What Woodrow Wilson left out of the definition of public administration: capital

Back in 1887, Woodrow Wilson wrote an essay on the importance of the study of administration of government. Mr. Wilson, who would go on to become president of the United States, is usually referred to as the father of public administration. By his definition:

“Administration is the most obvious part of government; it is government in action; it is he executive, the operative, the most visible side of government, and is of course as old as government itself. It is the object of administrative study to discover, first, what government can properly and successfully do, and secondly, how it can do these things with the utmost efficiency and the least possible cost either of money or of energy.”
Other scholars have offered their tweaks on the definition. Charles H. Levine, B. Guy Peters, and Frank J. Thompson define public administration as:

“[T]he implementation of government policy and an academic discipline that studies this implementation and that prepares civil servants for this work.” It is “centrally concerned with the organization of government policies and programs as well as the behavior of officials (usually non-elected) formally responsible for their conduct.”

George J. Gordon and Michael E. Milakovich define public administration as:

“… all processes, organizations, and individuals (the latter acting in official positions and roles) associated with carrying out laws and other rules adopted or issued by legislatures, executives, and courts.”

And Melvin J. Dubnick and Barbara S. Romzek provide the following take on this branch of political science:

“The practice of public administration involves the dynamic reconciliation of various forces in government’s efforts to manage public policies and programs.”

Looking back on my public administration studies and my time as a practitioner, I can say that the above definitions capture the various facets of the discipline; that academics and practitioners do not vary much from these definitions when either studying the administration of public policy or carrying out public policy and managing institutional systems. The problem, however, with the study and practice of public administration in a market-oriented political economy is that the study of public administration rarely if ever addresses public administration’s impact on private capital, specifically, how management of public capital positively impacts returns to private capital.

In getting to his description of public versus private capital, Thomas Piketty first describes national capital “as the total market value of everything owned by the residents and government of a given country at a given point in time, provided it can be traded on some market.” National wealth includes land, dwellings, commercial inventory, other buildings, machinery, infrastructure, patents, bank accounts, mutual funds, stocks, bonds. Mr Piketty found that public capital or public wealth are assets and liabilities held by government and other social entities including towns and other social insurance agencies while private capital or wealth is made up of assets and liabilities held by individuals.

One question that public administration does not address is how best to deploy public capital to boost returns to private capital. While there is literature discussing how public sector spending can boost gross domestic product or even productivity, the study of public administration silos itself by discussing fiscal policy, infrastructure, and public goods, and leaving the discussion of private capital to the markets.

Why is this discussion necessary? Public sector spending needs discipline. How many of us have asked the federal government to provide a cost analysis of each tax dollar we spend and then provide some data on returns on that tax dollar? I wager none. But if public spending on the public goods that act as inputs for private sector production was done at low cost to the tax payer while providing a low cost input for the private sector, could public administration play a more meaningful role in the production of returns on private capital?

It is a question worth pursuing.

What happens when the State abandons black Americans?

In their book, The Sovereign Individual: Mastering the Transition to the Information Age, James Dale Davidson and Lord William Rees-Mogg describe the demise of the welfare state with the political changes the information age will bring about. Those who can garner, manipulate, organize, distribute, and monetize information and use today’s digital technology to deploy this new capital from anywhere in the world will be able to achieve a level of individual sovereignty such that the protection services of the old nation-state will no longer be needed. The internet, cyberspace, will be their new jurisdiction, and with capital in the form of information, they will be able to carve out a minimized or tax-free environment in whatever physical jurisdiction they choose.

Information losers, according to Davidson and Rees-Mogg, won’t like this new world. This information-based economy will challenge their welfare state “employee” status. It is a welfare state employee status because in exchange for the “work” that they do at the polls i.e. their vote, information losers are awarded with transfer payments such as Medicaid, Medicare, food stamps, and low-income housing. As the hoarders of the new capital, information, choose lower tax jurisdictions, information losers are left holding the bag containing reduced benefits, the result of a lowered tax base.

The recent tax reform legislation passed by a GOP-led Congress and signed by President Donald Trump is a small indicator of the leverage the wealthy have, especially those who make their income as sole proprietors or partners in a business where they are now beneficiaries of a 20% reduction in the taxes they would normally pay on pass-through income. Congress and the President will now have to reduce or eliminate programs made infeasible by a $1.5 billion tax cut.

There is no guarantee that tax cut goody bags will be continually given out in the future. If the GOP loses both chambers of Congress in this year’s midterms, then Democrats will pursue a rewrite of the tax reform, or at least put on a good show effort.  I say a good show effort because the response by the wealthy will be, “Remember the two trillion dollars we have stashed overseas? How about we keep it there?”

Black Americans are not in the information age game even though blacks over-index on social media sites and, as a proportion of their population, own as many smartphones as whites and Latinos. Black Americans are under-indexed when it comes to employment in information technology. In an article for The Huffington Post, Jamal Simmons noted that black women may be able to scrape up $36,000 for a tech start-up, but white males scrape up on average $1.3 million in start-up funds.

And while blacks and Latinos continue to represent low single-digit proportions of actual STEM employees (technologists, mathematicians, engineers), there are plenty of black consumers of entertainment content on Facebook and Instagram. This content is low value. It differs from information which can be used as an input for production.

You may ask, “Don’t blacks have a right to consume entertainment?” My answer would be, “It’s not about rights to consumer content. It’s about channeling as much time and energy into mining and distributing information that creates knowledge that solves the deep well of problems in the black community.

Meanwhile, the State apparatus that blacks have disproportionately relied on for economic support and political protection is becoming bankrupt. Based on this recent tax reform, one would not sound too cynical in concluding that the GOP was in cahoots with the plot to blow it all up.  The information winners will not think twice about leaving information losers behind.

Does Maryland SB 67 make access to public capital less expensive?

Proposed amendments to the Maryland Economic Development code appear to expand a pool of capital available for eligible businesses and eligible local governments. SB 67, pre-filed last October by Maryland senate committee chairman Thomas Middleton changes the name of the Maryland Economic Development Assistance Fund to the Advantage Maryland Fund.

In addition to the fund’s name change, SB 67 proposes lifting the maximum amount for local economic development project assistance from $2 million to $5 million. Recipients of this type of funding may include an individual, private business, a non-profit entity, or a corporation. Assistance may take the form of a grant, loan, or an investment.

Local governments seeking assistance in the form of grants, loans, or investment will see the cap on funding increase from $3 million to $5 million.

As written, SB 67 introduces some uncertainty as to the amount of interest the fund will charge on loans. The bill eliminates Section 5-325 (c)(1) through (e)(4) addressing particular levels of interest rates that are assessed depending on the type of project or loan recipient. Those sections are replaced with language reiterating that the Maryland Department of Commerce shall determine the payment terms of loans as well as the amount of interest assessed. The amendment also provides the Department the authority to assess a zero interest rate on loans and that for defaulters, the Department may impose a default interest rate.

In my opinion, Maryland, like the rest of the country, is entering a 2018 that promises rising interest rates. The Federal Reserve has signaled three more increases of its intrabank lending rate. The massive tax cuts approved by Congress this week with President Trump’s signing-off on tax legislation expected shortly will put upward pressure on rates as the federal government will no doubt enter the debt markets to borrow additional money at higher rates. I doubt if the Maryland Department of Commerce will authorize a zero interest rate on loans. In addition, project managers approaching the Fund for assistance may have to be extra persuasive when arguing that their projects will provide positive returns on investment and the creation of jobs.