I’ll be away for the weekend. Here’s some stuff to read.
Contrary to myth, Reagan raised taxes.
Mark Zandi’s plan to save the economy.
Conor Friedersdorf on “The Shortcut To Serfdom.”
Ending the war on drugs would save $88 billion a year.
From time to time, I throw up a post about unintended consequences because it nicely illustrates the limits and problems with government action. This should always be kept in mind whenever I or anyone else advocates for any particular policy from the state. Although, recognizing that unintended consequences follow from almost every policy (the larger the more potential unintended consequences) shouldn’t paralyze us. The status quo’s consequences might just be worse than any result of the policy. Yet, it should humble us and remind us to pursue as minimal intervention as possible to correct any negative externality.
In Massachusetts a texting ban while driving will soon go into effect. But the a recent study found texting bans making things worse.
Researchers at the Highway Loss Data Institute compared rates of collision insurance claims in four states — California, Louisiana, Minnesota and Washington — before and after they enacted texting bans. Crash rates rose in three of the states after bans were enacted.
The Highway Loss group theorizes that drivers try to evade police by lowering their phones when texting, increasing the risk by taking their eyes even further from the road and for a longer time.
Another reminder that having empirical data to back one’s case, not just good intentions, can lead to better policy and better outcomes.
Check out these incredible photos of atomic bombs.
Completely to the surprise of everyone except atheists and agnostics, it turns out that nonbelievers actually know more about religion than the religious. It’s almost as if nonbelievers looked at the claims of religion, investigated them, and concluded they are astonishingly unconvincing.
Researchers from the independent Pew Forum on Religion and Public Life phoned more than 3,400 Americans and asked them 32 questions about the Bible, Christianity and other world religions, famous religious figures and the constitutional principles governing religion in public life.
On average, people who took the survey answered half the questions incorrectly, and many flubbed even questions about their own faith.
Those who scored the highest were atheists and agnostics, as well as two religious minorities: Jews and Mormons. The results were the same even after the researchers controlled for factors like age and racial differences.
This level of ignorance should be deeply embarrassing to anyone that considers themselves to be a particular religion. It seems to confirm the human bias to form tribes. The importance for most people isn’t in the content of the beliefs just their homogeneity with others in their group. This same type of ignorance I’m sure mirrors political beliefs to a certain extent.
Looking at this survey, it is unclear whether increasing the level of religious knowledge is casual to being a nonbeliever. Policy proposals (you can start around the 4:00 mark) by atheists like Dan Dennett to increase comparative religious knowledge seem to rest somewhat on the assumption that learning about religion in a secular way amplifies skepticism. Surveys like this help that case, but don’t prove it – after all it’s not like Jews and Mormons did that much worse than atheists and agnostics. Also, given that these numbers are an average, some atheists and agnostics probably have pretty poor competency as well. Yet, I’m never really against raising knowledge as a good in itself. At the least, you’d expect people learning about other religions would be able to better empathize with other groups which could lead to less sectarianism. Dennett seems to believe the same, and remarks that informed consent is essential to democracy. He’s right about the importance of knowledge and I support his proposal despite my worries about abuse of religious curriculum.
I’m happy this Pew Survey undermines the notion that atheists aren’t believers because they’re religious “know-nothings.” Apologists pursued the wrong target lecturing nonbelievers about their assumed ignorance – the more troubling problem is theists willing to believe while being ignorant of those very beliefs or of alternative doctrines. In Following the Equator, Mark Twain wrote, “It was the schoolboy who said, “Faith is believing what you know ain’t so.” In Human Society in Ethics and Politics, Bertrand Russell wrote, “We may define “faith” as a firm belief in something for which there is no evidence.” Both were wrong. Faith seems to be worse, it allows one to accept dogma without even awareness. Faith isn’t blind, it’s mindless. After all, if someone doesn’t know about something you’d expect them to not believe in it. But the unconscious credulity of the faithful is consequential and common. ”Belief in nothing” is no longer a slur appropriate for atheists. It’s the definition of faith.
You need to see this interview. We all need to see the movie.
I want to wish Larry Summers the best. The Administration is losing an irreplaceable talent. Ryan Avant seems to think that the unemployment rate would have been lower had Summers replaced Bernanke at the Fed. Seems like a pretty impossible thing to know, but given my admiration for Summers I’d have been willing to give it a try. Maybe next term. In the meantime I hope he takes up writing at FT again.
The Economist has a very good piece on “The perils of constitution-worship”. It serves as a useful reminder to people like me who sometimes fall into that trap. In a college course I wrote a paper defending James Madison from all attacks – in retrospect I realize I can recognize his genius without making him infallible.
When history is turned into scripture and men into deities, truth is the victim. The framers were giants, visionaries and polymaths. But they were also aristocrats, creatures of their time fearful of what they considered the excessive democracy taking hold in the states in the 1780s. They did not believe that poor men, or any women, let alone slaves, should have the vote. Many of their decisions, such as giving every state two senators regardless of population, were the product not of Olympian sagacity but of grubby power-struggles and compromises—exactly the sort of backroom dealmaking, in fact, in which today’s Congress excels and which is now so much out of favour with the tea-partiers.
The Declaration of Independence and the Constitution still amaze me and deserve our respect. This isn’t an argument for casting them aside as of relics of dead white men. We must be on guard against calcifying unnecessary flaws into our political system. Ironically, the last thing the Founding Fathers would have wanted would be to have their words treated as sacred… not that what they wanted has to matter.
(h/t The Daily Dish)
Here’s Ezra Klein on some of the cost savings measures contained in the bill.
Behind the acronym [IPAB] will be 15 presidential appointees, each confirmed by the Senate. They’ll be drawn from the health-care industry, academia, think tanks and consumer groups. Their reform proposals will have to pass through Congress, but they will have some advantages: If Congress doesn’t act, their recommendations go into effect. If Congress says no but the president vetoes Congress and the veto isn’t overturned, their recommendations go into effect. If Congress wants to change their recommendations in a way that’ll save less money, it will need a three-fifths majority. Oh, and no filibusters allowed.
The hope is that this will free Congress to permit cuts by making it easier for them to dodge the blame. “Putting the knife in someone else’s hand will be a relief,” says Robert Reischauer, director of the Urban Institute and a former director of the Congressional Budget Office. “It will allow Congress to rant against the cuts without actually stopping them.”
You’ve all heard the cliche enough times used in international diplomacy: “All options are on the table.” Of course, that’s code for the military option or even the nuclear option. Here, I want to use that metaphor to discuss our current debate about tax policy. Since the previous administration and legislature wrote into law that the “Bush tax cuts” must expire, we’re now faced with the predicament that lots of taxes will be raised amidst an anemic economy if something isn’t done, but if we extend them the deficit problem will be even worse. The locus of the debate or, if you will, the options on the table seem to be that we do nothing and let all the tax cuts expire, extend all the tax cuts, extend all but those for the wealthiest taxpayers, or compromise by extending the tax cuts for only 2 years.
The argument for extending all the tax cuts is pretty simple. Raising taxes now during a weak economy is going to make the economy worse, not better. Cato’s Jeff Miron wants to see them extended permanently.
Extending the Bush tax cuts — permanently — is a crucial step in restoring economic growth. The Bush cuts provided lower taxes on ordinary income, especially for taxpayers at the high end of the income distribution. These are some of the most energetic and productive people in society; raising tax rates would discourage their effort and entrepreneurship. High-income taxpayers also have multiple ways of avoiding high tax rates, so any revenue gain from raising rates would be modest.
Alan Viard of AEI likes them all too.
The figure shows the increases that will occur in marginal tax rates at the top income levels if the high-income rate reductions (including the dividend tax cut) expire. Beginning in 2011, the top income-tax bracket for wages and self-employment income, and for ordinary investment income, would revert from 35 to 39.6 percent; wages and self-employment income would continue to face an additional 2.9 percent Medicare tax. The top capital-gains tax rate would revert from 15 to 20 percent. Dividends would lose their current 15 percent tax rate and become taxable as ordinary income, subject to the new 39.6 percent rate. All four categories of income would also face a 1.2 percent stealth-tax-rate increase, from the restoration of a provision that phases out itemized deductions at high income levels.
Economists left of center like Paul Krugman think that extending the top-rate tax increases is not worth the $700 billion price tag (sounds hypocritical but it’s well reasoned).
Now, consider first what would happen if we extend the [high-end] tax cuts for the next 10 years. This would add $700 billion to the debt (pdf). If the rich spread their windfall evenly across the decade, that’s $70 billion a year in additional consumer spending — or $140 billion during the period when we need it. So, $700 billion in deficits for $140 billion in stimulus; not a good bargain!
Alternatively, suppose we extend the tax cuts for only 2 years. That’s only $140 billion on the deficit. But the rich, knowing that it’s temporary, won’t spend much of it — if they really operate on a 10-year horizon, they’ll spend only $14 billion a year more, so $28 billion of stimulus when we need it, in return for $140 billion of debt; still a lousy bargain!
Just for the record, it’s not like the rich wouldn’t get a tax cut under the Democrat’s proposal.
Most famously President Obama’s former OMB director, Peter Orszag wants to extend all the tax cuts for 2 years, then let them all expire.
In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether. Ideally only the middle-class tax cuts would be continued for now. Getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it.
In a great piece, Bruce Bartlett explains why the Bush tax cuts were inefficient, of little benefit, and harmful to the debt, but acknowledges that during this
recession recovery economy it’s probably best we just extend them.
Subsequent research by Federal Reserve economists has found little, if any, impact on growth from the 2003 tax cut. The main effect was to raise dividend payouts. But companies cut back on share repurchases by a similar amount, suggesting that only the form of payouts changed. (See here, here, and here.) Moreover, according to a study by Steven Bank of the UCLA law school, the fact that the dividend tax cut was temporary was a key motivation for higher dividend payouts; had the dividend tax cut been permanent, as the supply-siders favored, the impact probably would have been much less.
Maybe the answer is obvious (politics) but I’m not sure why these are the only options on the table. Can’t we extend the table? The nuclear option doesn’t even seem to be an option right now. But now may be the perfect time to blow up the tax code and put a new one in place. Here’s the diplomatic stick for the Administration to use: “Let’s put in a simpler, better tax code or all the tax cuts are going to expire and opponents will be responsible for raising taxes on Americans at the worst possible time.” There’s a carrot too: “You get to support a simple efficient tax code that everyone has long claimed they support.”
I honestly have trouble understanding why we have to extend poorly designed, little bang-for-the-buck tax cuts rather than doing something that could really be a huge boon for the economy. Talk about a game-changer from the Obama Administration! A Democratic administration gets to be the one supporting fundamental and economically productive tax reform while forcing the Republicans (or Democrats), if they vote against it, to be essentially responsible for raising taxes and blocking what a lot of their supporters favor. If Republicans are really worried, rest assured that the tax reform wouldn’t be able to save the economy soon enough to have a dramatic positive effect by the election so the GOP candidates will still have a great chance to pick up a ton of seats – and most likely take the House. Will businesses, conservative intellectuals, and angry tea-partiers (so-called small government types) really be able to support the Republicans ever again if they don’t jump on an opportunity like this?
I’ve long touted a VAT as a potential replacement for our absurd tax code. Many mainstream conservatives have even had good things to say about it assuming it was replacing the tax code, not being added on top of it. Here’s a favorite option of progressive policy wonks – something that might appeal to Obama, that I’d be excited to support: the progressive consumption tax. Maybe the Democrats could even slip in some decent energy policy (that they’ve given up on) by raising energy taxes as part of tax reform. Even a flat tax that conservatives have often pushed for would be better than the status quo. Lots of different and better options have to exist rather than being stuck with tinkering with the Bush tax cuts.
If the problem is just lack of time, I’m not sympathetic – everyone has known since the Bush tax cuts passed that they were going to expire. It seems difficult to imagine a potentially better time to force lawmakers’ hands to simplify the tax code than now. We’re in desperate need of new revenue, the weak economy could strongly benefit from a more efficient tax code, taxes will automatically rise if nothing is done, and sometimes it takes the people you’d least expect to be able to dramatically shift course. Think of Nixon going to China or Clinton with welfare reform. What Republican wants to be outflanked by a “socialist president” on tax reform? President Obama might be able to drag along enough in his own party to support a tax reform that the business community surely must favor.
It seems perverse that such extreme options can be on the table for international relations but are so limited for domestic issues. When it comes to tax policy, I welcome the mushroom cloud.
FFF Economic Liberty Lecture Series: Bryan Caplan from The Future of Freedom Foundation on Vimeo.
Bryan Caplan expands on the arguments of philosopher Michael Huemer. From Huemer’s “Is There a Right to Immigrate?”
It is possible to harm someone not only by directly inflicting a harm, but also by actively preventing that person from taking actions to avert or remedy a harm. Suppose that, through no fault of mine, Marvin is in danger of starvation. He asks me for food. If I refuse to give him food, I thereby fail to confer a benefit on Marvin and, at the same time, allow Marvin to go hungry. If Marvin then starves to death, those who accept the doing/allowing distinction would say that I have not killed Marvin, but merely allowed him to die. And some believe that this is much less wrong than killing, possibly not even wrong at all. But now consider a different case. Suppose that Marvin, again in danger of starvation, plans to walk to the local market to buy some food. In the absence of any outside interference, this plan would succeed—the market is open, and there are people willing to trade food for something that Marvin has. Now suppose that, knowing all this, I actively and forcibly restrain Marvin from reaching the market. As a result, he starves to death. In this situation, I would surely be said to have killed Marvin, or at least done something morally comparable to killing him.
The actions of the federal government of the United States are more analogous to the case in which I restrain Marvin from reaching the market, than to the case in which I merely decline to provide him with food. The government’s immigration policy is not a merely passive one—the government does not, for example, merely fail to assist people in coming to the United States. Rather, the government hires armed guards to stop people from coming in and to forcibly expel people who are already here. The federal government spends almost $13 billion a year on actively excluding or expelling unauthorized immigrants. The United States is like the market where would-be immigrants could satisfy their needs. There are Americans willing to hire immigrants, to rent them living spaces, and in general to engage in all other kinds of needed interactions with immigrants. My charge is not that the U.S. government fails to give Third World inhabitants what they need. It is that the government actively and coercively prevents many Third World inhabitants from taking a course of action that they otherwise would undertake and that would in fact succeed in enabling them to meet their needs. This is much closer to inflicting a harm than it is to merely allowing a harm to occur. (my emphasis)