Archive for the ‘Politics’ Category

A Taxing New Year

Another new year, and I fear it may be quite taxing.

Our nation started the year by temporarily avoiding the fiscal cliff, but we can expect a year of constant arguments over the fisc. We will become a nation of cliff dwellers. Those who hope for something else don’t understand how politics works.

The big change this year is higher taxes on “the rich”. It is almost always true that when “the rich” are taxed more, everyone else suffers. Economists can explain why. Think of it as trickle down austerity. Even the designation of “the rich” is misleading: our new higher taxes reach much farther down the income scale than is apparent. To see why, search for “PEP” and “Pease”. These back door tax increases will probably snag the unwary. Numerous other changes, often overlooked in the popular press, will ensure that most everyone feels some pain.

No one likes taxes, but lots of economists are especially concerned these days. Why? Because they know that if too much is taken by government, society suffers a decline in relative standard of living. They don’t know exactly where that threshold is, but there is troubling evidence that the US has reached or even breached that level. While much of the federal tax increase has been avoided, we still have relentless tax increases at the state level, the world’s highest corporate tax (which is built into most everything you buy), and the national debt which, to economists, is simply deferred taxes and interest. Taxes are a very big factor in determining everyone’s standard of living and the news isn’t good.

Of course, the impact of taxes could be totally eclipsed by stronger forces in the economy. No one really knows the direction our economy will take. But higher taxes have historically been bad news and too many of us are deluded in believing that “someone else” pays. For better or worse, we’re all going to take the hit. We’ll also see some benefits from government spending – the question is, as always, are the benefits worth the cost?

Tax

Tax (Photo credit: 401(K) 2013)

 

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The Public Has Spoken – Sort Of

Once you understand public choice theory, watching politics unfold becomes less of a frustration and more a source of amusement.

I just heard President Obama lay out his near term agenda. He was elected by a decent majority and will fight for the issues for which he campaigned. The people have spoken, and the people want a Democratic agenda implemented.

But the House of Representatives was also just elected. It is firmly Republican. The people have spoken, and the people want a Republican agenda implemented.

Same voters. Two conflicting agendas.

Some pundits say that voters want compromise. I don’t understand how you compromise between raising taxes and lowering taxes, for example.

I can only conclude that what voters actually favor is gridlock. This restrains both Democrats and Republicans and preserves the status quo. The last several presidents, when given a compliant Congress, have moved the country in unhappy directions. Gridlock forces politicians to take a “timeout” and allows only actions which are broadly acceptable to voters.

voting day in a small town

voting day in a small town (Photo credit: Muffet)

Don’t expect a lot to happen in a gridlocked political system – the public has spoken and inaction seems to be our preference as a nation.

Health Care in Wonderland

Wow. The surprising Supreme Court decision has caused an avalanche of commentary. The sequence of events and the underlying logic is bizarre. The bottom line is that the mandate (“not a tax”) would be unconstitutional if it were a mandate, but it is constitutional because it really is a tax (not a mandate). You can’t make up stuff this funny!

So, we have the biggest tax increase in history falling almost entirely on the middle class, sponsored by the folks who say there should be no tax increases for the middle class. You can’t make this stuff up!

Despite the Alice in Wonderland nature of the law and politics involved, the reform is chugging on – at least mostly. Big chunks have already been thrown overboard because the administration said they were unworkable. It remains to be seen how much more will collapse under it’s own weight. And, outside government, insurance rates are skyrocketing in anticipation of Reform and employers everywhere are deciding whether they can any longer afford to provide insurance for their employees. The fun has just begun!

Meanwhile, lots of economists have described what needs to be done to fix this mess. Their plot makes sense to me, but a real solution would not sound attractive to the poorly educated voters who decide elections. Democrats won’t touch the good ideas and even the boldest Republicans offer only faint echoes.

So, where are we headed? My guess is that health care will soon get a lot more expensive and a lot more people will do without or without enough. At some point we might hit rock bottom and entertain real reform, but only after the current cast of characters in government are only an unpleasant memory. I hope I’m wrong.

Washington DC: United States Supreme Court

Washington DC: United States Supreme Court (Photo credit: wallyg)

Austerity By Another Name

Members of the Socialists and Democrats in the...

Members of the Socialists and Democrats in the European Parliament protest austerity measures at the Parc du Cinquantenaire in Brussels, Belgium on September 29, 2010. (Photo credit: Wikipedia)

There’s joy in the streets of Paris due to the election of a Socialist leader. No austerity for us, mon ami.

The alternative to European austerity strikes me as austerity under a different name. There ain’t no free lunch and you can’t forever consume more than you produce. You can steal from Peter to pay Paul, but sooner or later, Peter runs out of money. Someone has to clean up after the party is over.

Enough clichés? One way or another, the overspending economies will have to adjust. The only question is how. All of the options are painful. Politicians can pretend otherwise and voters can be clueless, but reality will not be denied.

Springtime in Europe

Mish nails it:

Other than four ousted governments, Troika imposed governments in Greece and Italy, huge budget misses in Spain, increased protectionist measures in France, border controls, bickering between the ECB and the German Central Bank, the Bundesbank proclamation “Not ECB’s Job to Tackle Spain’s Problems“, Europe is holding together quite nicely.

Oh boy. At least a few European politicians have sufficient insight to note that their great experiment in Social Democracy has failed. This toxic mix of lavish entitlements, paternalistic government, high taxes, and strong unions is a real devil’s brew. Of course, not everyone has recognized this. In our own country, we are approaching an election where the incumbent President seems to view the European path as the right direction. This is despite the fact that we have our own “failing states” (California, New York, Illinois) which should serve as a clarion warning of the perils of this model of government. Nevertheless, we will have a hard fought battle here between who those who see deeper into reality and those who want to dream the dream.

Event often take strange turns, and things could yet work out. I would be more confident if we had a wider understanding of economics. This is going to be an interesting spring, summer, and fall.

Europe

Europe (Photo credit: Wikipedia)

Neuroethics

Deutsch: Phrenologie

Deutsch: Phrenologie (Photo credit: Wikipedia)

As Moral Foundation Theory is giving us a framework for understanding conflicting moral values, neuroethics is providing insights into how moral values emerge. (See this). One of the more interesting aspects is that the age old argument between deontologists and utilitarians may have been totally beside the point – bad news for Philosophy Departments everywhere! Evidence is gathering to show that our biology gives us both deontological and utilitarian views. Our brains process some things in the context of moral certainty and other things as trade offs. Exactly how different values end up in which mental processing system is TBD, but knowing that our brains work this way lends credence to Moral Foundation Theory.

Understanding moral foundation theory should give one a more tolerant stance toward the other person’s view, but knowing that a particular moral stance is deontological hints that no meaningful dialogue is possible.

Freedom for Me

The world is full of people with poor judgement, i.e., people whose judgement is different from yours. To make matters worse, their poor judgement impacts you in bad ways. What to do, what to do?

The operating philosophy that seems to unite us all is one of more freedom for me (and everyone displaying similar judgement) and more restrictions for everyone else. Conservative, liberals, the Tea Party, OWS – all share this common outlook. I might give the libertarians a pass, but theirs is largely an academic and philosophical exercise which often melts under the heat of reality.

This realization is giving me a whole new understanding and appreciation for politics.