Tuesday, July 19, 2011

No New Taxes?! (Take 2)

The GOP's obvious allergy to any sensible tax structure, combined with their claimed infatuation with the Constitution, has to rank near the top of the list of the most ridiculous things I've seen in my short, happy life. One of the crucial driving forces behind the creation of the Constitution at the outset was the government's need to collect excises and levy taxes on individual citizens when necessary. Under the Articles of Confederation, Congress had little recourse in the collection of revenue beyond reliance on the good faith of the states. The country was up to its eyeballs in the debt we'd incurred in the birthing and administering of this new experiment in democracy, and we needed to be able to service this debt if we were going to remain viable as a nation. So a small group of insignificant troublemakers—shameless "big government" types with names like George Washington, James Madison, Benjamin Franklin, Alexander Hamilton, and John Adams—began to push for a stronger central government to oversee commercial and fiscal policies directly, and thereby maintain the stability of the U.S. economy.  The result was our Constitution.

Bizarrely, we have a surprising number of people in Congress today who purport to be rabid for the Constitution, yet utterly fail to recognize the necessities that gave rise to it—necessities that remain in force today. In many respects these intellectual poseurs are anti-constitutionalists. Because it's still true: you cannot pay down the debt without raising revenues. In fact, I believe Alexander Hamilton may have said it best back in 1780: "Without revenues, a government can have no power. That power which holds the purse-strings absolutely, must rule."

Of course you don't want to raise taxes on those who would be rendered destitute by it, or in a way that will adversely impact the health of the economy.  One of the more thoughtful early comments on this comes directly from noted anti-federalist Patrick Henry: "the oppression arising from taxation, is not from the amount but, from the mode — a thorough acquaintance with the condition of the people, is necessary to a just distribution of taxes." That's why progressive taxation is such a vital idea. People who insist that the rich will stop spending if you raise their income tax a bit are—how to put this delicately—talking out of the wrong end of their digestive tracts.  That is to say, such utterances smell funny for pretty much the reason you'd expect. One of the more robust behavioral findings of the last few decades is the recognition that the spending habits of the astronomically wealthy don't change much at all when you slightly decrease the rate at which they're growing astronomically wealthier. In fact, pretty much the only thing that changes under those conditions is the size of the bequests that they leave to their broods.

Surely the ones who have benefited most disproportionally from the way our economy is structured and regulated are the very ones who both (a) owe that system the greatest debt of gratitude and (b) ought to bear the greatest responsibility for its continued stability. Eisenhower understood this, as did Nixon and Ford—and to some extent even Reagan and Bush the Elder—so it's not really a traditional Republican blind spot. This is a madness of relatively recent vintage.

In any event, I certainly have little time for anyone who claims to worship at the altar of the Constitution, yet asserts that raising taxes is anathematic to the American way of life. Even in terms of history alone, that one is a non-starter.


  1. As an adherent to neither party, if I may challenge a few points, if not make some groundless assertions... Prior to raising revenues, ought we not reconsider on what we're spending money? Maybe corn subsidies are crazy and have nothing to do with paying down the debt of birthing the country. Just sayin'. Also, is either party adhering to its historical roots? And, please define "rich". And, Hamilton? If the Father of the Country is Washington, Hamilton and Jefferson will forever be the annoying children: without the context of Washington, they should be quoted only after first having apologized for them. There is more than purse string to governing. To your closing point, what is The American Way of Life (to which something might be anathema)? Did Lee adhere to it? Grant? Hamilton? Jefferson? Bush? Do we?

  2. 1. Yes, we need to cut anywhere we're currently flushing money down the can, and especially in such areas as corn subsidies. Biofuel production hasn't even been compellingly shown to break even, energy-wise; what it *is* demonstrably doing is adding strain to global food markets. The only reasons that can now be advanced on behalf of corn subsidies are political—that is to say bad—reasons.

    2. Neither party is adhering to their political roots. As a President, Eisenhower was a raging socialist by today's standards. The Republican of the seventies was, by current reckoning, well to the left of most Democrats today. The Copperhead Democrats of the Civil War era weren't people with whom anyone would now want to identify. When exactly do you mean? What is remarkable about both parties at this point is their utter detachment from both history and its hard-won lessons. While both parties like to crow about "morality," our political system has never been more cynically amoral than it is today.

    3. Who are the rich? Let's look at some examples... 99th percentile gamers who load the dice and then fleece the system with bets that both weaken and morally compromise the financial system. People whose wealth is increasing exponentially faster than anybody more than a few percentile points below them (where real weekly wages have been decreasing since 1973), and whose obscene degree of metastasizing "success" is an artifact of outmoded rule sets—legacy code that ought to have been upgraded decades ago. People who have paid handsomely to ensure that those upgrades never made it onto the system—thereby relegating that system to a perpetual and spiraling state of policy drift which threatens the very substance of our social contract. People with enough financial mass to guarantee that any small increase in taxes is effortlessly accommodated in their utility analysis, and therefore would scarcely nudge the dial, intertemporally, in their consumption function. (This is well borne-out in the data as well: in poor households, consumption is correlated with contemporaneous income; in wealth households, it is not.) People who never feel the discomfiting scrape of existential necessity at their wallets precisely because that stopped happening at least two million dollars below where they live.

    Will that do? Of course "rich" is a relative term, but it's usually understood contextually by those using it. Economists are comfortable with it; if one wishes to split hairs, perhaps one could start with theirs.

    4. We needn't apologize for either Hamilton or Jefferson. They both had their intellectual fetishes, which sometimes got in the way of lucid, long term thinking; and they both saw some things clearly from our vantage point two-and-a-quarter centuries on. Neither do I recommend their deification—I have little patience with Founding Father idolatry. But they did write a fair bit, and some of that writing is well-worth quoting. The Federalist Papers are an essential source for anyone with an honest curiosity about the origins of our defining documents.

    5. "There is more than purse string to governing." Couldn't argue with that if I tried.

    And when government is virtually owned by organized money, that's called "plutocracy." Plutocracies don't work very well, as they don't fairly represent their purported constituencies. Policy drift serves them splendidly.

    6. it’s not helpful to think of the American way of life as a doctrine to which one might adhere. It does make sense as an evolving set of traditions, mores and behavior patterns, which have given rise to different opportunities of varying types, dispositions and levels at different times in our past, and continue to do so at present.