How do we arrive at our political beliefs? - Part 2 - emotions and politics

Why are we so emotional about our political beliefs?  Brain science has recently been finding that all our decisions are grounded in emotions.  We would be frozen with indecision choosing the color socks to buy if we don't have some emotional response to rescue us.

For most of us, once we adopt a particular political ideology and incorporate it into systems of thought to enable quick decision making we, in effect, dump that ideology into a bin in our emotions labeled "this is true."  Intellectual growth is largely about testing and revising those emotional responses in our "this is true" bin.

We often have our prototype political views in place late in childhood.  Then puberty hits and for decades thereafter our time and attention is monopolized by relationships, careers, families.  So we seldom have time to go through the process of really analyzing whether what we are emotionally attached to makes sense.  So we make our political decisions by just dipping into our "this is true" bin.

The "this is true" bin items get tested only when some strong negative emotion gets identified with the particular belief or it contradicts some other idea for which we have a strong emotional attachment.

My anecdotal experience suggests that our choice of career can effect the degree to which we challenge the political beliefs in our "this is true bin".   Some move into people oriented careers where the knowledge they depend on to make their living will from time to time contradict their political ideas, so the emotional attachment to making a living provides the emotional impetus we need to revise our political ideas.  But in my experience it seems like folks that move into careers that are not people oriented - hard science, Doctors, Dentists, Chemists, or business careers like farming or manufacturing, seldom have the sorts of people oriented experiences that provide the emotionally charged contradictory ideas that would jolt them out of their political emotional comfort zone.  The most politically ideological people I have known in my life have usually been from some career that is focused on understanding things, not people.   However I have never encountered any data to verify or contradict this tentative observation.

If the observation is true it raises the chicken or egg question.  Do people choose the career depending on whether they are more comfortable with the definitive nature of things or the ambiguity of human interaction?  Are we back to the impact of Oxytocin?

Where do our political beliefs come from?

Here is at statement I believe almost all of us would find to be true:  Most the people we know believe their political beliefs are correct and to the extent that other people don't share their beliefs the other people are wrong.  I know that I experience a visceral emotional reaction when someone contradicts some political belief I hold.


How can I (and most other people) feel so certain about our ideas when people who are just as certain hold contradictory ideas.  Perhaps our certainty reflects our emotions rather than reality?  How can we know if our political beliefs reflect real truths?  Where do our beliefs come from?


I started wondering about that a couple decades ago.  Here are some things I have learned:


Probably for many of us our initial political beliefs come from our upbringing.  When we register to vote we don't have to know anything (we humans have no problem manufacturing opinions out of thin air).  We don't take a test to prove we have some level of competency the way we do to get, for example, a drivers license.  So we adopt the ideology we have been exposed to from our parents, (or the opposite of our parents in some cases) or our peers. 


Some of our political beliefs derive from biology.  One example of a biological influence is the nuerotransmitter Oxytocin.  What the brain science says is lots of Oxytocin inclines us to submerge our self interest to the community interest, while low levels of Oxytocin makes us more self absorbed and oblivious to community interests.  Contemplate for yourself how that correlates to political ideologies.  Would it be an exaggeration to say that having lots of Oxytocin in our brains makes us Socialists, while low Oxytocin makes us barbarian Capitalists?


We also know from the biologists that women tend to have more Oxytocin, men less.  From political science we know women are more likely to be Democrats and men more likely to be Republicans.  Hmmmm.   Think this says something about Oxytocin influence in our choice of political ideologies?


I'm not aware of any studies on the topic, but I would imagine where our Oxytocin inclination matchs up with the ideology of our upbringing we are probably very certain our ideology is right.  Where our Oxytocin inclination is contrary to our ideology of upbringing we may be less dogmatic and more open minded.


Regardless of the particular mix of upbringing and biology that produces our political beliefs once we have started making decisions based on our adopted ideology we start casting our beliefs in stone.  Our brain is designed to avoid relearning things for efficient decision making.  When we make a decision once, unless there is some bad result, our emotions send us down that same mental path in the future.  This works well in day to day life because we get feedback.  Ooops, my girlfriend dumped me, time to rethink the decisions I made in that relationship.  Oooops, I got fired, time to rethink the decisions I made in that job.


But politics seldom gives us the kind of feedback about the wisdom of our decisions that we get in normal life.  When our candidate loses an election we don't question our ideology, we question the intelligence of the people who voted for the other candidate.  Since politics and economics are so complex, and everyone is pointing at the other guy as the problem, it is often really hard to sort out who is right and who is wrong, so we stay with the emotional comfort of our ideological leanings.


I concluded some years ago if I wanted my political decisions to really contribute to the kind of future I want for me and my loved ones I needed to get beyond the beliefs to which I am emotionally attached.  I need to step outside my emotions to understand where my beliefs came from and find a way to constantly test the truth of my beliefs with facts and data.  


I try hard but as with most people, life often gets in the way.  There are only so many hours in the day.  Jobs, family, friends, exercise and just having some fun take a lot of time.  Fairly regularly I find myself getting ready to vote and having to fall back on ideology because I haven't had time to research beyond sound bites and assertions.  


Replacing emotion and ideology with facts and data is a not easy.  The temptation to go the easy route - follow some sound bite that appeals to our emotions - is always an option for a quick decision that protects our time to do other things.  But I have found not testing emotional beliefs can have a price.  A lot of people relying on ideology got blindsided by the housing collapse and economic meltdown of a few years ago, and are getting whacked again by the sagging economy and stock market.  Because for the last decade or two I have been testing the ideological fads of the moment against history and common sense about economics and human behavior I was able to dodge some of the worst effects of the recent downturn(s).  But a number of bright, educated and hard working younger people I care about in that young families stage in life got caught up in it and now face daunting financial challenges. 


Sadly, it was avoidable if we had been better, more educated voters.

An alternative to Unions

In most human endeavors the successful enterprises are teams.   Yet in most business relationships the basic nature of unions and management relations is adversarial.  This is partly historical accident, partly a result of the ideological notion held by some people that unfettered free enterprise always produces the best result.


How could we make enterprises operate more as a team, and less as adversaries?  Sometimes hard times forces that kind of behavior, as we have seen in the auto industry, but that only happened when the industry was on the verge of collapse and both sides perceived that a big part of the industries problems was the adversarial nature of the relationship that inhibited innovation.


What if we could make enterprises work as a team before they are facing a disaster?  If we aligned the factors motivating people to make enterprise goals everyone's primary goal.


What if we made Corporate tax rates a sliding scale.  The flatter a corporations pay structure, the lower the corporate tax rate.  Measure the average rate of compensation from the deviation from the mean of the top and the bottom.  As the tide rises all boats do actually rise.  Exclude dividends from the computation if they are paid to someone not involved in management of the corporation, (or held in trust until some years after an employees tenure with the corporation ends).


If someone wants to run their corporation as their fiefdom, pay employee's as little as possible and take as much as possible, they are imposing real costs on society - from health care costs, to reducing the number of consumer dollars available to support the greater economy.  When workers have money to spend the economy grows, when management hoards money the economy suffers.  We should reward companies that share the risk and reward with workers without forcing employee's to band together to demand it..

The future of the Free Market and Unions

Unions exist to counter one of the most pernicious side effects of a free market.  Free markets are price driven, and without morality.  If we can buy something cheaper the fact it is produced by people in slavery or something a step or two above doesn't matter to many of us.  We go for the cheapest goods with the level of quality we seek.  


Early in the development of the market this may not be a problem, but in any successful niche as more companies move into the niche, the harder it becomes to maintain market share.  If you aren't clever enough to find significant improvements in the product or the production process, or if the product is so well developed there is no room for improvement, your only strategy is to cut cost and wages are usually the place you can cut the most costs.  


Once one company has taken this step it forces others to do the same.  Companies are in a race to the bottom - so see who can come the closest to treating their employees as slaves.


It is sort of working right now, because the income disparities around the world are so enormous their are populations who are happy with even a slavish job, and the rich world has the wherewithal to minimize the impact on their workers, believing they are just experiencing a down part of the business cycle and unemployment will go down and everything will be wonderful once the business cycle picks up.  Maybe.  But what happens as the expectations of workers in poor countries rise?  What happens when all workers expectations reach parity?  And there are no more countries to export jobs to at lower wages?


If we continue to build our hopes on the unfettered free market are we are setting the table for enormous, world wide strife in the future?  Worldwide Unions clashing with governments and companies?  If we are so smart can't we find a system that avoids the sorts of clashes we have seen repeatedly down through history?

Tax cuts and creating jobs

Presidential contenders are talking a lot of how they can create jobs out of one side of their mouth (including the incumbent) and talking major cuts in government spending out of the other side of their mouth.

It is fantasy to think you can have both.  A recent study that looked at 173 government policy changes  between 1978 and 2009 found that overwhelmingly cutting government led to a drop in GDP and a rise in unemployment (as  summarized in the Economist July 16, p.79).  Beyond the data it is simple common sense.  Cutting government means depriving businesses of contracts, and employees of jobs.  If you are need to do it you do it in a healthy economy, not an ailing economy.

Major cuts in government spending seem imminent, maybe as part of a Government debt ceiling deal.  Obama feels raising the debt ceiling is crucial to our good name as a creditor, Republicans have demanded major cuts in exchange, Republicans seem to have won that battle.

If we are lucky the cuts will be spaced over a long period of time, but given the scale of the proposed cuts, there is probably going to be a pretty big hit within the next year or so.

Here is what is going to happen. The cuts in government spending will mean contracts with private companies will be cancelled.  Those companies will lay off the workers they hired to work on that project.  Cuts in government spending mean government workers will be laid off, contributing to few consumer dollars to prop up the economy, and perhaps adding a little fuel to the ongoing foreclosure problem.  In short any cuts in Government spending right now will give a big boost to the possible relapse into recession and higher unemployment.   And next year both Presidential candidates will be pointing the finger of blame at the other for higher unemployment.

I am calendering this blog to revisit it during the heat of primary season next summer - Aug 15, 2012.  If I am wrong, if the economy picks up, I will tip my hat to Republicans.   If I am right I am hoping my Republican friends will acknowledge that maybe the hard core of the Republican party needs to rethink their economic notions a little bit.

Some interesting facts about the history of our Federal budget deficit

Here are some interesting facts about deficits and economic growth in the last 100 years.  As Democrats and Republicans point fingers to pin responsibility for the deficit it is important to understand both parties are culpable.  Republican influence has sometimes resulted in budget surpluses, but also contributed to the biggest yearly deficits.  Democrats don't blow up the deficit in the middle of healthy economies like Republicans sometimes do with tax cuts, but they have run big deficits in times of crisis, and in good times they historically have still, like water building a stalagmite, slowly and steadily added to the national debt.

Top 8 biggest annual deficits - (using deficits over 3% of GDP as the minimum qualifier):

#1 -  1942 to 1945 - WW II saw deficits that averaged about 20% of GDP.  Democrats controlled Congress and the Presidency throughout the war (as they had since 1933).  The nation went into war with a deficit from the Great Depression (see #6 below).

#2 - 1918 - 1919 -  WW I saw deficits shoot up to 12% in 1918, and then 17% in 1919.  This was a period with a Republican House and a Democratic Senate.

#3 - 2009 - 2010 - Deficits of about 9% of GDP - This was a result of a major loss in revenues as a result of the financial collapse, the various government credits and bail outs begun by President Bush and continued by President Obama to treat our ailing economy, and the ongoing wars in Iraq and Afghanistan

#4 -  1982 to 1988 - deficits ranged from 3.04 to 5.88 percent of GDP, averaged around 4.5%.  This was during the Reagan years - Republicans controlled the Presidency and the Senate, Democrats controlled the House.  There was no war at this time (other than the cold war), the economy was healthy and growing, the deficits were driven by tax cuts that reduced revenue coupled with increased spending, primarily in defense.

#5 - 1990 to 1993 - through and after the Gulf War we averaged deficits of about 4.25%.   Democrats controlled Congress, Mr Bush Sr was in the White House, Mr Clinton took over in 1993.  We experienced a recession during this period but the economy continued to grow.

#6 - 1933 to 1936 - After 12 years of Republican control of Congress and the Presidency Democrats took over Congress and the Presidency three years into the Great Depression.  Trying to pull the country out of the Depression we averaged deficits of about 4% for this period.  Before the Democrats took over the Republicans deficit in 1932 was 2.78%.

#7 - 1975-76 - at the end of the Vietnam war we averaged deficits of about 3.75% for these two years.  Democrats controlled the House and Senate, President Ford was in the White House.  The economy was growing but inflation was rampant.

#8 - 2003 and 2004 - Although the economy was growing we averaged deficits of about 3.4% during these years.  Republicans controlled Congress and the Presidency, the deficits were a result of tax cuts coupled with wars in Iraq and Afghanistan

Other notable periods in our deficit history:

The longest period of continuous balanced budgets was from 1920 to 1930.   Republicans took control of both houses of Congress and the presidency in 1921 and maintained that control until 1933.  In 1920 Wilson was President but Republicans controlled both the House and the Senate.   Economic growth during this period was spotty however, as a percent of GDP it did not reach 1920 levels until 1925 then collapsed from 1930 through1940.  It did not reach 1929 levels again until 1941.

Debt exploded during the 1930's through WW II.  After the war, from 1947 through 1960 we alternated between small surpluses and small deficits.

For the 26 years between 1955 and 1981 Democrats controlled Congress.  22 out of those 26 years we ran deficits.  The 4 non-deficit years, 1955, 1956, 1960 and 1969 were years we had Republican Presidents   These years spawned the immortal Republican phrase "tax and spend liberal".  On the upside the economy grew every year during this period.

We continued to run budget deficits from 1981 through 1997.  The amount of the deficit jumped up to around 5% of GDP from 1983 to 1986.  1981 to 1987 was the period when President Reagan's tax cuts were enacted.  Republicans controlled the Senate, Democrats controlled the House. GDP continued to rise each year.  After 1987 Democrats controlled Congress until 1995, each year after Democrats recaptured Congress the budget deficit shrank further from the highs of the mid-80's until they jumped back up in response to the Gulf War.  The economy grew continuously during this period.

In 1995 Republicans took over Congress and maintained that control until 2007.  The budget deficit shrunk further in 1995 and 1996 then we ran surpluses from 1997 to 2001.  In 2001 President Bush took office and Republicans continued to control Congress.  In 2002 we began running deficits again and we have since run deficits continuously.  The economy was consistently strong during this entire period until the housing bubble burst in 2007 leading to the financial collapse in 2008.  2009 was the first year since 1949 GDP shrank in comparison to the prior year.

Thoughts on Pension Plans

A couple generations ago Economists who didn't know what they didn't know sold both business and government on the idea they could give employees pension plans that would guarantee the employee's a certain return in retirement.  It was called a defined benefit plan.  Congress build in preferences for defined benefit plan into the tax code and it became the norm for Government and large businesses.

Recent history has demonstrated that defined benefit pension plans are prone to disaster.  They require an element of predicting the future based on scores of assumptions, and unless rigorously controlled the assumptions often tend to err on the side of overestimating the future.  They also require a level of discipline those who oversee plans often lack.   In the private sector companies don't contribute when they stock market is bullish, on the assumption increasing stock values will cover the cost of the program, then when the market crashes the program is hugely underfunded, or when the business founders the employee's pension get wiped out in bankruptcy.  Governments make promises to employee's that become impossible to keep when tax revenues fall.

In the private sector we now have a hundreds of thousands of older folks who are trying to figure out how to make due on far less than they expected in retirement after their companies ran through bankruptcy to reduce their pension obligations.

In the public sector we have the services provided by government disappearing under a crush of overly optomistic pension obligations.

Defined benefit plans are inherently unreliable over the long term.  The tax code should require any defined benefit plan to be based on conservative projections and fully funded each year without regard to investment performance.