America’s bi-polar legislature: The Club of Reward and Punishment

Posted on 31. Dec, 2012 by Stephan Helgesen in Economy, Politics

Not being a psychologist or mind reader I can’t point with certainty to the reasons our elected leaders act as they do, but if I were to make an educated guess I’d say that they all subscribe to the two kinds of people theory, aligning themselves with one of two schools of thought on how to legislate and motivate.

They are: the reward school — those who would rather change human behavior by offering incentives and the punishment school — those who believe that rigid rules and regulations will accomplish their goals.

I haven’t done extensive research on how successful each of these two approaches has been, but there are some actual decisions we can look at to see the fingerprints of the carrot and stick at work.

Let’s start with perhaps the classic example of a well-meaning law (punishment) that ended up being reversed after just 13 years in force (reward)… the Volstead Act or prohibition.

In 1920, all private ownership and consumption of alcohol was made illegal by the 18th Amendment to the Constitution, and the Government crackdown on beer, wine and distilled spirits ended up creating a cottage, off-the-books industry which eventually spawned a tidal wave of an even bigger industry, organized crime.

Way to go, Temperance League and politicians! By not understanding human nature, the punishment school advocates used this law to take away a good from those who had abused it and punished the not guilty as well. Talk about collateral damage!

Now I’m not saying that the alcohol banners’ motives weren’t admirable. Fact is, we’d probably be better off without all the DWIs, spousal abuse, crisis intervention and treatment costs associated with alcoholism. They just used the then nuclear option and failed. By the way, liquor sales (not counting beer or wine) were nearly $20 billion in 2011, up 4% from the year before. Exports were up 16.5% to $1.3 billion.

Next is the oil depletion allowance, an incentive (reward) to oil companies going back to WWI that lets them deduct 15% of the money generated from their wells from their taxes. It essentially allows oil companies to treat oil in the ground as capital equipment which can be written down.

Proponents say it’s a small price to pay (reward) for eventually drilling themselves out of business as resources dry up, but detractors say that oil in the ground must never be treated as capital equipment but rather a national resource which they say is being used for the oil companies’ profits (punishment).

A recent bill introduced in May 2011 that would have removed this subsidy was voted down in the Senate by 45 Republicans and 3 Democrats. It seems that oil is bi-partisan.

A prime example of a piece of legislation that embodies both the reward AND punishment school of legislative thought is the Patient Protection and Affordable Care Act — aka Obamacare.

Whatever your own personal feeling about this legislation, it was a bill born of a steamrollered process (punishment), passed using reconciliation requiring only 51 Senate votes (punishment) and enshrined healthcare coverage for all Americans (reward) while instituting a penalty (punishment) for those who refused to buy health insurance.

The 2,300 page bill will effectively impose other taxes (punishment) and may result in a government takeover of an industry that represents 26% of our GDP (punishment or reward depending on your political point of view).

While it may be human nature to use both reward and punishment for social engineering, it is probably the ultimate mistake to use only one of them all of the time.

Every parent knows the value of a carrot and a stick in child-rearing. It’s a pity our legislators didn’t get the memo, especially as we face the prospect of going over a fiscal cliff into the abyss where there is only punishment to greet them.

- Editor

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