Enacting a Pigou Tax

The growing inequality in America is probably one of our greatest problems – from reduced health outcomes to increased violence to reduced beneficial productivity (think of the quants who could have been working on energy or health care but instead were figuring out ever more creative ways to fleece the unsuspecting pension fund of its money), grotesque increases in inequality degrade a society in a multitude of ways. However, an equally difficult problem has been to find a reasonable solution.

Interestingly, British Depression Era Economist Arthur Pigou floated a possible solution to neutralizing undesirable externalities: Tax them! (An economic Externality is a side effect of a transaction that costs a third party – pollution is the most common example.)

In this well-presented essay, Liam C. Malloy and John Case explain more fully the idea, what it would imply, and present even some 'whys' – Why we would want to do this, Why it would help, Why it is reasonable for a society to take this action.

I was particularly struck by the number of topics we've discussed over the past year: The fact that higher taxes do NOT correlate with reduced economic productivity; The fact that CEO's who are paid 300-400 times their average workers are not producing at 300-400 times the average rate (in fact, likely 'earning' their income by lobbying the government for breaks or handouts for their company or sector); The fact that 80% of the productivity growth of America's economy over the last 35 years has gone to the top 1% (as pointed out in the article, if the 90% increase, 2.1% per year had accrued to everyone, today's median household income would be $85,000 instead of the $50,000 that it is.)

The only omission I easily spotted was failing to call to equate income taxes on labor (wages) and capital (capital gains). There is no good reason to give preferential treatment to money earned via investment, and many, many reasons to tax investment income at exactly the same rate as labor income. Left unsaid is that for the Pigou Tax to be most effective, it would have to apply equally to all income, regardless of source. But, that is a change that needs to occur regardless of our enacting a Pigou Tax.

Enjoy, and spread the word! Want to do something positive for America's future? Advocate for those actions (like this) that would reduce the grotesque, almost third-world, levels of inequality currently present. Our country does best when everyone works towards a common goal, and when everyone, even the rich, acknowledge and act like we're all in this together.

2012 Election - Work Will Remain After The Voting

When a friend asked if I would like to provide an essay for her blog about the election, I quickly agreed. It didn't seem like it would be too difficult: I have strong opinions, I've written about them for some time: How hard could it be?

It turned out to be much harder than I anticipated. This election is presenting me with some challenges that I just don't recall any previous election presenting. I know who I am going to vote for, but it seems woefully inadequate, woefully irrelevant. Let me explain:

I find the big social issues to be a continued source of disbelief: You mean, after the Civil War, Woman's suffrage, the passage of the 14^th Amendment (with its Equal Protection Clause) and the 15^th amendment on voting, we STILL insist on attempting to segregate people from general equality based upon some aspect of their lives? We STILL insist on attempting to force conformity to one particular set of religious beliefs, even as those beliefs are undergoing internal revision themselves and don't speak for all of us? Bah.

So, it has been easy for me to vote against the party that continually comes down on the discriminatory side of things – that somehow eschews calls for equality and advocates against women frequently, against a gender-blind definition of marriage. Add to that their almost fanatical support for increasing the means to inflict violence, and its a no-brain-er.

2008 was exciting. Here we had an articulate black man who voiced concern for those who don't get a fair shake; concern for those who face injustice and inequality; and who, more than anything else for me, was willing to advocate for a restructuring of our out-moded and poor system of health care that costs all of us too much and denies coverage to many, specifically many who need it.

He did exactly that, too. Once President, Barack Obama continued pushing to reform the system of health delivery, striking bargains to make the result palatable to Republicans, Democrats, the Insurance and the Health Care Industries.

Of course, what we got represents all sorts of compromises, and in a spectacular play against the nation and for the furthering of their own interests, members of the Republican Party unanimously voted against it – voted against a remodeling that looked surprisingly like plans put forth by their own party 30 years previously; a plan that strongly resembled a successful State Plan enacted in the previous decade.

In the intervening time since then, President Obama has come out in favor of Gay Marriage, and has allowed the Pentagon to repeal their nefarious 'Don't Ask; Don't Tell' policy.

So, here we are in 2012. There is a new gorilla in the room, but nobody is talking about it. Neither Republican candidate Mitt Romney, nor re-nominated Democratic candidate Barack Obama. Both, in fact, seem bent on side-stepping THE major issue of this election (and perhaps our lifetime and more), turning the whole processes into a frustrating side-show of irrelevancies.

Mr. Romney, following his party (actually, almost re-inventing himself to be crueler and more prejudiced against practically anyone who isn't wealthy and white and male than was evident during his tenure as Governor) has brought up the old, tired drudges about taxes and spending and jobs, as though we won't see through it again. His running mate, true to form, has sponsored a non-sense budget that panders exclusively to those who extract rent from the economy, and imposes austerity on those who work.

The gorilla, of course, is the outsized (over 40% of our economy!), enormously detrimental Financial Sector with its reckless debt creation, speculation, and extractive activities that drove us to the brink of ruin four years ago, and its continued existence in current form which will only repeat the cycle. The financial sector has driven debt creation, both private (which we, as a nation, are wallowing in), and public (as the falsely strong dollar elicits large trade deficits, piling on government debt as foreign traders recycle their American dollars in Bonds).

I want a champion who will go to Washington and take on the FIRE (Finance, Insurance, Real Estate) sector without concern for re-election, without concern for the opposition by the malefactors who daily steal the real productivity of the masses. I want a hero who will advocate a return to a true, classical economy, where debt is used to finance manufacturing expansion, where the unearned, 'free lunch' asset appreciation gains (Capital Gains) don't drive the economy nor contribute to outlandish awards to some.

I want a Neil Barofsky, or an Elizabeth Warren, or a Bill Black to go. Each has shown the fortitude to stand tall on this issue; each has worked in their way to raise awareness or to gain a foothold to battle it. Each has clearly demonstrated that they understand both what is happening, which of many possible solutions might give the best outcome, and the urgency with which this is needed.

Alas, outside of Warren who is running for the Senate, the others are not on the ballot. So, that leaves:

Mr. Romney, of course, who earned his fabulous wealth through this very means, borrowing and then saddling others to pay it off, while extracting a fortune from that very same debt. It is inconceivable that a Romney administration would promote the dismantling of the outsized banks and a return to a stable economy based upon real labor, real production, where real people perform real tasks to earn a real living.

President Obama, who has shown only a superficial awareness of this issue, and has so far backed away from any real attempts to address it or even communicate that he is considering it.

Hence, the lackluster feelings I have for this election. I will cast my vote for Obama, recognizing that my political participation will have only just begun at that point. That in order for us to gain any leverage, for us to stave off the austerity measures that the financial elite are cooking up for us, we will have to continue to participate, continue to advocate, continue to Occupy the public spaces.

How To Curb The Power Of Democracy

You have to admit it: Democracy is messy. Everyone gets a say in all matters, even the poor and uneducated. We toss and turn in the sea of public opinion, some informed, some ill-formed, some completely uninformed. What the masses want is not always the desire of those in power, or those with wealth. If you wanted to control or diminish the power of Democracy, what could you do?

First, I think you would posit something called a Free Market. You would imbue it with the power of a god – make it all encompassing, pure, and always correct. Posit that the God Market perfectly rewards those who work hard, and likewise punishes those who are negligent in their production or attention. Posit that the God Market is Strongly Efficient: the values It determines, whether they be salaries or prices or rewards of any sort, they are exactly the correct salaries or prices or rewards.

Now you have the perfect tool to curtail the power of The People. If they advocate for higher wages, you can simply beat them back: Their wages are exactly the wages God The Market has determined should accrue to one who does what they do. Paying them other than what the God Market has chosen is an affront, and will have many negative consequences.

Perhaps they would use their democratic powers to move something from the realm of the private into the realm of the public with the desire that the fruits of society should benefit all of its members. Again,

remind them that public entities are fraught with inefficiency and corruption – you know, because God The Market has informed you, and It has no interest in rewarding any who would not strive alone to better themselves.

You can even use it to bruise their ego. Observably, the masses are poor, and since the God Market is purely efficient and correct, ergo, they deserve their lot in life. Who would dare go against what is pure and true? Those who have succeeded, by definition, are those who have worked harder, dared more, and received the bounty of the God Market! Repeat often, and perhaps they will learn the error of choosing Democracy, and stop attempting to use their votes and some pathetic egalitarian ideal to oppose that which is natural and pure and good, and just go and toil for the God Market.

For surely, you can point to your own success, and recognize that it is of course the result of a mighty struggle that has received the beneficence of God The Free Market, and you now have the perfect tool with which to flay Democracy: Indeed, you can point to your own neutrality! Do The People want clean air and plentiful, pure water? It is not for you or they to decide: The God Market will provide those as needed and when needed, and if they are not as clean as some want, well, who are they to go against the providence of the God Market?

Use the tool often and with energy, and perhaps this desire for messy interference with the natural order of things, this desire to make society better for all, this desire to diminish the injustices of previous generations can be caused to wither, perhaps die. Those who would choose their fellow citizen over personal gain can see the error of their ways. For once this arrogant wrongness, this affront, this virtual heresy that is Democracy is banished, then all can turn towards the God Market and have its splendor and perfection shine upon their faces, and the world can become Its perfect reflection.

The Devil Is In The Details

Job Creator? Nope. More like pension looter, debt adder, layoff enjoyer.
Nicholas Shaxson gets the credit for this interesting Vanity Fair article looking into the finances (and perhaps moralities) of the man who would be president.

A Century Ago...

On September 22, 1906 a mob of white people (thousands strong) stormed Atlanta, beating, and sometimes killing, every black person they came across. In his account of the Atlanta riot, David Levering Lewis writes*:

The immediate cause of the terrible Atlanta riot of 1906 had been the newspaper drumfire of alleged assaults upon white women by black men. The underlying cause was to be found in the politics of class conflict among the white people. As cities of the New South like Atlanta filled with poor whites and blacks, the planters and politicians in rural counties mobilized...to brake the power of the urban colossi. Bloodsucking railroads, flint-hearted banks, merciless factories, the loss of white men's jobs to black men, sin corruption, and race mixing -- the rural diatribe ... was shrill and long. ... As [W.E.B.] DuBois wrote in a moving essay in The World Today, the explosion had occurred inevitably after "two years of vituperation and traduction of the Negro race by the most prominent candidates for governorship, together with a bad police system"

 Brought on, one might add, by the strong xenophobia the country had towards the ex-slaves, the Negros in their midst.

Thank goodness that is all behind us: Today we don't exhibit xenophobia towards people who are racially, culturally different; We have no difficulty advancing the cause of liberty to anyone regardless of their views on life; our leaders and newscasters don't spread vituperation via senseless name calling or degrading of those whose views differ from their own; The divisive fire of class warfare is not stoked by the elite nor politicians intent on gaining office. In short, the century that separates us from the riot of 1906 has brought us tolerance and the ability to discuss our different opinions about the country in a 'cool marketplace of ideas'. We should rejoice that we have ascended so far from those events...

What? What was that you said?

Oh.

Nevermind.


* Lewis, David Levering. "W.E.B. DuBois - Biography of a Race 1868-1919" Henry Holt, New York, 1993. p334.

The Deficit, Part Two...

One of the things that drives me nuts about politicians and politics is that they rarely are required to keep even a superficially consistent story. It would make so much more sense if we had on the one side those who believe that less should be privately controlled and more publicly controlled, offset by those who wish for stronger protections for private property, both balanced by the conservatives who just want to slow the pace of change and keep the status quo (and let's face it, changing for change's sake is not usually a good policy!). But instead, we get this:


In August we were treated to the spectacle of the deficit ceiling colliding with the rising deficit, and the hand-wringing of that singular (okay, so it turns out it wasn't that singular!) event: We were going to drive the country into ruin! We must cut the deficit! We must, must, must! One party in particular was driving the debate as the #1 issue facing the nation, now and into the future. We may disagree about the seriousness of the event, but they certainly can take a stand on it...

So, I would expect (especially after the collapse of the Deficit Reduction Commission - DRC) that any Republican candidate for the Presidency would continue to campaign on that idea - that the current policies followed by the current administration continue to increase the deficit and take us towards ruin. But, I am wrong.

Turns out that now candidates feel the best way to win the White House is to campaign on a promise to increase the deficit - on average by the amount the DRC was targeted to reduce: $1 trillion dollars. Say it with me: ONE TRILLION DOLLARS!

I am speechless. I'll let James Kwak tell the story:

The Times has a story out today: Surprise, all the Republican candidates’ tax plans increase the national deficit! The numbers (reduction in 2015 tax revenues, from the Tax Policy Center):

• Romney: $600 billion
• Gingrich: $1.3 trillion
• (Late lamented) Perry: $1.0 trillion
• Santorum: $1.3 trillion

*Paul is excluded, see fn1.

If I were an Independent or Democrat candidate for the Presidency, I would jump all over this (heck, if I were just an average journalist, I'd be all over this!) "Mr Candidate: Why isn't the deficit an issue any more and you feel that you are free to accelerate it's growth over the four years of your presidency if you were to be elected?" 

I have an idea why, though: Tax cuts are always popular - cutting programs is not. Sadly, though, all four candidates plans cut taxes for the rich and then wait for the resulting deficit to materialize so that they are 'forced' to cut government programss: Which usually are programs that aid the middle and lower class. You don't still doubt that we are governed by an oligarchy of the rich now, do you?

fn1: Mr Paul doesn't have a specific plan - other than to eliminate the IRS and wave his hands and hope that the reduction will be offset somehow - which leaves his plan well north of $1 trillion in deficit increase. But, he hasn't published specifics, so the Tax Policy Center can't run specifics...

Violent References

One of the notable achievements of an electoral democracy, like ours, is that the ballot box replaces violence as the mechanism of power change. As the different would be leaders contend for their time in control, the pen replaces the sword, words replace bullets, oration the cannonball.

In support of this ideal, many realize that allusions to violence have no place in the process either: Criticize your opponent (or those from a different power group), speak out with specific remedies you prefer, frame it as a contest if you will, but leave the violent metaphors (no 'targeting' your opponent, no 'assassinating' their view, etc.) out of the conversation or debate.

You would think that removing violent speech from the process would be so uncontroversable as to gain universal acceptance - that even those who've perhaps used such speech in the past would realize the undesirability, and join with those who call for all to abstain.

But, no. It seems that there are some who so identify with their idols that a call for them to refrain from violence as metaphor or allusion is a personal attack - and in defending the right (?) to violent speech, they show themselves to be morally unanchored.

For their very defense is to deny the interconnectedness of society - to deny that our actions ripple outwards and affect and influence those around us - that leading a moral life is not just for our benefit, but benefits (by example and support) our family, our friends, our colleagues, our fellow citizens.

Their defense, too, espouses the ultimate 'me first' attitude - recast as 'me only' - an abdication of any and all responsibility to anyone else, to society, to country.

But, for an electoral democracy to succeed requires that the citizenry accept shared responsibility for society's problems, that they build an inclusive community of shared ideals and values, and, foremost, that violence as a solution is eschewed in favor of open debate, with ideas carrying the day.