Opinion

Ward’s 2012 Washington State, King County, and Seattle voter’s guide to the issues

Washington State’s November 2012 election ballot is chalk-full of important initiatives that you have a duty (that’s right) to vote intelligently on. To help with that, I’m going to go over my recommendations below. With one notable exception this year, this guide will NOT cover individual candidates, as I believe that territory is too fraught with political biases to be worthwhile to an unsympathetic reader.

Why should you give any credence to what I say? Because I’ve researched each measure carefully, consulting several sources, am highly educated (two college diplomas and an MBA, with a solid background in economics, finance and even some philosophy), reasonably intelligent, and thoroughly rationale and critical.

My biases: I take it as given that each individual’s happiness is equally important (be it a Washington voter, felon, or Chinese guy), and that the goal of good policy should be to promote the greatest happiness across the greatest number of people. (I.e.: I’m a died-in-the-wool Utilitarian after the fashion of Jeremy Bentham.)

These positions follow from the above philosophy: I generally favor more choices for people as opposed to fewer (because people are usually made better off with more choice, except in certain cases.) I believe society should often reallocate its resources to the people who have the least in the world (being careful not to create bad incentives that decrease our prosperity), as the amount given up by the well-off often does more good as an amount received by the worse-off.

As a simple example, Bill Gates wouldn’t miss $20 (and nor would most of us), but that same $20 can buy vaccines in Africa that could save a life.

Without further ado, here’s how you should vote (and why)!

State issues:

Ref 74 – Allow the gays to get married – APPROVE. (Note that this bill preserves the right of religious organizations to refuse to perform, recognize, or accommodate any marriage ceremony, like that of a same-sex couple.)

502 – Legalize, regulate & tax marijuana – APPROVE.

Marijuana doesn’t appear to be particularly harmful. Let’s let adults make adult decisions about what (at worst) mildly harmful substances they choose to ingest of their own free will. Furthermore, policing marijuana has been largely a failure, and is extremely costly. Instead, this bill will stop treating ADULT (21+) casual weed users as criminals, and turn weed use into a profitable source of state revenue for education, etc.

1240 – Public charter schools in WA state: APPROVE. We need to explore more options in improving public education in WA state (and nationally), and allowing freer rein to nonprofit school administrators in a select group of 40 public charter schools seems like a very reasonable way to try some new things in education.

These charter schools are still publicly-funded & publicly-accountable schools (read the description of the bill before you go spouting off misleading WEA-influenced rhetoric willy nilly.) They’re open to everyone, regardless of income (there’s no tuition, overflow applications will be handled by an impartial lottery), and they don’t ‘take money from public schools’ in the sense that they ARE public schools, run by a nonprofit org, and therefore get money from existing public school sources. They are simply ALTERNATIVES to existing public schools. They have to maintain the same hiring & educational standards as all other WA state schools.

Charter schools may not end up being the ‘answer’ to our less-than-stellar education system, but let’s please at least explore the possibility (and then measure & analyze the results), rather than being defeatist by opposing any new innovations in public education. THINK OF THE CHILDREN! J

8221 & 8223: APPROVE each – Take a look at the 2012 Legislative voting: hardly anyone on either side of the political aisle opposed these bills of fiscal reasonableness, which is a good sign that we should pass them.

Advisory 1 – MAINTAINED – Recommend to the legislature to maintain the closure of a business tax deduction (aka, a tax ‘loophole’!) I’m all for eliminating deductions favoring silly things, even when popular (I’d LOVE to see the homeowner’s mortgage interest deduction go away, but it’ll never happen.) In economic theory, such loopholes distort incentives, and are bad for economic efficiency (unless they’re correcting/promoting for negative/positive externalities, like taxes on gasoline, which are a good thing, and should be higher!) Plus, WA need revenue, so let’s close this and collect some.

Advisory 2 – MAINTAINED – See above rationale. This time we’re taxing a negative externality-causing thing, petroleum, and perhaps correcting for subsidizing of negative externalities).

BTW, neither of these advisory votes matter that much since they won’t change the law by themselves!

Seattle & King County

APPROVE both Prop 1 in King County (fingerprinting levy to aid law enforcement) and Prop 1 in Seattle to rebuild the crumbling Alaskan Way seawall.

2012 Bonus recommendation – Ward’s votin’ Republican in the Governor’s Race

WA State governor: I normally don’t post any of my partisan (Dem vs Republican) recommendations, since I want to restrict this guide to a non-partisan review of issues, vs politicians, but I’m going to break this rule for this notable reason: for the first time in my (relatively short) electoral life, I’m voting for a Republican, Rob McKenna, for WA state governor. (The Seattle Times also recommends Mr. McKenna, along with a few other Republicans, as well as Democrats, that I will be voting for in large part due to their recommendation rationales.)

In short, McKenna seems to be more thoughtful and have more detailed, practical plans on tackling tough issues like education & health care costs in WA state than his opponent, Democrat Jay Inslee. Inslee seems mostly full of hot, nice-guy-that-you’d-have-a-drink-with political air, spouting vague platitudes which I generally agree with in principle, but that don’t seem to have any practical implementation behind them.

While I disagree with McKenna’s backing of Eyman’s initiative to prevent the legislature from passing taxes without a 2/3s majority (because I think it will hamstring our legislature’s ability to close loopholes & properly fund voter-approved measures, and puts us on a road to major fiscal problem similar to places like California that have tried such a thing), I think McKenna is the best choice for governor of the two. He has the strongest plan & apparent commitment to fund higher education (he wants to increase state funding from 30% to 50% of the cost of tuition), and he also seems serious about introducing measures to reduce the cost of health care at the state level (by favoring Health Savings Accounts & increased competition in state health care plans.)

You can find a comparison of McKenna & Inslee on the issues here: http://seattletimes.com/html/localnews/2019488749_govissues21m.html

And also here, which includes a video of the first gubernatorial debate: http://www.diffen.com/difference/Jay_Inslee_vs_Rob_McKenna

Do average Americans benefit from lower capital gains tax rates?

The answer, according to some well-reasoned arguments voiced by Fairmark.com‘s Kaye Thomas, is ‘not much.’ Here’s some interesting thoughts from Mr. Thomas’s article regarding taxable stock capital gains in the US. (Bolding and italics mine):

“[I]t may be true that 100 million Americans own stock, but most stock held by middle class Americans is in IRA or 401k accounts, where the capital gains rate doesn’t apply. The tax rate matters for stock held outside these retirement accounts, and most of that stock is owned by extremely wealthy individuals. The bottom 60% of households own just 9%, while the top 10% of households own 70%. Over half of all capital gains go to households with income over $1 million. That’s roughly two-tenths of one percent of the population getting more than half the benefit of the cut in the tax rate.”

[…]

“Advocates of lower capital gains rates (and lower corporate tax rates, and other tax benefits for business) often cite the statistic that 100 million Americans own stock, implying that the middle class will receive an ample share of the benefit. Yet ownership of stock is highly concentrated in the hands of wealthy individuals, a small fraction of the population. The vast majority receive little direct benefit, or none at all. To borrow an analogy from John Kenneth Galbraith, the “100 million” argument is like justifying the cost of feeding more oats to the horses by pointing out that some will fall to the ground and be eaten by sparrows.”

Disturbing (but not altogether surprising) news about the financial bailout

No one seems to know where the $700 billion financial bailout went, what’s being done with it, and how much is still in the bank’s coffers to be used for who know’s what. Read about this below:

http://news.yahoo.com/s/ap/20081222/ap_on_go_ca_st_pe/meltdown_secrets

Now I can understand how normally, banks wouldn’t track dollars that came from one source versus dollars from another. However, in THIS case, the government fronted billions in taxpayer money (not private investment.) Therefore, I can’t imagine congress requiring anything less than full disclosure of how the money was going to be allocated and spent.

It appears that the rush to get money to the banks has succeeded in giving banks no incentives whatsoever to transparently disclose what’s being done with the money, or ‘where’ it’s at within each bank. If one made the assumption that these banks were all going to use this money for the best possible long-term usages for their firms, this lack of disclose might be okay. BUT, the fact that banks are in this mess due to poor financial decisions (and NOT “bad luck” due to the economic downturn, despite the fact that it exacerbated the situation), destroys that assumption.

While I do strongly believe that private firms generally perform better than government-owned ones (been to your local post office lately?), one thing that political trumpeters of the “free market” like to neglect are the conflicts of interest between firms and their management teams. Unfortunately, CEOs are often rewarded with compensation that focuses on the short term stock price (stock options and bonuses dependant on share price) rather than being aligned with the company’s long term future.

Warren Buffet, CEO of Berkshire Hathaway and arguably the greatest investor of all time, is a notable exception. His substantial net worth of many billions is almost completely investing in the company he leads. This long term ownership, combined with the fact that Buffett’s salary is a meager (for CEOs) $100,000 per year, with no fancy options deals, means that Buffett’s incentives are aligned with those of his long term shareholders.

Also, CEOs are generally paid more relative to the size of the company they control***. This creates the incentives to make fiscally irresponsible mergers just to “grow the empire.” And now, with the precedent being set of companies designated “too big to fail,” managements have even more incentives to grow the size of their firms. These incentives by themselves do not encourage firms to pursue social gains (either for consumers or shareholders) and therefore are undesireable.

Coming back to the financial bailout, it is very troubling that in an effort to quickly sustain failing companies within the financial services industry (without discussing whether that was the right thing to do or not), congress and the administration may have not addressed the threat of those firms failing in the future, throught poor use of the bailout money in the present. This lack of oversight may result in these same companies returning years later in similar predicaments. (Of course, that may have resulted anyway, even with oversight, calling into question the wisdom of the bailout, of which I’m not knowledeable enough to discuss.)

Hopefully failure of many of these companies down the road does not turn out to be the case. But, when one has no idea of what’s happening with the bailout money those firms received, how can we know one way or the other?

*** From nobel prize-winning economist Gary Becker (on the Becker-Posner-Blog.com): “For every 10 per cent increase in firm size, measured by the market value of assets, by sales, or by related variables, compensation increases by about 3 per cent. This “30 per cent” law held during the 1930’s, and has held for every succeeding decade, including right up to the present.”