CEM Organization: Ways of Making Money

Maybe I’ve been wrong all along. Maybe it really is time for a third party.

Though Mr. Kirk and other Republicans thundered against pork-barrel spending and lawmakers’ practice of designating money for special projects through earmarks, they have not shied from using a less-well-known process called lettermarking to try to direct money to projects in their home districts…

Lettermarking, which takes place outside the Congressional appropriations process, is one of the many ways that legislators who support a ban on earmarks try to direct money back home.

In phonemarking, a lawmaker calls an agency to request financing for a project. More indirectly, members of Congress make use of what are known as soft earmarks, which involve making suggestions about where money should be directed, instead of explicitly instructing agencies to finance a project. Members also push for increases in financing of certain accounts in a federal agency’s budget and then forcefully request that the agency spend the money on the members’ pet project…

[A] New York Times review of letters and e-mail to government agencies from members of Congress shows that the practice is widespread despite the fact that both President George W. Bush and President Obama have issued executive orders instructing agencies not to finance projects based on communications from Congress.

According to the Times, there’s basically no way to track these requests short of using FOIA to demand correspondence between Congress and various agencies. Another fun fact: Both Obama and Bush issued executive orders instructing agencies not to fund projects based on requests from individual congressmen — and yet, oddly enough, the Times claims the practice is “widespread.” Why do you suppose that is? Why might an agency head, whose budget depends on congressional appropriations, feel compelled to comply with “requests” from individual representatives for a few million dollars of pork here and there?

What’s most depressing about this, I think, isn’t the betrayal of transparency or even the hypocrisy of being loudly anti-earmark yet quietly pro-lettermark, it’s that it’s yet another example of government trying to do an end-around recently imposed limits on its own power. In this case, that limit was self-imposed by the GOP’s pledge to end earmarks; in the case of last night’s post about countermeasures to executive regulations, that limit was imposed on the White House by voters who chose divided government in November. And yet the GOP presses ahead with lettermarks and Obama presses ahead with pursuing his agenda by ignoring Congress to whatever extent he can. Nothing illegal about either, but they’re proof that not even a giant midterm landslide is enough of a signal to convince some pols to change their ways. Some “representation.”

Incidentally, since we’ve been arguing lately about whether the House of Representatives should be expanded, take a minute to read this smart Jay Cost post about how a bigger House could also mean more pork. The more districts we have, the smaller and more parochial they’ll get, which could be a huge benefit to incumbents who are willing and able to deliver lucrative earmarks back home.

You're probably reading this on junk. And I'm not talking about newsprint - industry woes aside, that's high-quality stuff. But if you're on a computer or an iPad, and you're not plugged into an Internet jack in the wall? Junk, then.

But it's not your MacBook or your tablet that's so crummy. It's the spectrum it's using.

Spectrum, in the words of FCC Chairman Julius Genachowski, is the economy's "invisible infrastructure." It's the interstate system for information that travels wirelessly. It's how you get radio in your car, service on your cellphone and satellite to your television. It's also how you get WiFi.

But not all spectrum is created equal. "Beachfront spectrum" is like a well-paved road. Lots of information can travel long distances on it without losing much data. But not all spectrum is so valuable.

In 1985, there was a slice of spectrum that was too crummy for anyone to want. It was so weak that the radiation that microwaves emit could mess with it. So the government released it to the public. As long as whatever you were doing didn't interfere with what anyone else was doing, you could build on that spectrum. That's how we got garage-door openers and cordless phones. Because the information didn't have to travel far, the junk spectrum was good enough. Later on, that same section of junk spectrum became the home for WiFi - a crucial, multibillion-dollar industry. A platform for massive technological innovation. A huge increase in quality of life.

There's a lesson in that: Spectrum is really, really important. And not always in ways that we can predict in advance. Making sure that spectrum is used well is no less important than making sure our highways are used well: If the Beltway were reserved for horses, Washington would not be a very good place to do business.

But our spectrum is not being used well. It's the classic innovator's quandary: We made good decisions many years ago, but those good decisions created powerful incumbents, and in order to make good decisions now, we must somehow unseat the incumbents.

Today, much of the best spectrum is allocated to broadcast television. Decades ago, when 90 percent of Americans received their programming this way, that made sense. Today, when fewer than 10 percent of Americans do, it doesn't.

Meanwhile, mobile broadband is quite clearly the platform of the future - or at least the near future. But we don't have nearly enough spectrum allocated for its use. Unless that changes, the technology will be unable to progress, as more advanced uses will require more bandwidth, or it will have to be rationed, perhaps through extremely high prices that make sure most people can't use it.

The FCC could just yank the spectrum from the channels and hand it to the mobile industry. But it won't. It fears lawsuits and angry calls from lawmakers. And temperamentally, Genachowski himself is a consensus-builder rather than a steamroller.

Instead, the hope is that current owners of spectrum will give it up voluntarily. In exchange, they'd get big sacks of money. If a slice of spectrum is worth billions of dollars to Verizon but only a couple of million to a few aging TV stations - TV stations that have other ways to reach most of those customers - then there should be enough money in this transaction to leave everyone happy.

At least, that's some people's hope. Some advocates want that spectrum - or at least a substantial portion of it - left unlicensed. Rather than using telecom corporations such as Verizon to buy off the current owners of the spectrum, they'd like to see the federal government take some of that spectrum back and preserve it as a public resource for the sort of innovation we can't yet imagine and that the big corporations aren't likely to pioneer - the same as happened with WiFi. But as of yet, that's not the FCC's vision for this. Officials are more worried about the mobile broadband market. They argue (accurately) that they've already made more beachfront spectrum available for unlicensed uses. And although they don't say this clearly, auctioning spectrum to large corporations gives them the money to pay off the current owners. But even so, they can't do that.

"Imagine someone was given property on Fifth Avenue 50 years ago, but they don't use it and can't sell it," says Tim Wu, a law professor at Harvard and author of "The Master Switch." That's the situation that's arisen in the spectrum universe. It's not legal for the FCC to run auctions and hand over some of the proceeds to the old owners. That means the people sitting on the spectrum have little incentive to give it up. For that to change, the FCC needs Congress to pass a law empowering it to compensate current holders of spectrum with proceeds from the sale.

One way - the slightly demagogic way - to underscore the urgency here is to invoke China: Do you think it's letting its information infrastructure stagnate because it's a bureaucratic hassle to get the permits shifted? I rather doubt it.

Of course, we don't want the Chinese system. Democracy is worth some red tape. But if we're going to keep a good political system from becoming an economic handicap, there are going to be a lot of decisions like this one that need to be made. Decisions where we know what we need to do to move the economy forward, but where it's easier to do nothing because there are powerful interests attached to old habits. The problem with having a really good 20th century, as America did, is that you've built up a lot of infrastructure and made a lot of decisions that benefit the industries and innovators of the 20th century. But now we're in the 21st century, and junk won't cut it anymore.

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Monday, January 24, 2011

Ways of Making Money

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