Monday, November 30, 2009

Services and Costs

On my way back to Texas from Michigan, I was reading the Detroit News and came across a great point. Apparently, my home state of Michigan has a flat income tax, meaning they pay 4% (I think) on all wages above a certain amount. Now the current debate there is whether or not this flat tax should be converted to a progressive tax, similar to federal income taxes.

One astute commenter remarked that taxes are used to pay for government services. Think of it as a car pool, if 4 people share the car, then each should pay 1/4 of the cost. Economically this makes a lot of sense. Especially when you realize that if one person only paid 1/16 or the cost, that would have a profound effect on his decision of whether or not to car pool. The same is true for any good or service. Our desire for that service goes up or down depending on the cost. Remember that.

There are many of us who worry that too many people don't pay taxes, or don't pay enough taxes. The worry is simple. Government provides goods and services and they have a cost. If one doesn't pay those costs, then the calculus of utilizing those services is distorted and bad things happen.

As a society, we believe in helping those in need. On some level the desire for a progressive taxation system is designed to do just that. The problem with that system is it has a very undesirable side effect, it hides the costs of government. A more desirable system is to directly transfer wealth from those who have it, to those who don't. And then let EVERYONE pay EQUALLY for the costs of government.

Thursday, November 19, 2009

Is simplicity a partisan issue?

Who is against simplicity? Isn't it a generally accepted axiom that simplicity is preferred over complexity? There's even an acronym for it: KISS, Keep It Simple Stupid. I think simplicity is great and I can't fathom why promoting simplicity should be a partisan issue. Below are some simple questions that should have you scratching your head wondering: why is this so complex?

Why do we pay taxes?
-To pay for government services. Sounds simple enough.

Who should pay taxes and how much should each person pay?
-It appears that we all believe in a progressive tax system. Those with more ought to pay more.

So why do we have so many different taxes?
-We have payroll taxes, income taxes, sales taxes, excise taxes, corporate taxes, captital gains taxes, death taxes and probably many more I know noting about but unwittingly pay. It almost seems as if someone, somewhere, has deliberatly made the tax code ridicuously complicated.

Here's a crazy idea, let's have a stupidly simple (some might even call it genius) tax system. We have a single tax on individual income that is progressive. It generates revenue in the simplest possible form and soaks the the rich pay their fair share. That's it, no corporate income taxes, no federal sales taxes, no taxes for the privilege of dying, just one fat tax which does exactly what we need it to. Generate revenue to pay for government services. Who's against that and why?

Tuesday, November 17, 2009

Thank G-d for China

Starve the beast used to be the siren song of the right. Take away government's ability to spend and spending will be restrained. Unfortunately, the beast can print money and it doesn't have an appetite for restraint. Our country is heading towards a fiscal meltdown and it's only a matter of time. The economic policies being advocated by the Obama administration and the Democratic Congress are awful. They refuse to acknowledge this, because that would temper the beast.

Ultimately, nature enforces reality on a reluctant people, but we have been blessed with a gift, a warning shot, and we have the Chinese government to thank for it. One of the beauties of the marketplace is that it pits self interest against self interest. Caveat emptor, or "let the buyer beware" forces us to smartly distrust those we do business with. China is quickly waking up and their trust of the monetary and economic policies of the United States can kindly be described as circumspect. They have massive skin in the game, trillions of potentially worthless pieces of paper.

Every party has a point of view, and we can discover their biases by looking at their incentives. The United States owes trillions of dollars to the Chinese and others. It has a huge incetive to devalue it's currency in order to reduce that debt. The Chinese exist on opposite side of this spectrum. They own trillions of dollars and they don't want them to become worthless pieces of paper.

China is not the only US creditor; millions of Americans are also creditors to the US government. The difference, is that China is not a dispersed mass of economically ignorant people. China is a centralized regime with brilliant economists who see the writing on the wall. The United States is contemplating welching on it's debt. They are letting us know and thank G-d for that.

Friday, November 13, 2009

Health care and abortion

I am sure the writer of the following letter is opposed to restricting abortion in any sense. However, this is one line of argument that lacks logical cohesion. It supports the fallacy that insurance is about "pooling" risk, it isn't. What one ought to pay for insurance is the real expected cost for that person. Indirect subsidies are not insurance in any meaningful sense, except a political one.
To the Editor:

I would like to ask those people who, as a matter of conscience, do not want to see tax money being used to finance legal abortions where they think the money to finance that coverage comes from now. It comes out of their pockets, in the premiums they pay to their insurance companies.

Those who fought against the financing of abortions in the present health care reform bill may have good reasons for having done so, but pretending that keeping taxpayer dollars out of the equation somehow relieves them of financial complicity is a denial of reality.

Elizabeth Fuller
Peterborough, N.H., Nov. 10, 2009
Ms. Fuller is right in that the current insurance system acts upon a subsidization scheme, not on sound insurance principles. Basically, health insurance is insurance in name only. The conclusion drawn has the premise that this subsidization scheme is proper, it is not. We should end this indirect subsidization within the health insurance market and therefore allow people to pay for their own abortions. When will people admit that abortions arise out of controllable behavior. You don't come down with pregnancy. As someone who is not morally opposed to abortion, I find the inability to acknowledge this disturbing.

Thursday, November 12, 2009

Couldn't see this one coming

I was listening to Rush Limbaugh the other day and he made a great point. In the health care debate, the talk is never of creating more health care, never of increasing the supply, only of controlling costs, rationing care, sacrifice. One of the differences between the market and government, is that the market incentivizes creation, government doesn't. Here is a yet another New York Times letter from a disenchanted liberal lamenting the distribution of the H1N1 vaccine.
To the Editor:

Re “Officials Defend Distribution of Flu Vaccine to Companies” (news article, Nov. 6):

The defense by officials at the New York City Department of Health and Mental Hygiene of the distribution of thousands of doses of H1N1 vaccine to Wall Street firms is outrageous.

As an attending physician in pulmonary and critical care medicine, I find it disheartening that health care officials in New York City are not properly prioritizing those who require vaccination. The Centers for Disease Control and Prevention has clearly deemed that pregnant women, children, health care workers and people with underlying chronic medical conditions be vaccinated first.

As someone who cares for hundreds of patients with chronic respiratory disease, including young asthmatics on disability, I am deeply disturbed by the fact that my patients have no access to the vaccine.

It is difficult to fathom that physicians and nurses who work for large corporations have been empowered to distribute the vaccine and decide who meets the criteria for receiving it, whereas those of us who care for chronically ill patients, who are most at risk from H1N1 infection, have no access.

Although corporations that have access to the vaccine should, in theory, be following the guidelines set out by the C.D.C., the greatest need for the vaccine is clearly in our city’s hospitals and clinics.

Gail E. Schattner
New York, Nov. 6, 2009
Surprisingly I agree that the system ought to triage the use of a scarce medical resource. But why Mr. Schattner is surprised by the politization of this is beyond me. When will we learn that our governers are not saints?

Nevertheless, it's ironic that it never occurs to Mr. Shattner or the New York Times that reducing triage, aka rationing, ought to be the ultimate goal. Let prices reflect demand and encourage more supply from greedy capitalists. Fighting over who gets what and why will not provide everyone with more.

Wednesday, November 11, 2009

I'm from Stanford b*tch

Can anyone explain what being from Stanford has to do with the point he is making?
To the Editor:

Re “For Therapists in the Military, Painful Stories” (front page, Nov. 8):

It is striking to me as a trauma psychiatrist how much you focused on what was in Maj. Nidal Malik Hasan’s head and not on what was in his hands. He got onto a secure military base with two highly lethal civilian handguns, one of which could fire a bullet a second without reloading.

Our nation is infected with an epidemic of firearms, almost one for every person in the country. When you mix that many high-powered weapons with people, bad things will happen, like drinking and driving.

While Major Hasan may have suffered some secondary traumatization from listening to patients, he had not even been to a combat zone, and as your article concluded: “There are a lot of others who are worse off than him.”

Post-traumatic stress disorder doesn’t kill people. Guns kill people.

David Spiegel
Stanford, Calif., Nov. 8, 2009

The writer is associate chairman of the department of psychiatry and behavioral sciences, Stanford University School of Medicine.

Good meaning liberals

In my opinion, there are two types of liberals, naive well intentioned and the rest. There's a saying that if you are young and not liberal, you don't have a heart. If you are old and not Republican, you don't have a brain. I don't know how much truth there is to this adage, but this post goes out to all the well intentioned liberals who either don't know any better or close their eyes to reality. You are the hope for compromise between us and it is to the honesty within you that I appeal. Despite our differences, remember this: our goals are the same. Never forget that.

The world is unfair. That's a reality. Well meaning liberals want to change reality. They see inequality and suffering and demand that it stop. Any world less than ideal is a world for them to improve. And improve they must because reality is not ideal. It is unfair. And that is the essential fallacy of their beliefs, the fallacy of the young, the fallacy of innumerable possibilities not yet tempered by the harshness of life. The heart wants what it wants, but your elderly self reveals an inconvenient truth: You cannot change reality.

Idealism is not evil, in it's way it is noble. My only request to good liberals out there is not to confuse idealism with reality. You believe in noble causes, then believe in them sincerely. And understand that nobility doesn't allow you to ignore hypocrisy nor to ignore evil in the name of the greater good. If you are an honest liberal then call out all evil, even if it lowers the esteem of someone not worthy of your esteem.

In case this is not clear, here is an example of a "bad" liberal. Someone who ignored evil because it fit his paradigm of an idealistic world. The Wall Street Journal shows how John Kenneth Galbraith betrayed progressives by stating:
How the Soviets scrambled to keep up. After one of his chummy sight-seeing tours of Moscow in 1984, the Harvard economist John Kenneth Galbraith wrote an article about his trip for The New Yorker. The Soviet's "great material progress" impressed him, as did the look of "solid well-being of the people on the streets."
He should have known better, he did know better, but he was not honest with himself. He endorsed suffering because he was too weak.

Here are some things I expect good liberals to believe in.
  • Be against the Employee Free Choice Act - This takes away the secret ballot for union workers

  • Be against giving any subsidies to wealthy Americans - The only moral position for redistribution is for those in need. How can anyone justifying taking from one person and giving it to another for any other reason. This implies means testing for any and all programs that redistribute wealth

  • Be for school choice - It is abhorrent to condemn students to decimated schools because this isn't the ideal situation.

  • Speak out against blatant hypocrisy in either party. I want to hear you loudly condemn Al Gore's carbon footprint as loudly as you decry George W. Bush.
There are many more examples I could cite, but the point is that to be honest with yourself requires that you call out everyone, not just the other side. Are you a liberal I can work with? Are you a good or a bad liberal?

Tuesday, November 3, 2009

When you're right, you're right

When we started the New Liberal Democrat venture we wrote a little manifesto to explain our beliefs. Scary how dead on we were. In today's Wall Street Journal, one op-ed uncannily resembles our manifesto.
As a liberal she carries around in her head the liberal paradigm of how the world works and what needs to be done to make it work better. There's nothing wrong with that. We all use paradigms to make sense of what we see around us and couldn't get along without them. Unfortunately, the basic liberal paradigm hasn't shifted in a hundred years, while the world we live in has changed utterly since the late 19th century, when modern liberalism was born.

What is that paradigm? The basic premise is that the population is divided into three groups. By far the largest group consists of ordinary people. They are good, God fearing and hard working. But they are also often ignorant of their true self-interest ("What's the matter with Kansas?") and thus easily misled. They are also politically weak and thus need to be protected from the second group, which is politically strong.

The second group, far smaller, are the affluent, successful businessmen, corporate executives and financiers. Capitalists in other words. They are the establishment and it is the establishment that, by definition, runs the country. They are, in the liberal paradigm, smart, ruthless and totally self-interested. They care only about personal gain.

And then there is the third group, those few, those happy few, that band of brothers, the educated and enlightened liberals, who understand what is really going on and want to help the members of the first group to live a better and more satisfying life. Unlike the establishment, which supposedly cares only for itself, liberals supposedly care for society as a whole and have no personal self-interest.
And here's a snippet of our manifesto:
What is the best way to help men? This depends on how one views the nature of man. There are those who believe most people fit into one of three categories: the incapable, the weak, and the strong. They presume that if incapable people were allowed to attend to their own affairs, they would succumb to their irrational desires and irresponsible behaviors. They believe weak people are trapped in their present situation and unable to achieve due to forces beyond their control. They are convinced that the strong people exploit both the incapable and the weak.

These same people regard themselves as part of a distinct elite fourth category. One whose duty it is to shepherd the incapable and the weak from exploitation by the strong. They believe that their guidance and supervision is necessary for society to function, and that government is the instrument necessary to accomplish this.

Political Strategy for Dummies

1. Come up with solutions to people's problems
- You would think this would be obvious. The issue is that what I view as a problem others do not view as a problem. This is a case where perception determines reality. If you think income disparity is a problem, even though both people are fairly well off, then it's a problem. It's not the job of a politician to belittle your concern. It's the job of the politician to address it and come up with a solution.

2. Words matter
- Never implicitly weaken your argument by using incorrect terminology. The current health insurance debate is a perfect example. What's being described as insurance is really a system of subsidies. Whenever people opposed to reform use the term insurance to describe a subsidy they strengthen the false premise that increasing the risk pool can lower costs (it cannot). The Republicans would be much more successful if at every opportunity they reiterated that what the Democrats are proposing are indirect subsidies. Then they could argue for direct subsidies and shatter the entire fiction which is health insurance reform.

3. Be for good things and against bad things
- It's still perception stupid. People care far more about intentions than actual results. Therefore, to be successful, it is paramount to always be against inequality, unfairness, and any other bogeyman out there. It is also necessary to be for everything good. How we get there is the difference between us and them, but never fail to take the opportunity to tell the public that you want every child to have a world class education. And never state that it is acceptable for some children to be left behind (even though this may be inevitable).

4. Simplify, simplify, simplify
- Two posts ago I attempted to argue against spending as a means to stimulate the economy. Was I right? Who knows. I do know that very few people will ever take the time to think about economics and what politicians are telling them. Appealing to complicated arguments is bound to fail. Any argument must be so simple that it cannot be misunderstood. Or conversely, it must be simple enough to understand, i.e. cheating is wrong and they are cheating.

6. Absolutes are for suckers
- The constitution is dead, get over it. Any appeals to some unalterable document or some absolute right and wrong might make you feel better but will not change a damn thing. If your goal is to move the train in the right direction, then it's necessary to get off your soapbox and advocate ideas that stand a chance in hell of being adopted. It may not be ideal, but it will be better than the status quo.

7. Human nature doesn't change, it adapts
- Propose ideas which self regulate human behavior. These are called self regulating processes and a good example is the procedure your mother gave you for dividing a cake. One person slices and the other gets to choose. This process ensures that neither party can cheat. Don't propose solutions which require a super human (is incorruptible, etc.) to work. And remember to point out this flaw when criticizing other solutions.

8. Appeal to emotions over logic
- Unless you're Spock, logic doesn't get you out on the street, emotions do. All good politics appeal to base emotions and people's native sense of right and wrong. For instance, everyone knows that stealing is wrong. If you want to demonize your opponent's argument, an effective way of doing so is to conflate his argument with stealing. Now when the public thinks of his argument they will think of stealing and associate the same negative connotations.