By Kevin D. Williamson
Friday, December 04, 2020
Because it tends to exaggerate our already excessive
national sentimentality, the Christmas season is a time of sloppy thinking
about several separate kinds of endeavor that are all lumped into the category
of “generosity.” This year, the usual charitable impulses of the season
inevitably will tend to bleed into two adjacent concerns: the necessity and
design of social-welfare initiatives responding to the coronavirus epidemic,
and the necessity and design of a more macroeconomic program in what we hope
will be the final months of this emergency.
The easiest consideration is charity itself. Americans
are by and large a generous people, eager in their philanthropy — and
innovative, too: Writing in the New
York Times, Elizabeth Bruenig
notes the work of RIP Medical Debt, an organization that buys up medical debt
for pennies on the dollar, as some profit-seeking investors do, and then
forgives the debt rather than trying to collect it. Because it costs money to
collect debts, debt trades at a discount, often a steep one. “That means a
buyer can eliminate the debt for much less money than the debtor could,”
Bruenig writes.
The idea is an appealing one, and, moving from charity to
public policy, the model could be adapted to other pressing current needs. For
example, the loss of income associated with the COVID-19 epidemic has left many
renters, especially those who had low incomes to begin with, unable to keep
current on their rent. Many of those renters have been kept in their homes
under the protection of anti-eviction orders put in place as emergency
measures, but that arrangement is not sustainable. Landlords have obligations,
too: staff, payrolls, operating expenses, property taxes, mortgages, commercial
debt, and other expenses that have to be paid, and they may not be able to pay
them if renters aren’t making their payments. Smaller landlords are especially
vulnerable on that front: The Financial Times reports that landlord
households with incomes of more than $200,000 a year depend upon rental
earnings for only 5 percent of their household incomes, while landlords with
incomes of $89,000 or less get something closer to 20 percent of their income
from rent. Peter Spiegel of the Financial Times worries that missed
rental and mortgage payments could produce ill effects that “infect the
financial system,” sobering words to anybody who remembers 2008–09.
It is easy to imagine a program in which government buys
up a portfolio of unpaid rent at a discount with the intent of forgiving that
debt in part or in full, as circumstances warrant. Many landlords would jump at
the chance to exchange debt that will be difficult and costly to collect — if
it can be collected at all — for a lump-sum payment, even one that is well
below the notional value of the unpaid rent. Swapping a shoebox full of
business records for a shoebox full of cash is very often a good trade. Renters
could be kept in their homes; ideally, this could be done in a way that spares
at least some renters going forward from the ruinous effects unpaid rent can
have on their credit. (The centrality of the credit-rating system to American
life, and the burden it represents on the poor, is a subject that receives
insufficient attention.) Such a program would be good for the renters and good
for the landlords, and it might even (it would be impossible to know for sure)
end up saving taxpayers a bit by preventing broader social and financial
disruptions. It probably would represent an improvement over well-intentioned
but unwieldly eviction-diversion
programs currently in place.
Other creative approaches are easy to imagine. What is
difficult to imagine is an American public institution we could trust to carry
them out.
Most of you will have heard by now that in California,
hundreds of millions of dollars (and perhaps as much as $1 billion) in
COVID-related unemployment benefits were paid out fraudulently to some 20,000
individuals making claims on behalf of state prisoners, the infamous murderer
Scott Peterson among them. Some of the payments were made to prisoners
directly, some of them made to third parties making claims on prisoners’
behalf, and some to such presumably fictitious claimants as one Mr. Poopy
Britches. The Sacramento district attorney reports that at least $420,000 was
paid out to inmates on death row. There are many stories like this one, some of
them specific to the coronavirus response, some of them related to other
programs.
I do not propose to here engage in the familiar
rhetorical exercise in which the standard-issue libertarian critic notes the
existence of waste or fraud in a certain category of government programs and
then takes that as proving that such programs should never have existed in the
first place. (Everybody is a libertarian when the government is doing something
that irritates; Democrats complained bitterly about the Benghazi investigation
costing $7 million in 2016, or 0.00017 percent of federal spending in that
year.) Fraud is a fact of life when there is major money changing hands, as is
waste, and that is a problem that we simply have to manage. But we must do the
work of managing it.
(How to do so is not always obvious. E.g.: What is the
optimal level of fraud in a welfare program? The moralistic answer might be,
“The optimal level of fraud is zero,” while the economic answer might be, “The
optimal level of fraud is the level of fraud that exists when the cost of the
measures necessary to reduce fraud further exceeds the cost of the fraud that
would be thereby prevented.”)
The problem is that we need both intelligent programs and
credible institutions to carry them out. Good program design is not easy, but
we have a lot of brainpower to throw at that problem. (We could, as a matter of
national emergency, just lock Tyler Cowen and Reihan Salam in a room together
with some very strong coffee and generate enough intelligent and creative
reform proposals to keep the public sector busy for the next 20 years.) But
whom could we trust to carry out the work?
The problem illustrated by the vast COVID-related fraud
in California is not that some money may end up in the pockets of undeserving
recipients. In a purely philanthropic consideration, our attitude should be a
liberal one in which we do not make too many petty distinctions between the
“deserving” and the “undeserving.” (This being Advent, I hope you will forgive
me for insisting that Christians, especially, should be generous on that
account.) The problem with fraud of this sort is not so critically a moral one
as a practical one: What government does is not philanthropy, though it
may come from philanthropic impulses, and as repugnant as it may be to imagine
fraudsters profiting by the exploitation of our charitable impulses, the urgent
and principal concern is that these maladministered programs are ineffective.
Funds that go out the door on fraudulent pretexts do not accomplish what we
wish for them to accomplish in the short term, and, in the long term, the
incompetence thus demonstrated undermines public confidence and trust in such
programs and institutions across the board. That makes weak institutions even
weaker as declining prestige and low reputation make it more difficult for them
to recruit good workers and to secure adequate funding and other resources. In
order to be trusted, institutions must be trustworthy.
It is not as though reformers are asking the impossible.
Consider the case of the public schools in New York City:
As Mayor Bill de Blasio and his colleagues have lurched
from one pageant of buffoonery to the next, operators of New York City
charter schools — public schools managed with a degree of independence — have
shone. Students at Success Academies are learning virtually (wearing their
uniforms while doing it) in a way that is orderly, safe, and effective. As The
Economist reports, this required some great feats of logistics: About 7
percent of Success Academies students live in homeless shelters, meaning that
the charter operators had to set up wi-fi hotspots and provide them with
supplies such as laptop computers and noise-canceling headphones — which they
did. The head of Success Academies, Eva Moskowitz, is Public Enemy No. 1 among
New York City public-school teachers, and it is not uncharitable to interpret
that fact as plain proof that the interests of New York City’s public-school
teachers are not the same as the interests of New York City’s public-school
students. That our interest in the well-being of the latter is used to justify
a blank-check attitude toward the former is as cynical and as destructive an
abuse as California’s COVID-unemployment fraud.
Wasting good money on badly run programs is not generous.
Neither is greasing the wheels of corrupt or ineffective governments.
For years, institutions such as the International
Monetary Fund and the World Bank endured savage criticism for imposing “austerity”
measures on developing countries as a condition of aid, requirements excoriated
as miserly and meddlesome. These institutions were in most cases acting in the
genuine interests of their beneficiaries, which would have had very little
chance of achieving long-term stability and prosperity without reforming their
public finances and opening their economies. (It is a part of leadership to
understand that people’s desires and their interests are not
necessarily the same thing.) And now we are seeing a domestic version of that
same drama playing out as basket-case states such as Illinois use the COVID
epidemic as a pretext to try to finagle a federal bailout of their grossly
underfunded pension systems and other obligations resulting from bad governance
and bad decisions that long predate the coronavirus. Conservatives want reform,
and Democrats denounce this as short-sighted and uncharitable. Democrats also
charge that failure to assist spendthrift states and municipalities threatens
the overall health of the economy even as they steadfastly refuse to make the
reforms that might ease the way for such relief. That isn’t an honest position
— that is hostage-taking.
We should not allow our generous impulses to lure us into
imposing destructive policies (student-loan forgiveness leads the current list)
or to lull us into accepting the ineffectiveness and dysfunction of the
institutions we entrust with the public’s resources. It is a relatively easy
thing for rich people, or a rich society, to look at someone’s Christmas
wish-list and check off a few boxes, making everybody feel a little better. It
is a more difficult and higher kind of philanthropy to build the kind of
institutions — and the kind of society — that will help people to prosper in
the long term. We need clear thinking on this, urgently.
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