VT Bus. for Social Responsibility Comments 5/12/2011

I’d like to wind up the day by saying a few words about the social contract. I think we can all agree that the social contract is an agreement between citizens and their elected governing body to manage a set of tasks, tasks which only government can carry out with any efficiency and effectiveness, and which benefit society as a whole rather than specific individuals or entities and improve the environment and the economy on which that society’s prosperity is based.

Not everyone buys into the social contract, though. Libertarians and some far right conservatives firmly believe that, as Ronald Reagan said, “Government is not the solution to our problems; government is the problem.” These folks simply do not believe in the possibility of good and beneficial government. Their “Atlas Shrugged” vision of the world, in which a free and unregulated market, along with personal enterprise or even greed, establish the social and economic hierarchy. Neither do they believe generally in much of a social safety net for helping those who don’t compete as well as they do and end up at the bottom of the hierarchy.  The Libertarian mantra is reflected on the license plates of our tax-lite neighbor across the river, “Live free or drop dead” and in First Lady, Nancy Reagan’s simplistic solution to addiction, “Just say no.”

At the other extreme, are those who believe that government can and should do whatever it takes to meet the needs of all of its citizens, demanding little of them and consigning many to a paralytic and enduring welfare state at unsustainable expense.

The bitter polarity between these two extremes dominates what has become a current media circus. I would suggest, however, that both extremes of this ideological keyboard like the bass and treble extremes on a piano, receive very little actual play with a general audience. Many names like Sarah Palin and Donald Trump associated with the conservative extreme, and a similar number on the media-challenged far left, will eventually sink in the mire of political history.

Of much greater interest should be the 70% of people in the middle who may be Republicans, Democrats or Independents, but tend to vote for people whom they believe reflect their personal values and demonstrate at least a modicum of integrity and wisdom.

During the 18 months I worked on the Blue Ribbon Tax Commission, I found myself thinking a lot about the social contract here in Vermont. We listened to a wide range of single-issue advocates, economists, academics, and taxpayers up and down the income spectrum. We developed a number of economic models as we tried out policy variations, all of which maintained Vermont’s progressive income tax structure.

We sought out the hard data behind then-Governor Jim Douglas’ recurring triple headline that Vermont was the highest taxed state in the country; that wealthy Vermonters were fleeing the state in droves; and that Vermont was a bad place to do business. We could find no data to support any of the three claims.

We found out that indeed Vermont is in the top quartile of higher taxed states, as one might expect of a state with only 310,000 income tax filers and a challenging and diverse infrastructure. Our position is, in actual fact, between 10th and 12th, depending on what tax burden formula one chooses.

We found that, on average, the same number of people move into the state as move out, but those moving in have a 19% higher income than those moving out. This is good and bad news. Bad in that Vermont has the second highest income polarity in the country.

I leave it to you, the business backbone of Vermont, to decide if this is a terrible state in which to do business compared to the rest of the U.S.

What drew me to re-examine the wellbeing of the social contract here in Vermont was my certainty that the primary responsibility of a leader in any sector is to tell the truth to his or her people. Governor Douglas chose instead to make an ideological point that would support lower taxation and less regulation. He asserted facts while providing no data to support them. Had he looked for data, he would not have found them. Only his personal ideology did.

Sadly, we live in a time when leaders can repeat a catch phrase until it becomes true, even if it isn’t. The left can be guilty of the same toxic maneuver.

This, “Just say it enough times and it becomes true” phenomenon, along with the economic demise of quality journalism, the conflation of news and opinion, and the rise of blogs and comedy programs as a source of news, has helped erode citizens’ understanding of and belief in a social contract.

The decline in serious journalism and in its readership lays open the public arena to attack from unchallenged ideologues with the greatest financial resources and the loudest voices. Read here “Citizens United case.” Right now, these ideologues dispute the idea that the taxes we pay can be a sound investment in our security, wellbeing, education, environment and prosperity. These wealthier and more powerful elements have succeeded in demonizing taxes and regulation as inhibiting business growth, even though no historical data supports this position.

I think a lot about the social contract. It has a long history. It goes back to the philosophical writing of St Augustine, Jean Jacques Rousseau and Alexis de Tocqueville’s Democracy in America. Prosperous, intellectually tolerant communities are notable throughout our 4000 years of recorded history.

I have lost interest in political extremes, except that I occasionally listen in on their rants and read their polemics, simply to understand just how wide the chasm they define is. I am much more interested in the art of the possible, in the center, where I believe the majority of us live of our lives.

I have spent forty years in Vermont working in the for-profit and the for-mission communities. I have spent the same number of years observing the political scene, though never working in it.

My belief is that most Vermonters have not lost faith in the abstract idea of government, but have become dangerously disconnected from its place in their lives. They struggle not with the idea of paying taxes, but rather with their confusion about any visible benefits their tax investments might produce.

Con Hogan, when he was asked by Governor Snelling to lead the Agency of Human Services, our most expensive state agency, made the comment that he could not manage what he could not measure, and so, in collaboration with his staff and AHS’s constituent agencies, defined a set of measurable outcomes that would quantify the caliber of his leadership, the effectiveness of his agency and the agencies it served, and would define for Vermonters the return on their tax investment in the social safety net.

This concept of measuring the efficacy of government mission and return on taxpayer investment was unique and took many by surprise.

I was Chair of the VT Business Roundtable at the time and invited Con in to explain his initiative. Con had been CEO of a prominent Vermont business, so his plan was not a novel idea to the 120 CEO’s to whom Con laid it out. What was new and daring was the idea of measuring performance in government. The thirty-plus agency performance metrics survived the Snelling and Dean administrations, but were then removed by incoming Governor Douglas. Could this have been because they constituted a political liability?  Many political leaders are not fond of measurement.

But open and honest measurement may be the only way to rebuild Vermonters’ belief and trust in their social contract. I assume you all invest to some degree. I doubt you buy equities, funds or bonds and pay no attention to how they are performing, but that is what has been expected of us in the current social contract.

It thus becomes easy for those who reject the idea of a social contract or those wishing to enhance their ratings in the media, to focus solely on government failures, ineptitude, or, even worse, to just make things up.

The understanding that one can’t manage if one can’t measure is a durable axiom that government and the for-mission sector must take to heart. And, by the way, if you don’t measure the effect of your work, others will at your peril.

Last night, the community honored Gretchen Morse. For the last twenty years, Gretchen has led the United Way of Chittenden County. Realizing early on that the philanthropic resources from businesses and individuals in Chittenden County could never support in any depth all of the social safety net organizations in need, she began a collaborative effort with United Way’s many service partners to establish social and economic goals and objectives for the region, agreeing on performance metrics, and focusing support on partners who could best deliver on the agreed-upon outcomes. In so doing, they vastly increased the effectiveness of donor generosity and made a significant difference in Chittenden County. This exemplary initiative has become an exemplar for non-profits and philanthropists around the country.

Open government is the best policy for strengthening the social contract between a government and its citizens. A government that rigorously measures and shares its successes and failures with its citizens is the best way to rebuild trust in the social contract.

In an open marriage between the Public Assets and Ethan Allen Institutes, whom one might imagine, could agree on little else, the Vermont Transparency website was established in 2009 to open up government to its citizens. You can see it at VTtransparency.org.  It’s worth a serious look and worthy of your support. A well-resourced and managed transparency site is but one tool needed to rebuild the social contract though. Better access, navigation, and use of our VT historical archives is also a key tool on which Vermont State Archivist Gregory Sanford is doing yeoman work.  We tend to believe that every government challenge we encounter is new and that older and sometimes even wiser statesmen and women have not addressed these issues before in our history.

And finally, government must seize the opportunity and communicate back honestly to its citizens how their investment is doing. It must learn to measure itself, using both data and story. It must learn that failures are a learning opportunity and when fully understood can prevent their repetition.

It must learn to trust the wisdom of its taxpayer-investors and steer clear of toxic political grandstanding and voter manipulation. The taxpayers we heard from on the commission were not fools and government does itself a disservice by assuming the least of its investors.

Vermont’s motto is Freedom and Unity, which perfectly expresses the dynamic tension between taking care of oneself and one’s community. We need to go back and look at the art of the possible that was presumed by those who wrote this elegant motto, and our government needs to step up and be accountable for the investments we Vermonters make in our own wellbeing.

 

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5 Responses to VT Bus. for Social Responsibility Comments 5/12/2011

  1. Thank you, Bill. As I mentioned after your well received remarks yesterday, you have challenged us, the business community, to live up to current SR practices, stay at the forefront AND keep our elected representatives on track. I appreciate your thoughtful remarks. Very apropos.
    Julie

  2. J. C. TAYLOR says:

    Mr. Schubart – I have just read your speech and assuming your position is fully supported by the research and studies to which you allude, I can understand your point of view. However, I know from personal experience that Vermont is an expensive place in which to do businesss and an expensive tax jurisdiction. I simply do not understand why VT. doesn’t make it attractive financially for business to come into the State and thus keep its bright well educated residents in the State. More and more I hear parents moaning about the fact that their offspring have left VT. as the environment elsewhere was ecomically more rewarding.Many VT. legislators seem to think that VT. can have its cake and eat it too. Private capital is totally fungible and VT. simply is not getting enough.

  3. j.c. Taylor says:

    Mr. Schubart – I notice that you haven’t responded to my comment re your speech. Is it because you are doing further research or is it because you find it hard to acknowledge that Vermont does not have a response to a very difficult yet fundamental issue

  4. JC,
    I don’t know much comparative data you have looked at. You are right that VT is an expensive state in which to live, partially because the 620,000 Vermonters who live here, of whom 310,000 are tax filers and of whom 160,000 pay income tax, have relatively high standards for their educational system and the well being of their communities. A few people pay a lot for community. Energy costs are high and Vermont is cold. Our mountainous landscape and small, spread out towns make transportation and road maintenance expensive. Yet we choose to live here. Having run a company with several hundred employees, I can tell you it was no harder to do business in VT than in any other state. Business makes a habit of complaining about the cost of regulation in all fifty states.

    Any data I cited is on the Blue Ribbon Tax Commission website and is available for your review. Thanks for your thoughtful question. Bill

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