Add This To The Pile

What are the effects of taxes on the economy? Prevailing neo-fascist thinking emphasizes the negative, and of course, to some extent, this line of thinking is correct. Taxes reduce gains and therefore discourage investment and spending, which are two of the biggest economy-boosters around. The laugher - ahem, Laffer curve clearly shows that taxing 100% of something's profit completely removes the incentive to undertake that something. (That tautology, by the bye, represents the sum total of the wisdom of that curve.)

Where the taxes go is so often left out of the debate that if "the economy" were "the temperature inside a rustic cottage" and "taxing and spending" were "collecting logs and burning them in the fireplace," the debate would center around the extent to which taxation was depleting our firewood supply (ignoring all the heat the "spending" produced).

The neo-fascist counters that the free market generates more heat than the government can. This is debatable, and like most real-life debatable things, is true some of the time and untrue at other times. Nevertheless, spending does heat up the economy to some extent, and it is unfair to examine taxes, as the Laffer curve does, as though the money simply evaporates.

What's more, if tax dollars go toward strengthening our country's safety net, i.e. the social programs that help the (temporarily and chronically) poor, then investment and spending are encouraged. This happens because the investor/spender is confident that if he loses in his investment or if he overspends, he doesn't end up on the street, penniless.

This is as much of an oversimplification as the Laffer curve. What's the best way to strengthen the safety net? is just as complex a question as What's the best way to collect taxes? Is the safety net best strengthened by fighting wars? Guaranteeing health care? Supplementing income? All good questions. But by only analyzing the negative effects of taxation, we miss half the point.

The neo-fascist emphasizes the need to cut taxes to increase revenue, but I think it's difficult to argue that we're on the right side of the Laffer curve right now. No, most tax-cutting advocates in the 2000s are those so rich that the safety net is of little concern to them, or are those who, on the advice of the super-rich, only look at half the story.

So add that to the pile of arguments that centrist politicians need to use to fight the Reagan-Bush-Bush machine that delivered us from the frying pan of '70s stagflation and into the fire of today.

Solipsism

Stuart Scott said that some layup or other was "cool like the other side of the pillow." Everybody seems to say that about something now, but his usage was the first time I'd known for sure that a single other person knew the pleasure of turning over the pillow in the middle of the night. For all I knew, as a nine year old, it was my little secret.

The Sserpent Iss Crawling Insside Of Your Ear

I have never heard a good reason why Social Security is a special part of the US federal budget. I realize this is the hot-button issue of, like, three years ago, but I don’t think anything substantial has been done about it. (This absence of progress, by itself, is indicative of the pretty-much-inarguable fact that politicians use issues, truly important or not, for political purposes, i.e. to scare up votes, and that, important or not, any issue will get lots less attention if there is no political leverage to be attained by attending it. But everybody knows that, so I will spend precisely zero more time dwelling on that, at least in this post.)

SS is funded by a payroll tax, whereby I think 6.2% of a worker’s pay is deducted from the first roughly $100,000 of his yearly paycheck. This is matched by the employer; the self-employed have to pay 12.4%. Incidentally, Medicare works roughly the same way, and everything I’m going to argue for in this post is pretty much applicable to Medicare as well, except that there’s no upper-income limit to Medicare deductions.

In the 2004 presidential elections, the upcoming bankruptcy of SS was all the rage. Right now, the funds paid into SS by today’s workers are being taken out to pay today’s retirees. There’s some money in reserve, I think, and that’s what Al Gore’s circa-2000 lock box was supposed to hold. Either way, the funds are currently expected to be depleted in 2017, or 2042, or some time, probably within my lifetime. In 2004, President Bush’s solution was to invest what would have been normal SS funds in the private market as a means of getting more bang for the buck and, hopefully, getting more trickle out of the economy. This would have effectively ended the way the system is currently run, because Bush’s plan would have made it so that today’s worker is putting money into his own retirement account (not paying today’s retirees, although they would doubtlessly have been grandfathered). The Democratic solution was basically some kind of “mend it, don’t end it” un-sexy plan.

So what I mean when I say SS is a special part of our budget is that it’s its own separate fund, fed by its own special tax, spent in its own special way. It would seem that if it runs out of money, then indeed, later retirees would have no SS to rely on. My question is: since when does the government need to have the money it’s spending? The government is supposed to consistently run a manageable debt, which it does, although where it becomes unmanageable is up to debate, and there are a lot of respectable arguments out there that conclude that we passed that Rubicon several trillion dollars ago. But regardless, why not make SS just another budget item, like the Department of Defense or Health and Human Services? Then the fear of SS going broke at least gets lumped in with the fear of the US national debt skyrocketing out of control. We’ll call it “fear consolidation.”

There are other advantages. You get rid of the silly, regressive SS payroll tax (the progressive federal income tax, or estate tax or whatever, would of course be increased to make up the difference). You simplify the tax system, which is a popular, bipartisan goal. And a likely effect is that you change SS into run-of-the-mill welfare, which I think would be a good idea.

Today’s retiree accepts his SS check gladly, as well he should – he has earned it. However, the SS of tomorrow would be largely funded not so much by other middle class wage earners, but, proportionally, by the rich, like any old unemployment welfare is. Therefore, SS becomes state-mandated income redistribution. We could make it so that US citizens and permanent residents over age 65 (or, let’s face it, bumping that up to 70 would solve lots of problems) are automatically eligible for welfare. They have to apply for it, but a non-forged birth certificate from more than 70 years ago means they’re in. I believe that the result would be that people who have planned adequately for retirement (and most lifelong wage-earners these days have) will forgo the new SS out of pride. Not that there’s any shame in an old person getting some help from red-blooded Americans – we’re rich enough so that they don’t need to die in the gutter – but I think there’s a substantial portion of the population that is OK accepting a check they believe they’ve paid for all their life, but not one someone else is paying for.

Combining SS with the rest of the federal budget is the way to save it, or at least make it as safe as anything the government promises you.