February 19, 2011

‘Splain Yourself on Taxes

Posted in Economics, Financial Markets, Social Commentary tagged , , at 11:14 am by Doug Brockway

Inspired by some snarky-serious commentary by Paul Begala about the Conservatives’ positions on taxes I recently challenged a friend from Louisville to “’splain Kentucky and its ‘leaders.’”  As Begala pointed out some of the leaders in the US Senate and Congress on the Republicans’ side of the aisle who are most vocal about the wasteful spending in Congress hail from a state that, “according to the Conservative Tax Foundation ….received $1.51 back from Washington for every dollar it paid in federal taxes.”  Begala suggests we start by aligning tax payments with tax benefits.

My friend’s less than on-the-point response about Mitch McConnell, Rand Paul and Paul Rogers (head of the House Appropriations Committee) was that “they are bringing home the bacon and taking advantage of a broken system.  Nevertheless, we would all be better off with lower taxes and less pork.”

Well, as a tacit observation, the Republican leadership on the issue of spending and taxes is not nearly, not remotely as principled as it claims… and that, of course, puts it in the same boat as what the Democratic leadership does on the same issues most days.

So far most of the debate about how to reduce the deficit has the air of a farce.  I happened to catch a bit of Real Time With Bill Maher last night (that’s a strange show…).  Strangeness aside he had a fantastic visual aid: a plate of fried chicken (thigh and breast), mashed potatoes, and a very little bit of vegetables.  The pieces of chicken were labeled Social Security and either Medicare or Healthcare, I forget, but you get the idea.  The potatoes were labeled Defense.  The small bit that was vegetables was everything else.  He said that the plate is the budget and we’re trying to reduce it then, picking up one of those mini-cocktail corn cobs and said, “but we’re spending all our time arguing about this.”

We can’t seem to get to sensible conversations.  My father, who was a published economist and, like me, had the more proper, left-leaning politics….  wrote years ago, late ’80’s/early ’90’s, that Social Security should be means-tested and the retirement age of 65 was too fixed and too young.  There are plenty of people on the Left who understand and agree with this.  Similarly, there are likely many otherwise politically forlorn and twisted people, you know, Conservatives…. who understand that the US spending as much on Defense as the next 20 or so countries combined is nuts.  Secretary Gates seems to see that.

Instead we’re grousing about funds for NPR and protecting the US Army’s program to advertise by supporting NASCAR.

It’s like a business executive bringing rampant spending under control by working through the priorities in an obscure corner of the corporation that consumes less than 5% of the budget.

What’s going on in Wisconsin is a related and classic example of some good ideas and some reaching too far.  Most people I know think that public pensions are too rich, earned too early, and too burdensome for their benefits or for the public good.  Get a little deeper into it and you can see that unless something like bankruptcy can be engineered for US States they’re in a very hard place.  Its fairly clear to me that public workers of all stripes will have to accept significant adjustments simply to bring them closer into alignment with the general public (though reports are that the unions in Wisconsin that supported the new governor are exempted from his laws…).

Why any of that means that individuals shouldn’t be allowed to get together for their common good is beyond me.  I understand the argument about an implicit labor monopoly and it’s not too convincing in the face of the right to free assembly and the right to congress.  Does that make for dicey discussions and grey areas?  Sure.  But I don’t understand the move to restricting individual rights as appears to be the aim.

I wonder how long the new governor in Wisconsin actually thought about not reducing taxes, which he just did on February 1, in the face of his budget calamity or actually trying to recover from Wall St. the billions stolen via the sale of fraudulently designed CDO’s, based on clearly flawed sub-prime mortgages that were sold to his state pensions thus accelerating their default status.  OK, I understand the second idea has its practical challenges (even though it’s morally sound…) but it’s quite a bit myopic to grind so hard on state workers as if they are the sole cause or sole solution to his woes.

As a former colleague often said, “no fools, no fun.”