In response to a David Brooks column, Tom Scocca, writing for Slate, makes an important point. Debt itself isn’t the disease, it’s a symptom.
Casting the debt as an object of moral concern is the work of minds that have come detached from human experience. The debt is an epiphenomenon. It is the side effect created by the specific moral decisions about what the country wishes to see funded, and how it is willing to fund those things.
Talking about the deficit is a way of cutting morality out of the discussion. Waste! Mismanagement! Incompetence! Unaccountable earmarks! These things are noise. The actual questions are: is money to be spent on people who do not have money? And where is that money going to come from?
Emphasis is mine. The point being that the moral problem, if there is one, isn’t the debt itself. It’s that we are spending too much on people we shouldn’t be spending on, not taking enough from people we should be taking from, or a combination thereof. Talking about debt as a problem is a shorthand for that basic point; but I think there is value in making it explicit so we don’t lose sight of what’s happening by abstracting debt as something independent.
I’d elaborate more, but I have a bad habit of getting interested in something just before I have to get ready for work.
Kinda like how being overweight is the symptom, not the disease. The disease is lack of self-control.
What do you expect from a nation with high obesity rates and high personal debt rates? It isn’t “THE GOVERNMENT” doing this, it is us. We want the doughnut, or the car, or the tax break right now, and we don’t want the exercise, or the side job, or the taxes.
To me, one of the only ways to fix this is to have a constitutional amendment to pay as you go & no debt spending. Require every law that gets passed to either have taxes or program cuts to pay for it.
Or, maybe it’s more like malnourishment caused by tapeworms or other parasites. In that scenario, we can argue about whether the parasite is the handout seeking underclass or the resource hogging upper class or something else.
I see the debt issue from somewhat of a generational perspective. When we have yearly deficits, even in times of calm and quiet, we are effectively forcing our children and grandchildren to carry the burden (in the way of increased taxes) for our generations’ refusal to reduce government spending. I’ve always felt there should be some type of Equal Protection claim that this generational problem is really mucking up the outlook of future generations for the benefit of the present one.
It can also be looked at as a generational refusal to sufficiently tax income at the upper levels.
Here is a fun tool that lets you graph spending as a function of GDP. Looking at the post-war years (WWII got up to something like 48%), it seems government spending peaked in about 1982-86 at something like 22-23% of GDP. It spiked again in 1992 at about 22%, then it declined from 1992 – 2000 to about 18% before steadily climbing from 2000 to the present at something like 24-25%. Meanwhile, I’m fairly sure I read that taxes (maybe just federal income taxes?) are at a 50 year low.
The problem with looking at it as a ” generational refusal to sufficiently tax income at the upper levels” is that this theory assumes (1) the proper amount of spending is the current (deficit) level; and (2) that this amount of spending is best born solely by the rich.
I’m not saying that either of those assumptions are wrong, just that they are arguable, and not necessary. As your link points out, federal spending habits (and needs) change. So does our understanding of the consequences of taxation and the proper way to tax. America was set out as a democracy, without a nobility. This has given rise to individualism, and the thought that we are each responsible for our life choices. It seems simple to me that this belief system would give rise to the idea that each generation has the general responsibility to pay their own way. Apparently, I am in the minority on that. :-(
Good post. I always appreciate the thoughtful commentaries.
Cause/effect of debt/crisis is beyond debate.
Analogy is personal physical abuse (over-eating) causing negative outcome (heart attack.)
Folks will be forever at odds over what constitutes prudence when it comes to spending other peoples’ (taxpayers’) mooney. That’s why we have rule of law; people can be trusted.
I have a bad habit of reading this blog when I need to be getting work done.
Thanks Bart.
Another arguable point, Paul, is how much of this country’s individualism is – or ever has been – real and how much is more of a cherished myth.
I like the Somalia (or other failed state) thought experiment. Consider what a successful person has achieved here; then consider what that person might have been able to achieve in a place like Somalia. Then try to determine how much of the person’s success is due to individual labor, ingenuity, or whatever; and how much of the person’s success is attributable to the overall system he or she is fortunate enough to be part of.
That’s not to say individual effort isn’t part of the story – it’s just not the entire story, and I think that has to be kept in mind when we consider moral objections to taxation. I’m more comfortable with functional approaches to taxation – look at the nature and levels of taxation in place at a given time and see how the country was doing economically around those times. What did the tax structure look like at the times when the country was doing best economically? (That, also, isn’t going to be the entire story – lots of other variables in play other than just tax policy. But, it’s a start.)
And, of course, I’m not going to do the hard work of doing research and crunching numbers. Mostly, I’m just going to spout off on my blog.
Doug, you’re killing me once again. Killing me.
There is no doubt that someone from a third world country gains much by coming to America. The same Mexican is 10 times more productive in the US than he is in Mexico. There was a similar story recently about Egyptians, and how much more productive they are when they come to the US.
But to take that fact and use it as justification to raise taxes? That’s a stretch. There is no causal link between that productivity and really anything that the government is paying for.
Sure, we can make assumptions. You would think that effective laws and a good court system have something to do with it.
But when you get to the marginal dollar that the government is spending, it’s arguable that that dollar is lowering whatever it is that makes the US so special.
The problem with saying that individualism doesn’t matter is that the contrary (that the work that one does does not effect one’s outcome in life) is so easy to falsify. I did it once on my blog, crunching household income data from the census bureau. It was amazing how strong the correlation is between household income and how much the members of that household are working and how much education they have earned.
Really, if you think about it, if the US has institutions and other things that make people way more productive than they would be in the country of their origin, that actually means that the return to work is much higher in the US than anywhere else in the world.
BTW, Doug, I’ve come to the conclusion that an increase in inequality that is occurring is not due to tax policy because both pre-tax and post-tax inequality are increasing.
I agree with you that inequality is being driven from the top, mostly by outsize earnings by people on Wall Street, people that are generally Democrats. How can you justify Rahm Emmanuel making $18 million in two years over at Goldman Sachs, for example?
But the answer to that problem is not raising taxes on everyone making over $250k. The answer is to prohibit practices like Credit Default Swaps that make an enormous amount of money for a small amount of people AND that result in economic implosion and massive bailouts when things go bad.
I’m actually kind of surprised that talk of phasing out Freddie and Fannie has become a serious proposal. That would be a good first step in lowering those Wall Street salaries.
Dang, Buzzcut. Don’t prohibit practices like that! I just learned how much money (re: profits) can be made from privatizing schools. No wonder Republicos are so behind that!
In case I wasn’t clear – I wasn’t trying to say that individual effort has nothing to do with success; just that it’s far from the whole story.
And I’m not against income inequality from a fairness standpoint. Mom pounded into my thick skull that life isn’t fair. I’m cool with that. I just think that too much income inequality makes our society dysfunctional.
I’m open to the possibility that tax policy isn’t really the best way to get us to a more functional level of income equality. And, I don’t justify Rahm making piles of money for – essentially – knowing people. It’s evidence of a problem.
Check out the writings of Arnold Kling. He’s a libertarian economist who focuses in on what the real problem is on Wall Street, how they’ve captured the regulatory apparatus, how much of what they are doing is too complex to even regulate, and just needs to just be prohibited in the first place. He used to work at Fannie and has excellent insight into why they need to cease to exist.
He blogs at: http://econlog.econlib.org/
I liked Matt Taibbi’s line about Goldman Sachs being “a great vampire squid wrapped around the face of humanity.”
Doug: I have no objection to your argument that we make more here because of the infrastructure. I think that’s very true. However, this argument doesn’t counter the absolute fact that taxes change behavior.
The corporate behavior limited the most is investment, because returns on investment shrink when taxes increase, yet risk involved with these investments stays constant (the old risk/reward scenario).
The personal behavior limited the most by high taxes is employment. Why work when the govt. is going to take alot of your money? Second wage earners are the best example of this. Why have the second spouse work when the primary breadwinner already earns $150k (or more) and the govt. is going to tax every dollar this couple earns at 50-60% (including phase-outs, social security, reduced eligibility for Roth IRA’s, college grants, and other misc. stuff).
Now, add costs of child care, a maid, value of free time, it becomes very easy to see why wife stays home. If 2nd earner stays home, this decreases demand for restaurants, child care, laundry services, possibly vacations, etc. In summary, the economy is reduced in so many different small ways because of the rational consumption decisions of taxpayers to reduce their income and lifestyle due to taxes.
“then consider what that person might have been able to achieve in a place like Somalia”
I’ve wondered the same, but put it in the context of being alone on an island. Bill Gates would be broke.
Another analogy: Prior to professional basketball there were generations of people who had the same physical abilities as today’s NBA millionaires. It’s a combination of opportunity and talent.
Our success level is contingent upon our social, economic, political and physical environments. The challenge, then, is to create an environment that allows people to succeed in a fair and equitable way.
The challenge, then, is to create an environment that allows people to succeed in a fair and equitable way.
Which is the subject that Douglas North won the Nobel Prize for economics.
The problem is that it is not entirely clear exactly what in “the environment” makes the US so successful. The history of foreign aid is such that trying to transfer this or that aspect of “the environment” to other countries has not been successful. Not even close.
Thus, Doug’s extrapolation that, because “the environment” in the US is what makes people successful, you should support “the government” through much higher taxes on people who make more money than you do, is fallacious. Correlation is not causation, as always.
The challenge, then, is to create an environment that allows people to succeed in a fair and equitable way.
The challenge is a lot bigger than that. I don’t think that we can even agree on what “fair and equitable” is!
Look, I think that we have a problem with the Goldman Sachs of the world, but I don’t agree with Doug that taxes on “the rich” need to go up. Where Doug see’s “the rich”, I see people who got an education and who are working their butt’s off.
Just take Obama’s proposal to increase taxes on “the rich”, who he defines as any household making over $250k per year.
Well, it just so happens that, if my wife has never quit to take care of the kids, we would more than likely be close to that. She was a civil engineer with a master’s degree, and was on course to be very well compensated (actually, she was very well compensated, she made more than I did).
But she quit, because that type of job requires a lot of hours, and part time work is not accepted in that field. If she had continued working, our household income would be high, but our hours worked would collectively be 100 to 110 hours a week.
And then we’d have all kinds of additional expenses for childcare and whatnot, all the services that she now provides “for free”. ;)
Instead of being in the very low tax bracket we are currently in, we’d be in the highest tax bracket. All of our lovely credits and deductions (child, mortgage interest, etc.) would be phased out. Her marginal tax rate would be well over 50%. And that’s before Doug and Obama raise taxes on “the rich”.
Is that fair and equitable?
I think that what is fair and equitable is that people who work get to keep what they earn, and people who don’t work don’t get anything that they don’t deserve. It is time that the people who play by the rules, the people who got an education, make a good salary, and work hard for it, to stop carrying everybody else.
Despite what the chatterers say on Fox News, I don’t think that most people are out to soak the rich. However, what is galling — and why legislators are leaving states and people are protesting in the streets — is that in a time when we’re all being asked to sacrifice, the largest corporations and the biggest moneymakers, for the most part, are not willing to contribute. In fact, as we’ve seen with the Koch brothers’ marionette, Scott Walker, they aren’t just declining to participate — their goal is to shove that sacrifice down the economic ladder as far as it can go.
In that sense, you can see why a lot of people (I’ve seen this from a lot of pastors) refer to a budget as being a moral document. Not merely about debt, but about what your spending priorities are. Who are you trying to help? Who gets left out? What does it say, morally, when, say, Scott Walker is proposing corporate tax breaks and capital gains tax cuts while at the same time gutting funding for education and local governments?
Most leftists are delusional when it comes to economics. The fail to grasp the distinction between wealth and production.
Ultimately, EVERY ECONOMY IS A PRODUCTION-BASED ECONOMY.
It doesn’t how much oil is in the ground, someone has to go to work to get it out.
Wealth is the outcome of production. The challenge is not to redestribute wealth but to create an environment that encouarges productive people to produce the most.
Unfortunately, the more I consider and review tax policy and suggestions, the more certain I am that there is no such thing as “fair” when it comes to tax policy.
Possibly the best and least controversial example of this is the concept of marriage. Single people can persuasively argue that two people that make $100k a year each should be taxed higher than two single people that make $100k a year because the married couple have much more disposable income. That argument makes sense to me. However, so does the married couple’s argument that they shouldn’t be penalized for getting married, rather than staying single and just shacking up together.
We could make similar pro and con arguments regarding capital gains, whether cost of living should determine your tax rate, and so many other concepts.
Most leftists are delusional when it comes to economics. The fail to grasp the distinction between wealth and production.
Yeah, that’s always been my big problem with Marx.
“there is no such thing as “fair” when it comes to tax policy.”
Good point.
Some are more fair than others; none are fair.
Life isn’t fair. I think it’s a fool’s game trying to design a tax system that’s “fair.”
My perspective on designing a tax system changes depending which hat I have on. As an individual, I want to get the most while paying the least. If I’m a government, I want a tax system that maximizes the productivity of my citizens and results in a median standard of living that’s as high as possible. As a citizen, I have a blend of the individual and governmental interests.
Doug: to summarize my two posts: taxes aren’t fair, and they hurt the economy. Therefore, we need to make taxes as small a part of people’s lives as possible.
On a slightly different note… I am a bit surprised by your lack of interest in fairness, and multiple statements of “life isn’t fair.” I’m not knocking you here, but this is a rather unique perspective. I think many would argue that being “fair” is the principle behind the 14th amendment, and is generally the rallying cry for many liberal and mainstream causes, including affirmative action, better public schools, civil unions/gay marriage, Title IX and so many other causes too multiple to name. (What I’m afraid of though, is that you only don’t care about fairness when it comes to taxes.)
For starters, equality and fairness aren’t necessarily the same thing. We can equally forbid the rich & poor from sleeping under bridges and stealing bread; we can equally tax 100% of everything anyone makes over $1 million. But, these policies wouldn’t necessarily be “fair.”
In my personal life, I try to treat people fairly, but it’s just such an amorphous concept; it’s tough to codify into law. The Golden Rule is a pretty good start – treat people as you would have people treat you.
What does it say, morally, when, say, Scott Walker is proposing corporate tax breaks and capital gains tax cuts while at the same time gutting funding for education and local governments?
I think that this comment is illustrative of the divide we have. Walker of course would say that he is lowering the tax on productive investment in the state, and attempting to reign in the cost of government. Being that the vast majority of governmental cost at the state and local level is salary and benefits, you can’t really balance the budget without addressing the unions.
Elimination of collective bargaining allows Walker to balance the budget without layoffs. He deserves that kind of flexibility, as do all elected officials.
Agreed that equality and fairness don’t have to be the same thing. But isn’t the whole point of equality to be treated fair? You do agree that if they aren’t the same thing, they certainly are neighbors, yes?
So, let’s explore your 100% taxation above. Other than the obvious fact that 100% taxation would seriously damage and reduce our economy (and fit well within an Ayn Rand plot line), would you be ok with this type of taxation?
I’m sure there is a point at which I could probably agree with 100% taxation. I’m not sure what that point is, exactly. Call it $1 billion in individual income in a year. I don’t think taxing at that level would hurt productivity in any noticeable fashion, and I don’t think anyone adds that much additional value, so I can’t feel too bad that it’s being taken from them.
The reason I don’t think it would hurt productivity is that I don’t think people are going to work much harder or smarter for a billion dollars than they would for, say, 100 million. It’s pretty clear people will work harder for $100 than they will for $1; but at a certain point, i think the returns diminish to just about nothing – there is a level at which you’re willing to work your hardest.
“For starters, equality and fairness aren’t necessarily the same thing. ”
Please notify the Rev. Jesse Jackson.
He seems to the sameness is synonymous with equality.
I think 0 is a nice fair number.
Americans need to surround the Federal Reserve Banksters in NYC. We need to have an Egypt style revolution.
The banksters at the Federal Reserve are the disease and the people without morality.
Damn, and I had March 4 in the “Black Bart makes a wholly gratuitous Jessie Jackson or Al Sharpton reference” Sweepstakes.
So close….