Wednesday, August 25, 2010

generosity tax

In a generally interesting interview, Penn Gillette makes the case that government taxation is a form of theft and that if society has genuine needs, they should be met by the charitable giving of citizens. Of course, I find it very amusing and ironic that he makes this argument in an interview that is primarily devoted to Penn arguing that all religious people are naive idiots for believing in any sort of deity. Talk about the pot calling the kettle black...

But what really strikes me about this argument, an argument I've heard many times from extreme libertarians and anarchist-types, is this essentially amounts to a tax on generosity. Governments exist to meet needs that cannot be met on an individual basis. Of course, there can be considerable debate about what exactly those needs are and how to best meet them, but most people can agree that at least some level of government is needed for society to function. And from that it follows that revenue must be collected to pay for the services of government.

Typically, this is done by requiring everybody who operates under the protection of the government, with access to the services provided, is required to pay a portion of the cost. What the libertarians desire, however, is that this be voluntary. While that sounds nice in theory, this simply leads to a situation where selfish people can choose to pay nothing and still receive the benefits of having a government. Generous people, meanwhile, must pay extra to make up for the shortfall caused by those who give nothing.

Next time somebody throws out the idea that government has no right to "coerce" or "force" people into giving, ask that person why they believe the government should tax generosity.

Monday, August 16, 2010

Citizens United Against Everything

Do you want to destroy democracy?

It's very simple: just vote all incumbents out of office and continue to do so until you get an elected official who represents the majority opinion on most significant issues.

It seems counter-intuitive, because we're taught that in a democracy, the majority should rule (except in cases where fundamental civil rights are at stake, but I'm leaving that out of this discussion). The problem is, most issues aren't limited to only two possible approaches. And when there are more than two possible approaches, there may not be a majority in support of any of the approaches.

Simple example: health care. Poll after poll will show that the majority of Americans think the status quo (prior to the passing of recent legislation) needs to be changed, so the majority opposes the status quo. And polls show the majority of Americans oppose the reform bill that was passed. The majority of Americans also oppose single-payer. The majority of Americans oppose a public health insurance option, but a majority also opposes getting rid of Medicare (a public health insurance option, ironically). A majority of Americans oppose absolutely every approach to providing health care in America.

And health care is just one of many important issues where there are countless possible solutions...immigration, unemployment, tax policy, and on and on, most major issues can't simply be reduced to a simply choice between A or B. And, unfortunately, voters (and politicians) are becoming less willing to compromise on complicated issues.* In a functioning democracy, rational people will realize that there may be 10 different approaches to a problem, and probably nobody will get all elements of their preferred solution. However, a functioning governing body will generally craft a solution containing elements of the most popular approaches, and perhaps find ways to appease those whose preferred solution cannot be accommodated in any way. Unfortunately, we seem to be descending to a point where we no longer have a functioning governing body...and voters have nobody but themselves to blame.

(*I base the statement that compromise has become less acceptable on a number of studies I've seen indicating that voting across party lines is at an all-time historic low. During the tumultuous, divisive 60's, for example, members of Congress voted with their party about 60-70% of the time. Today, it's 80-90%. There are numerous other examples I've seen of actual, quantitative analyses indicating we are at a more partisan period in our nation's history than any period, excepting the Civil War obviously.)

The abundance of wedge issues and single-issue voters is having a poisoning affect on American politics. Angry protesters are constantly demanding that politicians do the will "of the people," even though a majority of "the people" don't support anything, even the status quo.

So what's a politician to do? Supposing this regular churning of politicians continues to grow more steady and terms in office grow steadily shorter; then what's the rational response?

Well, economists have actually looked at a very similar issue and the response is quite predictable. It turns out dictators aren't always bad for the prosperity of their nation. In some cases, they can be beneficial. What's the difference? There is one essential factor that usually determines whether a dictator will be beneficial or detrimental to the health of the nation: Expected time in power. A dictator with a tenuous grasp of power will generally just loot the economy and grab as much as possible because he expects to lose power soon. However, a dictator with firm control of the country, who expects his reign to be lengthy, will engage in activities that are often beneficial for the nation as a whole (not always, of course, as dictators are human and make mistakes--but the point is they attempt to improve the nation).

The rationale is simple: If you don't have much time, then you'll grab as much loot as you can as fast as you. But if you feel you have lots of time, then you're better off trying to grow the economy and skim a steady portion of it off on a regular basis. (see joke at the bottom...)

So what does this say about what a strong anti-incumbency campaign will do in America? Well, not good things, obviously. If politicians can expect to only serve a single term in office, then they're not going to consider the long term impact of their actions. Instead, we'll be encouraging politicians to simply look out for their short term interests and grab as much loot as they can. Some may say this is already going on...but if you compare the political practices in the US to most undeveloped nations, you'll see the current crop of US politicians are rank amateurs in the area of corruption compared to what's possible. Increasing the churning of politicians will likely just encourage them to turn pro.

(And now for the joke: A mayor of a large American city is hosting the dictator of a small, undeveloped nation. He takes the dictator on a tour of the city. As he's driving along, the mayor says, "You see this highway we're driving on? This whole project was completed while I was mayor." Then he gives the dictator a knowing nod, rubs his fingers together and pretends to put the money in his breast pocket. He winks, grins, and says, "10%". Then the mayor takes the dictator to an arena that's under construction. Again, the mayor gives the dictator the knowing look, says, "See this arena? 10%." And gives the same wink and grin. Finally, he takes him to his office with a great view of the city, points out construction zone after construction zone, then gives the same look and says, "See all those projects? 10%."

The dictator looks at the mayor, laughs, and says, "Come to my country and you'll really be impressed." So the mayor arranges to travel to the dictator's country. The dictator takes him straight to the top of the tallest building in town...the only building over two stories. He spreads his arms, allowing the mayor to take in the slums, the squalid ramshackle homes, the open sewers draining straight into the sole river running through town, the dirt roads, the people walking the streets or, in the case of the well-to-do, pulling carts with animals.

After the mayor has taken this in, the dictator says, "You see all this? 100%!")

Friday, August 13, 2010

A splash of cold water in the face...

It's popular rhetoric today to say that the key to maintaining and improving the American standard of living is to simply make sure Americans have broad access to education which will allow us to be highly productive workers. Being highly productive will allow nearly all Americans to continue to have high-wage jobs and enjoy the comfortable and steadily improving standard of living that we've become accustomed to.

While I wish things were so simple, I think the cold reality is that the problem is a lot more intractable than anybody wants to admit--and probably beyond the capability of our political system to address.

First, creating productive, capital-intensive jobs is one thing. Making sure workers get paid accordingly is another. It's well-documented that over the last 3 decades, worker productivity has risen dramatically but wages have been stagnant. It's easy to blame the conservative economic policies, and I'm sure that's contributed, but it's hard to see how things could have been dramatically different. In the first few decades after WWII, the US was far and away the dominant developed economy because most others were left in ruins. If somebody wanted to run a modern, industrial business, there weren't a lot of other options. Today, there's educated workers and highly productive machinery and equipment all over the world. So if US workers want a large slice of the pie while Indian workers, with comparable education, are willing to settle for 10% or less of what US workers are, it's pretty easy to open a production center there and ship (or electronically transmit) the results back to the US (or anywhere else that can pay for the output). We can pass laws and regulations that require companies to pay workers some legal definition of "fair" wages, but if the laws become to onerous companies can simply move their entire operations overseas. We can restrict imports, but considering about half of all revenues from S&P 500 companies come from overseas, it's easy to see how such a strategy could blow up in our faces (see: Hoover's tariff policies).

Second, making sure Americans have the skills for the jobs requires not simply that they have the skills, but they have them in greater degree than anywhere else. Assuming that Americans are, on average, not dramatically more intelligent and capable of acquiring skills than residents of any other nation, it's going to be impossible to keep Americans ahead of the rest of the nations in terms of skills. Knowledge is nearly impossible to contain. Witness how after a few years of American dominance in IT, the industry is now dominated by foreign workers who are able to learn the skills just as quickly as the brightest Americans, but can apply them for a fraction of the price.

Unfortunately, there exists a global imbalance between the standard of living Americans are accustomed to, and the standard of living most of the rest of the world experiences. Innovative production methods have become extremely mobile, making it nearly impossible for Americans to maintain superior productivity levels that justify the higher standard of living. I don't think there's any realistic way to maintain the global imbalance that currently exists where Americans expect to earn 10-100x what workers earn in the rest of the world (often for similar work). Either the American standard of living will drop dramatically, or the rest of the world's standard of living has to rise dramatically. Clearly, the latter alternative is preferable. The problem is achieving it would require essentially a global Marshall plan. And that's pretty much a political impossibility. Explaining to the typical American that spending trillions of dollars annually on building schools and infrastructure in foreign countries is ultimately in his best interest seems like political suicide to me. Of course, we spent, as a percent of GDP, more than that to prevent a global takeover by Nazi & Fascist forces. But politics is easier when the enemy has a face.