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Why "Conservatives" are Wrong About Just About Everything, Part 1 - Taxes and Government
Or: The Basics of Liberal Philosophy, Part 1 - Taxes and Government
This is somewhat inspired by unpacking a new "conservative" book yesterday, called 100 People Who're Screwing Up America, and includes such luminaries as Barbara Streisand (?!), along with the usual reactionary bogeymen like Michael Moore, Ted Kennedy, and Hillary Clinton. (I STILL don't understand what about her makes Republicans go so frothingly mad). Obviously, they're gearing up early for 2006 and 2008. So, I figured I'd start assembling notes for my own attack book or something, with the exception of mine being a bit more based in reality.
Conservatives love to call liberals names, usually based on nothing other than their own strawmen caricatures of liberals. And then they cite random college professors nobody's ever heard of as their example. Right. So let's look at some mainstream conservative ideas, and see how in almost every case, the "conservative" view is wrong either on the substance, or in execution. For the first case, the one mantra that seems to unite the current Republican party, taxes. Conservatives of all stripes like to attack taxes, bash the government, hold up the plight of the poor multimillionaire, and ritually invoke lines about "people knowing how best to spend their money." This is of course all bullshit.
Cutting taxes is about the only thing that the Republican Congress has done regularly over the past six years. They claim that by cutting taxes, the economy will grow faster, and the government will get more money by taking a smaller slice of a bigger pie. This demonstrably hasn't happened. It didn't happen with Reagan's Voodoo Economics, and it hasn't happened the second time around with Bush's Voodoo II: Electric Boogaloo. A simple thought experiment will explain why. Assuming the Republican's claims were true, then if the government's tax rate were 0%, it should be making more money than if its tax rate were 1%. This isn't true, so obviously there's some points where cutting taxes reduces government income. And that point likely changes, depending on economic growth and a bunch of other factors. Which is all a very wonky way of saying the Republicans are spewing bullshit.
Okay, so if I'm so smart, am I saying that the government would make the most at 100%? Of course not, that's equally stupid, because then there'd be plenty of reason for people not to report income, and avoid taxes. Yay for corruption. There's obviously a point in-between that maximizes government income, and that maximizes economic growth. I don't know enough to say what it might be exactly, and neither does anybody else. Not even Alan Greenspan. The best we can do is guess, then tweak it when we see how things work.
But the Republicans try and frame it in moral terms, "the government is taking my money! It's my money, why shouldn't I decide how to spend it?" That's not how it works, though it's a popular view among libertarians. We need the government. The government does all sorts of things for people, things they can't do for themselves, and the "free market" doesn't supply for various reasons. The government ensures when you buy a pound of flour, it's actually a pound, and actually flour, not talcum powder or chalk or something. The government is involved in creating and paying for roads, power, water, sewage, telephone, internet, air traffic, police, fire departments, the military, postal service, education, environmental protection, and most of the rest of the infrastructure of the United States. Oh, but air traffic, power, the Internet, etc are private, you say? Somewhat, but they all get government subsidies, or were built by the government and then sold or given away to private companies, usually at less than market price. The government ensured that all rural areas would get phone connections, power, and mail. There wasn't enough of a market to get the companies to build there, if they even existed then.
Imagine if the government weren't around, the cell phone companies would have been like instant messaging, you could only call people on the same carrier. Lots of things have benefits that don't accrue directly to the people who spend on them, but are spread out through society. Like education. Or environmental protection. There's no reason for a company to not dump pollutants in the river, it doesn't affect them, it affects everybody downstream. So it affects them, but in the long run, and very diffusely. But if dumping would cost them more in fines than it would save them in cleaning up, they're not going to do it. And all of society benefits from that. The same with police, fire departments, education, nationwide postal service, national defense, and quite a few of the programs that help poor people.
The government isn't "taking" your money, any more than a restaraunt "takes" your money, or an insurance company "takes" your money. You're paying the government for what it does. "But I'm paying for all this stuff I don't use!" See above, about externalities and benefits spread across society. But if you really think you shouldn't be paying for something, then you can vote, run for office, lobby, and all the other ways of influencing government. Just like stockholders do for companies, because that's what you are, you're a stockholder in the government.
The "Taxes bad!" mantra is a piece of rhetoric that has captured most "conservatives", to the exclusion of any policies that would actually help the economy, or lower taxes in the long run. And if any of them dare question the orthodox position, the anti-tax jihadists will come out of the woodwork with phone calls, editorials, and running primary opponents against them. Support for any tax increases, even necessary ones, is practically a kiss of death. Which is stupid.
If the Republicans really wanted the economy to grow faster, and really wanted to reduce the tax burden on the average American, there's one obvious thing they should be doing. They should balance the government's books. One of the largest portions of the government's budget is paying interest on the national debt. That's money that WILL have to be paid back. And paid back out of tax money. So those tax cuts they keep promising? They're just shifting taxes. Onto the future, and onto everybody outside the top 1% of income. Yes, you and I, and our hypothetical kids, are going to have to pay back the trillions of dollars in debt we've got. Which means taxes are going to have to go up, or the government's gonna have to cut spending by like a third or more, and there's not THAT much "waste". Most people don't understand orders of magnitude on an instinctive level. Even I don't, if I don't think about it. Million, Billion, Trillion, they're all "many many lots", and sound the same. I don't have any colorful analogies on hand, but a a thousand thousand times bigger than a million, or one million times bigger. So cutting the "waste" like the National Endowment for the Arts (whose budget I don't have on hand, but is probably in the hundred millions AT MOST), or National Education Agency (likewise), will do practically nothing to a deficit of TRILLIONS of dollars. It's like paying pennies on a hundreds of thousands dollar credit card bill.
Which means taxes are going to have to go up, and go up a lot, to pay these off. And by "cutting" taxes and spending more and racking up ever-growing debt, the "anti-tax" people are making future taxes higher and higher. On the other hand, if, like under Clinton and the Democratic Senate, you stop giving trillions of dollars away to rich people and corporations, and raise taxes enough that the government's not spending more than it makes, you can start paying down the debt. And if you go even farther, and get rid of some of the truly wasteful spending (agricultural subsidies that go to giant factory farms, billions and trillions in subsidies to other industries that then incorporate in the Caymans to escape paying taxes, etc), it'll go even faster. And that'll help the economy grow, too.
Okay, why would the government having a balanced budget help the economy? I'll explain, but it's going to take a little economic wonkiness, which I hope I can make make sense. When you're spending more than you make, where do you get the extra money? You borrow it, either from the bank, or with a credit card, or you bum off your friends. It works the same way for the government, though there's less bumming off friends. The main way the government borrows money is by issuing Treasury Bonds and selling them. A Treasury Bond is basically the government promising to pay back X money, plus interest to the bearer. These get sold to all sorts of people, you, me, investors, banks, mutual funds, and so on. This includes foreigners, especially banks, much of the money we've been borrowing lately has been coming from the central banks of China, Japan, and a few other countries. Most of the bonds have a life of 20 years, which is called "maturity". So 20 years later, it gets cashed in, and so right now, we just issue new bonds to pay for the ones that come back. Which is about all you really ever need to know about Treasury Bonds, and probably more.
So what's this have to do with the economy, you're wondering? Well, generally, there's only so much money available for investing in things. The total of how much people, banks, and companies have that they're willing and able to invest. When the government's running a deficit, and selling Treasury Bonds like mad, those tend to soak up investment money first. The US Treasury Bond is reputedly the safest investment on the planet (and if that changes, we're even MORE screwed. Trust me, you DON'T want to know what would happen if the US government defaulted on its debts). So the more money the government is borrowing, the less money there is available for other investments. Loans for people starting new businesses, inventors, expansion of existing businesses, people buying houses, cars, and all the other things people and companies invest in. With less money available to businesses, they hire less people, expand less, fewer new products come out, and the economy grows slower. (In economics, the money available to businesses to expand and build is called capital. Another Useless Fact)
So if the government is selling less Treasury Bonds, and paying off old ones in cash, rather than just re-borrowing the money, there's more capital available, which is sorta like gas for the economy. There's more opportunity for companies to expand, people to start new businesses, and all the other things that make the economy grow. Plus, if the government started paying off its debts, then the interest on the debt would go down, and as that went down, the extra money (plus the money from the bigger "slice of the pie" from the growing economy) could be used either for the government to shore up, expand, or create programs, or used to actually cut taxes. Or to pay down the debt even quicker. Or some combination of the three.
But don't hold your breath to hear anything about that from the Republicans, they've long since given up being the "Party of Fiscal Responsibility", and I wouldn't wait to hear it from the people who think taxes are too high, either. That's too long term.
And that's just one of the reasons "conservatives" are wrong about just about everything.
Technorati Tags: Politics, Mindscribbles, Economics
This is somewhat inspired by unpacking a new "conservative" book yesterday, called 100 People Who're Screwing Up America, and includes such luminaries as Barbara Streisand (?!), along with the usual reactionary bogeymen like Michael Moore, Ted Kennedy, and Hillary Clinton. (I STILL don't understand what about her makes Republicans go so frothingly mad). Obviously, they're gearing up early for 2006 and 2008. So, I figured I'd start assembling notes for my own attack book or something, with the exception of mine being a bit more based in reality.
Conservatives love to call liberals names, usually based on nothing other than their own strawmen caricatures of liberals. And then they cite random college professors nobody's ever heard of as their example. Right. So let's look at some mainstream conservative ideas, and see how in almost every case, the "conservative" view is wrong either on the substance, or in execution. For the first case, the one mantra that seems to unite the current Republican party, taxes. Conservatives of all stripes like to attack taxes, bash the government, hold up the plight of the poor multimillionaire, and ritually invoke lines about "people knowing how best to spend their money." This is of course all bullshit.
Cutting taxes is about the only thing that the Republican Congress has done regularly over the past six years. They claim that by cutting taxes, the economy will grow faster, and the government will get more money by taking a smaller slice of a bigger pie. This demonstrably hasn't happened. It didn't happen with Reagan's Voodoo Economics, and it hasn't happened the second time around with Bush's Voodoo II: Electric Boogaloo. A simple thought experiment will explain why. Assuming the Republican's claims were true, then if the government's tax rate were 0%, it should be making more money than if its tax rate were 1%. This isn't true, so obviously there's some points where cutting taxes reduces government income. And that point likely changes, depending on economic growth and a bunch of other factors. Which is all a very wonky way of saying the Republicans are spewing bullshit.
Okay, so if I'm so smart, am I saying that the government would make the most at 100%? Of course not, that's equally stupid, because then there'd be plenty of reason for people not to report income, and avoid taxes. Yay for corruption. There's obviously a point in-between that maximizes government income, and that maximizes economic growth. I don't know enough to say what it might be exactly, and neither does anybody else. Not even Alan Greenspan. The best we can do is guess, then tweak it when we see how things work.
But the Republicans try and frame it in moral terms, "the government is taking my money! It's my money, why shouldn't I decide how to spend it?" That's not how it works, though it's a popular view among libertarians. We need the government. The government does all sorts of things for people, things they can't do for themselves, and the "free market" doesn't supply for various reasons. The government ensures when you buy a pound of flour, it's actually a pound, and actually flour, not talcum powder or chalk or something. The government is involved in creating and paying for roads, power, water, sewage, telephone, internet, air traffic, police, fire departments, the military, postal service, education, environmental protection, and most of the rest of the infrastructure of the United States. Oh, but air traffic, power, the Internet, etc are private, you say? Somewhat, but they all get government subsidies, or were built by the government and then sold or given away to private companies, usually at less than market price. The government ensured that all rural areas would get phone connections, power, and mail. There wasn't enough of a market to get the companies to build there, if they even existed then.
Imagine if the government weren't around, the cell phone companies would have been like instant messaging, you could only call people on the same carrier. Lots of things have benefits that don't accrue directly to the people who spend on them, but are spread out through society. Like education. Or environmental protection. There's no reason for a company to not dump pollutants in the river, it doesn't affect them, it affects everybody downstream. So it affects them, but in the long run, and very diffusely. But if dumping would cost them more in fines than it would save them in cleaning up, they're not going to do it. And all of society benefits from that. The same with police, fire departments, education, nationwide postal service, national defense, and quite a few of the programs that help poor people.
The government isn't "taking" your money, any more than a restaraunt "takes" your money, or an insurance company "takes" your money. You're paying the government for what it does. "But I'm paying for all this stuff I don't use!" See above, about externalities and benefits spread across society. But if you really think you shouldn't be paying for something, then you can vote, run for office, lobby, and all the other ways of influencing government. Just like stockholders do for companies, because that's what you are, you're a stockholder in the government.
The "Taxes bad!" mantra is a piece of rhetoric that has captured most "conservatives", to the exclusion of any policies that would actually help the economy, or lower taxes in the long run. And if any of them dare question the orthodox position, the anti-tax jihadists will come out of the woodwork with phone calls, editorials, and running primary opponents against them. Support for any tax increases, even necessary ones, is practically a kiss of death. Which is stupid.
If the Republicans really wanted the economy to grow faster, and really wanted to reduce the tax burden on the average American, there's one obvious thing they should be doing. They should balance the government's books. One of the largest portions of the government's budget is paying interest on the national debt. That's money that WILL have to be paid back. And paid back out of tax money. So those tax cuts they keep promising? They're just shifting taxes. Onto the future, and onto everybody outside the top 1% of income. Yes, you and I, and our hypothetical kids, are going to have to pay back the trillions of dollars in debt we've got. Which means taxes are going to have to go up, or the government's gonna have to cut spending by like a third or more, and there's not THAT much "waste". Most people don't understand orders of magnitude on an instinctive level. Even I don't, if I don't think about it. Million, Billion, Trillion, they're all "many many lots", and sound the same. I don't have any colorful analogies on hand, but a a thousand thousand times bigger than a million, or one million times bigger. So cutting the "waste" like the National Endowment for the Arts (whose budget I don't have on hand, but is probably in the hundred millions AT MOST), or National Education Agency (likewise), will do practically nothing to a deficit of TRILLIONS of dollars. It's like paying pennies on a hundreds of thousands dollar credit card bill.
Which means taxes are going to have to go up, and go up a lot, to pay these off. And by "cutting" taxes and spending more and racking up ever-growing debt, the "anti-tax" people are making future taxes higher and higher. On the other hand, if, like under Clinton and the Democratic Senate, you stop giving trillions of dollars away to rich people and corporations, and raise taxes enough that the government's not spending more than it makes, you can start paying down the debt. And if you go even farther, and get rid of some of the truly wasteful spending (agricultural subsidies that go to giant factory farms, billions and trillions in subsidies to other industries that then incorporate in the Caymans to escape paying taxes, etc), it'll go even faster. And that'll help the economy grow, too.
Okay, why would the government having a balanced budget help the economy? I'll explain, but it's going to take a little economic wonkiness, which I hope I can make make sense. When you're spending more than you make, where do you get the extra money? You borrow it, either from the bank, or with a credit card, or you bum off your friends. It works the same way for the government, though there's less bumming off friends. The main way the government borrows money is by issuing Treasury Bonds and selling them. A Treasury Bond is basically the government promising to pay back X money, plus interest to the bearer. These get sold to all sorts of people, you, me, investors, banks, mutual funds, and so on. This includes foreigners, especially banks, much of the money we've been borrowing lately has been coming from the central banks of China, Japan, and a few other countries. Most of the bonds have a life of 20 years, which is called "maturity". So 20 years later, it gets cashed in, and so right now, we just issue new bonds to pay for the ones that come back. Which is about all you really ever need to know about Treasury Bonds, and probably more.
So what's this have to do with the economy, you're wondering? Well, generally, there's only so much money available for investing in things. The total of how much people, banks, and companies have that they're willing and able to invest. When the government's running a deficit, and selling Treasury Bonds like mad, those tend to soak up investment money first. The US Treasury Bond is reputedly the safest investment on the planet (and if that changes, we're even MORE screwed. Trust me, you DON'T want to know what would happen if the US government defaulted on its debts). So the more money the government is borrowing, the less money there is available for other investments. Loans for people starting new businesses, inventors, expansion of existing businesses, people buying houses, cars, and all the other things people and companies invest in. With less money available to businesses, they hire less people, expand less, fewer new products come out, and the economy grows slower. (In economics, the money available to businesses to expand and build is called capital. Another Useless Fact)
So if the government is selling less Treasury Bonds, and paying off old ones in cash, rather than just re-borrowing the money, there's more capital available, which is sorta like gas for the economy. There's more opportunity for companies to expand, people to start new businesses, and all the other things that make the economy grow. Plus, if the government started paying off its debts, then the interest on the debt would go down, and as that went down, the extra money (plus the money from the bigger "slice of the pie" from the growing economy) could be used either for the government to shore up, expand, or create programs, or used to actually cut taxes. Or to pay down the debt even quicker. Or some combination of the three.
But don't hold your breath to hear anything about that from the Republicans, they've long since given up being the "Party of Fiscal Responsibility", and I wouldn't wait to hear it from the people who think taxes are too high, either. That's too long term.
And that's just one of the reasons "conservatives" are wrong about just about everything.
Technorati Tags: Politics, Mindscribbles, Economics