America's financial regulatory framework; The mess gets messier

Some things clearly show the failings of two party politics and that something is missing from mainstream public debate. An example is American regulation of all sorts of things, how its done and how much it costs our economy. The February 18, 2012 issue of The Economist contains three articles at pages 9, 22-24 and 77 (online here, here and here) that address the issue and describes some of the failings of both parties. Although not stated explicitly, The three articles hint at how and/or why the ideology of both Democrats and Republicans failed.

The page 9 lead opinion ("Over-Regulated America") notes that the 2010 Dodd-Frank Act is too long (for average people) and complex (for anyone) to read or understand. Dodd-Frank, which includes Wall Street reforms to eliminate the "too big to fail" threat to the U.S. economy, is nowhere near being fully implemented. It therefore cannot possibly be understood even now. The Economist supported such regulation, but points out how flawed the "fix" is going to be. The lead opinion also notes that complex health care regulations now generate 30-60 minutes of paperwork for every hour spent treating patients. It also notes that regulations cost certain small businesses about $10,585 per employee per year according to a 2008 federal study (see Executive Summary at page iv). The federal study estimated the 2008 federal regulation cost total for all U.S. workers at about $1.75 trillion.

The article at page 22 ("The Dodd-Frank Act - Too Big Not to Fail") shows how expensive, confused and bloated the Dodd-Frank Act is. The complexity and remaining uncertainty is a drag on U.S. businesses being able to function efficiently. It also points out the complexity and dysfunctional nature of the layers of state and federal regulatory agencies.

Finally, The Economist article at page 77 ("The Rule of More - Measuring the Imapct of Regulation") points out the sleight of hand that both Republicans and Democrats routinely use to justify and evaluate/obscure the efficacy of their regulations. The stench of political ideology weighs heavily on that arcane but important activity. Collectively, the three articles argue at least implicitly that the two party system has failed and will continue to fail as long as ideology dominates Democratic and Republican thinking.

What about the benefits?

The question is what is the benefit that came from that $1.75 trillion regulatory cost. If its lower than $1.75 trillion, we have a problem, the size of which varies with any imbalance significantly below or maybe above that number. Unfortunately, The Economist articles did not squarely address the benefits issue, so the size of the problem, if any, can't be assessed from that information alone. Given that, one just has to take The Economist at its word that the U.S. is over-regulated, i.e., regulatory costs significantly outweigh the benefits.


That's not a big leap of faith for most conservatives but it probably is for most liberals. From a pragmatic, non-ideological point of view, over-regulation feels like it is a real problem. The costs probably do significantly outweigh the benefits, e.g., by maybe $200-$300 billion/year or more. That's based on personal experiences in the real world, e.g., discussions with doctors, working for decades in a heavily regulated industry, watching the ongoing creep of some dumb regulations here in California under democratic ideologue rule, etc. Obviously, many other people's experiences and perceptions of reality will be at variance with that.


And, there may be some isolated exceptions: A 2011 federal OMB study concludes that American Indian benefits from federal regulations from 2000 to 2010 were about $132-$655 billion/year, while costs were estimated at $44-$62 billion/year (see Executive Summary at page 3). Of course, those benefits came from somewhere, e.g., U.S. taxpayers. Estimating benefits from regulation is understandably difficult, see, e.g., this OMB analysis of federal regulation benefits.


As The Economist and others (see this review of reviews of cost-benefit estimates) point out, the issue of regulatory costs and benefits varies with who is doing the estimating and what their political/ideological agenda is. Liberals usually estimate high benefit levels, conservatives estimate low. Liberals usually estimate low cost levels, conservatives estimate high. That's just how the poison of ideology routinely works in politics. That's an example of why and how ideologues are usually clueless.

Non-ideological pragmatism is AWOL

The other thing the three articles show is that non-ideological pragmatism is absent from mainstream American political debate - one doesn't hear this kind of analysis and argument from (i) anyone in politics or (ii) nearly anyone in the mainstream press. The articles present an even-handed pragmatic point of view that is grounded in facts and unspun reality and focused on efficient problem solving. The Economist recognizes and accepts the fact that reasonable regulation is needed in a complex society. Political or religious ideology, if it is part of the author's beliefs, isn't obviously distorting facts or logic. Its hard to detect any ideology as a driving force behind the facts chosen for, or logic expressed in, the three articles. They make the point that just the right amount of intelligent regulation is important. Too much is just as bad as too little.

The lack of pragmatism in politics and the attendant damage to the public interest is a point that has been argued here over and over. It is argued again. Ideology dominates political thinking and policy. That pushes Democrats to over-regulate and Republicans to under-regulate, with bad outcomes in both cases. It can even be bad when a moderate* gets it wrong, e.g., Pres. Clinton (with republican and some democratic help) deregulating the financial services industry. That arguably was a factor in the 2008 financial meltdown.

* As pointed out here before, a moderate isn't a pragmatist if being moderate means just compromising between the left and the right. There is a fourth way, i.e., relying on pragmatism/common sense, to do or think about politics. The 4th way may or may not overlap with what the left, right or compromising center thinks or wants for any given issue.

Both ideologies and sometimes compromise between them have led to failure. Ideologies distort reality and limit creative thinking. Garbage in, garbage out. As long as any flavor of ideologue stays in power and pragmatists are out of power, America will be in trouble.

The political intelligence industry; The best political story there can be

Sometimes politics is just so much better than fiction. On Thurs., Feb. 16, 2012 (pages C1, C2; online article) the Wall Street Journal ran an article with the title "New Bill Clouds Legality of Tips." As it turns out, Congress is drafting a new law that would ban insider trading by the president, members of congress, congressional staffers and maybe some others. The article had nothing to do with tipping the waiter or bartender.

 Stardust launch 1999

The WSJ article was about information gatherers who work with people in congress and/or their staff and in the course of their work get inside information about impending laws, i.e., "tips". The WSJ noted the existence of a "political intelligence" industry dedicated to making money from this unique source of information. The people involved sell their inside information or "tips" to whoever has the cash and money to capitalize on the information. Those folks then make stock trades and money. According to an attorney familiar with this industry, the "legal risks may well outweigh the financial benefits" if the proposed bill becomes law.

This whole thing started up two or three months ago when the WSJ ran an article and 60 Minutes news show aired a piece at about the same time about people in congress, their staffers and lobbyists doing inside trades based on what congress was or was not going to do. Insider trading by congress, their staffers and lobbyists who do business with them is legal and thus a good way to make money.

People in congress and their friends have been doing inside trades for a long time. Occasional stories about this have come up over the years, but the topic apparently didn't penetrate public consciousness until (i) the two high profile WSJ and 60 Minutes stories and (ii) the public approval rating of congress dropped to below about 17% last year, an all time low until more recently when it it hit 10%. Profound public disapproval coupled with growing awareness that people in congress and their cronies were inside traders may have finally prompted a reluctant congress to fix the "problem".

If those things are not the reason for congress' attention to this topic, then who knows what is. Regardless, there is a reason. Congress partly feeds its massive ego on being above the law. They won't mess with that exhaulted status unless something very serious forces a change.

The congressional effort to deal with this public relations issue may cause the political intelligence industry massive potential collateral damage (or maybe not, if Republicans get their way). That was the focus of the WSJ article. The trouble with the pending legislation is that it may require people who gather tradable information to file disclosure reports. The horror of that is that the firms who work in this industry and the people who buy that inside information would likely lose their anonymity and the fees paid for such information might be made public. That awful scenario would ruin the whole political intelligence industry and cause massive job losses among the very wealthy and well-connected. Economic chaos would ensue. Or would it?

A plethora of questions from the bemused/irate

taxpayer outside the beltway

Why would the political intelligence industry be damaged at all if they had to disclose the people, fees and profits involved? After all, what they do is perfectly legal. Perfectly legal. What's wrong with making money? What's wrong with screwing the party (admittedly, usually anonymous) without inside information on the opposite side of an insider's trade? Its legal in this context. This is just a matter of winners and losers in a deadly serious capitalist game of making money. Some economists defend insider trading and some Republicans (Eric Cantor) are trying to defend the fine, job-creating, mom & apple pie, all-American political intelligence industry, so there must be merit to it, right?

Or, is it just that the people involved in this profitable industry don't want the rest of us idiots to know just how much money they make and how they make it, i.e., by cheating? But why? Are they embarrassed? Come to think if it, just what do inside trades do for the U.S. economy as a whole? It punishes fools without inside information and dumb enough to think they trade in a clean and fair marketplace. So, is inside trading good for the economy in some other way? Does it create confidence in our economy among those with inside access, wealth and power and that more than trumps any downside among the idiot masses or in the overall economy?

Allowing legal inside trading arguably undermines public trust in the federal government and financial markets by showing the reality of just how corrupt our government and "respectable" business people can be. It undermines public trust in congress. It is hypocritical, e.g., a few in congress complain about people in congress doing it but say nothing about people outside congress. If its bad for people in congress to do insider trades why isn't bad for those on the outside? Does the inside trade industry create jobs in the wider economy? If so, how many jobs and what are they - a few butlers and yacht and private jet salesmen?

The WSJ article quoted a political intelligence industry insider who said the new law will mean that some information providers "will simply quit doing it as the compliance creates burdens and costs." Huh? They will quit because they don't want to be outed and their information will likely become worthless or people will risk Martha Stewart's mildly adverse fate. That's probably not that big a risk, given the SEC's usual inability to police the markets, hedge funds and Bernie Madoff, but that's a different topic. Nonetheless getting caught by the SEC is a probably enough of a deterrent to cause the inside information to lose significant value to political intelligence operatives and their stalwart customers.

Fair and balanced

All that one can reasonably and fairly say about the people in congress, their staff and the fine "entrepreneurs" involved in the political intelligence industry is that they are sleazy cheats. Like Honey Badger, they just don't care. They are not criminals because what they do is legal. What Martha Stewart did and went to jail for, they do with impunity. This sleaze or variations of it has been going on in federal, state and local governments for decades, if not centuries.

Even Newt's failed fantasy called the 1994 Contract With America had a provision that laws applicable to us would also apply to people in congress. We all know how far that got. If insider trading like this was even marginally good for the country, then why doesn't congress just tell the public that and do nothing? On the other hand, if it was bad all along, then why didn't congress fix this in 1994 or decades or centuries ago? Either way, congress is far beyond being just ethically challenged. The institution is inherently corrupt. The people outside government who make money from this cheating scheme could not care less about the sleaze or the people they rip off so long as they (i) remain anonymous (look good via plausible deniability), (ii) make money and (iii) pay taxes, if any, at the 15% capital gains rate. Is that a sweet deal or what?

Now, how can a political story get any better than that? It is easy to see why congress' approval rating is 10%. They earned it.

The nature and scope of cyber theft - it's personal

A recent U.S. intelligence report observed that cyber theft by our economic and military competitors pointed out that countries like China and Russia are stealing as much technology as they can as fast as they can from anyone who lets them steal it. America's response is, just like politics as usual, ineffective chaos and paralysis. That report and other sources were mentioned here previously.

The Wall Street reported an instance about the nature and broad scope of hacking at Nortel that began in 2000 and continued for a about decade (Tuesday, Feb. 14, 2012, story at pages A1 and A16; online version). Even the CEO of Nortel was hacked and had no idea it was happening. Nortel was completely compromised - hackers had access to essentially everything. Nortel is a Canadian telecommunications firm and was once a large company. It is in bankruptcy now, presumably because of bad business decisions and not because the Chinese hacked them to death. 

Just how much of this is going on?

That disturbing Nortel story led to the question of just how pervasive is this hacking thing. The intelligence report says it is widespread in U.S. industry and government. How about average Americans with nothing in particular of value to go after? A check of IP addresses that query my home router seemed like a good, obscure, utterly worthless place to look for anything. No one in their right mind would waste any time looking for anything there. What was on my router log was a real surprise. There are endless probes of all ports coming from Chinese and Russian IP addresses. The probes are persistent and repeated. Probes occasionally come from U.S. and other IP address locations, but the majority (probably > 85% come from China and Russia). That's creepy.

I mentioned this to the IT guy at my company. He laughed and wasn't surprised. Hackers use software programs that probe everyone's PC at random. No one was specifically looking for my router or me personally. He said that the Chinese and Russians are well-known in the IT community as the major hyper-aggressive hackers and that they probably have hacked millions or tens of millions of personal computers.  Maybe more, maybe less. Nobody knows. Lots of organizations have been hacked: Homeland Security, U.S. Chamber of Commerce, U.S. military, U.S. banks and retailers, 90% of U.S. companies according to one survey, the $300 billion U.S. Strike Fighter project and so on. The threat is real and now, not theoretical or in the future. The value of what has been stolen to date is incalculable, for obvious reasons.

F-35B Lightening II

Joint strike fighter - Elgin AFB, Florida - January 2012



Why care?

Why should anyone care that millions of U.S. and other PCs are hacked? That's their own damn problem, right? Well, not really. If those hacked machines are used in coordinated cyber attacks, they can cause chaos on the internet and our economy. A coordinated attack can cripple critical civilian and government infrastructure and/or operations. It can shut down our electrical grid, which is a definite bummer. It can cost our economy billions or tens of billions per day. In short, hacked PCs and the folks who own them are a real menace to all of us, including themselves.

How to fix it

Although a fix is probably simple and doable, it isn't going to happen with our current state of political meltdown and paralysis. One fix would be to require, in the name of national security, that everyone to use security software on their PC and keep it updated. That would have to be done automatically because many people are too lazy to do it on their own and/or would outright refuse on whatever grounds struck their fancy at the time, e.g., conservative Republicans and Libertarians refusing to submit to government interference with essentially anything.

Since our perpetually paralyzed U.S. government isn't going to fix anything in my lifetime, here is something easy to do that might help defend America at least a bit. It costs nothing except about 1 or 2 minutes of time.

Quick, easy check for a hacked PC

There is an easy way to check if your computer is hacked. Close all applications and then click the Microsoft icon on the bar at the bottom of your desktop to get the search programs and files box. Then:
1. type "run" and hit enter - a new window opens
2. type "CMD" and hit enter - a new window opens (C:\windows\system32\CMD.exe)
3. type "netstat -ano" (don't omit the "-" before ano or the space after netstat)
4. in the State column, look for the word "ESTABLISHED" - if it is there, your computer is hacked - if you check it with you browser open and connected to the internet you will see the word established because the internet connection via your browser is on, i.e., the connection to the internet is ESTABLISHED
5. if your PC is hacked, get it fixed and keep it fixed - that keeps me safe from you

Its free

Security software doesn't have to cost anything. I use Microsoft Security Essentials (its free) and one off breed free security program. It ought to be free since its Microsoft's own OS that is hackable, which is my definition of a defective consumer product. But that's a different topic. The off breed is there to back Microsoft up in case hackers try and succed in hacking Microsoft's security. Few hackers, if any, goes after off breeds, unlike they do with the big guys like Norton, MacAfee and probably Microsoft itself. The payoff from toasting off breeds is too small.

With any luck, software for individual personal computers will get harder to hack over time and this here & now national security threat will diminish. Businesses and the government will need to figure out on their own how they are going to defend themselves. Congress probably isn't to going be much help in fixing this threat to our economy and security. They are pre-occupied blaming each other, gerrymandering their voting districts for their own benefit and working on reelection, i.e., doing political business as usual.

Defending sloppy politics or something else?

Over the last couple of weeks several commentators have expressed a really new and unusual sentiment. They have noted that U.S. politics is inherently messy, inefficient and chaotic. That sloppiness, for lack of a better term, is something we apparently just have to live with. The questions is whether that's true, partly true or mostly false. If its mostly false, why might some people express that sentiment?

When one looks at some areas of human endeavor, it is clear that there's little slop in it. Consider financial institutions like Goldman Sachs and what they do, even when the economy melts down and millions of people are economically injured. Is that sloppy or logical and efficient, i.e., very profitable over time? What about utilities and oil companies? How about scientific disciplines like chemistry, electrical engineering, medicine, economics and weapons research? Consider lobbyists and superpacs, backed by millions in campaign contributions or donations and what they do. Are their efforts sloppy and random or relatively efficient?

In normal operations, there are significant differences of opinion and fights between factions in business and scientific endeavors, but the overall enterprise typically remains reasonably efficient. Given that, nothing says that American politics inherently has to be an inefficient, chaotic morass. Humans can be focused and efficient when they want to, especially when they are (i) incentivised, (ii) reasonably well-informed and (iii) not manipulated into endless diversionary conflicts by very sophisticated interests with hidden agendas. If that is reasonably true, and it is, then why would anyone say that politics has to be inefficient and chaotic? Of course, in politics one often needs to compromise or the whole enterprise tends to bog down. That's a difference, but that's no reason that it has to dominate the situation. Intractable differences of opinion didn't seem to dominate and paralyze politics from the 1950s through about 2008.

Something is different now, or at it least seems to be. If there wasn't something new and ugly in politics, then why are some experts beginning to assert that politics has to be chaos and waste? Why didn't they say things like that in the 1960s, 1970s or 1980s?

From a non-ideological, pragmatic viewpoint, there is an explanation. Its that the "experts" have bought into the modern conflict narrative the two sides have constructed. That helps preserve the status quo. It gives the two parties an easy excuse for delivering sloppy, wasteful, failed political policies. What the American public gets from liberal and conservative ideologues and from wealthy business interests is a lot of polarizing propaganda, useless ideological arguments and third rate political policy.

Who is the worst?

The Republicans are particularly at fault when it comes to spin, polarization and hate politics. Facts simply do not get in the way of the bizarre fairy tale world many (most?) hard core conservatives live in. Its not that conservatives are necessarily wrong about everything, they certainly aren't, but their way of doing politic is pure all or none political war. Its a zero sum game and conservatives play a vicious version of it. Many businesses play the same harsh game, but that's to be expected. They have to look out for themselves, not the public interest. Government is there to protect the public interest, not businesses.

When some experts assert that politics has to be a chaotic, wasteful sloppy morass, that's nonsense. Politics doesn't have to be that way. We can't afford for it to be that way. As argued here before, so long as ideologues on the left and the right dominate, politics will remain a sloppy enterprise driven by emotion, ideology and misinformation. Until a relatively virulent strain of pragmatism that rejects ideology as the way to solve problems takes hold, we will be stuck with chaos and waste. At least to that extent, the experts are right.

The value of tax exemptions: Trillions or billions?

What is the value of tax exemptions for churches and non-profits? Getting a handle on that would be interesting. In theory, churches lose tax exemptions if they become active enough, i.e., spend enough of their income to cross some murky threshold and/or engage in some other overtly political things, in politics. As usual, anything to do with taxes is blindingly complex and mostly grey. Loss of tax exempt status for churches would have the following theoretical consequences, among other things:

• Net income would be subject to federal and state income taxes
• Charitable donations would be taxed
• State unemployment, property and sales tax exemptions could be lost

Fungus in tree trunk

Mount Cuyamaca - February 2012

 As noted here before, tax exemptions for all of the myriad of non-profit organizations could be very high. For example one study estimated the value of tax exemptions at about $489 million for 27 hospitals in the Chicago area in a single year. There are about 2,900 non-profit hospitals in the U.S. If one extrapolates from the Chicago study and assumes that tax exemptions for each are worth about half as much, i.e., about $9 million per hospital/year, the total cost to taxpayers would be about $26 billion. If the value of services was half that per hospital compared to the Chicago study, those 2,900 hospitals would provide about $9.3 billion in services.

One study from the 1960s or 1970s (hard to tell when) estimated the value of church properties at about $118 billion. With inflation that might now be about $400 billion. All tax exempt properties would probably be worth about $500 billion to $1 trillion. From a legal point of view, the courts have held that tax exemptions for church properties are constitutional based on the argument that a property tax exemption (no tax collected) is not the same as an unconstitutional tax subsidy (owed/paid taxes returned or not collected in the first place, which would violate the Establishment clause).

Its is reasonable to conclude that governments could tax churches if they decided to do so. As one federal court put it in 1972, a "tax exemption is a privilege, a matter of grace rather than a right". Taxing churches arguably forces churches to support federal, state and local governments, but there is nothing inherently wrong with that, especially in view of the fact that U.S. governments have supported U.S. churches for centuries. That support includes sending untaxed U.S. dollars to religious entities outside the U.S. who may or may not be friendly toward the U.S.

The question remains, what is the value of tax exemptions and what is the value of the benefits the public interest gets in return. When it come to hospitals, the value of what is received can reasonably be estimated. From churches, much (most?) of the value is harder to pin down in terms of dollars. One can argue that there is only modest or little value in inculcating religion into people. Others would vigorously dispute that.

Given the problems with financing all levels of U.S. governments, it seems reasonable to consider how generous we want to continue to be and how generous we can afford to be. How much does our generosity cost? $1 trillion per year? $100 billion? As long as various tax exemptions for non-profits remain, they divert revenues from federal, state and/or local governments. Americans pay for their generosity, especially to the extent it is based on borrowed dollars or causes reductions to government functions, e.g., public school support.

The press has failed and continues to fail

On Friday, February 3, 2012, Pete Dominick (Sirius radio, POTUS Politics, channel 124) aired an interview with investigative reporter Greg Palast. Palast worked for the BBC for years and reported on corporate corruption stories. He now writes books (Chapter 1 of Vulture's Picnic) and reports on various issues related to both business as usual and corruption in U.S. business and politics.

For example, Palast asserted that software analyzing the data received from safety equipment in the gas pipeline (pipeline integrity gauge) is programmed so that warnings about gas leaks were not always recorded. That may or may not have anything to do with accidents such as the 2010 San Bruno California gas explosion, but it is something not reported by the U.S. press. Palast asserts that oil and gas companies sometimes want "defective" software to reduce the high cost of maintaining pipeline operations ($100 - $200 million per ten miles just to analyze a pipeline, not to maintain it). Of course, oil and gas companies vehemently deny any complicity with anything unsavory like that.

In the interview, Palast commented that over the years a fair number of the major corruption stories he reported for the BBC and broadcast outside the U.S. got limited or no attention form the U.S. press inside the U.S. According to Palast, the failure of the U.S. press (or maybe more accurately, the people who control reporters and the news agenda) to reasonably inform the public on corporate corruption stories stems at least partly from press ties to or reliance on corporations and advertisers. Economic pressure sometimes limits what the U.S. press is willing and/or economically able to report.

Complaints about the general uselessness of the U.S. press have been aired from time to time over the years from all sorts of sources, including a few complaints from here. The economic pressure on the mainstream press is powerful. In a capitalist system like ours, the press has to make money or go bankrupt. That's just reality. It is also reality that corporations and individuals rarely or never want adverse publicity. If it is in their power, they will influence owners of the press to be quiet and not report news that is adverse to the bad actor.

Of course, essentially all press outlets will strongly deny that corporate or economic pressure ever affects any reporting decision. That defense of the status quo has been voiced for years. However, people like Palast and sometimes events that simply spin out of control show that that the press' denials of undue influence by money is not in synch with reality.

Money does sometimes limit things the press will report. That damages the public interest. The press defense of itself is the same as politicians telling us that campaign contributions do not affect anything. In both cases, the unspun reality just isn't the same as the spun version we get from self-interested parties. Unfortunately, there doesn't seem to be anything that can be done to change the status quo.

About all that the average voter can do is to be constantly on guard about what one choses to believe and to try to independently figure out what is reality and what is spin. That's not easy when significant amounts of information are simply withheld and/or otherwise hidden from the public. Public discourse has been impaired but there's no obvious way to fix the damage.

Do tax-exemptions for non-profits still make sense?

Tax breaks for non-profits support an vast array of activities that are generally supposed to support the public interest or welfare. Tax breaks support non-profits that include, e.g., churches and religions, social organizations, hospitals, medical research foundations, environmental advocacy groups, historical societies, medical service groups that provide services for the poor and others with limited access and so on.

Most of the organizations and causes that taxpayers support were relatively non-controversial for the most part. But that is changing. Religious groups such as the Catholic church and many evangelical groups are now fully engaged in unrestrained political advocacy. Political advocacy by churches arguably negates their tax exempt status. Some charities like Planned Parenthood have been controversial for a long time. On top of that, some tax exempt "charities", e.g., section 524 and 501(c)(4) political action committees (PACs) are tax exempt.

Some people don't support some or many church activities. Some religions don't support groups like Planned Parenthood and what they do. Given the typical PACs' job of spreading lies and smearing political opponents, one can reasonably ask why it is that taxpayers are forced to support those activities. Tax subsidies for spreading political poison by PACs arguably hurts the public interest. One can argue that what PACs, churches and groups like Planned Parenthood, the Sierra Club or the Boy Scouts do isn't worth the benefit that accrues to the public interest.

In other words, what is the cost-benefit for various tax exempt groups? On balance, is providing tax exemptions for all or some of these groups worth the cost? What is the cost? A trillion dollars per year or 10 billion? What is the value of the benefits that tax exempt groups provide? Can we afford that kind and level of support in view of our serious financial problems?

A 2009 study (see page 3) of 27 non-profit hospitals in the Chicago area estimated the value of tax breaks at $489 million in 2009 while the value of the services that were provided was about $175 million. That seems to argue that the tax breaks may not be worth it, assuming those numbers fairly represent the whole story. On the other hand, people who favor tax breaks for their preferred charity will probably find that the tax exemptions are well worth the cost. For example, charities will no doubt argue it would cost government more to do the charity's job while simply ignoring the question of whether or not some or all of the job should even be done at all. That's just how political advocacy works, or fails to work, depending on one's point of view.

Given our financial problems, it is time to ask the cost-benefit question. That requires a fair and brutally honest assessment based on facts, not spin. One cannot simply take conclusions from supporters of the status quo at their word. Its not clear we can afford it any longer, but getting a handle on the cost-benefit would help start an intelligent public debate.