Runaway incompetence in IRS

Since a little over a year I have been shocked over the extreme level of incompetence that I have encountered in IRS, the US tax agency. It started when they lost a form I sent them. Since they received the second form that was in the same envelope, I think we can be pretty sure it was IRS, and not USPS, who lost it.

After getting a request for the form some 2 months later, I sent in a copy, but due to an error in the copy printed from a file, I had to amend it. The problem with IRS seems to be that the left hand doesn’t know what the right is doing, and neither hand is connected to any sort of brain.

What happened is that they kept sending out requests for that form, and then for other forms, and over and over, from different offices. After a while they sent out statements that I owed them money, then a new letter came a few days later saying I didn’t owe them, and then I supposedly owed them again, and so on. Apparently, it took so long for them to process correspondence that their response was totally out of sync with the paper trail.

And here is my most damning criticism. When they do send out a claim, they fail to provide any sort of calculation or reference to the paper trail.

This is a deadly sin in any bureaucracy.

There is just no defense for it.

It is this incompetence that causes the entire problem. Let me give you an example. Today I got a letter saying that what I paid for a certain period was $355 less than what I filed for that same period. The letter did not mention neither how much I supposedly paid, nor how much I supposedly filed for, just the difference of $355.

It is beside the point that I neither paid nor filed for that period, what drives me nuts is that IRS sends out these anonymous letters without providing the necessary information for the taxpayer to be able to assess the validity of the claim, and respond to it.

Also, the letter is completely anonymous. Not even the initials of a person authorizing it. Could it be because nobody wants to be associated with it, knowing full well that it is fraudulent?

There is definitely a fish buried in IRS. Reforming USA might well start with reforming IRS (and the tax code). Most of the employees could surely be fired. They are obviously too incompetent to keep on taxpayers’ salary anyway.

Amend the 14th amendment!

The 14th amendment to the constitution of USA says “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States…”

The reason for the text passed 1868 was to explicitly make former slaves citizens, but the problem now is that it acts like a carrot, attracting illegal immigrants from Latin America. The immigrants figure that even if they have to live as illegals in the US their entire life, at least their children will become citizens and can stay legally. It is thus an immigration loophole. When the normal process takes upwards of 20 years, the difference is not so big to this illegal process. Even if it takes a generation, a generation is only about 20 years or so, right?

It also flies in the face of international law. International law, valid in the US as well, states that every child gets the citizenship of his or her parents. For instance, a child born to a woman with US citizenship abroad will still get US citizenship. Thus, the US applies that principle, which now is the international norm. There is no reason to hold on to the rule from 1868.

Thus, since there are strong reasons to abandon it, and no reason to keep it, a constitutional amendment should be introduced to change the rule of citizenship explicitly to be determined by the parents’ citizenship(s), not the country of birth. (Note that amendment 14 contains also other provisions and sections, that serve a purpose.)

Democracy Advice to FNRP in Honduras

A one day debate on Facebook within the FNRP (the so-called resistance of Honduras) in April this year leaves me with mixed feelings. It seems clear that they desperately want participatory democracy, and reject the traditional style of politics in the Americas, the strong-man style of caudillismo. That is very good.

However, it also seems that for all their desires and energy (demonstrated in demonstrations the past year), they seem not to know where to begin. How to do it. Where to start. What to do. And that is tragic.

They dream of participatory democracy, but they appear not to know how to create it. They are lucky, though. Learning how is easy. They already have the hardest part taken care of: The will to do it.

It would be very good for Honduras if the FNRP would get organized in a participatory democratic way. Broad based political movements are important, as we have seen in Sweden for instance, with several parties that are so-called popular movements (“folkrörelser”), with a bottom up decision making process. That seems to be exactly what several of the participants in the debate want for Honduras, without really knowing that they don’t have to re-invent participatory democracy. It has existed for thousands of years.

A while ago I wrote a page on Democracy for Dummies, with the bare basics. It is not rocket science, all it takes is that the members commit to a democratic process, and write statutes or bylaws that reflect what they want. (BTW, “bylaw” literally means ‘village law’ since “by” is ‘village’ in Scandinavian languages.)

What these bylaws should say is of course very important, and that is something that has to be worked on diligently. Writing the bylaws correctly is very important for the success. It is the foundation upon which the rest of the building is constructed. Once they are mature, they can call to a constituting assembly and create their organization, e.g. a party with a bottom-up structure in which the congressmen and women are answerable to the members, and not to campaign contributors.

I do hope that they manage to pull this off, because it would benefit everyone in Honduras, also the richest. Yes, those that they call “golpistas.” I know that many in the “frente” believe that the “golpistas” are their enemies, but that is just not true. The enemies of the “golpistas” are not the people, the average Joe who wants to create a more equal society and participatory democracy. No, the enemies are the populists who pretend to share these values with the people, but who really are just out to help themselves, and who would, if they succeed, destroy the chances of economical prosperity in Honduras for decades.

As someone wrote in the debate I mentioned above, this is a struggle that the Honduran people has to do. They must learn for themselves to do these things. They must study. They must reject those who come in and say “I can do that for you, just give me a mandate”. That is caudillismo. What they need is democracy, and the only ones who can bring about democracy is the “demos”, the people.

I wish them good luck, and I offer the advice to look for examples and guidance where democracy works and where there is an ancient tradition. Don’t try to learn from your mistakes, you won’t live long enough to make them all. Learn from the experience of other peoples instead!

An Economical Rescue Plan for Honduras

Public hydroelectric projects can get the economy going in Honduras, create jobs, improve the national economy, and diffuse some of the social conflicts.

While many are still debating what to do with the split in Honduras, between the redshirts who want to write a new constitution from scratch, and the whiteshirts who insist on respecting the rule of law based on the existing constitution, Honduras is bleeding. Unemployment is around 30%; the economy hasn’t recovered since the double-crisis of world depression and severed diplomatic relations; crime is astronomical; and big infrastructure projects such as a hydropower project in the Patuca have seen their foreign investors pull out. The country is in crisis. What to do?

President Porfirio Lobo has spent much political capital on trying to re-establish diplomatic relations, so that foreign aid and credit can start flowing again. However, he has not managed to get the wheels turning, apparently not taking that matter so seriously. But it is imperative to deal with it.

I suggest that Honduras can lift itself by the bootstraps. This is how:

The state of Honduras should invest in infrastructure projects that lead to a long-term return on investment. There is an obvious candidate: Hydropower. Years ago I saw in a hydropower atlas that Honduras has the second highest unexploited hydropower potential per capita in the world, after Iceland. Yet, some 80% of the electricity is generated in thermic plants, using expensive imported fossil fuel in the form of diesel. Only 20% is hydropower, in a few plants owned by the state electrical utility company ENEE.

Since over 20 years the state has built no more hydropower plants, due to lack of foreign credit (which dried up when the neoconservatives took over the policy making). All new capacity has been privately funded, and thermal, since that gives a better short-term ROI. However, it is very detrimental to the national economy. Lately there has been interest from the private sector in developing hydropower, under concessions from the government. This has been met with resistance from people living in the affected areas, since they view their public land and water being given to private companies without them even being consulted.

There is a win-win way out of this, and that is to develop this renewable energy resource in a public utility instead of in a private company. By keeping it in ENEE, it will remain the property of the people, thus increasing the chances of social acceptance, and the possibility for the government to ensure an environmental-friendly implementation in harmony with local indigenous cultures.

The main reason to do this is to benefit the national economy. By carrying out the project by itself, the government can make sure that most of the money invested stays in the country, which means that it eventually comes back to the coffers of the state (in the form of taxes, decreased unemployment, and–importantly–in the form of increased GDP).

To fund the project or projects, the government should borrow money domestically, not internationally. I’ve heard that there is money in the banks, which is not lent out since there are no viable projects. Just like in the US or the EU, it is the state that has to kick-start the economy, using the principles of Keynes. By borrowing domestically they avoid creating a devaluation pressure, and once the investment starts paying off, the domestic currency (the Lempira) will gain in value, so the lenders will be paid back in a currency that was stronger than before. It’s a win-win.

Some might think that the private sector should have this chance to make money. My answer is, they do! Rather than pour the concrete they lend the money, and are payed back with interest, in a currency that is expected to be stronger than before. It seems to me that the capitalists have nothing to complain about on this plan. And as for the private engineering companies, many of them will surely get contract jobs, so they, too, should be content. The unemployed, finally, will discover that there will be more demand for them.

Once the plant is ready and operating, the hydropower will replace some of the need for thermal plants. The importation of diesel might, in theory, decrease, but in practice the overall consumption of electrical power might increase by a similar amount, due to the overall increase in GDP that these and related projects lead to.

In summary, I propose that Honduras should be able to lift itself by the bootstraps by developing hydropower within the public electric utility company ENEE, financed with domestic capital, built by domestic companies (with just some foreign assistance for key skills); and that this would lead to an increase in employment, in GDP, and a long term improvement in the state finances.

Note: These are my views and nothing else. In the interest of full disclosure I will say that I have worked as a consultant for ENEE in the past, and developed projects for environmental impact assessment of proposed hydropower projects.

Strengthening Democracy in Honduras

The political map of Honduras will change for ever after last year’s political crisis, in which the vast majority of the Liberal party, supported by the main opposition party the Nacionalistas, and most of the small parties, denounced the Liberal president Manuel Zelaya after he had violated the Constitution and Supreme Court orders. For which the Supreme Court ordered his arrest by the military.

This has left the Liberal party, a party that has won 2 out of 3 elections the past 28 years, split. The left fraction around Manuel Zelaya and his ex foreign minister Patricia Rodas – who grew up in sandinista Nicaragua and clearly has her political ideology colored by that fact – has now decided to throw in their chips with the FNRP. They call themselves the “resistance” movement, in reference to a resistance against what they claim to be a “coup d’état” (i.e., the arrest and removal from office of Zelaya on June 28, 2009).

When the dust has settled, perhaps there will be three main parties instead of two in Honduras. That this is possible we see in the UK. The three might be a leftist party around FNRP (which will perhaps eventually drift to social democratic ideals rather than socialist ideals); the Liberal party based on liberal ideals; and the Nationalist party based on conservative ideals.

A problem now is that the FNRP is not accepting the legitimacy of the present government of Honduras, and thus not of the Republic of Honduras as such. From my Swedish background that is an absolutely outlandish position–and I mean that quite literally. A person who did not accept the law of the land was an outlaw, in the ancient jurisprudence of Scandinavia, and he had to seek refuge in the “outland” (i.e., abroad or in uninhabited land) since he was not protected by the law. Such a person could be killed without punishment. With the development of international law things have of course changed now, but that ancient principle is a foundation for the modern concept of nations, ever since the Peace of Westphalia: It is implicit that all citizens of a state must obey the laws of that state, or leave it.

In fact, the e-mail signature I use, “If you only knew, my son, with how little wisdom the world is run”, is a quote from a letter that Axel Oxenstierna wrote to his son when he sent him to negotiate the Peace of Westphalia on behalf of Sweden…

What FNRP is saying would be a crime in some countries, but in others it would not be a crime until they went from words to action. But regardless of the legality of it, what they are doing is, politically speaking, a very foolish and immature thing. And perhaps that is why the ruling party is allowing them to continue, because it benefits the Nationalists.

This is a pity, because Honduras really needs reform, and the FNRP has got some legitimate grievances. However, their leaders seem to lack political savvy, democratic experience, and wise advisers–or if they have, they don’t listen to them. Their whole strategy is based on them writing a new constitution, from scratch, even though it is unconstitutional according to the existing constitution, which they consider no longer to be valid. The problems with their position are, however, first that a large part of the population considers the existing constitution to be legitimate why the FNRP one automatically will be illegitimate (and according to the existing constitution all Hondurans must then restore the existing, which means the country will be split). Secondly, even if they manage to impose a new constitution, they will have done it at the price of undermining the rule of law, why it will be a Pyrrhus victory; what they really will have accoomplished, if they succeed in their enedeavor (which I find higly unlikely), is to establish the Law of the Jungle as the supreme principle in Honduras.

Thus, whether they succeed or fail in their strategy, they will fail to achieve their goals. What they need to do is to change strategy. And now I will give them some advice on what to do instead.

To achieve a functioning democracy, they must demonstrate that they are mature enough to take on the responsibility. They must participate in democratic meetings. They must demonstrate that they are ready to accept majority decisions, and implement them even if they initially voted against them.

When Micheletti was interim president he invited many of the present members of the FNRP to discussions, but they refused to attend such meetings. That was a childish reaction. It is true that meetings can be used for trickery, and they had reason to be weary, but it was unwise not to engage when the hand was streched out in search for a compromise. They had a position of power from which to negotiate, but they threw the opportunity away.

They no longer have a position of power from which to negotiate. Most countries have recognized the new government, and those that remain are getting increasingly isolated internationally, as Chávez is seen more and more as a dictator and terrorist-supporter by the week. They blew their best chance, and now they have to start with a new strategy.

That is why I advice them to start by demonstrating their committment to democracy, to the rule of law, to democratic meetings, and to following the rules. Only by doing that can they gain the confidence of their political opponents, a confidence that they need in order to negotiate reforms. They have to prove themselves as trustworthy partners in the business of managing the public good. They have to gain that respect.

The next step is to analyze the constitution and propose reforms that can increase democracy, prosperity, and transparency (thus decreasing corruption). All of this analysis has to be done, and debated publically, before the actual reforms to the constitution are proposed in Congress. This is necessary in order to gain legitimacy and public support.

As for possible reforms that may improve conditions in Honduras, I have previously proposed the introduction of parliamentarianism, thus reducing the president to a largely symbolic head of state. This can be done within the confines of the present constitution, as far as I can judge. The president cannot be reelected, but a prime minister could, meaning that in a parliamentarian system the FNRP could get that continuity that they apparently think is so important, while at the same time preventing caudillos from taking over, something that the right is rightly concerned about.

Furthermore, I would recommend the drafters of the constitutional reform to study the Swedish constitution and laws as regards the prohibition of politicians to deal with individual cases. This is a way to mitigate corruption. Note that the Swedish constitution no longer is based on the principle of power sharing, but on the sovereignty of the people. All power emanates from the people and is exercised through their elected representatives in parliament, city council, etc.

The Swedish-Finnish administrative system seems to me to be a unique design, based on ancient democratic principles. I have compared corporate law from Sweden, Denmark, France, and Florida, and while the Swedish system of governing a corporation matches the way all democratic bodies are ruled in Sweden, all the others follow a different system. The main difference is this:

In Sweden those elected cannot interfere in specifics. They hire someone to do the specifics, and all they can do if they don’t like his job is to fire him. Also, the elected persons can only take decisions in a group by voting in a formal meeting, that has to follow very specific rules (designed to prevent “palace coups”). Their main job is to set policy, and supervise that the implementation of the policy by the administration (meaning those who are employed, non-political persons) is as intended.

In the US they elect people for actual jobs. The problem with the US approach is that it leads to corruption. Instead of a corrupt permanent office holder, there is instead corrupt temporary office holders – unless the person is beyond corruption.

The Swedish form of representative democracy is designed to prevent corruption not through the threat of loosing the next election, but by design, while they are still in office. Also, it allows for persons to be hired based on competence, rather than elected based on fundraising ability. Since the state pays for university education, including in public administration, there are lots of people with a dedicated education for the task. While in the US, many officials have an education designed for the private enterprise, which is a different beast than public administration.

There is another key difference between USA and Sweden on the one hand, and Honduras on the other, that tends to be forgotten (although the UN takes it seriously and considers it perhaps the most important problem to deal with). And that is local sovereignty.

Swedish kommuner (communes) have local sovereignty, meaning they can levy taxes and decide how to use it. There are two levels of kommun, corresponding to departamento and municipalidad in Honduras. Both have an elected council, but no mayor (Sweden and Finland are the only countries in Europe that have no mayors as far as I know). Instead they are governed like a corporation in Sweden: The council hires an administrator (equivalent to a CEO), and he is in charge of operations. The council decides policy and supervises the administration, but does not decide individual cases. This latter is in stark contrast to the US, where the councilmen decide itty bitty details.

Honduras has very weak local sovereignty, and that may actually be a key thing that needs to change. Money is spent better locally, and corruption is fought better too. Furthermore, local democracy with budget responsibility will foster more responsible citizens, and activists who try to work for results rather than take to the streets and demand action like overgrown children.

Congressmen and -women of Honduras: Give the people local budget responsibility, and watch them start working for bettering the roads, instead of blocking the roads!