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Sunday, January 31, 2016

Do You Have "Skin in the Game?"

 “Skin in the Game”a phrase that gets bandied about without much agreement as to what it may mean.  According to Wikipedia, to have skin in the game is “to have incurred monetary risk by being involved in achieving a goal.  ‘Skin’ is a synecdoche (figure of speech by which a part is put for the whole) for the person involved, and ‘game’ is the metaphor for the actions on whatever field of play is at reference. The aphorism is particularly common in business, finance, gambling, and is also used in politics.” 

 Investopedia .com refers to a situation in which “high-ranking insiders use their own money to buy stock in the company they are running…to ensure that corporations are managed by like-minded individuals who share a stake in the company. Executives can talk all they want, but the best vote of confidence is putting one’s own money on the line just like outside investors.”  This probably takes us as close as we will come to the original meaning of the phrase.


 It is what an investor like Warren Buffet looks for in companies in which he likes to invest.  Although Buffett did not originate the phrase (as some contend) he prefers to invest in companies where executives invest their own funds in their firms.  The late William Safire, columnist for the NY Times sought the origin of the phrase, dispelling the rumor that Buffett created it, but learning from another investment specialist that the expression is much used to “convey financial risk in any kind of venture, but you could stretch it to mean some kind of emotional investment.”   The phrase has become somewhat popular in everyday language and has become increasingly popular in political speech.  It has been heard more than once or twice in the Senate chamber, and even President Obama got into the act in an interview with George Stephanopoulos when the President-elect explained that a long-term fix for the economy would demand sacrifices from all Americans.  He proclaimed, “Everyone’s going to have to give.  Everybody’s going to have to have some skin in the game.”
One writer, Michael Corning, on www.deliberatelyconsidered.com  used the phrase to sum up the differences between Republicans and Democrats as to its meaning. 
“Democrats tend to say that the wealthy aren’t paying enough taxes, and Republicans frequently lament that around 45% of all households pay no federal income taxes.”  Similar arguments are applied to Social Security, Medicare, Medicaid and public pension and retirement programs.  “Democrats seek to preserve these programs without making major changes to them, and Republicans insist that to preserve these programs, substantial changes are needed and more skin needs to be put into the game.” 
Corning then makes a point which carries a great deal of truth, and puts our raging political debate into a somewhat different perspective.  He said (in 2011), “These opposing views will dominate public policy discussion through the 2012 elections and beyond.  Ultimately, public policy will (have to) resolve whose skin should be in the game, and how much of it should be committed.”  He concludes: “Putting ‘skin in the game’ touches us on an elemental level and reaches beyond reason.  It is this characteristic that makes it attractive for political rhetoric for those promoting shared sacrifices and others seeking personal investment in solutions.  The next time you hear the expression, you might want to stop and ask: 'what is being asked by whom, and for what purposes’?”
That, in essence, brings us back to the title question:  Do You Have “Skin in the Game?”  In other words, what investments are you making in the enterprise called “democracy?”  Using alternative phrasing, do you have a stake in the management of our system of government?  Do you make an investment in terms of money, time, effort in being a citizen?  Have you put anything on the line, so to speak so that you have something to lose if things are not going well?  Do you have a real stake in our common enterprise of making democracy work for all?  Or, are you being led astray, bamboozled, and made ineffectively invisible by certain forces and interests that take control of your very being in a subtle or surreptitious manner?   Let’s explore some thoughts:

1.     It has to be acknowledged that many people – citizens and non-citizens – already have some skin in the game.  That is, there are those who are already investing themselves in this enterprise of governing, of being a good citizen -- investing money, time and/or effort in this franchise.  Some could say that the mere act of paying taxes is such an investment.  However, one could also argue that tax-paying is a citizen obligation imposed by government at all levels, but is not a ‘voluntary’ investment.  I happen to be one who believes that the aspect of being voluntary is crucial to the concept of having ‘skin in the game’; at least that seems to be more than implied by the original use of the phrase in business – executives deciding to use their own money to invest in their company’s stock.   So, at the very soul of this phrase is voluntary contribution.

Who could we safely say are already making such a contribution to the enterprise of governing and making our democracy work?  Following-up on #1, I would venture to say that such a definition would encompass:

·        Volunteer enlistees in the military

·        Those engaged in volunteer service for their country for at least 2 years such as AmeriCorps or Peace Corps members; Teacher Corps members and VISTAs would also qualify, as would Older American Programs like Foster Grandparents and Senior Companions.  (By the way, just because some of these volunteers receive a stipend does not, by law, count as wages)

·        Caregivers who volunteer to care for a loved one or stranger for a period of their lives

·        There are also some very famous people who have put their own skin in the game, often on a broader scale than just for this country.  Some are former Presidents, like Jimmy Carter, Bill Clinton and Jack Kennedy.  Others are entrepreneurs who have made enormous amounts of money and then founded Foundations or organizations to undertake worldwide missions of healing, of starting businesses among the poor of the world or investing in education, rights of girls and women or of technology.  Bill and Melinda Gates come immediately to mind, but don’t forget people like Zell Kravinsky who made millions investing in real estate in his native Pennsylvania, but in 2001, began donating money and land to various charities until his contributions reached $45 million dollars. However, Kravinsky still felt that donating money and land wasn’t enough. He decided to up the ante and gave his kidney to a total stranger – now that’s putting some real skin into the game!

·        Celebrities in the entertainment and professional sports worlds have also been contributors of money and effort in ways that show extraordinary investment of self in our system and our enterprise of democracy, fairness and equality.  
    I think of Brad Pitt and Angelina Jolie.  Brad has been involved in the effort to rebuild New Orleans (especially in the 9th Ward where devastation is still quite visible).  Brad and a group of colleagues have been actively supporting the rebuilding of houses along “green” lines in the midst of that devastation caused by Hurricane Katrina.  Angelina has been shown time and again working with young girls and women of other countries to bring opportunities in health, nutrition and education to other countries of this world.  Together they have also made it a point of their lives to adopt children with special needs from different races and cultures.  These celebrities have skin in the game, as do others like Oprah Winfrey and Muhammed Ali. 
    We know something of Opray’s involvement beyond just charitable giving, but Ali is more of a hidden treasure.  “Muhammad Ali’s charitable legacy is not measured in dollar signs and decimals, but by the countless stories of his willingness to bring joy to others. As President Barack Obama put it, “We admire the man who has never stopped using his celebrity for good — the man who helped secure the release of 14 American hostages from Iraq in 1990; who journeyed to South Africa upon Nelson Mandela’s release from prison; who has traveled to Afghanistan to help struggling schools as a United Nations Messenger of Peace; and who routinely visits sick children and children with disabilities around the world, giving them the pleasure of his presence and the inspiration of his example.” Muhammad Ali is the first, the original charitable athlete. And he’s been at it for 50 years now,” proclaims TotalProSports.com.

These are just some of the citizens who are broadening the concept of ‘skin in the game’ by investing themselves directly – one of the hallmarks of having ‘skin in the game.’

2.     On the other hand, there are those who possess wealth or special talent or entrepreneurship who choose not to put skin into the political or equal opportunity game.  It is somewhat painful to know that many millionaires and billionaires do not even give to charity.  In fact, the average rate of charitable giving amongst the rich and powerful is a mere 1.7% of their income.  A sad comment indeed on the “job creators and best among us,” as they have been termed by some of their worshippers.   An article by Ken Stern in The Atlantic magazine (online) from April 2013 tells some additional interesting facts.

·   Many of the 12 individual charitable gifts that topped $100 million in the U.S. last year were showered with public attention: $150 million from Carl Icahn to the Mount Sinai School of Medicine, $125 million from Phil Knight to the Oregon Health & Science University, and $300 million from Paul Allen to the Allen Institute for Brain Science in Seattle, among them. If you scanned the press releases, or drove past the many university buildings, symphony halls, institutes, and stadiums named for their benefactors, or for that matter read the histories of grand giving by the Rockefellers, Carnegies, Stanfords, and Dukes, you would be forgiven for thinking that the story of charity in this country is a story of epic generosity on the part of the American rich.

·  It is not. One of the most surprising, and perhaps confounding, facts of charity in America is that the people who can least afford to give are the ones who donate the greatest percentage of their income. In 2011, the wealthiest Americans—those with earnings in the top 20 percent—contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their income. The relative generosity of lower-income Americans is accentuated by the fact that, unlike middle-class and wealthy donors, most of them cannot take advantage of the charitable tax deduction, because they do not itemize deductions on their income-tax returns.  Another article takes a narrower view of “the richest” and claims that in 2008 (note the date) “the wealthiest Americans — those making over $500,000 annually, which is less than 1 percent of all tax filers — gave away 3.4 percent of their income in 2008… significantly higher than Americans at lower income levels.”  So we have a debate as to statistics and when they are promulgated, where they were retrieved and who they target.

·   Some experts have speculated that the wealthy may be less generous—that the personal drive to accumulate wealth may be inconsistent with the idea of communal support -- “the rich are way more likely to prioritize their own self-interests above the interests of other people.”

·   In a series of controlled experiments, lower-income people and people who identified themselves as being on a relatively low social rung were consistently more generous with limited goods than upper-class participants were.

·  The poor tend to give to religious organizations and social-service charities, while the wealthy prefer to support colleges and universities, arts organizations, and museums. Of the 50 largest individual gifts to public charities in 2012, 34 went to educational institutions, the vast majority of them colleges and universities that cater to the nation’s and the world’s elite. Museums and arts organizations such as the Metropolitan Museum of Art received nine of these major gifts, with the remaining donations spread among medical facilities and fashionable charities like the Central Park Conservancy. Not a single one of them went to a social-service organization or to a charity that principally serves the poor and the dispossessed. More gifts in this group went to elite prep schools than to any of our nation’s largest social-service organizations, including United Way, the Salvation Army, and Feeding America (which got, among them, zero).

·   And finally, on this topic, we know too well the record of very rich corporations that have a reputation for keeping income from the tax system, or extracting subsidies from that tax system, so that the needs of the poor and those with special needs go un-attended and under-funded.  Corporations like General Electric, Con Edison, Verizon, FirstEnergy and Pepco Holdings paid no income tax between 2008-2012, according to an article from Huffington Post that cited studies from the Institute on Taxation and Economic Policy.

Thus, in spite of the fact that the wealthy give huge sums of money to charity, they seem not to have any real skin in the game in terms of self-risk or selfless motivation generally serving the elite rather than those people most in need, most living at the bottom of the income scale. 
3.     We have to take into consideration the complaint of the rich that 45% of the citizens of this country who exist in the lower and some middle income brackets, do not pay federal taxes, and in fact some are subsidized by a mechanism called the Earned Income Tax Credit (EITC). 

·   EITC is a refundable tax credit that increases the income of low- and moderate-income working families by providing tax reductions and cash supplements.

·   As a federally funded anti-poverty initiative, the primary purpose of EITC is to help employed low-wage earners achieve financial self-sufficiency by offsetting taxes, supplementing wages, and making work more attractive than welfare. 

·   Refunds received from EITC are not considered income for any federal or federally funded public benefit program.  EITC has been instrumental in closing the poverty gap for many of the nation’s working poor.

·   Preliminary reports for tax year 2013, indicate that EITC provided $62.9 billion in tax credits to over 28 million eligible families and individuals.

·   IRS reports that EITC is credited for lifting more than 6 million people out of poverty, including 3.3 million children during tax year 2013
 It is incumbent upon us that we take this situation with a similar gravity to that we take of wealthy individuals and corporations who pay no taxes.  Those who pay no federal tax at the bottom and perhaps middle of the income scale, but receive federal subsidies from our tax system need to be seen as having some ‘skin in the game.’  However, that does not mean that there is no difference between the two income classes.  The rich who pay no taxes have already taken huge profits from the economic system.  They have a tremendous obligation to give back some of that wealth (earned on others’ backs); the government subsidies they receive enable them to gather even more profit.  Contrariwise, the working poor and some middle class families are not making profits, are not in a position to invest, and are not gaining huge additional wealth from their subsidies.  They are, instead, merely surviving.  So let us not contend that these circumstances equate with each other.  They do not.  HOWEVER, in terms of having skin in the game, there is something to be said for advocating for equal obligation but not necessarily for an equal expression of that obligation. 

4.     We have too many citizens (and non-citizens) in our nation who simply will not invest themselves in a way that certifies that they have skin in the game of democracy and politics (more on this next time).
And so, we come to that moment when we have to ask:  what is the point of all this?  We will never be a nation that has full participation and investment of its citizens.  Why not?  Why is it that we abandon the concept of full participation for our citizenry when we know full well that self-investment, emotional investment, patriotic investment – SKIN IN THE GAME – is what we must be all about in order to maintain and sustain, develop and protect our form of democracy?  

Why do we consider voting as an option instead of a duty or obligation?  Why is paying something into the system not required of everyone?  It doesn’t have to be cash money!  Why is running for elective office so narrowly meant for professional politicians and those who can afford to do so?  Why do we leave governing and politics to the bureaucrats and not involve ordinary citizen volunteers in those fields?  Why is participation in certain events called patriotic, yet other activities and events are called socialistic or subversive?    Why do we emphasize good citizenship as obeying laws and rules instead of making contributions and investing ourselves in others?  In my next posting, I’m going to offer up some suggestions that might change some definitions of citizenship while broadly defining ‘skin in the game.