.

On the other side of the coin are the followers of Ayn Rand, the author of Atlas Shrugged, (1956), her magnum opus that has become the guiding light for those on the right, including the Speaker of the House of Representatives, Paul Ryan.

Rand savaged the post-FDR view of the role of government that she defined as “collectivist.”

Collectivism is the tribal premise of primordial savages who, unable to conceive of individual rights, believed that the tribe is a supreme, omnipotent ruler, that it owns the lives of its members and may sacrifice them whenever it pleases.

 a philosophy of supreme self-reliance devoted to the pursuit of supreme self-interest appears to be an idealized version of core American ideals: freedom from tyranny, hard work and individualism. It promises a better world if people are simply allowed to pursue their own self-interest without regard to the impact of their actions on others. After all, others are simply pursuing their own self-interest as well.

Rand is enormously popular across college campuses today. The “hero” of Atlas Shrugged is John Gault, “… a ruthless captain of industry who struggles against stifling government regulations that stand in the way of commerce and profit. In a revolt, he and other captains of industry each close down production of their factories, bringing the world economy to its knees. ‘You need us more than we need you’ is their message.”

Do Ryan, Pence and DeVos worship statues of Gault?

The sharpest critic of our public school system is the Nobel Prize winning economist Milton Freedman; in his Capitalism and Freedom (1962) Freedman laid out his views of education, views clearly at the core of the Trump/Pence/DeVos education philosophy,

Governments could require a minimum level of schooling financed by giving parents vouchers redeemable for a specified maximum sum per child per year if spent on “approved” educational services. Parents would then be free to spend this sum and any additional sum they themselves provided on purchasing educational services from an “approved” institution of their own choice. The educational services could be rendered by private enterprises operated for profit, or by non-profit institutions. The role of government would be limited to insuring that the schools met certain minimum standards, such as the inclusion of a minimum common content in their programs, much as it now inspects restaurants.

 With respect to teachers’ salaries, the major problem is not that they are too low on the average, but that they are too uniform and rigid. Poor teachers are grossly overpaid and good teachers grossly underpaid. Salary schedules tend to be uniform and determined far more by seniority, degrees received, and teaching certificates acquired than by merit.

If one were to seek deliberately to devise a system of recruiting and paying teachers calculated to repel the imaginative and daring, and to attract the mediocre and uninspiring, he could hardly do better than imitate the system of requiring teaching certificates and enforcing standard salary structures that has developed in the largest city and state-wide systems. It is perhaps surprising that the level of ability in elementary and secondary school teaching is as high as it is under these circumstances. The alternative system would resolve these problems and permit competition to be effective in rewarding merit and attracting ability to teaching.

I understand, and vehemently disagree with this perverse combination of philosophy, religion and a defense of ruthless aggrandizement. I am far more sympathetic to Karl Marx, “Religion is the sigh of the oppressed creature, the heart of a heartless world, and the soul of soulless conditions. It is the opium of the people”.

Thirty years ago I exchanged my apartment and lived in Paris for a month, my first trip was to the The Communards’ Wall (Mur des Fédérés) at the Pere Lachaise cemetery ”… where, on May 28, 1871, one-hundred and forty-seven fédérés, combatants of the Paris Commune, were shot and thrown in an open trench at the foot of the wall. … the wall became the symbol of the people’s struggle for their liberty and ideals.”  Rationalizing the plutocracy, the oppression that has created an underclass, the use of religion to justify inequity is despicable. My ancestors lived in ghettos, oppression was their reality, pogroms a fact of life, and, those who failed to flee Europe died in the holocaust. My wife’s forbearers were transported in slave ships. We live in a nation, far from perfect; however a nation that has offered opportunity to generations of immigrants. Immigration is our life-blood; we receive the “first round draft choices” from around the world; immigration has a Darwinian aspect.

An “invisible hand” is not hovering to “save us,” greed, racism, anti-Semitism, avarice can steer our nation to anarchy, can set neighbor against neighbor. We face an uncertain future.

Pence, DeVos and Ryan worship at the altar of Rand and Freedman.

Does Trump worship at the altar of Machiavelli?