Rational Politics?

Today I heard a podcast on economics that was a followup to one I did some weeks ago. Recall if you will when the NPR guys got a half dozen different economists, liberal, conservative, libertarian, together and asked them for ideas on which they could all actually agree? And they did! They came up with half a dozen ideas that made economic sense to all of them. The only problem of course was that these ideas were so radical and so apparently politically unpalatable that they wouldn’t sell. Well, in today’s podcast they got two professional political consultants who said they could construct sales pitches that would sell them!

Now I know full well that there’s no time to promote these ideas and educate the public about them for this cycle, but hope springs eternal and now that we are in the home stretch of the political campaigns I thought it might be beneficially mind-stretching to consider them and how they might be presented, not just because they are eminently rational, but because the discussion itself reveals something that ought to give us all pause: as voters we are being manipulated. There’s no way to avoid the pressures, the sound bites, the one-liners, the 30-second or even 15-second ads that tug the heart strings or pander to patriotism, and all the rest of it, but perhaps we can become a little more rational about the process if we simply realize how the tricks are done, and listening to this 23 minute podcast can, in my opinion, do just that. You will hear one of the consultants state that “voting is an irrational act.” Wouldn’t it be nice if that weren’t true? Maybe it can be for some of us.

Just to whet your interest (I hope) and your memory (perhaps), I will list the radical ideas below, and as you read them, remember a principal rule all the economists agreed on: when you tax something, you get less of it, and of course the reverse is also true. (Please hold your laughter and cat-calls until you’ve listened to the podcast.  This is entertaining – trust me.)

1. Eliminate the home mortgage income-tax deduction.
2. Tax employer-provided healthcare benefits the same as salaries.
3. Eliminate the corporate income tax entirely.
4. Eliminate all individual income taxes and payroll taxes.
5. Enact a carbon tax on energy (coal and oil products).
6. Enact a consumption tax to provide the necessary government revenue.

Listen to the podcast HERE.

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About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Independent, tending progressive as the GOP recedes from its Eisenhower roots.
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9 Responses to Rational Politics?

  1. I will definitely listen to the podcast (though that will have to wait until I get some stuff done after dinner), but I will whole-heartedly agree on the carbon tax, at least in the form of fuel taxes and especially on gasoline. My reasoning is supported by the “car scene” in Europe. While we pound down the road in ponderous pachyderms (SUVs to you and me), the European motor scene is filled with hatchbacks, manual gearboxes, and 4-cylinder engines. What about your precious space and even more precious horsepower? Try a VW Golf, available in the same size here as in Europe, but available in Europe with a 1.4-litre super- AND turbo-charged engine, making 160 hp (only 10 less than the 2.5-litre 5-cylinder engines available here) and getting several miles to the gallon better mileage (American and European mileage ratings differ in how they’re calculated) while going 0-60mph in only .4 of a second slower to 60 mph. Yes – four tenths of a second. All this, because our $4 a gallon gas is 2/3 to 1/2 the price of various European countries. And frankly put, when my neighbor delivers “meals on wheels” out of a full-size Suburban, instead of a “huge” (by European standards) wagon like my 1996 Buick Century (with an equally “huge” 3.1-litre V-6), the argument for total freedom of choice begins to wear a bit thin. Especially when, on my commutes to work back in Chicago, my V-6 equipped Cavalier would regularly be blown past by minivans (not so mini, really) and full-size sport-utes with only a driver on board.
    Really?
    (This concludes your “gearhead” moment for the week. 😀 )

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  2. John Hester says:

    Since these ideas suggest eliminating all individual income taxes, isn’t it misleading to suggest you want to tax employer-provided healthcare the same as salaries?

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    • Jim Wheeler says:

      Good eye, John. Even though these six ideas all garnered support among the diverse economists, that doesn’t mean they are all compatible with one another. What you spotted indicated that each was considered separately. Obviously, none of these ideas can stand alone and any final solution needs to result in enough revenue for the government to run on and a balanced budget that both parties can agree on, a very tall order.

      Can one’s brain get stretch marks? I think mine does. 🙄

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  3. ansonburlingame says:

    Not bad, Jim. A good second podcast, along with the first one. I offer two observations on the combination of the two.

    First, everyone that votes casts a ballot primarily to promote his or her own self interest. We vote for candidates that we think will improve our own prospects for a “good life”. For example, if a candidate said Medicare is going broke and I will raise the monthly Medicare premiums coming out of your SS check by $100 each month, just how many seniors would vote for him???? But IF he also said that he or she would NOT raise the payroll deduction for Medicare above the current 1.9% for wages up to $101K, then he or she MIGHT get some votes from “workers”.

    But such “self interest” motivated voting is not at all rational in many cases. Go look at inner city ghettos as just an example, particularly the BLACK inner city ghetto voters. The unemployment rate for those voters is around 50% and has not gotten any better for sure over the last 4 years. But such voters will overwhelmingly vote for Obama or any other Dem because they think he will “give them more ……” than will a GOP candidate. THAT is “irrational self interest” in my view, if the “record” is considered, not just the campaign slogans and sound bites.

    The EC yesterday was lauding the support for the “struggling masses” on the part of DEMs over the decades or even a century or so. Well how much improvement have we seen in say those ghettos, I like to use Detroit as the example, over the last 50 years. Dems sustain “struggling masses” but sure as hell do not “lift them out” of such conditions would be my counterpoint. Of course you will disagree with such an observation, but that is beside the point.

    Second point. Economics is NOT a system to promote FAIRNESS. Economics as a practical, even somewhat scientific, matter determines how money might flow in various forms of “things” like supply and demand. Here is what will “shift the curves” is the “science” of economics. Only politicians them add, “but that is not FAIR”.

    Try for example to EITHER grow GDP (the economy) OR redistribute income within that economy. You can do one or the other for sure with government action. But I defy you to construct an economic theory, proven through history, that can do BOTH at the same time. Redistribute income, taking from the “rich” and giving to the “poor” can be achieved, in great strides if you want that, through really onnerous taxation or communism or to a degree socialism. But if you do that the “investment” part of GDP goes to hell in a hand basket. I stand on my reading of history to enforce that point. More on that later as I have a blog in mind along those lines.

    Another case in point. I continue to have an idea that a consumption tax might well be a better way to go than an income tax. ANY tax reduces that which is taxed and income for all people is not something anyone wants to reduce across a broad spectrum. The more we PRODUCE, a good thing in my view, the more we EARN in income, so why tax income?

    Given our society today there are some that choose NOT to earn any “income” from working or producing and are content to let “government” sustain them as well. Again you will disagree, but that is a political disagreement, not one of “economics”, in my view.

    EVERYONE has to “consume” to live. We must have food, shelter, etc. People WILL consume things to eat, etc. no matter how high the tax might become. I would also suggest that our consumption in America is driving us into a ditch. Compared to other countries we consume far more than our “fair share” of many things. So why not tax consumption, reasonably, to reduce American consumption, particularly of things that “hurt us”. Go ahead and tax “carbon” if you like to promote the production of energy from non-carbon sources. BUT don’t do that while at the same time calling for an INCREASE in income taxes as well. Income, investment is what will shift the production of energy away from “carbon” to alternative ways to produce energy.

    Want to make a “mini-step” foward in such an approach. Make the Bush INCOME taxes permanent and add a small carbon tax to oil and coal produced energy to increase federal revenues to a level comminserate with rescinding the Bush tax cuts. Everyone gets to “keep” what they would have to pay in rescinding Bush tax cuts but turn around and pay the same amount more in an energy tax unless they had a solar powered, wind powered or nuclear powered source of energy. As well watch the sale of hybrid cars skyrocket if you include gasoline in such a “carbon tax”! That will do far more to increase the milage of our autos than some EPA imposed mandate on auto producers, in my view. It could also stimulate the hell out of converting over time to hydrogen powered autos across the land of America which is the “reasonable” technology solution to the fuel for future transportation.

    Bottom line is to tax what “hurts us” and only tax enough to fund a government democratically elected. As well FORCE that government to PAY FOR EVERYTHING that it imposes on all Americans. Want HC for all Americans. Fine with me but tax all the people to pay for it using a tax on consumption that “hurts” all the people, like “ding dongs” or big screen TVs. Just how big must a TV become is then the question for consumers.

    And whatever you do to “improve” our economic conditions, do so “scientifically”. Once you get the economy to the point of optimum production and growth, then go ahead and raise taxes to promote “fairness” at least to the extent that a democratic majority will allow you to do so. But remember, fairness must as well be sustainable over time. Communists and socialists forgot that simple point, in my view.

    Anson

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    • Jim Wheeler says:

      @ Anson,

      1. Where you see the “masses” voting Democratic in order to get handouts I see their motivation as support for safety-net type things like unemployment insurance and MediCaid for the poor, the sick and the elderly, all things that would suffer under a Romney/Ryan plan. This goes to the same arguments we had under my last post, “Working – A Memoir”. Bottom line, you have a contempt for the 47% that I don’t see as valid, and so far as I can see this election seems to be turning on exactly that difference.

      2. True, “economics” is not a system to promote “FAIRNESS”, it’s a process. But it is exactly that nature that makes politics necessary. And yes, politics is about redistribution. This is not Davy Crockett’s America anymore, it is a modern interdependent society of specialization and as such it demands rational political decisions to keep it going. Left to its own Darwinian devices, it seems to me that any unregulated economy is inherently unstable, gravitating toward larger and larger income gaps until oligopolies prevail and it collapses in a bubble. History is replete with examples of such collapses, and the only instrument we have to control that is government regulation and taxation.

      American government has been in the redistribution business ever since the invention of the income tax because that tax is progressive in nature. Social Security and MediCare are also socialized redistribution systems, and pretty popular ones at that, made morally palatable by their contribution requirements and never mind that their benefits paid almost always exceed the “contributions” paid into them. Those contributions are actually taxes. In short, your economic independence is an illusion. You are completely dependent on a complex of government-funded infrastructure that makes your life comfortable and safe, and that includes roads, bridges, dams, farm subsidies, food inspectors, border guards, aviation inspectors, the defense department, police, fire departments, water companies, electric companies, judicial courts, environmental inspectors and researchers, license bureaus, game wardens . . . Well, you get the idea.

      And last but not least, that system also guarantees that certain members of the military, i.e., retirees, are entitled to a portion of the current nation’s wealth each year in return for their active duty service. That is redistribution too because the duration of the payments is unlimited except by the life of the recipient and because the quality of military service is not economically measurable.

      3. Making the Bush era tax cuts permanent ignores the growing income gap between the rich and the other 90% of the population at a time when the economy is struggling, so that issue goes to the same argument as the one for the progressivity of the income tax. It doesn’t matter that having the upper 10% pay more doesn’t fix the whole problem because any solution has to be incremental- it’s just too big for any simple approach and the truth is that it can’t be fixed without some fundamental changes to healthcare and Defense. However, Obama has at least made a start in each of those areas despite entrenched teavangelical opposition at every turn.

      4. We seem to agree about the carbon tax and a consumption tax. Gee, imagine that. But don’t forget that a consumption tax needs to be structured to exempt basics. (Please see my reply to Helen on this same post.) There goes that darned redistribution again.

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  4. Well, Jim, since I missed this on air, I was glad to see it here. Frankly, they didn’t convince me of anything. After listening to this, I still held the same opinions I held before: still agreed with some (numbers 2, 5, and legalize marijuana which was in the podcast but not numbered here) but not with all.
    And some of these I think can be done in moderation. Such as why not eliminate the home mortgage deduction only for second homes?
    I held fast to my position that consumption tax hurts the poor — they pay a much much higher percentage of their income for the things they need then do the rich. I don’t mean just food and medicine — school supplies, clothes, cars, computers, all these take a much larger cut out of the salary of low-income people. Once upon a time, we had a luxury tax. Do we still have that? Theoretically, at least, I might agree with Anson’s support to tax “things that hurt us.” Quite frankly, I don’t know where we would get the money to run our government if we enact these recommendations.

    All this reminds me of a recent article from The American Conservative (not my usual reading, but I do sometimes branch out):

    Our plutocracy now lives like the British in colonial India: in the place and ruling it, but not of it. If one can afford private security, public safety is of no concern; if one owns a Gulfstream jet, crumbling bridges cause less apprehension—and viable public transportation doesn’t even show up on the radar screen. With private doctors on call and a chartered plane to get to the Mayo Clinic, why worry about Medicare?

    As far as voting being irrational, it’s probably possible, theoretically, to create a system in which voting would be a rational act, but politically, not so easy.

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    • Jim Wheeler says:

      @ Helen,

      Agreed, these ideas would need a lot of massaging before being adopted and I can imagine all sorts of modifications. I get your point about the consumption tax, but I think it’s important to think outside the box on that one. The items exempted could include the things you mention, and more. And the consumption tax on other things, like SUV’s, houses, flat-screen TV’s and yachts for example, could be quite steep. As I said, any plan would have to garner the required revenue.

      I always appreciate your thoughtful comments.

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  5. ansonburlingame says:

    Just a few quick points. Jim wrote and posted this, Helen, BEFORE last night’s debates. Obama tried his usual sound bite attacks in the debate but this time the TV set ‘talked back to him” s aying WRONG, on many occasions with details, to a degree, to make that counterpoint.

    Debating the debate will happen in these blogs but this in no the place to do so, in my view.

    Other point is voting in a democracy will NEVER be able to change the nature of self-interest promoting voting. That is exactly why the Founders created a Republic, not a pure democracy where the “struggling masses” will always outnumber the “thinkers and doers” in a society.

    Finally Jim, I do not demean the “”47%” in its entirety. But I KNOW that some portion of the overall “47%” ARE no loads looking for a handout only with no intent to put forth their own effort to improve their conditions in life.

    I did a “though experiment” in my recent blog using an OWS mob of 70,000 people as the basis for my concerns in that regard. Give EACH ONE of them $100K (cash, instantly) then sit back and watch what happens, hypothetically.

    Anson

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  6. Alan Scott says:

    “5. Enact a carbon tax on energy (coal and oil products).
    6. Enact a consumption tax to provide the necessary government revenue.”

    These are economically horrible ideas . They are anti growth . They punish people for economic activity and would lead to a black market economy . The government is this ever hungry, ever growing monster that consumes the wealth of the people . The monster has to be put on a serious diet .

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