Sadly, any real attempts at tax "reform" seem to have faded from the current political agenda. Both sides of the debate (lower rates, but broader base, on the one side, and higher rates for top incomes and fewer "loopholes", on the other) seem now to be waiting for either a showdown over the debt ceiling or for the results of the 2014 Congressional elections to tip the scales one way or another. If you take out the common theme (broader base/fewer loopholes), you're left with the impasse of lower rates versus higher rates and no progress can occur given the current political balances and the nearly sacred ideologies underlying those polar views on rates. Sadly, no one seems to want to do the hard work of really developing that common theme so that those opposing ideologies wouldn't be so powerful.
Rep. Kevin Brady (R) Texas cited, in the May 6, 2013 Wall Street Journal, data that tends to inflame economic conservatives. Since 1980, the share of income taxes paid by the top 1% grew from 19.1% to 37.4%, while the share paid by the bottom 50% shrank from 7.1% to 2.4%. The biggest gripe is not really the change, but the end result: 1% of taxpayers pay close to 40% of the total burden while almost half the people pay none. But, of course, that's not the whole story. People at the bottom of the federal income tax ledger may be paying some state income tax and some property tax and are certainly paying sales taxes and (if employed) payroll taxes that account for a much larger share of their total income than those at the upper reaches of the income ledger. But, even that's not a complete picture. The relatively wealthy consume more and thus pay more sales tax and have more valuable houses and thus pay more real estate tax. Local variations on sales tax-exempt items and differentials in "homestead allowances" can make a really thorough and accurate comparison almost impossible.
So, maybe an answer is to approach the total revenue needs of various levels of government within the aggregate fairness notions that society, as a whole, can agree is appropriate. Maybe we could impose upper limits on the total tax that can be extracted, in the aggregate, from all these forms of taxation. I don't pretend that this would be easy. What is the measure? Income, assets, some combination? How would this be enforced? The already flawed "voluntary compliance" system can't easily be relied upon for an asset-based limitation. John Cochrane, finance professor at the Booth School at the University of Chicago (my business school alma mater...but long ago, before it was renamed in honor of David Booth's huge donation, but still with it's strong free market policy orientation) argues (April 15, 2013 Wall Street Journal) for applying this notion at least to the federal income tax take as a percentage of income. As an inviolate promise to entrepreneurs and risk-takers, innovators, and all people willing to work hard, the federal tax law would never take more than X% of income...no matter when the income occurs or how much it is. Once we would adopt that concept, we could then have an interesting, centrist debate about what that "X" should be. And, as a matter of fairness, on some notion that we're all in this together, I would add a true minimum, Y%. Again, we could have an interesting, centrist debate on how much that "Y" should be so that every income contributes at least a little to the common welfare.
Monday, July 29, 2013
How Much do we Really Know About Our Future with China?
In yesterday's (July 28, 2013) New York Times Sunday Review (page 5), an article by Richard Rosecrance of Harvard posits that China must come to grips with a "unified West", Europe and America, because of that aggregate's absolute economic size. Not only would such an economic union create extraordinary incremental wealth for it's participants, it would draw China (and other countries) toward it thru its economic gravitational pull. China needs the markets of the West for its exports and it needs raw materials imports, especially hydrocarbons and technology, to drive its internal engine. With that economic gravity would come, Rosecrance argues, an eventually more liberal and democratic political apparatus within China.
This perspective both argues strongly for a more closely economically unified "West" and offers a counterpoint to the fairly common view these days that China's economic ascendancy is both inevitable and largely unreliant on the existing, Western economic powers. That view is expressed, with something of a shudder, by Heriberto Araujo and Pablo Cardenal in the June 2, 2013 Sunday Review. There, they express the fear that China is determined to spread a form of "state capitalism", citing the huge investments China is making in natural resources and infrastructure around the world, but especially in the non-West geography of Africa and the Asian periphery. At the end, however, they come to the same conclusion...but, I think, with less hope for success...that China must adapt to the world, not the other way around. To do that, they would clearly agree with the fundamental Rosecrance premise, that it is "essential that Western governments stick to what has been the core of Western prosperity: the rule of law, political freedom, and fair competition".
In a neighboring piece in that June 2 edition, two voices that I respect enormously, Ian Bremmer and Jon Hunstman (Ambassador to China, 2009-2011, and once, and I hope future, Presidential candidate), argue that China and the US are locked in 21st Century form of MAD...mutually assured destruction...but this time of the economic variety. Both countries are entitled to a sense of "exceptionalism"...a right to make the rules, not just accept those laid down by others. The course they recommend, therefore, is perhaps the obvious one of tireless dialogue and some attempt at compromise, recognizing that both sides have limits to what they can impose on the other.
I would add another, hopeful, perspective: time. The West is typically in a hurry, China understands it operates on a much longer scale of events. Still, the imperatives of human nature, the freedom and prosperity that each individual (or family, or local community, or region) naturally desires probably outweighs the benefits of stability and harmony over time. Given enough time, the outcomes seem almost certain to me. But careful understanding, respect, and cooperation along the way will probably make that result occur sooner and with less risk
This perspective both argues strongly for a more closely economically unified "West" and offers a counterpoint to the fairly common view these days that China's economic ascendancy is both inevitable and largely unreliant on the existing, Western economic powers. That view is expressed, with something of a shudder, by Heriberto Araujo and Pablo Cardenal in the June 2, 2013 Sunday Review. There, they express the fear that China is determined to spread a form of "state capitalism", citing the huge investments China is making in natural resources and infrastructure around the world, but especially in the non-West geography of Africa and the Asian periphery. At the end, however, they come to the same conclusion...but, I think, with less hope for success...that China must adapt to the world, not the other way around. To do that, they would clearly agree with the fundamental Rosecrance premise, that it is "essential that Western governments stick to what has been the core of Western prosperity: the rule of law, political freedom, and fair competition".
In a neighboring piece in that June 2 edition, two voices that I respect enormously, Ian Bremmer and Jon Hunstman (Ambassador to China, 2009-2011, and once, and I hope future, Presidential candidate), argue that China and the US are locked in 21st Century form of MAD...mutually assured destruction...but this time of the economic variety. Both countries are entitled to a sense of "exceptionalism"...a right to make the rules, not just accept those laid down by others. The course they recommend, therefore, is perhaps the obvious one of tireless dialogue and some attempt at compromise, recognizing that both sides have limits to what they can impose on the other.
I would add another, hopeful, perspective: time. The West is typically in a hurry, China understands it operates on a much longer scale of events. Still, the imperatives of human nature, the freedom and prosperity that each individual (or family, or local community, or region) naturally desires probably outweighs the benefits of stability and harmony over time. Given enough time, the outcomes seem almost certain to me. But careful understanding, respect, and cooperation along the way will probably make that result occur sooner and with less risk
Monday, June 10, 2013
Differing World Views
This past weekend, two influential economic commentators, Niall Ferguson and Robert Shiller, pronounced importantly different views of what is needed for a continuing successful future for our society. Perhaps characteristic of the venues, Ferguson wrote in the weekend (June 8-9) Wall Street Journal, drawing from his new book, "The Great Degeneration.." and Shiller wrote in the June 9th Sunday New York Times.
It won't surprise readers of this blog that I am much more sympathetic to the views of Niall Feguson, who presents startling...and embarrassing statistics... showing a deteriorating position for the US for economic freedom, regulatory efficiency, reliable legal apparatus and defense of property rights, and global competitiveness. At one time, the US was the world's unparalleled standard bearer on these dimensions and many US institutions are founded and run on fostering these characteristics for the rest of the world. If the change in relative position were a case of the pupils excelling their teacher, we could be happier about this result. Ferguson believes, and I suspect he's right, that instead, this decline reflects a true degeneration. He cites classic theory to suggest that it may be the inevitable outcome of all republics (governments of the people, by the people, for the people) "giving way to oligarchy or tyranny", where the chief benefits of a society flow only to the powerful. More optimistically, he cites many ongoing advantages to American society, relative to other already developed economies, but still faults many poor policy choices, especially in the tax and regulatory environment, and particularly at the federal level. His cure would be an honest look at and a careful dismantling of the impediments we've created to economic success.
At the outset of Robert Shiller's piece, I was excited to see a well respected voice argue for a more nuanced approach to fixing the funding/benefits problem looming in Social Security. As I've commented in this blog ( "Elections have Consequences..." November, 2012) and elsewhere, there are many ways to fix the problem. No one of them needs to do all the work; and, in any case, trying to solve the problem on only one dimension is probably...and appropriately...politically impossible, even if it could be economically viable. Instead, small doses of those many forms of medicine will probably need to be combined in some form of generally tolerable prescription for the aggregate change to have any political viability.
Thanks to Shiller for adding another: benefit changes (presumably down as well as up) to reflect changes in real GD,P per capita, rather than in mere CPI, chained or unchained. As he puts it, this would better insure that one generation doesn't bear too much or enjoy too little of real changes in society's overall welfare. Bravo! But, to my dismay, Shiller several times mentions, as if just in passing, that tax rates or the contribution base for employees, and employers, might have to be raised...as if that were an unimportant consideration. "So, be it", he says, "...keeping our eyes on the integrity of Social Security, which is crucial to our identity as a civil society". This sounded to me more like the classic logical fallacy of assuming the very thing to be proven ("begging the question") and a politician's pronouncement than the cooler perspective of a social scientist. Similarly, he makes only very brief mention of the relative size of respective generations, thus dismissing probably the most important element in the arithmetic of inter-generational economic justice. How we divide up the per capita GDP of the economy as a whole will be hugely reliant on how many capita there are in one generation or another.
It won't surprise readers of this blog that I am much more sympathetic to the views of Niall Feguson, who presents startling...and embarrassing statistics... showing a deteriorating position for the US for economic freedom, regulatory efficiency, reliable legal apparatus and defense of property rights, and global competitiveness. At one time, the US was the world's unparalleled standard bearer on these dimensions and many US institutions are founded and run on fostering these characteristics for the rest of the world. If the change in relative position were a case of the pupils excelling their teacher, we could be happier about this result. Ferguson believes, and I suspect he's right, that instead, this decline reflects a true degeneration. He cites classic theory to suggest that it may be the inevitable outcome of all republics (governments of the people, by the people, for the people) "giving way to oligarchy or tyranny", where the chief benefits of a society flow only to the powerful. More optimistically, he cites many ongoing advantages to American society, relative to other already developed economies, but still faults many poor policy choices, especially in the tax and regulatory environment, and particularly at the federal level. His cure would be an honest look at and a careful dismantling of the impediments we've created to economic success.
At the outset of Robert Shiller's piece, I was excited to see a well respected voice argue for a more nuanced approach to fixing the funding/benefits problem looming in Social Security. As I've commented in this blog ( "Elections have Consequences..." November, 2012) and elsewhere, there are many ways to fix the problem. No one of them needs to do all the work; and, in any case, trying to solve the problem on only one dimension is probably...and appropriately...politically impossible, even if it could be economically viable. Instead, small doses of those many forms of medicine will probably need to be combined in some form of generally tolerable prescription for the aggregate change to have any political viability.
Thanks to Shiller for adding another: benefit changes (presumably down as well as up) to reflect changes in real GD,P per capita, rather than in mere CPI, chained or unchained. As he puts it, this would better insure that one generation doesn't bear too much or enjoy too little of real changes in society's overall welfare. Bravo! But, to my dismay, Shiller several times mentions, as if just in passing, that tax rates or the contribution base for employees, and employers, might have to be raised...as if that were an unimportant consideration. "So, be it", he says, "...keeping our eyes on the integrity of Social Security, which is crucial to our identity as a civil society". This sounded to me more like the classic logical fallacy of assuming the very thing to be proven ("begging the question") and a politician's pronouncement than the cooler perspective of a social scientist. Similarly, he makes only very brief mention of the relative size of respective generations, thus dismissing probably the most important element in the arithmetic of inter-generational economic justice. How we divide up the per capita GDP of the economy as a whole will be hugely reliant on how many capita there are in one generation or another.
Monday, January 21, 2013
Hope on Inauguration Day
Today we witnessed one of our country's most magnificent events, a Presidential Inauguration, celebrating our ability to be governed by officials who are elected only for specified terms. It also ennobles all of us by causing us to recognize that, despite very important differences, we all respect the process even when it produces results we don't prefer.
As readers of this blog have gathered, I am among those tens of millions of American voters who would have preferred a different result this time around. And I am still annoyed by the commonly expressed narrative that President Obama achieved a "great victory". In fact, it was one of the narrowest popular vote victories in history (about 1%), especially for a re-elected incumbent, with very small margins in states that gave him his electoral vote win, which, itself, was smaller than the first time around. In any event, he won and let us all hope that he and his administration can work with the co-equal Legislative Branch (let's not forget the basics of how our government is intended to work) to achieve good results for our country over the next four years. A lot of our future, for better or for worse, will depend on what we're able to accomplish in this short time.
Like many, I was surprised, but pleased, by the specificity of the President's inaugural address. Rather than mere thematic platitudes about America's exceptional natural and human endowment and its unique set of core values leading us to continued greatness as a nation, we heard a long list of intentions for particular results. I was personally very pleased to hear the calls to better deal with gun violence, a much more welcoming policy for immigration, gay rights, tax reform, and better managing the costs of entitlements. It would be hard to disagree with the broad goals; the problems will lie in the details of how those goals are to be achieved. And I would have preferred him to say more about cooperative engagement with those who don't share all his views and less continuing to divide the nation on economic terms. There was a lot of "code" in his speach to reassure his electoral base that they could count on him to further their agendae; there was little to suggest that he genuinely respected the views of those not in that base. And most fundamentally, there was little to suggest that he is prepared to truly grapple with the most fundamental of all the problems we face...the completely unsustainable mismatch of government expenditures and revenue. That problem must be set on a credible course of correction or all of the other goals will be impossible to achieve.
Still, today, I am prepared to be hopeful, both because that's in the spirit of celebration of our success as a democratic republic and because our newly inaugurated President should be looking to how history will judge him over all future time. If he is as wise as he is smart, he will not want to waste this fabulous opportunity to do some very good things...that the country is actually able to pay for indefinitely. Still, I'm glad that the next election is only about 21 months away, just in case.
As readers of this blog have gathered, I am among those tens of millions of American voters who would have preferred a different result this time around. And I am still annoyed by the commonly expressed narrative that President Obama achieved a "great victory". In fact, it was one of the narrowest popular vote victories in history (about 1%), especially for a re-elected incumbent, with very small margins in states that gave him his electoral vote win, which, itself, was smaller than the first time around. In any event, he won and let us all hope that he and his administration can work with the co-equal Legislative Branch (let's not forget the basics of how our government is intended to work) to achieve good results for our country over the next four years. A lot of our future, for better or for worse, will depend on what we're able to accomplish in this short time.
Like many, I was surprised, but pleased, by the specificity of the President's inaugural address. Rather than mere thematic platitudes about America's exceptional natural and human endowment and its unique set of core values leading us to continued greatness as a nation, we heard a long list of intentions for particular results. I was personally very pleased to hear the calls to better deal with gun violence, a much more welcoming policy for immigration, gay rights, tax reform, and better managing the costs of entitlements. It would be hard to disagree with the broad goals; the problems will lie in the details of how those goals are to be achieved. And I would have preferred him to say more about cooperative engagement with those who don't share all his views and less continuing to divide the nation on economic terms. There was a lot of "code" in his speach to reassure his electoral base that they could count on him to further their agendae; there was little to suggest that he genuinely respected the views of those not in that base. And most fundamentally, there was little to suggest that he is prepared to truly grapple with the most fundamental of all the problems we face...the completely unsustainable mismatch of government expenditures and revenue. That problem must be set on a credible course of correction or all of the other goals will be impossible to achieve.
Still, today, I am prepared to be hopeful, both because that's in the spirit of celebration of our success as a democratic republic and because our newly inaugurated President should be looking to how history will judge him over all future time. If he is as wise as he is smart, he will not want to waste this fabulous opportunity to do some very good things...that the country is actually able to pay for indefinitely. Still, I'm glad that the next election is only about 21 months away, just in case.
Friday, November 23, 2012
Another Country
With apologies to James Baldwin for using his 1962 title to caption this post, I'll share a few comments on a trip that Penelope and I made to the United Kingdom in October. I emphasize both words, united and kingdom, since both contain some irony. It's also an opportunity to recall some often-confused geo-political basics. England is a country, occupying part of an island, Great Britain, which in turn is only a part of the political entity, the United Kingdom, which takes the northeastern chunk of another island to complete.
After just one quick day in London upon arrival (beautiful room, with a great view, in gorgeous fall weather, at the Sheraton Towers in Knightsbridge...dangerously close to Harrods), we traveled by car to Wales for a meeting of the Financial Planning Standards Board. Just past Bristol, the road signs changed to include a Celtic language, in addition to English. The driver explained that we were now in "another country", Wales...and quickly added that the Welsh and the English don't necessarily get along too well. English weekend homeowners sometimes find their Welsh properties put to the torch. Hmmm.
I also remninded myself that Charles is the "Prince" of this place and that Will and Harry have "Wales", not Windsor, as their surname. If Charles ever gets to the throne, one presumes that Will will take over the Princedom. "Poor" Harry stays a mere Duke.
The country is green and wet and blustery in October; the sky changed dramatically from dark overcast to brilliant sun several times a day. Because FPSB kept me busy during the days at The Celtic Manor (home to the Ryder Cup a few years earlier), there was little opportunity to explore; but Penelope took the train from Newport to Cardiff one day and had fun shopping and negotiating lunch to avoid cream, butter, and cheese.
We were treated to a large Welsh Choir's performance (excellent!) one evening and a trip to a nearby castle for dinner theatre on another night. Getting there was quite an adventure. The driver of our bus (one of two) made a woefully wrong turn and, with much skepticism from those at the front of the bus, took us a long way down a very narrow, unpaved (so quite muddy), one lane road till we reached a firm barrier. On either side were deep ditches and wheel swallowing mud, so we had no choice but to back up...at least a mile and an half, in total darkness...it was interesting to observe the range of responses, from great humor to near panic from the 40 or so international attendees, all of whom are accustomed to being "in control" in their own spheres. I think the driver nearly had a heart attack and many of us were much more concerned about him. Eventually, now very late, we found the castle and joined with our colleagues from the other bus who were refused (unexplainedly) anything to drink until the whole group had arrived.
After Wales, we flew to Edinburgh for several days of history (there is much: start with Edinburgh castle itself), art, great food, sighseeing, in town as well as in the wild and beautiful Highlands, and getting into the spirit of yet another country. So, of course I bought a kilt, learning that not many people really take specific tartans into account anymore, so my having not a drop of Scottish blood was no obstacle. A taxi driver later explained to me that the outfit wouldn't be complete without a "dirk", the small blade true Scotsmen always carry in their stocking and that always gets him in trouble with our TSA.
We visited the Parliament of Scotland (it proudly has a separate one; and something like 40% of the population say they favor separation, "devolution", from the British crown) and so much of the history of this place is framed in terms of it's soveriegnty struggles and actual battles, some won, some lost, with the English. A Scottish joke asks why God was so generous with Scotland: great beauty, fertile land, clever, handsome people; it seems unfair. The response, "but look who he gave them as neighbors!"
Hail Britannia
Still, Edinburgh won the competition to be the permanent home of the recently decommissioned royal yacht, Brittania. Touring it, complete with the Queen's and Prince Phillip's private quarters and the decidedly more modest quarters for the non-officer crew, brought to life the very strange (to Americans) situation of a hereditary monarchy living an almost other-worldly existence, now deep into the 21st century. It's not just that the family is extraordinarily rich, and enjoys a healthy budget provided by taxpayers as well, it's that they are treated almost as if a superior species.
After just one quick day in London upon arrival (beautiful room, with a great view, in gorgeous fall weather, at the Sheraton Towers in Knightsbridge...dangerously close to Harrods), we traveled by car to Wales for a meeting of the Financial Planning Standards Board. Just past Bristol, the road signs changed to include a Celtic language, in addition to English. The driver explained that we were now in "another country", Wales...and quickly added that the Welsh and the English don't necessarily get along too well. English weekend homeowners sometimes find their Welsh properties put to the torch. Hmmm.
I also remninded myself that Charles is the "Prince" of this place and that Will and Harry have "Wales", not Windsor, as their surname. If Charles ever gets to the throne, one presumes that Will will take over the Princedom. "Poor" Harry stays a mere Duke.
The country is green and wet and blustery in October; the sky changed dramatically from dark overcast to brilliant sun several times a day. Because FPSB kept me busy during the days at The Celtic Manor (home to the Ryder Cup a few years earlier), there was little opportunity to explore; but Penelope took the train from Newport to Cardiff one day and had fun shopping and negotiating lunch to avoid cream, butter, and cheese.
We were treated to a large Welsh Choir's performance (excellent!) one evening and a trip to a nearby castle for dinner theatre on another night. Getting there was quite an adventure. The driver of our bus (one of two) made a woefully wrong turn and, with much skepticism from those at the front of the bus, took us a long way down a very narrow, unpaved (so quite muddy), one lane road till we reached a firm barrier. On either side were deep ditches and wheel swallowing mud, so we had no choice but to back up...at least a mile and an half, in total darkness...it was interesting to observe the range of responses, from great humor to near panic from the 40 or so international attendees, all of whom are accustomed to being "in control" in their own spheres. I think the driver nearly had a heart attack and many of us were much more concerned about him. Eventually, now very late, we found the castle and joined with our colleagues from the other bus who were refused (unexplainedly) anything to drink until the whole group had arrived.
After Wales, we flew to Edinburgh for several days of history (there is much: start with Edinburgh castle itself), art, great food, sighseeing, in town as well as in the wild and beautiful Highlands, and getting into the spirit of yet another country. So, of course I bought a kilt, learning that not many people really take specific tartans into account anymore, so my having not a drop of Scottish blood was no obstacle. A taxi driver later explained to me that the outfit wouldn't be complete without a "dirk", the small blade true Scotsmen always carry in their stocking and that always gets him in trouble with our TSA.
We visited the Parliament of Scotland (it proudly has a separate one; and something like 40% of the population say they favor separation, "devolution", from the British crown) and so much of the history of this place is framed in terms of it's soveriegnty struggles and actual battles, some won, some lost, with the English. A Scottish joke asks why God was so generous with Scotland: great beauty, fertile land, clever, handsome people; it seems unfair. The response, "but look who he gave them as neighbors!"
Hail Britannia
Still, Edinburgh won the competition to be the permanent home of the recently decommissioned royal yacht, Brittania. Touring it, complete with the Queen's and Prince Phillip's private quarters and the decidedly more modest quarters for the non-officer crew, brought to life the very strange (to Americans) situation of a hereditary monarchy living an almost other-worldly existence, now deep into the 21st century. It's not just that the family is extraordinarily rich, and enjoys a healthy budget provided by taxpayers as well, it's that they are treated almost as if a superior species.
Saturday, November 10, 2012
Elections Have Consequences...Not Necessarily Obvious Ones.
It's now a few days after the election of 2012 and I'm still searching for something to be optimistic about in the results. As I suggested in recent posts, this was to be an opportunity for a choice about the nation we want to be, the emphasis we want to pursue. Sadly, my view is that the choice we've actually made is probably the wrong one on the economic and fiscal policy fronts. And, my home state of California has gone even further in a continuing wrong direction than at the federal level.
Mitt Romney is indeed a very good man, smart, compassionate, and very generous, worthy of respect and admiration. I disagree with several aspects of his announced social agenda, but I would be much more optimistic about good economic results in the coming years with him in the White House. I am convinced that we've got to get the economics right before we can effectively tackle whatever social agenda is appropriate for any government to pursue...and, for me, that's not really very much. I would feel much more comfortable having government, with its potential for the tyranny of the majority and its susceptibility to influence by very committed, though small, interest groups, exert its huge power in favor of no social agenda at all. So, I could tolerate a few cringe-worthy social policy perspectives, from either left or right, in order to get the really higher priority economic issues on a better path.
We did come very close to what I think would have been, overall, a better result. If the election were a few days earlier, before Hurricane Sandy took Romney off the front page and put the President in the role of Rescuer in Chief... or a few days later, after the further doubts about Benghazi emerged in the main stream press, and Petraeus resigned in shame, and the increasing Katrina-ization of Sandy's aftermath, Romney could have squeaked thru. As it is, Obama's "victory" was less emphatic (a narrower popular vote margin and fewer electoral votes) than his initial election 4 years ago; and it was pretty thin in any event. 50 million plus people voted for the other guy...and some of Obama's crucial electoral college wins were in fact very close.
Still, as everyone now observes, the Romney/Republican campaign failed to adequately capture the confidence of key...and growing...segments of the electorate, especially the young, women, and Hispanics and other immigrants. If they fail to better welcome and respond to these groups, shame on them. They won't deserve future electoral victory and they probably won't get it, despite the very high relevance to these groups of the key Republican themes of smaller, less intrusive government, self-reliance, and upward economic mobility thru one's own effort. It now seems clearer that they won't get enough people to adhere to this set of values unless they also share more common ground on important social issues as well. If Democrats, in turn, can also move from their current stance closer to the center on issues of long range fiscal discipline, we could all celebrate a very happy new day in American politics and be much more optimistic about the life of our nation going forward.
A Time for Compromise
Everyone says that they hope for it, and the "fiscal cliff" at year-end provides a deadline to get serious about it, but the actual political and structural fundamentals for compromise don't look especially promising. Yesterday, three days after the election, Obama, still in hot campaigning mode, had selected citizens standing on risers behind him...in the East Room of the White House (!)...as he claimed a popular mandate and brandished his pen in a challenge to Republicans to send him legislation to sign that met his requirements of increasing taxes on wealthier Americans. Meanwhile, the Republicans claim a mandate of their own, retaining control of the House and still having filibuster capability in the Senate. Whatever mandate that is, however, is also pretty skinny; they now will hold fewer seats in both houses than before.
So, maybe those chastened positions, on both sides, provide an environment for progress; and maybe the first element of a recipe for collaborative success relies on a careful parsing of the respective rhetoric on taxes. For a long time now, there's been a deliberate obfuscation (particularly, I think, by Democrats) of the crucial difference between rates of tax, on the margin, and absolute volumes of tax collected. Republicans insist on no increase in rates (and argue strongly for even reducing them); Democrats insist on making the "millionaires and billionaires" pay more. Instead of comparing warren Buffet's, or Mitt Romney's, tax rate with the rate their secretaries pay, let's have both sides acknowledge that you can increase the amount of tax anyone pays, without increasing the marginal rate...or even when lowering it... if allowances or deductions are reduced or eliminated and if additional categories of income are subjected to tax.
With the right leadership, the American people are smart enough to grasp this structural choice and the arithmetic involved and to at least then intelligently debate the merits of marginal rate increases or decreases as incentives or disincentives toward economic growth. The data, such as exists, is regrettably not conclusive on this. For now, it's more a matter of faith and logic on the side in favor of low marginal rates and a sense of distributive fairness on the other. But, if the wealthy have their allowances reduced such that they actually pay more than they do now, even with no rate increase, the revenue increase the Democrats want should occur. And, if the no increase in marginal rates that Republicans insist on actually does spur economic growth, there will be a potentially huge bonus in the resulting increased revenue across the board.
Romney alluded to this in the first debate, almost in passing...suggesting a cap on itemized deductions of a certain dollar amount (or perhaps a certain percentage of income) that can be used for whatever item (mortgage interest, charitable contributions, state taxes, etc.) that is most salient for each individual wealthy tax-payer. No-one's favorite deduction has to bear the entire burden. And, if that cap is small enough, the amount of tax actually collected from the wealthy can increase even if their marginal rates come down. Victory is available to both sides here.
A Bigger Fight over Entitlements.
More revenue from the wealthy, alone, won't solve the problem of annual trillion dollar deficits. There isn't enough income or wealth among the wealthy to solve the problem even if the government confiscated all of it (and what's left then for a second act?). Much reduced spending is even more essential than revenue increases, particularly reductions in the area of our expected "entitlements" committments. Here, the Democrats have the longest road to travel. At least they are no longer asserting that there is no problem. There is...and a very big one. The demographics are working against these programs and the reserve "funding" is imaginary: the government's own IOU's. Major structural changes are necessary, and fast.
The Democrats will need to quickly abandon their pledges never to do anything to change these programs' benefits nor ever employ viable alternative funding mechanisms.
To me, it seems that the only politically workable solution is to employ a combination of some form of grandfathering for current beneficiaries with many partial solutions for the future so that opposition to any one of them is too small to wreck the whole package:
The American people are neither stupid nor blindly self-interested. Let's abandon all the pretenses. With a sensible plan and effective leadership, we can solve these problems. To quote President Obama's closing exhortation
yesterday: "Let's get busy!" Regardless of our vote on election day, we can all agree with that.
Mitt Romney is indeed a very good man, smart, compassionate, and very generous, worthy of respect and admiration. I disagree with several aspects of his announced social agenda, but I would be much more optimistic about good economic results in the coming years with him in the White House. I am convinced that we've got to get the economics right before we can effectively tackle whatever social agenda is appropriate for any government to pursue...and, for me, that's not really very much. I would feel much more comfortable having government, with its potential for the tyranny of the majority and its susceptibility to influence by very committed, though small, interest groups, exert its huge power in favor of no social agenda at all. So, I could tolerate a few cringe-worthy social policy perspectives, from either left or right, in order to get the really higher priority economic issues on a better path.
We did come very close to what I think would have been, overall, a better result. If the election were a few days earlier, before Hurricane Sandy took Romney off the front page and put the President in the role of Rescuer in Chief... or a few days later, after the further doubts about Benghazi emerged in the main stream press, and Petraeus resigned in shame, and the increasing Katrina-ization of Sandy's aftermath, Romney could have squeaked thru. As it is, Obama's "victory" was less emphatic (a narrower popular vote margin and fewer electoral votes) than his initial election 4 years ago; and it was pretty thin in any event. 50 million plus people voted for the other guy...and some of Obama's crucial electoral college wins were in fact very close.
Still, as everyone now observes, the Romney/Republican campaign failed to adequately capture the confidence of key...and growing...segments of the electorate, especially the young, women, and Hispanics and other immigrants. If they fail to better welcome and respond to these groups, shame on them. They won't deserve future electoral victory and they probably won't get it, despite the very high relevance to these groups of the key Republican themes of smaller, less intrusive government, self-reliance, and upward economic mobility thru one's own effort. It now seems clearer that they won't get enough people to adhere to this set of values unless they also share more common ground on important social issues as well. If Democrats, in turn, can also move from their current stance closer to the center on issues of long range fiscal discipline, we could all celebrate a very happy new day in American politics and be much more optimistic about the life of our nation going forward.
A Time for Compromise
Everyone says that they hope for it, and the "fiscal cliff" at year-end provides a deadline to get serious about it, but the actual political and structural fundamentals for compromise don't look especially promising. Yesterday, three days after the election, Obama, still in hot campaigning mode, had selected citizens standing on risers behind him...in the East Room of the White House (!)...as he claimed a popular mandate and brandished his pen in a challenge to Republicans to send him legislation to sign that met his requirements of increasing taxes on wealthier Americans. Meanwhile, the Republicans claim a mandate of their own, retaining control of the House and still having filibuster capability in the Senate. Whatever mandate that is, however, is also pretty skinny; they now will hold fewer seats in both houses than before.
So, maybe those chastened positions, on both sides, provide an environment for progress; and maybe the first element of a recipe for collaborative success relies on a careful parsing of the respective rhetoric on taxes. For a long time now, there's been a deliberate obfuscation (particularly, I think, by Democrats) of the crucial difference between rates of tax, on the margin, and absolute volumes of tax collected. Republicans insist on no increase in rates (and argue strongly for even reducing them); Democrats insist on making the "millionaires and billionaires" pay more. Instead of comparing warren Buffet's, or Mitt Romney's, tax rate with the rate their secretaries pay, let's have both sides acknowledge that you can increase the amount of tax anyone pays, without increasing the marginal rate...or even when lowering it... if allowances or deductions are reduced or eliminated and if additional categories of income are subjected to tax.
With the right leadership, the American people are smart enough to grasp this structural choice and the arithmetic involved and to at least then intelligently debate the merits of marginal rate increases or decreases as incentives or disincentives toward economic growth. The data, such as exists, is regrettably not conclusive on this. For now, it's more a matter of faith and logic on the side in favor of low marginal rates and a sense of distributive fairness on the other. But, if the wealthy have their allowances reduced such that they actually pay more than they do now, even with no rate increase, the revenue increase the Democrats want should occur. And, if the no increase in marginal rates that Republicans insist on actually does spur economic growth, there will be a potentially huge bonus in the resulting increased revenue across the board.
Romney alluded to this in the first debate, almost in passing...suggesting a cap on itemized deductions of a certain dollar amount (or perhaps a certain percentage of income) that can be used for whatever item (mortgage interest, charitable contributions, state taxes, etc.) that is most salient for each individual wealthy tax-payer. No-one's favorite deduction has to bear the entire burden. And, if that cap is small enough, the amount of tax actually collected from the wealthy can increase even if their marginal rates come down. Victory is available to both sides here.
A Bigger Fight over Entitlements.
More revenue from the wealthy, alone, won't solve the problem of annual trillion dollar deficits. There isn't enough income or wealth among the wealthy to solve the problem even if the government confiscated all of it (and what's left then for a second act?). Much reduced spending is even more essential than revenue increases, particularly reductions in the area of our expected "entitlements" committments. Here, the Democrats have the longest road to travel. At least they are no longer asserting that there is no problem. There is...and a very big one. The demographics are working against these programs and the reserve "funding" is imaginary: the government's own IOU's. Major structural changes are necessary, and fast.
The Democrats will need to quickly abandon their pledges never to do anything to change these programs' benefits nor ever employ viable alternative funding mechanisms.
To me, it seems that the only politically workable solution is to employ a combination of some form of grandfathering for current beneficiaries with many partial solutions for the future so that opposition to any one of them is too small to wreck the whole package:
- postponed retirement ages
- increased payroll tax rates
- larger taxable base
- means-testing of benefits
- partial privatized accounts (maybe increased IRA and HSA opportunities, funded by a part of the payroll tax)
- vouchers for parts of Medicare/Medicaid benefits (see blog post of March 3, 2010)
- mandated catastrophic insurance coverage, in addition to or in lieu of mandated "first dollar" coverage (also see blog post of March 3, 2010)
- portions of governmental components' prefunding committed to real, third-party investments, instead of Treasuries.
- and, probably some additional solutions as well.
The American people are neither stupid nor blindly self-interested. Let's abandon all the pretenses. With a sensible plan and effective leadership, we can solve these problems. To quote President Obama's closing exhortation
yesterday: "Let's get busy!" Regardless of our vote on election day, we can all agree with that.
Monday, November 5, 2012
Voting for Vengeance?
It's the day before election day and like, I'm sure, most Americans, I'm exhausted by this presidential campaign...eager for it to be over, almost regardless of who wins the White House. I yearned, throughout, for a more substantive discussion of the very serious issues facing our country, but there was very little of that from either side. What is, however, increasingly clear is that there is a real choice in front of the American people about what kind of nation we will strive to be; where we will put our emphasis in the next several years. Though I am not a fan of harnessing the coercive power of government to any particular social agenda, my instincts favor most (but not all) of what the Obama administration and its supporters on the left would also prefer. So, despite that personal preference, my vote has long been decided in favor of the Romney/Ryan ticket for what I believe it will do to foster good results in the more important (and more governmentally appropriate) and the more immediately urgent issues of economic growth, fiscal discipline, tax reform, and structural changes necessary to solve the entitlements disaster looming on the near horizon.
So, I hope the Republican ticket wins. Less important, I hope that Barack Obama loses. I had voted for him in 2008 and hoped that he would be a true agent for change and the pragmatist he was reputed to be. Instead, I'm afraid we got an inexperienced ideologue. I still find him an attractive personality, but I'm convinced he does not belong in the role of our nation's head of state and our government's chief servant. I would be enthused to have him as a delightful dinner companion or an enjoyable weekend houseguest. I would be eager to engage in spirited interchange with an obviously very intelligent, eloquent, and deeply commited person; but I do not trust him in a position of enormous power precisely because I do not share his convictions.
If I needed further convincing of that, it came a few days ago, where, at a campaign rally, in response to a comment from the crowd, he urged his supporters to "vote; it's the best revenge".
Really!?!
Revenge for what? What wrongs have been perpetrated, by whom, against whom, does he feel need to be avenged? And in what way would an election be the proper vengeance in any event. If you saw and heard Obama's statement, it's obvious that this remark did not appear on his teleprompter. It was instinctual, in the moment, unscripted, coming from the man's gut, revealing him as the class warrior and unreconstructed community organizer many fear. It was an expression of genuine, unguarded belief not worthy of a man who should be President of all of the people of the United States.
So, I hope the Republican ticket wins. Less important, I hope that Barack Obama loses. I had voted for him in 2008 and hoped that he would be a true agent for change and the pragmatist he was reputed to be. Instead, I'm afraid we got an inexperienced ideologue. I still find him an attractive personality, but I'm convinced he does not belong in the role of our nation's head of state and our government's chief servant. I would be enthused to have him as a delightful dinner companion or an enjoyable weekend houseguest. I would be eager to engage in spirited interchange with an obviously very intelligent, eloquent, and deeply commited person; but I do not trust him in a position of enormous power precisely because I do not share his convictions.
If I needed further convincing of that, it came a few days ago, where, at a campaign rally, in response to a comment from the crowd, he urged his supporters to "vote; it's the best revenge".
Really!?!
Revenge for what? What wrongs have been perpetrated, by whom, against whom, does he feel need to be avenged? And in what way would an election be the proper vengeance in any event. If you saw and heard Obama's statement, it's obvious that this remark did not appear on his teleprompter. It was instinctual, in the moment, unscripted, coming from the man's gut, revealing him as the class warrior and unreconstructed community organizer many fear. It was an expression of genuine, unguarded belief not worthy of a man who should be President of all of the people of the United States.
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