Thursday, July 27, 2017

Thinking About Things

It is an unfortunate fact of the human condition that so few of us can be persuaded to change our opinions. We decide what we think about something years ago for a variety of reasons involving education, training and experience. Then we have a tendency to cling to that opinion forever, despite evidence that might raise doubts about our original conclusion, even when that evidence becomes overwhelming. Basically, human beings suffer from an age old character flaw...pride, which makes it extremely difficult to admit error. This writer is no exception to this condition. But when we double down on long held ideas despite contrary evidence, we become that thing we hate when we see it in others. We become an ideologue, slaves to tribalism and dogma.

So, when many people who I respect start to call into question some of my long held views on politics, the role and nature of government, and economic theory, as a thinking person, I owe it to myself to reexamine those long held views. I do this out of what I believe to be my obligation as a citizen of a constitutional republic, but also out of the respect due to some very fine people in my life who I know, love and trust. I write this as an attempt to question myself in an organized and public way, and in doing so, I invite your responses, whether intended to encourage or correct.

First, some background. My views on government and economic theory have evolved partially out of my real world experience as a small business owner, but their foundation was built by three influential books I read 40 years ago...The Wealth of Nations, by Adam Smith, The Road to Serfdom by Freidrich Hayek, and Gulag Archipelago by Aleksandr Solzhenitsyn. I was a sophomore in college at the time, and these three books, all read within a stormy six months made a huge impression on me. It is from these three gentlemen that I formed my thoughts on public policy. Accordingly, I have for most of my life taken a very dim view of governmental attempts at economic planning. Stemming from that dim view grew the parallel fear and suspicion of the heavy hand of centralized power and its wretched record of totalitarianism. The fact that powerful governments corrupted both sides of political theory, Fascists and Communists, seemed to conform my fears. 

So, in 2017 some things have noticeably not changed. Unchecked centralized governments still tend to treat human beings in despicable ways. The question now seems to be, is my justifiable fear of muscular government blinding me to what its proper role in today's world could or should be? Are my fears overblown? Should I have more confidence in the ability and the motives of my government to do what is best for the people? Is my confidence in Adam Smith's Invisible Hand misplaced? Has a generation of pocket-lining plutocrats and crony capitalists poisoned the well of free enterprise and stacked the deck so overwhelmingly in their own favor as to demand a new response? These are the questions that I have been asking myself for quite some time now. Let's examine one such response that I hear frequently from people who I respect...the living wage.

Income inequality is the problem, my friends say. A very small ultra-elite at the very top of the pyramid are gobbling up far too large a share of wealth creation, often at the expense of everyone else, especially the very poor. Their preferred solution is some combination of  a surtax, or tax increase on these elites, in addition to either a big increase in the minimum wage or some sort of guaranteed income for all.

I won't get into the weeds of the specific numbers involved with the income inequality argument, but I will freely admit that it exists. The question for me becomes what, if anything, can be done about it that won't have an unintended destructive impact on the larger economy? It is my view that in any free, or even semi-free economic system, there will always and forever be an elite class of human beings who will grab an outsized share of wealth. This is due to the fact that while all men may be created equal, that equality doesn't last very long. Some of us are smarter, more disciplined, more energetic, more creative, more willing to take risk, etc.. Since those particular qualities are not evenly distributed among the population, we should not and cannot expect an equality of outcomes in a free society. But, are the rather massive concentrations of wealth seen today solely a function of these personality traits, or has what is a naturally occurring economic outcome been artificially juiced by horrible tax policy and the crippling power of oligarchs? This is a fair question, and I am increasingly thinking that something needs to be done to correct it. I have long argued that the number one source of power for crony capitalist and oligharchs alike is our ridiculously complex tax code...but that is a problem for another day.

So, if I acknowledge that income equality is a problem that demands redress, what about raising taxes, hiking the minimum wage or a guaranteed income for all as solutions? Here, I must do battle with my philosophical mentors.

Part of me can get on board with the idea of raising taxes on the rich, and for this discussion I will refer to the top 1% of taxpayers in America...those with incomes of over $470,000 a year for a married couple and $418,400 for an individual. They are currently taxed at a top federal tax rate of 39.6%. These people earn about 20% of all income earned in the United States and pay roughly 40% of all federal income taxes collected. But, taxes are collected on income earned, not wealth. And, guess what? If you jacked up the rate on these people to 70%, they would find a way to avoid the taxes by various deferral schemes, courtesy of our aforementioned ridiculously complex tax code. Contrary to your average John Oliver rant, wealthy people are not idiots, and even if they were they have enough money to hire out the brains of others to avoid taxes. But, just for a moment, let's assume that this new 70% rate was both collectible and enforceable. The problem I have with the logic behind a tax increase is the assumption it makes that what is ailing public policy in America is a lack of revenue to the Treasury. This is unarguably a false assumption. Our government is currently raking in record amounts of revenue. In fact, for the first six months of fiscal year 2017 (ending in March, 2017) we took in record amounts of both income and payroll taxes totaling $1,242,882,000,000. That's 1.24 TRILLION. However, despite this mind boggling haul, we still managed to run a deficit of $544,491,000,000. That's right, we went half a trillion MORE in debt, despite breaking all revenue records. This is the sort of unreported fact that blows the mind of an Adam Smith disciple like me. It would appear to me that our fiscal problems are not based in a lack of revenue, but too much spending.

Now, if you're still in favor of taxing the rich it would appear that you would need to admit that the payoff would not be an economic one but rather the more emotionally gratifying payoff of fairness. Fair enough.

As far as a national guaranteed income goes, I have warmed to the idea and argued as much in a previous blogpost ( ). When one considers the massive amount of money this country spends on poverty-fighting programs, a national guaranteed income becomes more attractive as an alternative. It would in fact be a money saver, if, and only if, the other programs were replaced upon installation of the new plan. A brief look at the history of entitlements in this country does not bode well for that particular if.

I've listened carefully to all of the arguments for and against the $15 minimum wage. I've read the articles pro and con about the Seattle experiment. Again, my old views cause me to doubt the workability of such an immediate, mandated wage increase. But, as a tool to make it easier for entry level workers to become self sufficient as they find their way in the world, and considering the massive cash holding of some of the biggest complainers about such an increase, I am willing to lend some support for at least giving it a try.

Here's what I know. Right now, this country is as divided as I have ever seen it. No accommodation is being sought, or even desired across the political divide, by anyone, about anything! Our politicians are more interested in winning than they are governing. If this is ever going to change, it will have to start with each of us being willing to question ourselves, to be willing to examine our biases to see if we can discover common ground, common goals. Sometimes it will mean being willing to let go of a bit of dogma. Smith, Hayek, and Solzhenitsyn are still my heros, but Adam Smith died 227 years ago this month. Maybe, some things have changed these past two centuries that would allow for a few tweaks. I'm willing to tinker with all of this if it means finding workable solutions to what vexes us in 2017.

Are you?