Thursday, May 24, 2012

How Not To Improve Elections

I am ending my blog vacation a bit early as I felt the need to comment on a recent trend. I have heard again and again about this rather silly "None of the above" proposal. It sounds nice, but in reality it will fix nothing, and will never be passed in any event.

Basically, as I understand it, the idea is to add "none of the above" as an option during elections. The proponents I have heard are a little vague on the details, but it appears the aim is to leave the seat empty should "none of the above" win. It seems to be mentioned mostly in terms of national elections, and so I will limit my comments to its use in those races. It will not work on a state level either, for many of the same reasons, but for the moment I am sticking to national races only.

So, why is "none of the above" such a bad idea? Because it is simply unworkable. What do these people think will happen if "none of the above" wins? The seat will sit vacant for two or four or six years? Hardly. No state will allow any of its national representative positions to remain empty, and no legislature would pass a law that would ensure a loss of state representation.So, there are three possibilities. First, the seat would be considered "empty", which would mean the governor or legislature would appoint a replacement. Second, the current officeholder, if any, would continue on to another term. Third, a new election would be held.

Let us look at those. The first, obviously, is hardly an incentive to run good candidates. If people vote "none of the above" they are effectively just voting to turn over the selection to whatever local officials fill vacant seats. The second option is even worse, as it is the exact opposite of the "throw them all out" mentality which is behind the "none of the above" movement. Only the final really seems to be even close to what the movement wants, but it still won't work. Think about it, the second election will just be a repeat of the first. The parties won't run new primaries, and even if they do, they will likely get similar results. So, what will be the outcome? We will spend a lot of money on a second or third election, and in the end, tired voters will finally give in and take one of the original bad choices. No real improvement.

So, what can we do?

I originally thought about proposing open ballots, allowing anyone to get his name on any ballot, and I still think that is a good idea for other reasons, but if third party candidates are not enough to break the choke hold of the two major parties, I doubt adding what amount to a few more third party candidates will do anything other than clutter the ballots. For any number of reasons, our history shows that American politics has pretty effectively enshrined a two party system, and no amount of reform is going to create a multiparty or nonpartisan system.

So, in reality, there is very little we can do. Or very little that will provide a quick fix that most people seem to want. As I said before, people are impatient, and seem to want a magic fix that will make everything better. That is at the bottom of the "none of the above" movement, the belief that some magic bullet will give us good candidates.

It won't.

The solution IS simple, but it is also slow, and tedious, and requires some effort on our part, which makes it unappealing to most. And it is practical and boring, and so it doesn't make good copy in the press or on blogs. Unfortunately, the truth rarely does.

The solution is to work with our neighbors, and the other members of our party, to support good candidates, to make sure they run for nominations, that they have the proper grass roots support, that they get good word of mouth and that they eventually win the nomination. And if our candidates don't win, then our job is to make sure that we get out there and find out why, and educate other party members, and make sure that the goal of our party are properly spelled out and that other party members understand why the candidates we support should be nominated based on those beliefs.

It is boring, it is slow, and it lacks the drama or flair of most quick fixes. But it has the one advantage of actually working, so I must stand behind it.

NOTE

As I said before, there is one political fix which would help, and that is eliminating the silliness of "open" primaries. But that only makes sense. And it does not eliminate the need to support good candidates, or persuading fellow party members. Unfortunately the tedious grunt work will remain whether or not we eliminate open primaries.

ADDENDUM

If you think about it, this movement is kind of funny. Taking them at face value, they are arguing for their right to not be represented in congress. In other words, where our ancestors fought and died for the principle that every man deserves representation in the governing body, these people are getting worked up over their right to not be represented.

How odd.

Originally posted in Random Notes on 2008/06/01.

Monday, May 7, 2012

Quick Note From The Vacationing Author

I am still officially on vacation, but I had to note something I have observed.

A while ago I mentioned that I disagreed with all those pundits who were predicting an Obama sweep. One of the major foundations of that prediction was the belief that McCain had little Republican support. And they were right when they wrote it, but that is the problem with predicting a November election in March or April.

Has anyone else noticed that all the posts which said "I will never vote for McCain" are starting to be replaced with posts reading "I don't love McCain but..."?

Yes, there are still a number saying they will never vote for McCain, but most are either those who were pushing Ron Paul, or CFR/NAU conspiracists who would probably oppose any candidate other than Pat Buchanan. In other words, most of the remaining opposition is on the fringe, voters who were unlikely to vote for any Republican candidate.

Now McCain still lacks strong Republican support, but he is already drawing back many Republicans, or, to be accurate, fear of Obama is driving many Republicans back.

All of which means that my older predictions seem more and more likely, and those over confident promises of an Obama sweep seem ever less likely.

Well, back to my vacation from my regular blogging. I just could not resist commenting on this evolving trend.

Correction (06/02/2008): As I took my vacation seriously and ignored this blog, I didn't notice that the title originally said "Quite Note..." rather than "Quick Note...". As it was posted at 5 PM, I can't blame the late hour, so I really have no excuse. Mark one up to carelessness I suppose.

Originally posted in Random Notes on 2008/05/31.

One Loophole

When I said I was taking a vacation, I meant from THIS blog. I just posted an essay on my other blog. Don't read that to mean my vacation has failed. Far from it. As my other blog ignores current events to focus on more abstract arguments on the single topic of drug laws, I don't think of it as anything like my main blog.

I am still on vacation form current events, taxes, and the rest. But I am taking advantage of that time to write a bit on drug laws.

So, see everyone on Monday. If you just can't get enough of my sparkling wit (though I have yet to meet anyone for whom that is true), you can get your fix at my drug law blog "Examining the War on Drugs".

Until Monday, goodbye.


Originally posted in Random Notes on 2008/05/29.

Another Stab At A Vacation

I tried this before and it lasted less than 24 hours, but I think I am going to take another break from blogging.

I do enjoy this blog, but I am burning out a bit. There are only so many things one can say about Obama, and McCain is not inspiring enough to really fire me up to write about him day after day. I do have my on-going FairTax debate, but as I said elsewhere I feel the way the debate has been framed I am arguing a point I really don't believe, arguing for flat tax or capitation where I would really much rather the feds got out of taxation entirely. And while I do have two longish posts half finished (one on federalism and one on the government in general), I just can't seem to find the energy to finish them.

While I continue posting essay after essay, I feel they are becoming less and less significant. Where before I felt satisfied with at least half of my writing, today it is well under a quarter. Therefore, I am going to try to give myself a short vacation from blogging. My current plan is to take a break until next Monday, to allow myself a bit of time to put politics out of my mind, concentrate on my fiction writing, and generally try to rest, focus a bit and get my blogging back on track. Of course, as I said, my last attempt failed miserably, as I couldn't stay away for even a full day. But I am trying again.

We will see how this goes. If I succeed, look for a new essay Monday. But, if I can't stay away, as was the case last time, look for one much sooner.


Originally posted in Random Notes on 2008/05/27.

The One Thing The Left Forgets

The left, and many pundits on both sides, think they have the race all sewn up. I have argued elsewhere that I think Obama will have trouble winning over any independents, and may even lose the blue collar Democrats, but I will ignore that for now. Instead, I will argue that one major component of the Democrat strategy is much weaker than they think.

The Democrat strategy seems to amount to two different means of cashing in on dissatisfaction. First, they promise "change" to get votes form those unhappy with the current situation, and then they link McCain to Bush, to rob him of votes.

Now, the first seems to be working at the moment, but that is largely because only Democrats are listening to Obama. For reasons I explained before, I think many independents and conservative Democrats will not trust that the type of change Obama offers is in their best interest.

However, the second is the big stumbling block for Democrats. McCain is not exactly a confidant of the Bush administration, in fact he has been more of a thorn in Bush's side than anything else. But let us leave that aside for the moment, and assume Obama can successfully link McCain and Bush. What will it do?

Not as much as the Democrats think. Democrats have a tendency to mistake dissatisfaction with Bush as being identical to Democrat style Bush hatred, and that just isn't the case. Independents, and some conservative Democrats, may think Bush is not doing the best job possible while still not despising the man. Which means simply associating McCain with him will not do as much as the Democrats hope. It is their belief that mere guilt by association will turn into some sort of visceral loathing of McCain, while far more likely it will produce nothing more than indifference.

Of course, I seem to be largely alone in this belief. But I still think it is true. I just do not see the Bush hatred out there among independents that the Democrats seem to see. And if their rosy predictions are based up tapping into something that isn't there, is it not likely that the predictions they have made are a bit off the mark as well?

Originally posted in Random Notes on 2008/05/27.

Someone Forgot Kerry

I can't believe it took me so long to get around to this, but does Obama's quote about the rest of the world not saying OK to us driving SUVs and keeping our houses at 72 degrees remind anyone else of something?

Just four short years ago, John Kerry managed to lose an election in part because he said any use of US military force would have to be subjected to the "international test", whatever that meant. There was a lot of back and forth as he tried to redefine what this term meant, so as to dig himself out of the hole he had started, but, in the end, the idea of subjecting US military decisions to foreign approval just did not fly with the American people.

Now Obama is not just subjecting our military, but our entire economy and our personal choices to an international test. And yet the pundits continue to tell me this man is going to win?

Here is my prediction, as soon as Obama has the nomination secured, we will start to see Reverend Wright's face, either chanting "G-d D*mn America" or else from his "explaining myself" tour, and we will being hearing Obama telling us that foreign nations need to approve our SUV use. Maybe we will hear him talking about invading Pakistan a well. Or the high price of arugula. Or see printed quotes about bitterness and G-d.

A few days of such media and Obama's numbers overall will plummet. Of course the media will claim that it is racism, but it won't matter. Before the end of August, Obama will have sub-Mondale numbers. The left will fail to understand, but the pundits will claim to get it. They will explain that they knew Obama would lose all along, conveniently forgetting their claims about his sure fire victory. For some it will be racism, for others working class over-reaction to charges of elitism, a slew of excuses to avoid the truth that a far left politician with no platform won the Democrat nomination on slick packaging, but couldn't sell the rest of America on his content-free campaign.

Well, that's my call. I have said it all along and haven't changed. Perhaps November will prove me wrong. If so, I will admit it. These essays will be here for all to see. You can mock me all you want.

But, for some reason, I am not worried.

Originally posted in Random Notes on 2008/05/27.

Reframing the Debate

In my several responses to yt_knight I am afraid I have in many places let him frame the debate and that has led me to be a bit less than happy with my replies. I still stand by what I said, but I do want to clarify a few things.

First of all, yt_knight's insistence that I could not simply "poke holes" in the FairTax, but had to propose an alternative led me to acting as an advocate of the flat tax, which I am not. If we assume we must change the tax system, and that the substitute must be another national tax scheme, I suppose it is the best, but that is not saying much. In reality, if it were politically possible, I would prefer a capitation tax or poll tax if we must have a nation tax, as a uniform fee per citizen seems more fair, and much less intrusive. However, it would never get out of committee, much less to any legislature floor.

And, of course, in reality, I would prefer to eliminate national taxation entirely, and return taxation to the states. Actually, I would want almost all state functions returned to the states. But since yt_knight insists on framing this in terms of competing national tax schemes, I have not been able to argue that.

Second, I am a bit put off by the assumption that we must have tax reform. Or that it is the most urgent problem facing us domestically. I agree that our tax system is not ideal, but I don't even know if I would agree that it is broken, though I think I have said so once or twice in the past. In reality, confusing as it is, it works relatively well and generates revenues without too many ill effects. It could obviously be better, but is it in such urgent need of reform that we should jump at anything even marginally better?

Even if we accept that the tax system is broken, I would argue that spending reform comes before tax reform. Far more harm is done by deficit spending and subsequent monetary expansion than by the tax system. If we are going to focus on one domestic issue, I would rather see a balanced budget bill with real teeth than even the most wonderful new tax system. It would do far more good.

Third, the very format itself is a bit peculiar. Yt_knight has proposed a debate of what are essential traits of a new tax system, but then smuggled in items which appeared to be there simply to make sure only the FairTax fit. If we are debating an ideal tax system, then we must not worry about ephemeral issues such as whether the tax system deals with social security. If we are dealing with a realistic proposal for the present, then we cannot ignore issues such as WTO fines which cut against the FairTax. It cannot go both ways. Until we agree whether we are arguing over the ideal system or the best we can hope for at present, this is a meaningless debate, as the vague criteria lead to nothing but confusion.

Finally, I cannot understand yt_knight's objections that I am comparing the FairTax to a system without tax, as opposed to comparing it to what we have now. If I am to evaluate something, I need to see how it changes the economy, not how it improves what we have now. When a doctor looks at a patient, he compares his symptoms to a healthy person, not to the patient down the hall. We need to evaluate each tax system against a system without taxes to see how that system changes the economy. We can then compare the effects of each system to the others to choose the best means to achieve whatever goals we set. We cannot start off comparing systems to one another before we see what they do on their own.

So, I would propose agree to the following points before continuing the debate.

First, that we eliminate any rhetoric of urgent need as a justification for change. The present system in one form or another has existed since World War I, and the world has not ended. We have more than enough time to debate this question properly.

Second, just being better than our current system is not enough to justify change. Change is not without costs. Any new system has to be not just better, but enough of an improvement to justify the costs of change as well.

Third, admit that there is uncertainty in any new enterprise. That being the case, the proper way to evaluate a change is to look not just at the the most optimistic assessments, but the most pessimistic as well. It is not "poking holes" to point out the worst case, but a reasonable approach. When we know the best and worst any approach has to offer, we can fairly evaluate it.

Fourth, as there is uncertainty, it is not enough to justify change by pointing out the most optimistic outcomes of the new approach are better than the present reality. Either one must show the most optimistic outcomes are near certainties, or show that on average all likely outcomes are sufficiently better than the present.

Fifth, any given theory must first be evaluated in isolation. After it has been assessed on its own terms, its strengths and weaknesses can be compared to those of other theories. Starting off by comparing it to a known theory simply shows whether it is better or worse than that theory and does not provide us any means of evaluating it against a third theory. Specifically, showing how the FairTax improves on what we have now does not tell us how it would compare to a flat tax or another alternative.

Sixth, all evaluations are valid only in relation to certain fixed goals. It is impossible to say "objectively X is better". X is only better in terms of its ability to achieve a set goal. To speak of X as better than Y in the abstract is meaningless. There is no such thing as absolute good and bad in economics.

Finally, there is no logical necessity for a national tax. While I may from time to time compare the FairTax to alternate proposals for a national tax plan, there is no necessity of a national tax at all, and we existed for quite some time without one. Yes, it is unlikely that the federal government will surrender their power to tax, but it is unlikely the 16th amendment will be repealed as well, so we aren't talking about likely events on either side here.

I think that's it. If we can agree on those, I think the debate may be a bit more clear, as we seem to have had some confusion and some hidden assumptions that made the discussion a bit more confused than it needed to be.

Originally posted in Random Notes on 2008/05/27.

Another Reply to Yt_knight

Apparently yt_knight responded to my critique of his essay on the essential features of a tax system yesterday, but I only noticed it now. For those who have not seen the earlier installments, I am providing links to essays on both sites at the end of this response.

Basically, yt_knight took exception to some of my criticisms of the FairTax. This is not a new position for me, a look at my blog index will show that I spent quite a bit of time last year criticizing the FairTax when it was in the news more regularly. However, with the end of Huckabee candidacy I had largely ignored the FairTax, since it had dropped from the headlines. Only with the publication of the new FairTax book, and a commentary by Mike Adams, did I find myself mentioning it again, which brought about this ongoing debate with yt_kinght.

Before moving into my specific response, I do want to address one issue yt_knight raised which is involved in several individual items. When I suggested that while reforming taxes we should reform spending as well, yt_knight , rightly, said that it was unrealistic to expect both spending reform and tax reform to pass at the same time. However, he then followed that up by dismissing my objections about WTO sanctions with idealistic rhetoric about sovereignty.

We must decide whether we are discussing an ideal or a realistic solution. If it is an ideal, then I will accept that we can ignore the WTO as it can be replaced with alternate international trade agreements. However, if that is the case, then my call for spending reforms is valid as well. On the other hand, if we are dealing with reality, then I must accept that it is unlikely we will get significant spending reforms along with tax reform (though it is possible), but we also have to deal with WTO rules and the rest of the world as it exists today.

I would point out that, given that his whole plan requires the repeal of the 16th amendment1, realism may not be the best approach for a FairTax advocate, but, for the moment, I think realism is the approach I shall take. While I am still planning to discuss how to evaluate a tax plan in the abstract, I shall not criticize his positions from the perspective of an ideal tax system, but of the best possible plan we can realistically achieve. It does not make a huge difference, but it will change things slightly.

I would also like to address one other statement. As before yt_knight accuses me of making irrelevant arguments by arguing semantics (previously he accused me of pointlessly "knocking holes" in theories). I disagree. My distinction, for example, between simple and consistent is very important. Likewise, there is a huge difference between saying a tax system should remove as little capital as possible and a tax system should "build capital". Simple and consistent are VERY different things. And tax systems can NEVER add money, only take it away. The very fact that people forget this simple truths leads to bad arguments. So it is not arguing semantics to remind people of these facts. It is urgent that we recall the truth behind the words we say. If we start thinking taxes can create wealth we are prone to follow a very dangerous course. Similarly if we confuse simple and consistent we may overlook valid options because they are not simple enough. Pointing out truths is not "arguing semantics".

Lastly, I did not pit his "objectives against a system of no taxes whatsoever". Read my post and see for yourself. I simply evaluated his system on its own. We do not have to compare a system to another option to see what its flaws and strengths are. By yt_knight's logic, I would have to bring a healthy person to the doctor's office to provide a model. We can assess plans in isolation, and that is precisely what I did. I do not disagree with his statements because of some "semantic" argument, or because it was unfairly compared to a system of "no taxes", but because things he proposed either are not essential to a tax system, are simply wrong, or would cause undesirable economic dislocations. But you will hopefully see that in my response below.

And having said all that, let me jump into the specific points.

1. Simple - yt_knight agrees with my call for consistency, but sticks with his call for simplicity as well. Again, this is not a requirement for a tax system. As I said before, absolute confiscation at gun point is simple, yet horribly unfair. And a very complex system could be fair. From the viewpoint of efficiency, if added complexity generates enough revenue to offset the cost of that complexity, then it makes sense. So I just do not agree that simplicity is essential. I care about fair, about keeping taxes collected as low as possible, about doing as little harm to the economy as possible. If those can be done simply, fine. If not, then I don't care about simple. It simply is not an essential trait.

2. Maintain funding level - Since I adopted a realist approach, I will agree that we cannot see a significant drop in revenues if we hope to pass a tax reform. On the other hand, I have argued before that there is no guarantee that the FairTax will not see a drop in revenue. There are a lot of assumptions built in, including that spending will remain relatively flat, as the 23%/30% tax will be offset by removing 22% of embedded taxes. But as I argued before, that "offset" will not be evenly distributed, meaning the impact could be greater than anticipated. As I asked before, I would like to see an impartial accounting of the numbers behind the "revenue neutral" claim. However, ignoring the specifics of the FairTax, as I am adopting a realist position, I have to agree, by definition, that maintaining revenues is a necessary goal, but only because we so defined the realist position.

3,4,5,6, & 7 - These all relate to capital formation, investment, foreign trade, and so on. I am going to lump them all together as they all relate to one another.

As these have been reworded I have no objection per se. However, again, I think that the focus on capital to the exclusion of consumption is essentially to substitute one mistake for another. The old system emphasized spending by penalizing capital formation, and the focus of the new is on capital formation at the expense of consumption. I would much prefer a system which did neither. Both consumption and production are essential. By penalizing production, the current system harmed the economy, but I would argue that by penalizing consumption the FairTax will cause harm as well. Consumption cannot continue without production, but without consumption, production ha snot purpose. To focus on either is a bit of a mistake. It is far better to penalize neither activity.

However, that is a minor argument. If the FairTax folks wish to emphasize production and capital formation at the expense of consumption then so be it. I will not say that this focus is essential to any system of taxation, but I won't say it makes their position invalid.

As a bit of a postscript, I would renew my objection to the proposed handling of foreign trade. The bill says the difference between any tariff and the FairTax will be added to imported goods. As we are being realistic in our assessments, then I am right to mention that this would trigger WTO challenges by other nations who would rightly claim it is a hidden 30%2 tariff. Most likely we would either have to drop this provision or face serious penalties in foreign trade. And, if we drop this provision, then my worries about overseas trade as a means to circumvent the FairTax are once again valid.

8. Privacy- I still fail to see the worries over privacy, but even granting that privacy is a valid concern, yt_knight fails to see that he contradicts himself. He says that the current system requires too much information, but he does nto see that the FairTax does as well. By myopically focusing on the wage earner, he does not see the burden placed on every seller, big and small, to report every single transaction.  Nor do I think the FairTax will be any more fair in judging those collecitng taxes. He claims citizens are now "guilty until proven innocent", I argue under the FAirTax the same will be true of businesses charged with collecting taxes. So I think the gains he sees come solely form either ignoring business or else simply not caring about anyone but wage earners.

9. Transparency- I simply do not understand what yt_knight is saying. He mentions programs being put on the spending side of the ledger, but I can't understand what he is thinking. My original argument was that because of deficit spending, no tax system will make government costs transparent, and I can't see how the FairTax, or any tax system, cures this unless we eliminate deficit spending as a regular practice, which nothing short of a constitutional amendment would do, and even then likely some way around it would be created. So I just don't get his point here.

10. Social Mobility - Here yt_knight trots out the silliness about the FairTax allowing people to "choose when to be taxed". Well, yes, people can opt to buy only necessities to avoid taxes, but under the current system they can opt for a subsistence wage to avoid taxes as well. This is not a strength. The FairTax is no more voluntary than an income tax. Both can be avoided by making unpleasant changes to your life. That doesn't make it voluntary. Sailors could avoid the press gangs by blinding themselves, but that didn't mean people caught by the press gangs were volunteers, and the fact that not spending lets you avoid a sales tax does not make the sales tax voluntary3. Beyond that, I really don't think "social mobility" is something we should consider when planning a tax system. I still stand by my 6 points.

11. employment costs - yt_knight misses my point here. He is thinking his system "lowers the cost of employment" because it is lower than other tax systems. We are not comparing the FairTax to the current system. We are comparing it to a lack of taxes. I don't care that it is lower than what we have now, I care only what it does on its own. And consider on their own merits, no tax system lowers the cost of anything. yt_knight insists on arguing the FairTax against what we have now, when he should be arguing it on its own merits. His position is akin to calling myself a genius because I am smarter than the guy with a head injury. Good and bad can be evaluated on their own, without comparison to something else. Which was the reason for all the "non-employment" material he found confusing. I was arguing that taxes do not reduce the cost of anything, to make clear that we were discussing taxes on their own, not relative to other taxes. Of course his tax is cheaper than some others, and probably costlier than others as well. So what? We are asking about the merits of this system on its own, and when viewed on its own, no tax will reduce any costs.

12, 14, and 15. These are more capital formation and job creation ones and I have dealt with that above.

I would point out one thing that is obvious from yt_knight's examples. He thinks new businesses cost a lot more to start and that capital is a lot more scarce than it is. He seems to have something of a crisis mentality, as shown by his runaway stagecoach example, which may explain this, but I find it odd that anyone could have lived through the start-up frenzy of the 1990's, who says he is a software developer no less, and think that our current system has destroyed small business. Our system may hamper capital formation, but it is hardly as dire as he would have readers believe. Then again,  one of his earlier arguments was "things are so bad, wh6y not just try the FairTax". Either a gloomy outlook is at the root of his faith in the FairTax, or else he has adopted a gloomy outlook as a tool to promote the FairTax. IN either case, I have to disagree. Things are not so bad. Even compared to the 1970's we have it quite easy, much less compared tot imes of true economic hardship.  Conditions are far from ideal, but they are nowhere near as bad as many say.

13. Equitable treatment - I think we agree on this. Though obviously not on some of the specific applications I suggested, but we can argue those where relevant.

14-15. See above

16. Tax Planning - He still does not answer my contention that no plan short of a straight capitation tax will be free of tax planning. Even a poll tax allows the vote/do not vote planning option. As long as a plan offers means of reducing one's tax burden, there will be tax planning. And as far as I can tell, the FairTax does precisely that. Especially with all the exempt categories (new/user,wholesale/retail), it opens up planning options in areas such as materials purchase, where tax planning is not currently an issue. But yt_knight did not really reply to my contention, so I will simply let my previous comment stand.

17. Easy to administer- yt_knight seems to think I am arguing "for the sake of argument". Far from it. I simply say that simplicity of administration is not essential. If complexity produces better results, should we reject it because it is complex? Is Ptolemy better than Kepler? Or Newton better than Einstein?  Complexity is not in itself a bad thing. And that applies to taxation as well. A complex system may be more equitable and efficient than a simple system. So I am not willing to say simplicity is essential. Nor will I say that "ease of administration" is essential for the same reasons.

18. Social Security - As we were talking about taxation systems in the abstract I did not mention social security and medicare. Also, I would argue with yt_knight they ARE NOT part of the tax system as they are collected independently under their own laws. According to the state they are premiums contributed and not taxes. Obviously, I do not believe that, but the state does, so changing them would require separate laws, they cannot be handled as part of income taxation, or any other tax plan.

I would also argue that they cannot be fixed, even by the FairTax. Despite the claims that the FairTax will spur growth, I cannot see how even under the most optimistic of assumptions the FairTax will cover ever increasing liabilities with a shrinking pool of contributors. The "fix" for social security is elimination, anything less is just a band aid, even the FairTax. So I chose to ignore them as distractions from the question of a tax system.

However, if anyone cares to show me how the FairTax will not only make us rich but continue to fund Social Security out through 2050 or so, be my guest. As the FairTax is "revenue neutral", and the estimates are that a bit after 2050, social security and medicare will require over 10% of GDP4, I don't see how this revenue neutral plan fixes anything. Even with the overly rosy growth picture the FairTax proponents espouse, the combined cost will still be at a minimum 7-8% of GDP, which means that the FairTax will need to take a lot of revenue to balance out this picture. I don't think the 23%/30% will be enough to capture 15-20% of GDP we will require for social security, medicare and all normal government functions.

Well, that's it for my response. I still would prefer to ignore side issues such as social security and medicare, as they are not central to taxation and introduce other legal issues that muddy the waters, but if yt_knight insists, I will deal with them as well. However, I would much prefer we stick to questions of taxation proper.

--------------------------------------------------

1. This is the one provision that places the FairTax firmly in the category of fantasy. The bill as written requires the repeal of the 16th amendment before it becomes active. Not only does that mean the bill will almost certainly remain a dead issue for the foreseeable future, but it is also useless. The FairTax advocates seem to forget that the US had an income tax during the Civil War and after without the benefit of the 16th amendment, meaning its repeal would not prevent someone layering an income tax on top of the FairTax. It would have certain technical differences from our current income tax, but it is still possible. Which means the requirement not only keeps the bill from every coming into effect, but is also a failure as a safeguard against a revival of the income tax. Not to mention the fact that it does not eliminate the FairTax if a future amendment effectively restores the 16th amendment. Unlikely, but still possible as well.

2. In this case it is appropriate to call it 30%, as tariffs are traditionally measured as increase in cost over untaxed amount. Whatever one thinks of the FairTax's argument for calling this 23% (and my opinion is recorded elsewhere), when foreign nations view the amount added by the FairTax, they will consider the Tariff plus FairTax to be a total 30% tariff.

3. I read two truly voluntary taxation scheme in an objectivist book some years ago, I don't recall which one, nor do I remember who was writing. However,t he two schemes were a national lottery and a contract enforcement fee. Both seemed good ideas, though the second is unlikely to be politically viable. I would add a third, a poll tax. If you want to vote, you pay the fee, but otherwise not paying taxes has no consequence. Essentially, it is payment for the right to participate in politics.

4. Another thing to keep in mind is that the trustee reports have, in the past, not been the most accurate predictors of actual costs. Especially with our limited experience with part D, I think this one may seriously underestimate future costs. But even assuming it is reliable, it suggests that FairTax or not, we will need a big chunk of cash to pay for everything we are promising seniors.

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NOTE

Here is the list of articles from my blog. Originally I had intended to include yt_knight's responses on his own blog as well, but I felt a bit presumptuous choosing which were relevant and which were not, so I will leave it to yt_knight to cite those articles he considers significant on his own blog.

Short Reply to Doctor Adams
Revisiting the FairTax

A Very Brief Reply to the FairTax Advocates
Reply to FairTax Comments
Reply to FairTax Comment II
Why Do I Bother?
Making Taxes Hurt
Reply to FairTax Comment III

What Is Wrong With A Prebate?

Why Argue

Ch-Ch-Changes
Imports and the FairTax (One Issue)
The VAT Versus The FairTax
The Runaway Stagecoach

A Partial Reply to yt_knight
Truths About Taxation

Originally posted in Random Notes on 2008/05/27.

People Are Not Idiots

So often I hear the claim that "people" are stupid. Not just on the left, but on the right as well. They nominate the wrong candidate, they don't save enough, they have too many children, they don't do what is in their own interest. I wrote before about how many bad ideas in government are based on viewing our fellow citizens as stupid, and about the arrogant individuals who call others "sheep", but since I hear this so often, I feel the need to show again that what appears to be "stupid" to some arrogant souls is really quite rational behavior.

I would be tempted to argue against the left wing Zero Population Growth types, but Julian Simon beat me to it. He showed quite well that even in the most poor and "backwards" countries, most parents do actually plan the number of children they want, at least to a degree comparable to that of "enlightened" wealthy nations. The large families they have are not the result of ignorance or a lack of understanding about birth control, but of the economic realities of those nations where a large family is seen as a form of old age insurance.

But even if it were still possible to add to Simon's argument, I think arguing against ZPG might not have as much impact as arguing against a sacred cow of the right. So, to make my point most forcefully, I will instead argue against the theory that people "aren't saving enough".

First, let me say that this is a very non-economic statement. Economically there is no "right" amount of savings. Capital investment is just another choice one can make to allocate his money, and is valued individually just like any other choice. We can say that this or that level of savings is required to reach a specific goal, but the desirability of that goal is still established by the collective valuation of every person participating in the economy1. Thus there is no optimal level of savings. It is just a legacy of silly Keynesian theory that we even think there is some economic ideal toward which we can strive. Economics does not define ideals, it simply recognizes that individual valuations set the relative values and then asks how best to achieve those goals.

Some will respond that "clearly" it is bad when we spend more than we take in, but even that is not true.There are any number of circumstances under which it makes sense to spend up one's accumulated capital and even add additional debt.  For example, if a state enacts very liberal bankruptcy laws while at the same time penalizing investment, it only makes sense to live paycheck to paycheck while piling on debt to accumulate material goods, as bankruptcy provides an easy forgiveness of debt, allowing the debtor to retain most material goods. In other words, bankruptcy laws allow one to essentially buy things cost free. Of course, one must have no investments to cash in on bankruptcy laws, but that is not a problem, as punitive capital gains taxes make savings unattractive anyway, as the investor loses a fixed percentage of all gains, but suffers all losses himself. It makes investment less rewarding than it would otherwise be.

Of course, this is looking only at the individual incentives, but the aggregation of all those individual pressures creates our overall societal pressure, and, at present, those point rationally toward a life deep in debt without savings for many people. Obviously there are circumstances or personal beliefs which cause many not to follow this model, but, when one looks at it honestly, the bankruptcy laws and tax structure really do make it rational for some to live in debt.

Now, having said that it is rational for individuals to fail to invest, or to live in debt, I have to ask if, as a whole, we are pursuing our goals rationally. As a whole, we seem to desire economic growth, increasing affluence, and the other outcomes that follow investment. However, we also want to forgive debtors without imposing heavy burdens and we appear to want to tax heavily those we call rich. Unfortunately, those goals are mutually exclusive. You cannot have capital formation with punitive taxes and liberal bankruptcy laws.

So, we must decided what we want. Do we value more highly the ability to soak the rich and forgive debtors or do we want a strong economy? If we decide for the former, don't accuse those who bow to the legal pressures and spend up their capital of being stupid. They are simply accepting the logical consequences of the laws we have enacted.

And this does not just apply to savings and investment. In almost every field, the actions that some call "stupid" or "mindless" make perfect sense. Of course there are individuals who do stupid things, but, as a whole, people tend to behave in sensible ways. Much as it may gall some to believe, the vast majority of mankind is just as clever as those who look down on them. They do not mindlessly follow trends, but look at the world around them and make decisions based on the available information.

However, that image does not serve the ends of those who press the "sheep" line. Some do it for personal aggrandizement, feeling good for being different and superior. But many others claim that mankind is a herd for more selfish goals. Many bad ideas have been foisted on the public based on the idea that people are not competent to take care of themselves.

I doubt I will convince anyone that man is rational, as many have too much invested in their beliefs that man as a whole is incompetent. So, I would ask only this of those who are not dedicated to an image of "stupid humanity": Whenever you hear someone claim that mankind is a bunch of sheep, realize that he means you, and ask yourself if you really want to follow someone who thinks you are stupid.

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1. In an update to an earlier essay, I dubbed this mistake "producerism" to contrast it with "consumerism", as I think the two are just opposite sides of the same coin. Consumerism focuses on consumption to the exclusion of all else, and producerism focuses on production. Neither one gives an accurate view of the economy, and both tend to offer bad advice. Admittedly the harm of consumerism is more immediate and painful, but producerism will be just as disastrous if followed rigidly, it will just take a little longer. On the other hand, though we would take longer to crash under producerism, the way there will be very drab and tedious, so maybe consumerism's flashy, quick crash is better.


Originally posted in Random Notes on 2008/05/27.

One Position, Please

Am I the only person who notices that Obama seems to adopt more than one position on almost every issue? And this man is supposed to be a "different kind of politician"? If so, it is only because he is more openly two-faced than any predecessor.

The obvious example is his recent claim that Iran is a tiny nation we could easily take, followed immediately by the claim that Iran is a grave threat. But that is not the only one. His string of contradictions goes all the way back to his claims that gun rights were absolute but could be regulated by the state. Nor did he stop after the Iran comments, recently adding conditions to his unconditional willingness to talk to any tyrant who asked.

It is almost second nature to Obama. Depending on the audience he is pro-Israel, pro-Palestine, for a two-state solution, opposed to a two-state solution, who knows? Which is also mirrored in his aide's statements to Canada that his NAFTA opposition is "just campaign rhetoric". Of course, that was one of the few times he bothered to hide his multiple positions. Most are out there for all the world to see, such as his claim that he could not renounce Reverend Wright, followed, as we all know, by his renunciation.

I could go on and on with this list, but I think the examples above provide a good example. Now some, obviously, can be explained away as changing positions based on political expediency, and others represent backing away from a  position he discovered to be unpopular. But others are truly puzzling. The gun control positions were adopted int he same speech, meaning that either he believes mutually contradictory things about gun control, or believes he can make his audience believe that he does. Neither one speaks well of Obama.

But, whatever the explanation, these conflicting opinions do reveal one thing. Whether he is changing his beliefs to suit the political climate, or tailoring his beliefs to suit the audience, they show that Obama, far from being "a different kind of politician" or "change we can believe in", is just another deceitful politician willing to say whatever it takes to enter office.

And, as the only thing he has to offer us is a glib tongue and this myth of being "different",  once the myth of difference is removed, there is very little reason to even consider offering him the top office in the nation.

POSTSCRIPT

For those interested in more Obama foreign policy madness I would refer you to three essays I wrote on the subject over the weekend: "Captain Kirk Returns", "Clinton Mark II?", and "What is Obama's Foreign Policy?".

Originally Posted in Random Notes on 2008/05/27.

The Price of Gasoline

I realize that we have suffered some rather dramatic price increases in gasoline, but I also think that some of the impact may be more psychological than real. As we approach the dreaded "$4 per gallon" we start to think that gasoline is exorbitantly expensive. However, I recall that other prices have risen just as much, yet received less press. For example, thanks to inflation and taxes, a pack of cigarettes that cost $0.95 in 1984 are now well over $5 today, $6 in many places. Likewise, I recall eating a meal for $2 in 1986, while the same grade of restaurant (admittedly not a fine establishment) would be well over $10 today. I also recall that $10,000 was expensive for a car in the 1970's, while it is hard to find a car for under $10,000 today.

So, to see how much of our fuel fear is real, and how much is based on a temporary up tick, I picked an arbitrary year (1965) and decided to look at what fuel costs were then versus now. Of course, I didn't actually look at just fuel costs, as we don't buy fuel for the sake of fuel, instead I looked at the use to which we put fuel, driving. So, I asked, what percentage of income was required to drive 1000 miles in 1965, and what percentage at $3.50 per gallon and at $4.00 per gallon today.

As inflation has changed money values, I decided to measure this as cost to drive 1000 miles as a percentage of mean or median income. Since numbers for 2008 and 2007 are not available, I am using 2006, which actually makes the numbers look a bit worse than they should be, but they were the only numbers available. So, using figures from the census bureau, 1965 median income was $6957 per household and mean income was $7704 per household. In 2006 median income was $58,407 and mean was $77,315. Using the best figures I could find, and there aren't great figures available, the estimated MPG for cars on the road in 1965 is about 15 mpg, and in 2005 about 28 mpg. Finally, it appears that gasoline was selling around $0.30 per gallon in 1965.

Using these figures, it took about $0.02 to drive a mile in 1965. Using $3.50 per gallon in 2006, that puts it at about $0.125 per mile, and at $4.00 per gallon at $0.143 per mile. So, to drive 1000 miles in 1965 cost $20, at $3.50 per gallon $125 and at $4 per gallon $143.

Using mean and media income, in 1965 it took 0.28% of median or 0.25% of mean income to drive 1000 miles. In terms of 2006 income, using $3.50 per gallon, it took 0.21% of median and 0.16% of mean income to drive 1000 miles. Even at $4 per gallon it would take 0.24% of median or 0.18% of mean income.

So, yes, we have seen a sudden rise in the cost of gasoline, but, in terms of the percentage of our income it takes to drive a fixed distance,w e are still better off than people were in 1965. We are a bit worse off than we were when gas was $3.50 per gallon, but we are still getting more miles per constant value dollar than we did in 1965. All of which makes me think that this worry is a bit silly.

Now, I am not saying that we are not spending more on fuel than we did in say 2005 or 2004, but, on the other hand, we are spending less than we would have in the past. As in the housing crisis, very favorable recent conditions make a return to normal levels seem a crisis. Houses rose 200% to300% between 2000 and 2007 in some markets, before they fell something like 20%. Seeing only the price decline, some choose to call it a crisis, forgetting the previous rapid inflation in prices. Likewise, fuel prices were very low for a long while, and are now rising to more reasonable levels, leading many to call it a crisis.

Of course, this push for ethanol is making costs of food rise, and making fuel more expensive than it was. However, if we dropped taxes, allowed domestic exploration, dropped the ethanol requirements, and allowed new refineries, we would be better off still. It is a bit shameful that we have progressed so little since 1965, but, on the other hand, we ARE still better off than we were in 1965, so to call this a crisis is just absurd.

NOTE

I picked 1965 quite arbitrarily. Looking at the numbers, 1964 would have made the numbers even more favorable, as income rose very little from 1964 to 1965, while prices did rise. On the other hand 1966 would have made the numbers slightly less favorable as wages rose significantly faster than prices between 1965 and 1966. However, having chosen 1965, I stuck with it.

I would also note that using 2006 figures and 2005-6 fuel economy skews the numbers to make them look slightly worse for the present. Present incomes are well above 2006 levels, and fuel economy has risen quite a bit from 2005-2006. Given that, my numbers are actually more negative than the reality.

I would also point out that this "crisis" mentality, leading to such idiocies as threats of windfall profit taxes, mandates of higher ethanol percentages, and others, may actually serve to make things worse, causing prices to rise more. The best solution to today's increase in prices would be to remove the impediments to the free market, as well as restrictions on domestic exploration and refining. Anything else, especially confiscating profits, will do nothing to lower prices, and will serve no end but buying votes for populist demagogues.


Originally posted in Random Notes on 2008/05/26.

Maryland News

I was watching local news and, of course, they had to give the Iraq death tally, as the media just can't get enough deaths in Iraq. They mentioned that since the start of the war, 92 Marylanders died in Afghanistan or Iraq.

I have another number for the news to consider. Since the war started, liberal law enforcement policies have resulted in more than 1500 deaths in Baltimore alone. At least our involvement in the Middle East and Central Asia is making the US safer. What exactly are we accomplishing in our inner cities?

The news beats us over the head day after day with the deaths in Iraq, acting as if they were lives wasted. They forget that these deaths came in a war fought to remove yet another safe haven for terrorists*. Instead they pretend Bush just randomly chose to attack a peaceful wonderful middle eastern paradise because he likes to kill soldiers.

On the other hand, I really can't figure out what is in the minds of those who support lax punishment. Often they pretend that it is "racial justice", because blacks are in jail in "disproportionate numbers", but since those black criminals often rob and kill other blacks, I don't see how it is pro-black to release criminals back into black neighborhoods. Except for a knee-jerk liberal opposition to law and order, and the rhetorical benefits at election time of being seen as "pro-black" even if it really harms blacks, I can't see why anyone would think a soft on crime stance is a good idea.

And yet, the media misses the point of both events. They treat the murders in our inner cities as if they had nothing to do with lax enforcement and the deaths overseas as if they had no purpose.Is the media really that blind that they can see no connections? Or are they simply that dogmatic in their liberalism?

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* I don't feel like fighting those who claim that Saddam had nothing to do with terrorism, so lets just say that I am referring to Afghanistan. I'll argue about Iraq and terrorism another time. Or you can go back to my older essay and read what I said there. It is not exactly on point, but the Jordanian chemical attack mentioned there suggests al Qaida may have a lot closer ties to Iraq than many would admit.

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UPDATED 05/27/2008


One of my points in the essay above was mentioned by Dr. Sowell the day after I wrote it:

Leaping to the defense of black criminals is another common practice among liberals who need black mascots. Most of the crimes committed by black criminals are committed against other blacks. But, again, the actual well-being of mascots is not the point.
Of course, this should be obvious to anyone who thinks about the question for a few minutes, but it is still nice to have an author I respect confirm my thoughts.

Originally posted in Random Notes on 2008/05/26.

What is Obama's Foreign Policy?

As my last post made mention of Obama's foreign policy, specifically his boundless faith in the power of talk, I feel I should at least try to figure out what his foreign policy is.

Normally there would be no problem figuring out what a candidate's foreign policy is. Most candidates go to great lengths to explain their positions. However, as I have pointed out before, Obama ran a largely content-free campaign for much of the primary season. Until the Wright fiasco forced him to start taking a handful of firm stands on positions, the only platform we had was his written platform, "Blueprint for Change", itself rather vague, to say the least.

His "Blueprint" follows the Clinton campaign model, emphasizing domestic over foreign policy, giving only 6 pages to defense and foreign relations in a 64 page document, with half of one page taken up by one of the many Obama quotes which litter the document. The platform itself is rather nebulous, as is most of Obama's platform. Even for a high-level overview, it is remarkably vague. It does clearly promise to bring the troops home, and there are platitudes about fighting terrorism and an equitable settlement of the Israeli-Palestinian conflict, but the only things which come through clearly are Obama's dedication to a nuclear free world, a limitless faith in his ability to negotiate, and a commitment to sending lots of money overseas.

As his platform itself tells us nothing beyond Obama's belief that he will be able to either talk or bribe world leaders into being nice, I suppose we need to turn to Obama's few concrete statements. However, doing so leads only to more confusion.

Obama's first real statement was simply an expansion on his platform. This is Obama's notorious promise to engage in unconditional talks with any world leader. As this drew such scorn he later modified it, but at the time it was clear that he meant just what he said, that any dictator, state sponsor of terror, anyone at all, could have access to the president of the US without any conditions attached. The possibility that this would grant legitimacy to dangerous regimes, or that ti could be used to stall US response in critical situations apparently never entered Obama's thoughts. As in his "Blueprint" it appears that his faith in negotiations, most specifically his ability to negotiate, is unlimited.

Following that came Obama's first really puzzling foreign policy statement, his promise to invade our ally Pakistan to get Osama. He quickly let this one drop, but followed it up with an even more puzzling promise, to return to Iraq if al Qaida set up operations there. As was pointed out at the time, al Qaida was already involved in Iraq, but Obama again, just pretended he had never made such a stupid statement. It set up a few amusing japes in the alternative press, but somehow the MSM missed both "gaffes" and concentrated on John McCain's supposed Middle East "gaffe" instead.

On the economic front his foreign policy was just as puzzling, promising to oppose NAFTA while his aide told Canadian officials that ti was just "campaign rhetoric". Apparently even Obama's explicit statements cannot be trusted to show us his real foreign policy. However, as they are all we have, I suppose we will have to take them at face value.

Obama was then caught up in the Wright fiasco to the exclusion of all else for quite a while, leaving his foreign policy even more up in the air than it was before. But, once the dust cleared, Obama was back to foreign affairs, and busy throwing out puzzling inconsistencies with increasing frequency. Claiming Iran is a tiny nation and no threat, followed immediately by claims that it was a grave threat. He followed this up by promising to continue blockades of Cuba, though allow remittances of money by family members. Though what they would do with US dollars during an economic blockade is not mentioned.

However, throughout all of his back and forth, and all of his inconsistent statements, there is one thread that is always present in Obama's foreign policy. That is his belief that if he just talks to a foreign leader he will be able to make them see the error of their ways. It is not an unusual position, it is something we have seen before, the arrogance of the persuasive man. Obama has been so successful in his own life using his powers of persuasion that eh just can't believe it will solve all problems everywhere.

But that error has led to disaster. The Byzantine belief that negotiations and tribute could keep alive their flagging empire was proved false in 1453. The Venetian belief that they could talk their way out of European politics ended with Napoleon's troops erecting the "liberty tree" in the plaza in front of St. Mark's. Europe's faith in the League of Nations, and Ethiopia's belief in European promises, allowed Mussolini to march through that nation without any European opposition. Chamberlain's faith in the power of talk kept Europe from ending Hitler's ambitions in 1938 rather than 1945. And finally, there is that impotent debating body known as the UN, which has passed countless resolutions yet accomplished real change only when a nation has agreed to lend them military force to make those words a reality.

Talk can sometimes solve problems, but it is not the only solution, many times it is not a solution at all. Often those who are so confident in their own ability to persuade others are actually easily deceived. Those who face them, seeing their preening confidence in their own ability to talk, play up to it, promise the moon, and then continue on with their original schemes.

Which is what is dangerous about Obama. He is so convinced that talk will solve everything that it would be very easy for Iran or Venezuela to agree to whatever he asked while secretly continuing with their plans. Obama, so sure of his abilities, would not even consider that they might have lied, giving them more time to prepare for their eventual betrayal. An excess of confidence can be a very dangerous thing. And in this case, not just dangerous for Obama himself, but for the entire nation.


Originally posted in Random Notes on 2008/05/26.

Friday, May 4, 2012

Clinton Mark II?

I know that many are arguing that Hillary would prove to be a repeat of the first Clinton co-presidency, but I have to say, in terms of policy, it appears that Obama is far more likely to be another Clinton than Mrs. Clinton is.

Let us look at the facts. Both were adept at running content free campaigns, both had ideologies far to the left of their platforms, both promised "change", and both ran on charisma rather than any coherent platform. Even in terms of trivialities they seem quite similar. They both seemed unable to avoid scandals, even doing things that prolonged scandals they could have avoided. And Obama is trying to make this even more similar by campaigning against an unpopular Bush rather than McCain.

However, there is one major difference, Clinton ran on domestic policy during a time of relative peace, while Obama is running largely on domestic policy during a time of huge threat. And that is where the danger of another "feel good" Clinton-type presidency lies. Even during the relatively peaceful 1990's, Clinton's willful ignorance of foreign affairs set the stage for 9/11, a nuclear North Korea, Putin's expansionism, and China's as well. By ignoring foreign policy, Clinton gave the impression that the US was uninterested in the rest of the world, allowing foreign leaders to carry on as they wished, creating many of the threats we see today.

Were we to elect Obama, with his fondness for talk, we would be setting the stage for much, much worse. Foreign nations were temporarily confused by Bush's foreign policy, unsure if the US was breaking with its weak foreign policy of the Clinton years. The endless congressional bickering and Bush weakness in face of public disapproval made them think that perhaps Iraq and Afghanistan were flukes, and the US really is no longer a player in international affairs. An Obama presidency would confirm that. Which means the US would no longer be able to reign in any of these rogue states.

It may not cause any direct harm immediately. Far more likely we would be left alone for a time while states around the globe carried out their plans for consolidation. Instead of any attacks on US interests, we would see Russian power quietly expanding into eastern Europe and Central Asia. China would absorb Taiwan and try to exert influence over Southeast Asia and Japan. Chavez would export revolution to the Caribbean and South and Central America. Israel would suffer an unprecedented wave of attacks, openly sponsored by neighboring states. Iran would try to exercise control over the Middle East, and maybe parts of Central Asia. Even North Korea may try to enter the fray, using its willingness to export technology to establish some client states among the smaller dictatorships in which the other powers are not interested. Only once these foreign states were confident in their power would we start to see attacks on American interests. Maybe not until after Obama left office.

The problem is, by them it would be too late. Just as the Clinton presidency allowed al Qaida and others to establish networks and set up massive support networks, an Obama presidency would give foreign aggressors time to establish strong power bases around the world, as well as establish terrorist networks of their own. By the time someone struck, we would no longer be in a position to defend ourselves.

Of course, the US is a strong, wealthy nation. Even with eight years in which to prepare, other nations may still not be strong enough to attack us with impunity, we would likely survive. But what if rather than direct attacks, they attacked us through terrorist proxies? With no one at whom to strike, what would we do?

Do we really want to start the war on terror anew in eight years? Or do we want to finish it now?

We just cannot afford another presidency which turns a blind eye to international affairs. Or which has infinite faith in the power of negotiations.


Originally posted in Random Notes on 2008/05/26.

Captain Kirk Returns

Does everyone recall those episodes of the original Star Trek where Captain Kirk would ramble on and on until he literally talked a computer to death? Apparently, that is the Obama campaign's model for foreign policy.

While he supports invading allies such as Pakistan, and thinks that sanctions worked for Iraq, he thinks sanctions are a bad idea for Cuba, and he will instead talk Castro into "libertad".

I won't go into this in detail, as I think I need to write a much longer post on the follies of the Obama foreign policy positions, such as they are. However, I do have one question. Obama has offered to allow remittances to family, but won't lift trade embargoes, so what exactly are the relatives going to spend those US dollars on?

Well, as I said, I think I will write at greater length on the ever-shifting, inconsistent sound bites which form the Obama foreign policy. So, for now, I will just ask Obama boosters precisely what Obama is going to say that will suddenly turn Cuba and Iran into model democracies?

POSTSCRIPT

It is a shame Doc Steech isn't drawing his cartoons any longer, this just calls out for a cartoon. Obama in a Star Trek pull over, Raul Castro as NOMAD.
Raul-Nomad: I am Communist, I am perfect.
Obama-Kirk: No, you are in error.
Raul-Nomad: Who are you say that?
Obama-Kirk: I am the Obama, the savior.
Raul-Nomad: You are post racial, yet attend a black separatist church... you are a dogmatic liberal, yet a uniter... does not compute, danger danger!
Sadly, I think some on the left really think that is going to happen. Or maybe Raul will be so overwhelmed by the awesome presence of The Obama that he will simply do whatever is asked of him.

The more I listen to Obama the farther and farther from reality he seems to be. If he really believes what his campaign is claiming, he is dangerously delusional. McCain may not be my first choice, or in the top 100, but even Hillary is better than Obama. At least she is only a corrupt socialist, she doesn't seem to have strange messianic delusions about herself.

Originally posted in Random Notes on 2008/05/26.

The Failure of Wikipedia

I have often written that Wikipedia proves that a million monkeys typing for a million years still produce gibberish. Of course, that is a bit of a harsh assessment, but it is not that far off the mark. Wikipedia, despite all the high sounding ideals behind it, shows that consensus is not the best route to truth.

Before I wrote about how the administrative model adopted by Wikipedia leads to problems, but that will not be my topic today. Instead, I am going to look at Wikipedia at its best. I am going to grant Wikipedia all of its assumptions. I will grant it everything it alleges, and show that it still falls far short of a traditional encyclopedia. After that I may also look at why a few of these assumptions are unfounded, but my main goal is to show that, even when everything works right, Wikipedia is just a bad idea.

Now the basic assumption behind Wikipedia is that the majority is engaged in an effort to produce an accurate report. The theory does allow for the occasional stray malcontent or vandal, but the overall theory requires that the majority are sincere. Given these assumptions, the model works as follows. First, an interested individual posts an article. Another individual reads the article and either spots an error and corrects it, or else decides it needs additional information and expands it. This continues in an ongoing process and the article slowly gets closer and closer to the truth.

However, even assuming we have nothing but sincere truth seekers working on the article, there is one very big problem with this model, the assumption that all involved can agree on what is true. Or agree on what is settled and what is unsettled. This is obviously most prevalent in contentious areas, but it happens everywhere. Even in subjects as dry as mathematics or philology. Allow em to give an example.

Let us suppose we have an article on the theories of John Maynard Keynes. Let us further suppose that someone posts the statement "Henry Hazlitt proved these theories false." To the poster, this is a fact. However, to a dedicated Keynesian, this is not. So he changes it to read "Henry Hazlitt claimed to have proved these theories false." The original poster returns, and arguing that the proofs have not been successfully challenged,  reverts to his original sentence. And thus begins one of those "reversion wars" that plague Wikipedia. Both sides claiming that their position is true, and both marshaling seemingly valid arguments.

Another problem comes in the form of questions of relevance. For example, is it relevant to an article on the World Trade Center to state "some allege that George W Bush had them blown up." Some would argue that these allegations are important, as they provide an explanation for the collapse. Others would argue that, as they are fringe beliefs not supported by evidence,t hey are clearly not relevant. The second group could also argue, though they rarely do, if we allow every fringe belief to have a single sentence, the storage requirements would exceed all available storage on the planet, as the conspiracy theories surrounding the twin towers alone run into the thousands of pages.

And both of those show a problem inherent in Wikipedia. It wants to be, in Wikipedia jargon, NPOV. That is "neutral point of view", adopting no position but providing information on all possible perspectives. It sounds noble and the Wikipedia supporters argue that it is essential, as they don't want to exclude any aspect of the topic, but in reality it simply leads to chaos. Without an overarching set of beliefs, it is impossible to establish what is truth and what is opinion, as well as establish criteria for relevance.

Let us take an extreme example. Suppose we have a historian who takes one specific reading of Hegel very seriously, believing that history is simply the materialization of the various national spirits, and that individuals have no relevance, being nothing but tools for expressing these national spirits. In his mind, mention of the role of any individual in events is irrelevant, and he would edit in accord with his philosophy. The problem is, how can we argue against him while maintaining NPOV? The only possible counter argument is that his philosophy is incorrect, but to say that we must propose an alternate philosophy on which to base that claim.

And that is the truth of the NPOV claim. There is not really a neutral point of view, but a smuggled point of view, a Wikipedia consensus which informs all the posts. But where a traditional encyclopedia would have an explicit editorial philosophy, Wikipedia instead has a silent, unacknowledged perspective. And, so long as readers and posters accept this view, that is fine. However, should one try to post in opposition tot his consensus, he will find himself suddenly accused of forcing his point of view into the proceedings. It is, in essence, a very hypocritical position, this smuggled POV. The editors and posters are just as opinionated as those they chastise, but they do not admit it.

In addition, this smuggled point of view raises one other issue, is an unspoken consensus the best way to establish truth? As I said, posts are generally evaluated against this unrecognized consensus and judged accordingly, but is that how truth is established? Is the consensus the best measure of accuracy? I would argue that it is not. Conventional wisdom can be wrong as often as it is right. For example, a vast majority since the 1970's have believed that oil companies earn huge profits. The truth is that earnings in the big oil companies are actually average or slightly lower in comparison to capital investment. And if conventional wisdom on one matter can be wrong for almost 40 years, why would the silent consensus of Wikipedia be any more correct?

And it is not just a consensus, but a clearly political one. As with most trendy internet phenomena, Wikipedia seems to follow the political perspective I first identified on Slashdot as "left-libertarian". It is a contradictory view that distrusts all things governmental yet still adopts a number of views on the political left. It is largely anti-military, anti-war, anti-big business, yet anti-government. It believes in AGW, believes extinction is a massive problem, and is open to many conspiracy theories. It has a vague belief in government helping the "poor" though it opposes most specific applications. It thinks most people are "sheep", racist, falsely patriotic and easily led. In other words, it is your traditional arrogant liberal viewpoint trying to subscribe to the GPL-type of pseudo-libertarianism. Not all Wikipedia editors fall into this category, but enough do that this political position informs many Wikipedia articles.

And those are just the problems that occur when we grant all of Wikipedia's assumptions. In reality, many are not as ready to allow corrections as Wikipedia's theory would assume. Many people have a strong viewpoint they will restore over and over again, not matter what arguments are raised against them. The result of this is that those with the most time, and who feel strongly enough to dedicate themselves to controlling their Wikipedia article, will end up winning. The article will not be determined by the best argument, but by the person most committed to seeing their viewpoint in print.

Now, I am not saying Wikipedia is worthless. It is fine for finding bits of trivia, birth dates, and some very basic information, but that is it. I would say it is valuable for researching something which is not in dispute, but the problem is that many of us are not aware of what constitutes a controversial issue in mathematics or Slavic history, so we could think we are reading an unbiased article only to discover we inadvertently just heard one side of an ongoing debate. Given that, I have to say, the utility of Wikipedia is very, very limited, and for the foreseeable future, I am sticking to information that has been vetted by an editorial board with an explicit policy. Even a highly politicized journal is more useful, as at least the bias is obvious for all to see, and I can correct the information for bias. Wikipedia provides no such check, pretending to a neutrality it fails to achieve in practice.

POSTSCRIPT

There are two matters that did not fit in the article above, but I feel the need to mention.

First, there is an additional problem with Wikipedia. Even if we assume Wikipedia were perfect and corrected for errors, the truth is that anyone can edit it. So, when you do your research, who is to say a vandal has not just changed something, and the information you are receiving is not false? Even if the editors were perfect and the end result was a fully accurate, unbiased encyclopedia, at any specific moment the information is completely unreliable, and thus worthless.

Second, I know some of what I wrote sounds like a bitter poster, but that is not the case. I have made a few trivial corrections in Wikipedia. I corrected a typo in the article on porphyry, removed a badly worded sentence in the article on Maimonides, removed a strange and apparently irrelevant paragraph from the article on sticky toffee pudding, and removed an irrelevant sentence in the article on dachas. I may have corrected one or two other minor issues. As far as I know, my changes are still there. I am not a Wikipedia contributor, embittered or otherwise. My criticism is based solely on my observations about the shortcomings of the model upon which Wikipedia is based.

NOTE

I have written all these things elsewhere in the past. However, most were either in comments about Townhall columnists, on GunnyG's blog, or on Slashdot several years ago. As I had never put it together in a single location, I decided to write this essay.

Originally posted in Random Notes on 2008/05/23.

NOTE: Since I wrote this, I believe I have corrected mistakes or poorly worded items in five or six more articles, though I can't recall which ones. I know it is a rather futile activity, as new mistakes appear almost immediately, and bad wording is commonplace, especially in any articles related to foreign nations. (Not that video games and pop culture articles are much better. Our own youth write almost as badly as people who barely speak English.) Still, when I find an article that simply makes no sense, or contains an obvious error, I feel compelled to fix it.

Truths about Taxation

At the end of my last post I gave a very brief outline of what we should desire from a tax system. I did not explain or justify those statements, as I was not feeling up to such a lengthy discussion. I am feeling a bit better now, so I will try to explain what I wrote, and explain why I think options other than the FairTax are preferable.

First, let us look at something more basic. The unarguable truths about taxation.

Taxation cannot create any wealth, it simply takes wealth from an individual. That wealth my come from an intermediary such as a corporation or trust, but, in the end, that money would have eventually gone to an individual but for taxation. Taxes are nothing more than a means of transferring money from an individual to the state1.

Taxation can be used to encourage specific behaviors, but only at the expense of other behaviors. The tax system encourages behavior X by making it less costly than behaviors A through W. That is done by making the tax burden higher on those alternatives than on option X. This will have one of two effects. Either it will do nothing, as individuals were inclined to do X anyway, or it will turn individuals from an option they prefers (say A) to an option they like less (X). Whether or not this is beneficial is a question that must be answered in each specific case. All I want to make clear is that using the tax system to encourage, for example, home ownership, is by making other options, such as renting, less appealing.

With regard to capital formation and investment, taxation can be used to encourage greater savings, but only by discouraging spending. History shows that relatively small tax breaks for savings are not enough to discourage spending, it takes a much more drastic action. Whether done through government mandated austerity programs, punitive luxury taxes, or an overall crippling sales tax, it takes a pretty severe penalty to discourage people from spending. However, it can be done. The question remains, however, whether the level of penalty required to dissuade spending will harm the economy more than increased capital formation helps it2. The economy is not driven solely by capital accumulation and production, they do not exist in a vacuum. Without buyers, the economy falters just as badly as it would without capital investment.

A tax system which favors one kind of action, investment or income will tend to produce more of that option and less of all others. This is basic economics, but it needs to be repeated. Especially as many forget this truth and thus fail to see the unintended consequences. For example, many in office fail to see how the capital gains tax, by discouraging the sale of investments, tends to keep money in an investment too long, as well as discouraging investment entirely. In other words, it keeps people form investing, and for those who do eventually invest, it leads them to hold on to investments longer than they would otherwise, making the market a less efficient means of reallocating capital. Or how the interest deduction on mortgages tends to make people less concerned with mortgage rates, even in adjustable mortgages, which can lead them to forget that they have to actually make the payments before deducting them. So, in some ways the mortgage deduction helped lead to a borrower mindset which fueled the subprime crisis we see today.

I think I have covered all the basic points I wanted to explain. I know most were stated in lesser detail in my last post, but I thought a few deserved more attention. Having said all that, let me now proceed to explain those six points I raised in my previous post.

For those who missed the previous post, my statement was that an ideal tax system would do the following:
1. Minimizes the individual harm done
2. Treats all individuals and all types of income and wealth similarly
3. Does not target specific acts or assets for favorable or punitive treatment
4. Has the lowest total administrative cost per dollar of revenue
5. Taxes only enough to cover needs, not more
6. Produces consistent results
Let me address these points one by one.

Minimizes Individual Harm Done

This point goes beyond the superficial meaning of keeping the taxes assessed to a minimum. That is obviously a concern, but it is just one concern. As the truism goes "the power to tax is the power to destroy". We need to make sure that we use this power sparingly. However, as this point relates to all of the subsequent points, I think I will leave the discussion for later. We will return to this at the end to see how it relates to everything else we discussed.

Equal Treatment

This is the first principle and probably the most contentious. My starting point is that the economy runs best when left alone, that the free market allocates resource to those desires most keenly felt, so leaving the market alone produces the greatest net satisfaction. As a result, any government intervention will, of necessity, reduce that satisfaction.

On the other hand, the government does need money to operate, so some reduction of private wealth is inevitable. That will also, of necessity take money from desires more keenly felt and apply it to less keenly felt needs for government services. That minimal harm is unavoidable.

What we can avoid in funding the state is creating economic distortions which cause money to flow to purposes that would otherwise not receive that money. For example, by allowing a deduction for insulation the state causes people to spend more on insulation than they would otherwise. This leaves people less satisfied.

Now, if one believes the government knows better than individuals, then this is a good thing. As I do not believe the government is any better than an individual at knowing what that individual wants, I would prefer the tax system leave the economy, as much as possible, as it would exist without taxes. The easiest way to do that is to treat all sources of income, all types of spending and all other matters equally.

No Punitive Taxes

This follows the argument above. If we assess higher taxes on some acts, or forgive taxes on others, we cause economic dislocations, and we end up changing the economy. In other words, the tax system becomes a tool for social engineering. As I think the tax system is a tool, and a tool suited specifically for gather revenues, I would argue against using it for social engineering. First, it is a very inefficient means of social engineering compared to the other alternatives. Second, social engineering gets in the way of efficient tax collection. It is better to let the tax system collect taxes and the legislature engage in whatever social engineering we find appropriate.

Lowest Total Cost

Obviously, this is the best measure of a tax system int he most basic sense. All other things being equal, the system which collects the most money per administrative dollar is best. On the other hand, we need to apply this measure last, as all the other rules are more important.

How so?

Well, look at this plan. Every dime you earn is paid to the state which then remits a stipend to you. At the end of the year it calculates your tax burden and returns the remaining balance. As it is very simple, it probably produces pretty good revenues per administrative dollar, but it is hardly the best system. Or, to make it even more plain, if the state simply came into your home and took what it wanted, the administrative cost would be almost nothing, but I doubt any would consider that system ideal.

As I said at first, all other things being equal, the system is best which returns the most revenue per administrative dollar spent.


Least Possible Tax

This is a problem with our current system, taking far more in withholding than is actually due. Ideally, the tax system would take only what is owed to the state and not a dime more. But our current system is actually engineered to produce modest rebate checks in order to mollify the public, so that will never happen.

Why do I say that this is important? The reason is simple. Every dollar which is paid to the state in excess of taxes owed amounts to an interest free loan to the state.As state investment is less efficient than private, this produces a net drag on the economy. Beyond that collective ill, there is also an individual ill, as citizens are compelled to make such interest free loans, not only violating their property rights, but robbing them of whatever returns they would have earned on that money, or what satisfaction they would have received form spending it.

Obviously, few systems exist which will never take a dollar to which the state is not entitled. My earlier proposal of eliminating withholding and requiring quarterly checks would, but people would be quite unhappy with the massive checks they would write3. Other than that, any system which operates on the principle of ongoing collection,m be it withholding or the  sales tax used in the FairTax runs the risk of taking in more in taxation than is required by the state.

So, since we likely cannot avoid this problem, I would argue that, if avoiding the problem is impossible, we should still favor a system which reduces to a minimum payments in excess of taxes owed.

Consistent Results

This is one point on which yt_knight and I agree, though he seemed to sometimes confuse simplicity and consistency. Regardless, it is evident that tax systems should produce consistent results. We should not have a system such as we have now, where the same facts can produce multiple outcomes, depending upon the expert answering. However, that is more the result of the sheer volume of rules, not so much of internal inconsistencies. I think our current system would be almost consistent were an individual able to hold all of the rules in mind while preparing taxes. There are some vague rules, but for the most part any confusion is more the result of the limits of human memory combined with a massive set of rules than of internal inconsistencies.

Conclusion

So, having said all of that, let me look at three options. Our current system, the FairTax, and my proposed flat tax without withholding, corporate taxes, or anything else, excepting perhaps a small tariff4.

The current system obviously falls short in almost every category. As I just said, the sheer volume of rules precludes consistency, not to mention contradictory or vague rules, which, though not that numerous, do make certainty impossible.There are numerous punitive taxes to either encourage or discourage activities, producing huge economic dislocations. And it withholds far more than is actually owed. The only area in which it is arguably somewhat efficient is in terms of administrative costs. Despite the claims of the FairTax advocates, the income tax is relatively cheap in terms of total revenue generated. When we add in individual costs for tax preparations the cost does rise, however. So, once we consider both the obvious and hidden costs, our present system fails in every respect.

Now let us look at the FairTax. It is, for the most part, consistent. I have said before that I think distinction between new and used and wholesale and retail will generate some confusion, but for most cases, it is sufficiently consistent. I do think that the administrative costs will be much higher than the advocates admit, mostly because those costs will be hidden in increased costs for the Social Security Administration and state tax agencies, but how the revenue per administrative dollar figures compare to other choices will remain to be seen.

Where the FairTax really fails is in the area of consistent treatment. It is based entirely on treating purchases as a select class, subject to taxes which do not effect other areas. In addition, it distinguishes between retail and wholesale purchases and new and used goods. As I have said over and over, this will cause massive economic dislocations.Some will argue that these dislocations will be "beneficial", but I would ask by what standard? If people who would make a purchase now decide to invest, who is to say that is "better"? If they wanted to purchase, that would make them more satisfied, and as they are the sole judge of their own needs, investing rather than spending is a net loss for them. How can someone argue that "in reality" they are better off now?

In short, arguments for the advantages of the FairTax rest on the assumption that the speaker knows better than other individuals what is in their own interest. And that I cannot accept.

Finally, let us look at the variation of the flat tax I once proposed. It does have the shortcoming of all income taxes, that of treating earned income as different from other money, and thus it does violate my second and third rules. On the other hand, earning income is unavoidable for most people, so I doubt taxing income will cause much change in behavior. In addition, by applying a flat schedule it does over come the current problem of avoiding pay raises lest one jump into a higher bracket. So, while it violates the second and third rules, it does as little harm in so doing as possible.

Other than that, there is nothing objectionable. Obviously, there will be some difficulty over defining what is considered income, but that is the only area for uncertainty. With no deductions, or exemptions, it will doubtless be more simple than the current system. It has a relatively low administrative cost, as I remove all taxes other than the income tax, and without withholding or exemptions, it will allow a massive reduction of IRS size. The rate can be adjusted to match anticipated needs, reducing or eliminating excessive taxation worries.

It is far from ideal, but in terms of reducing the harm done, keeping costs low, and avoiding economic distortions it is about as good as one can expect from a politically palatable solution.

The only nationwide tax alternative which avoids even those problems is a straight capitation tax, paid monthly. Every citizen over 18 would be charged monthly for the costs incurred during the previous month. It is simple, cheap, and does not distort the economy. On the other hand it is a political impossibility, as it makes no allowances for income. Not to mention the fact that after maybe two months the nation would be up in arms demanding massive cuts in spending, which means no politician would ever propose it.

Ideally, I would return taxation to the states, create fifty little labs where these questions could be worked out. But I was asked to propose a national tax scheme, so my first choice is not an option.

Hopefully that answered all of yt_knight's questions. I doubt he will agree with my conclusions, but at least I think I made clear how I reached them.

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1. For my purposes I am ignoring disguised welfare scheme such as the EITC. They are not truly taxation but a welfare plan which uses yearly tax filings as a means to distribute them. They have nothing to do with taxation proper.

2. To clarify, capital formation is essential to industry, but so is a vibrant consumer base. If we save every dime we earn then I have to wonder who will be buying anything? The economy requires two parties, a buyer and a seller. If we remove the buyer,t hen all the capital formation in the world won't save the economy.

3. The pain could be reduced with monthly, rather than quarterly checks. On the other hand, part of my reasoning was that I wanted taxes to hurt. I believe that only if people have to pay taxes out of their pocket, without the fig leaf of withholding, or the FairTax's embedded sales tax, will citizens begin to question what they are receiving for the money they pay.

4. This tax is not my first choice, but as yt_knight continues to insist I propose an alternative, this is the closest I can come. Ideally I would leave taxation to the individual states, with the states themselves funding the federal government directly, as was envisioned in the Constitution. But no one seems to accept that position as my alternative, so I will pretend that I advocate the flat tax, as it is the national system I find least objectionable. Actually, I would favor a capitation tax even more, but as it is seen as "unfair" I doubt it will ever see the light of day.

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UPDATE 05/27/2008


I read my post again, and want to clarify something I said in my third general statement about taxation and in footnote #2. I do not want readers to think I am pushing some sort of Keynesian "consumerism". What I am trying to do is balance out the opposite error, let us call it "producerism".

Consumerism is a silly theory that focuses on spending to the exclusion of all else. It is at the heart of silly ideas such as the "stimulus" checks that went out recently. However, as a reaction to that theory, many, including many FairTax advocates, have fallen into the opposite error, and made a fetish of capital formation and productive capacity. Now production and capital formation are important, but to accumulate capital at the expense of radical reductions in consumption can be just as harmful as the opposite fallacy.

Perhaps an analogy would help. The consumerist is the wastrel who immediately spends every die he receives. The productionist is the old man who hoards every dime despite the fact that he has no heirs.

Our economy does grow when we accumulate capital and refrain from excessive consumption, however that misses the point of the economy. While the productionists are busy laying up treasures they forget why we want treasures, to consume them. If the FairTax does discourage consumption to favor production, then it also changes consumer behavior to their detriment. There is no absolute value in capital accumulation, the value of any act of savings or consumption is what the consumer or saver puts on that act. And to force them to change their behavior is to leave them less satisfied. To argue that "growth" in itself is good is to engage in the fallacy of forcing one's own valuation onto the economy as a whole. Growth is only as valuable as the collective assessment of all participants make it, no more no less. And they express those valuations through their spending and saving decisions.

And that is one more objection to the FairTax, by telling people they should spend less and save more it is setting the value judgments of the plan originators as more valuable than the valuations of all other citizens. Admittedly, the FairTax does this in a fairly limited area, but it is still a principle I do not want to incorporate, as it leads to the acceptance of  all kinds of bad ideas. Basically, the FairTax is founded, in many ways, on the view of other citizens as stupid, at least too stupid to save a smuch as they should.

But I will leave that subject alone for now. I just wanted to make clear that I did not mean to adopt a consumerist theory, just balance out what appeared to be an error in the opposite direction.


Originally posted in Random Notes on 2008/05/25.