Monday, March 16, 2009

The Workfare State

"X and Y generations... are ready to do great things. But we don't ask anything of them. They have not been challenged."--Joe Biden

The idea of a workfare state is a simple one. Supplement programs that are currently wholly funded through general taxation--and start new programs--by adopting compulsory or semi-compulsory civilian service. According to the Obama administration's transitional website, these would include:

  • a Classroom Corps to help underserved schools

  • a Health Corps to serve in the nation's clinics and hospitals

  • a Clean Energy Corps to achieve the goal of energy independence
  • a Veterans Corps to support the Americans who serve by standing in harm's way
Obama and Biden will call on citizens of all ages to serve. They'll set a goal that all middle school and high school students engage in 50 hours of community service a year, and develop a plan for all college students who engage in 100 hours of community service to receive a fully-refundable tax credit of $4,000 for their education. Obama and Biden will encourage retiring Americans to serve by improving programs available for individuals over age 55, while at the same time promoting youth programs such as Youth Build and Head Start.

According to the policy wonks who have dreamed up such things (see links) the latter would hopefully lead to the former. Here's what the Democratic Leadership Caucus/Progressive Policy Institute had to say:

"Universal service. If adopted, these five steps for taking voluntary national service to scale would move us closer to the ideal of universal service. By bringing tens, and eventually hundreds, of thousands of willing citizens together to meet the great challenges of our time, we will hasten the day when it will become routine for Americans to ask each other: What did you do for your national service?"

And how will it become UNIVERSAL? Representative Charles Rangel of NY has an idea. He has introduced legislation that has been sitting in the Ways and Means Committee since 2007. H.R.393 would require all those between the ages of 18 and 42 years of age to serve at Uncle Sam's pleasure, in either a military or civilian capacity.

...Just the first step to an organized and mobilized economy...

"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion." --Friedrich A. Hayek

Thursday, March 5, 2009

Universal Micro-Credit?

"...both my husband and I were determined that the concept of microcredit would have universal relevance. We looked for ways to apply microcredit in America, taking the best of the principles and values that it represented, but making it sure that it could be put into practice in different settings."--Hillary Clinton (February 3, 1997)

Microcredit has gotten a lot of attention in recent years from politicians as well as celebrities like Oprah Winfrey and micro-lender Muhammad Yunus even won a Nobel Peace Prize. For those who are unfamiliar with the term, I will review briefly; An NGO such as Grameen Bank recieves funds from philanthropists, the UN, and the countries in which it operates. It then distributes these funds to individuals under the care of "solidarity groups." These groups see to it that the funds are repaid with interest. As the name suggests, the members of the group are cojointly liable for the repayment of funds. If a microcredit recipient does not repay the other members of the group have to cough it up. So there each member has a vested interest in seeing to it that a borrower repays whether or not that borrower is able to turn a profit from his/her enterprise. It is unclear whether the methods of ensuring repayment are monitored by the NGO, but suffice to say that high repayment rates show that whatever methods employed are highly effective. There have even been reports of borrowers having to turn to loan sharks in order to meet their solidarity requirements.

So one might ask: Why shouldn't we use such an effective lending system to solve our luquidity crisis? Well good news-- the new administration is all about microcredit! Take Treasury secretary Geithner. His father ran The Ford Foundation's microcredit program in Indonesia (One of his employees was one Ann Dunham Soetoro). Ray LaHood introduced microcredit legislation is Illinois. Hillary Clinton helped bring Yunus and microcredit to Arkansas.

So what does this suggest about how our credit liquidity problem is to be solved? Maybe we'd better get used to the idea of solidarity.