Will America Become Detroit, Part 4: The End of the Victimless Crime Spree

"Even if one takes every reefer madness allegation of the prohibitionists at face value, marijuana prohibition has done far more harm to far more people than marijuana ever could."
- William F. Buckley, Jr.

"Oh what a delight to
Be given the right to
Be care free and gay once again"
- From "Cocktails for Two" by by Arthur Johnston and Sam Coslow

Some of humanity's greatest advances emerged from severe crises. As bad as the looming U.S. debt crisis is, it will force badly needed reforms in our criminal code. This nation devotes and a tremendous amount of resources prosecuting victimless crimes, especially the war on drugs. This relentless pursuit of adults engaging in consensual behavior is wasteful, ineffective, and frequently violates our civil liberties. But this particular form of government overreach will almost certainly end, and it will do for a rather mundane reason: the state simply won't have the funds to continue.

Prohibition Repeal as the Ultimate Rent Party

There is a historical precedent for the immanent demise of most victimless crimes. Consider the Volstead act, commonly known as prohibition. This forerunner of the war on drugs banned intoxicating alcoholic beverages. Even though the failures of this act became apparent soon after the act's passage in 1919, it was not repealed until 1933. What happened in 1933 that finally did in the Volstead act?

In part, prohibition was ended by the great depression. At a time when the economic downturn was drying up tax revenue, governments were saddled with the substantial costs of enforcing prohibition. Moreover, keeping bars and liquor closed also closed off a badly needed source of tax revenue. When it became clear that prohibition could only be continued by asking an impoverished public to tighten their belts still further, the prohibition repeal effort passed overwhelmingly.

The Volstead Act on Crack

If 1930's depression era America found prohibition too dear a luxury, then twenty-first century debt crisis America will almost certainly reject its even more expensive offshoot, the war on drugs. Essentially, the war on drugs is the Volstead Act on Crack. Consider these expenses:

Jail House Rock

Key element of the war on drugs is harsh minimum sentences for drug offenses and extremely aggressive enforcement. Since President Nixon kicked off the war on drugs in 1971, American incarceration rates have more than quadrupled. We now hold the dubious distinction of having the highest incarceration rate in the world. We have more prisoners than all of China, which has four times our general population. We jail a larger portion of our black population than did Apartheid era South Africa.

The costs of all these prisoners is straining state budgets.
California pays $45,563 a year to keep a man in prison, so now the Golden state spends more on jails than it does on universities. And that does not even could the loss of tax revenue from taking these prisoners out of the economy. Longitudinal studies show an even greater expense: those serving lengthy drug sentences are less likely to ever become a productive member of society.

In the past, the mantra of the drug warrior has been that it is important to "send a message" to users of illicit drugs. But as states such as California and Michigan face the threat of default, they are bound to ask if we could please send this message via Western Union.

Putting the War into "The War on Drugs"

The war on drugs quickly took up a large portion of law enforcement efforts at all levels. It even has its own enforcement agency, the DEA, which has spend $536 billion on drug enforcement since its inception in 1973. (See the suitable tacky DEA museum gift shop). But victimless crimes are notoriously hard to enforce. When this effort fell short, harsher tactics such as SWAT teams and no-knock raids were tried. Some police departments have even acquired military equipment from the DOD. When they called it the "War on Drugs", they were not kidding!

Like most wars, this one has had plenty of collateral damage. There have been raids on the wrong house that have resulted in innocent people or even pets getting shot. To be fair, raids on real drug dealers are highly dangerous operations, so police are bound to make mistakes in these high stress situations. But this is a danger of our own making. The day prohibition was repealed, the bootlegger gangs went out of business, and with their demise, there was a marked decrease in gang violence. Drug decriminalization would likely have the same effect, saving us both money and lives.

Too Poor to Keep Screwing Up

Due to budget constraints, Detroit has had to make cuts in its police force. In order to protect themselves, some of this city's citizens have formed a citizen's group called Detroit 300 that patrols the streets that Detroit's finest used to patrol. Not surprisingly, all the crimes that Detroit 300 deal with are crimes with victims: rape, robbery, assult, murder, etc. They are not chasing down dope smokers. When hard choices have to be made, enforcing victimless crimes is the first thing to go.

As the nation's debt crisis comes to a head, we will forced to take the same approach as Detroit 300. There are many better reasons to end the war on drugs, but it will definitely end for one reason: we cannot afford it. Lack of funds will force our government to do the right thing.

Speaking of victimless crimes, check out the documentary Derrick J's Victimless Crime Spree, where one activist gets into an amazing amount of legal trouble for peaceably protesting his local public officials.

Will America Become Detroit?

"Neither a borrower nor a lender be"
- Hamlet Act 1, scene 3

"You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store"
- From "Sixteen Tons" by Merle Travis

Detroit News editorial writer Shikha Dalmia has written a sobering op-ed about my former home town's financial crisis. Detroit's leaders seem to be in a state of denial about the severity of the problem. This Op-Ed argues that bankruptcy may be the best option for Detroit, since it would force the changes needed to get the city's debt under control.

It is sad to see what has happened to this once great city, but it is hardly surprising. The city has been spending far beyond either current or projected revenue for many years now. Bowing to political pressure, the city council has been kicking the can down the road for as long as possible. But now, they have run out of road.

But those from other American cities should neither scorn nor pity the city of Detroit. The nation as a whole are following the same trajectory that Detroit followed years ago. So what prevents our country from meeting the same fate as this tragic city? Neither party has offered a serious plan for getting government debt under control. We hear a lot about climate change denialism, but this nation's undoing may well turn out to be deficit denialism.

Wait a Minute! Didn't We Fix This in the 90's?

As late as the last years of the Clinton administration, our government was not running up the deficit. Today, a third of all federal spending is borrowed. How did this our nation go so far wrong in the last 12 years? To answer this question, let us compare the year 2000 budget to this year's budget. Adjusting for inflation (2012 dollars) and population growth,

• In 2000, the government took in $2.5 trillion dollars and spent $2.0 trillion; and
• In 2012, our nation will take in $2.4 trillion dollars and spend $3.8 trillion. 

Revenue is down from 2000, but given how much weaker the economy is now, what is really surprising is that the revenue is not down even further. Spending, on the other hand, has gone out of control. Even after adjusting for population and inflation, spending has nearly doubled. If our government spent at year 2000 levels, we would still have a budget surplus.

In short, the problem is spending, not revenue. But spending cuts are more popular in the abstract than they are in practice, hence neither major party has put out serious proposals for reigning in the red ink.

Is Our Situation That Bad? No, It's Even Worse!

As the national debt clock so vividly displays, the U.S. federal deficit is rapidly approaching $16 trillion. But as stunning as that figure is, it is only a small part of our shared indebtedness. This figure does not include the unfunded liabilities of entitlement programs such as Medicare and Social Security. The unfunded liabilities of these two programs dwarf the $16 trillion figure. The 2012 Medicare trustees report estimates a shortfall of $27 trillion, and the 2012 Social Security trustees report places its unfunded liability at $8.6 trillion. And these trustees reports estimates are on the conservative side!

Another debt problem that U.S. governments, at all levels, have woefully underfunded their pension plans.We have seen the trouble this creates in California, Wisconsin, New Jersey, as well as Detroit. As the baby boom start retiring in droves, this problem will trigger more municipal bankruptcies. And the feds will not have the money to bail them out.

The Lighter Side of Default

We have general agreement that our current spending is unsustainable. Secretary of State Hillary Clinton went so far as to identify the debt crisis as the greatest threat to our nation's future. My next post will look at both party's (wholly inadequate) proposed solutions. But at this point, it is safe to say that, irrespective of who wins in November, this crisis will be dealt with the same way it was in Detroit: at the very last minute, using desperate measures. But cheer up: the impending U.S. default may be very painful in the short run, but it will force some very positive changes in our governance. Follow up posts will explain why the coming storm will be followed by brighter days. Watch this space.

Solving the Budget Crisis Through Theft

"If you steal from one author, it's plagiarism. If you steal from two, it's research."
- John Burke

"PlagiarizeLet no one else's work evade your eyes
Remember why the good Lord made your eyes
So don't shade your eyes
But plagiarize, plagiarize, plagiarize
Only be sure always to call it please 'research'"
- From "Lobachevsky" by Tom Lehrer.

The federal budget fight has been unusually acrimonious. On July 14, Obama walked out of the budget talks. On July 22, Boehner walked out of the budget talks. And throughout these talks, the American public has been walking out from both parties, and for good reason: neither party has been serious about tackling the debt crisis. Sure, both sides crow about how they have proposed drastic cuts, but these spending proposals are "cuts" only in a sense that is accepted no where else than Washington. What they mean by cuts is that they propose spending less than projected 2011 spending. Neither the "Cut, Cap, and Trade" proposal nor the president's most recent proposal would reduce 2011 spending to less than the previous year, even after adjusting last year's spending for inflation and population growth. The Republicans have been reluctant to really address the looming entitlement crisis. Congressional Democrats are even worse on this issue, threatening to block any entitlement program changes, while hypocritically complaining that the Republicans are too inflexible about taxes.

We need not worry the August 2 deadline, however. For starters, the default deadline is bogus anyways: the government need not default nor miss sending Social Security checks if the debt ceiling is not raised by August 2. But now that both sides have propped up this phony crisis, they will have to save face by coming up with some compromise before the "deadline". The bigger problem is that the compromise that the president and congress will likely fall far short of what is needed to reassure the rating services such as Standard and Poor's. They want to see creditable deficit reduction if U.S. government bonds are to retain their AAA ratings. If U.S. bonds are downgraded,

1. Bond holders will be hurt; and
2. The costs of U.S. borrowing will balloon.

So we may dodge the August 2 bullet, only to be hit with the S&P bond downgrade.

Dramatic action is required to prevent our bond rating dropping to AA. We need a deficit reduction plan, and fast. One effective approach would be to find a previous successful budget, and steal it. In short, we can solve our money problem by theft - not of money, but ideas.

I propose that the 2011 budget be based on the U.S. budget from 2000, one of the last budgets assembled before the 2 recent spendthrift administrations. This budget covered the basic government functions while spending less than the revenues collected. This budget was put together by a Democratic president working with a Republican congress - if they could do it, why can't we? When you adjust the 2000 budget for inflation and population growth, it comes out to $1,965,999 million. This would allow us to meet the S&P deficit reduction limits without taking the perilous action of raising taxes in a troubled economy. So one simple approach would be to adopt the 2000 budget, adjusted for inflation and population growth. This is the one sequel that we would all welcome.

Critics will immediately point out how the world has changed since 2000. We are now fighting 3 simultaneous wars, we have a slew of new agencies that have cropped up to fight the "War on Terror", a bunch of new Czars, not to mention ambitious new programs such as designing and building a whole new rail system. How could the 2000 budget cover these programs that did not exist 10 years ago? To this argument, I would reply that a large part of the reason we are in this mess is that we adopted expensive new programs without figuring out how to pay for them. We simply cannot afford all of them, so we need to prioritize. Given that we almost certainly cannot do both, should we engage in nation building in 3 middle east countries, or should we rebuild our own nation? Do we really need all these agencies that we were able to get along without for two centuries, and if so, could we pay for them by making cuts elsewhere in the 2000 prototype budget? If we really need the TSA, could we pay for it by eliminating the Import-Export bank or by cutting farm subsidies paid to millionaire farmers?

Real budget reform is possible. In fact, it is inevitable: the only real question is whether we fix the budget ourselves now or let our creditors decide how to fix it in the future. With the 200 budget austerity program, we can avoid default, avoid a credit downgrade, pay down the deficit, revive the economy, and then we can party like it's 1999.

Government Greed

"Be on your guard against all kinds of greed; for one’s life does not consist in the abundance of possessions."
- Luke 12:15"

Money, so they say
Is the root of all evil today
But if you ask for a rise
It's no surprise
That they're giving none away"
- From "Money" by Roger Waters

In many an economic debate, you will find one participant who feels that all our troubles can be boiled down to one word: greed. You've heard this argument before: greed is what drives the profit motive, the basis of free market economies, and that this dependence on one of the seven deadly sins accounts for all our society's ills, including oil spills, stock market crashes, and lousy "Star Wars" sequels. If I had a dime for every time someone given this one word diagnosis, I'd be, well, a successful capitalist.

This one word critique of free market economics is quite emotionally satisfying, but it does not hold up to scrutiny for a number of reasons. The world economic environment is extremely complex, and one word diagnoses generally do not apply to systems more complicated than a food processor. The greed critique of the private sector also seems to make the assumption that, in the absence of profits, people behave in a less greedy fashion. But a number of recent news stories confirm that the public sector succumbs to greed at least as often as the private sector.

For example, many cities and towns use special cameras to ticket drivers who run red lights. These are there for our safety, or so we are told. But multiple studies have recently shown that red light cameras actually increases accidents. When drivers spot the cameras, they frequently slam on the brakes, and this causes more accidents than are prevented by the cameras. In fact, a Dutch city has discovered that they can decrease accidents by a re-design of their roads that does not use traffic lights at all. So how many cities have dropped the red light cameras in light of these studies? Whenever this question is posed to city officials, it is amazing how quickly the topic is changed from safety to how could we possibly replace the lost ticket revenue. So are these cameras used because of safety, or because of greed?

Consider the recent pay scandal in Bell, California, a small, lower middle working class suburb of Los Angeles. The median family income in Bell is only $30,504, but the city residents pay some of the highest property tax rates in the country. When city officials insisted that these taxes needed to be raised even further to keep the city solvent, investigative reporters looked from the L. A. Times looked into city finances. They found that Bell was dramatically overpaying its officials. The Bell police chief earned 33% more than the police chief of Los Angeles. The city manager's base salary was $800,000, almost twice as much as what we pay the president of the United States, and bonuses and other benefits raised his total compensation for last year to $1.5 million dollars. To the poor, over-taxed families of Bell, this looks like greed.

Another case to ponder: in 1992, Massachusetts passed a ballot initiative to increase tobacco taxes, and to use the additional revenue for tobacco prevention programs. Starting in 1993, the state had created an effective anti-smoking ad campaign. The most popular of these ads featured the saga of Pam Laffin, a young woman who was dying of emphysema. The ads traced her various diagnoses, her vain attempt to get a lung transplant, and finally her death that left her two young daughters without a mother. The ads had quite an impact: the number of smokers in the state dropped off faster than the national average. And yet, this successful ad campaign dropped less than a decade later.

Now why did the state drop a program that was actually helping smokers quit? Too expensive, of course. Forget the promise to voters that the tobacco tax money would go to tobacco prevention, the legislators decided that they had better uses for the money. Don't worry that the tobacco tax is highly regressive, for smokers are a politically unpopular group. When tobacco companies benefit from the unhealthful addiction of smokers, we call that greed. So when the state over-taxes these same smokers, why isn't that greed?

These and other examples of government avarice show that the public sector effort to eliminate greed is about as successful as the Puritan effort to eliminate lust. It's not clear if , greed is an integral part of human nature. It is not an issue of whether "Greed is good", the main point is that "Greed is". One virtue of free markets is that they harness greed to some positive ends. For all the moral posturing, It was greed that propelled the tremendous improvements in our PC's (Moore's Law), in our cars, and in our home entertainment (from LP's to CD's to MP3's, from VHS to DVD to Blue Ray).

So the next time you hear someone sanctimoniously boiling down a complex issue to one word ("Greed"), feel free to accuse him of one of the other deadly sins: sloth.