Archive for the ‘Clive Crook’ Category

Show Me the Cheddar!

February 24, 2011 3 comments

When most people look at a political question objectively they try to determine which side is right and which is wrong. But that framework doesn’t properly illuminate what’s going on in Wisconsin (or most other political dilemmas). Just making this a battle between pro-union Democrats and taxpayer Republican advocates obscures some of the deeper issues going on.

Most attempts to make one side righteous and the other wicked come off as silly.

Here’s Paul Krugman in an otherwise decent piece on the issues:

What Mr. Walker and his backers are trying to do is to make Wisconsin — and eventually, America — less of a functioning democracy and more of a third-world-style oligarchy.

As Clive Crook notes Mr. Walker may be disingenuous when he claims busting the unions is all about the budget (“the unions have agreed (under pressure) to the cuts in pay and benefits he was seeking”), but suggesting Walker and allies are trying to bust not just unions but American democracy is ridiculous. Do fair-minded people really think Walker is sitting in his office rubbing his hands dreaming of undermining our founding fathers? It’s is also a weird charge since the only thing preventing Walker from stripping public employee’s collective-bargaining rights is a group of Wisconsin Democrats fleeing the state so a democratic vote can’t proceed.

It happens that I actually side mostly with the pro-union side and think collective-bargaining isn’t incompatible with balanced budgets. Yet after complaining strongly about how filibusters and other anti-majoritarian legislative tools cause more harm in the long run I feel compelled to condemn the technique of fleeing the state to break the quorum. It’s not in some misguided offering to the alter of political consistency, but as a “secular consequentialist” (via Scott Sumner) I think even if this counts in the negative column, more good comes from allowing legislatures to actually govern.

With that out of the way allow me to clear up some lingering issues. A lot of the debate centers on whether or not public employees are “overpaid” compared to their privately employed counterparts. In the much passed around EPI study, we have strong evidence that in Wisconsin comparable public employees are actually compensated less than private workers. Jim Manzi calls into question some of the assumptions in the study and argues that without factoring in an “all-but infinite number of such relevant potential differences” we can’t say for sure that public workers “are underpaid, overpaid, or paid just right.” To a certain extent he’s correct, but as Ezra Klein notes, the EPI study shifts “the burden of proof [onto] those who say Wisconsin’s public employees make too much money.” Anyone who argues that they are overpaid is arguing in spite of available evidence, and public policy shouldn’t be made on sheer opinion.

The reason so many people conclude public employees are overpaid is because those people often have an ideological commitment to that assumption. Many on the right hold as an article of faith that government a priori causes more problems than it solves and doesn’t work as well as the private sector. Given that premise, it’s perfectly logical to reason that public workers are necessarily overpaid. Any cost above 0 is overpayment for a counterproductive job.

Some on the left assume that any benefit cut or pay cut is automatically unreasonable, but given that the union itself has agreed to cuts and compromises we can’t say this about the union itself. The budget shortfall is largely caused by the recession which dried up revenues and for much of the poor reasoning behind cutting the wealthy’s taxes when facing large deficits, Wisconsin’s public workers were going to have to give up a little make the budget math conform to a fair deal for Wisconsin’s taxpayers. With an absence of the ideological assumption that the government can’t provide anything of value, taxpayers need to balance the need for qualified workers with their tax burden. If you think government can provide useful services it’s important to try to attract public employees that won’t cause a potentially self-fulfilling prophecy. It’s only a correlation but “the two states with the lowest public sector unionization rates — Louisiana and Mississippi — have the highest corruption rates.” Also, the 5 states without collective bargaining for educators rank last or near last on their SAT/ACT scores (h/t Heidi).* I don’t believe that the lack of collective bargaining is directly causing corruption or low test scores but if you look at the labor market as one competitive entity it seems natural that lower compensation leads to a weaker work force as better workers flow to higher paying jobs.

Everything unions want isn’t always in the best interest of the state or even of workers generally, but there is no persuasive reason to believe that removing unions as a counterweight to corporatist (anti-market) influence and demonizing public workers leads to a stronger middle class, better public services, or even balanced budgets.

*[update: correction]

Utopian Leftists and Veruca Salt Centrists

November 2, 2010 4 comments

Election Day is here. Bring out the pundits ready to explain why things are going to go so badly for the Democrats (I’m not immune). In the Financial Times today Clive Crook, who’s great on policy but suffers from a version of the pundit’s fallacy whenever political strategy comes up, brings us another column faulting Obama for his lack of centrism (another example here). He gets some big things right – he notices that the economy is mainly to blame – but then Crook makes an odd argument (emphasis mine).

My own preferred theories emphasise the economy – which the administration has handled tolerably well in appallingly difficult circumstances – combined with serial political miscalculation. Mr Obama often settled for untidy centrist compromises (on the stimulus, on healthcare), thus disappointing the left; but without ever championing those compromises, causing moderates to wonder where he would stop, given the chance to go further. Offending both segments was an avoidable mistake.

Partly, then, this election is about disaffection in the centre – and the effort to tell Mr Obama, “Enough.” But if this is correct, and the polls turn out to be true, one should pay special tribute to the role the left has played in its own downfall. It did not have to be this way.


In any event, suppose that the Democratic base had not been sulking. Suppose it saw, for example, that persisting with a historic healthcare reform was politically challenging in the middle of an economic crash. Suppose it granted that radically overhauling a health system – some 20 per cent of the US economy – that many Americans rather like was a lot to take on. Suppose it was impressed that Mr Obama did it anyway, and was ready to go further.

Supposing those hopelessly implausible things, Mr Obama’s midterm strategy could have been different. Sure of the loyalty of the base, he could have addressed himself to the anxious middle, defended his policies as centrist compromises (which they were), and told the country (as he did in 2008) that its concerns were his concerns. In this alternative universe, he would have had his base and at least a shot at bringing the centre back.

Veruca Salt Imdb

Here we have Crook arguing that President Obama enacted “centrist compromises” not the policies the “whining utopian left” wanted. He then imagines that if only the Democratic base had not complained at all and just automatically remained loyal, Obama would have been free to direct his message to the center. I actually agree that the base, whatever their real grievances, should vote to reelect Democrats, but why does Crook imagine that leftists should be unquestioningly loyal while centrists get to act like Veruca Salt – they get all centrist policies but still feel entitled to complain and stomp off? Why doesn’t he “suppose” a scenario where the center “had not been sulking?” Crook is arguing that the left must shut up and support the President despite not getting what they wanted while centrists are free to complain and vote the Democrats out because Obama didn’t coddle them enough even though he delivered them “centrist compromises.”

I come at this as someone who generally favors centrist policies. Yes, I’ve criticized Obama for being “too timid”, as Crook claims liberals say (btw, is this a “whining utopian” leftist?). But the left shouldn’t be expected to always just fall into lock step out of loyalty but the center not. Isn’t the idea to champion as loudly and strongly the policies you want – if you’re always “loyal” what is the incentive for politicians to ever deliver? Remember politics should be about policy goals not political ones.

Also, he just fails to provide any data to back up his argument. I’m positive lots of centrist sounding Democrats are going to lose their seats. In fact, they’re probably the most vulnerable in this election (that’s for structural reasons not tonal ones). The data seems to show that most races are decided for structural reasons – notice how the US House and Lower House in States seat changes track each other.


So to recap: Veruca Salt centrist Clive Crook believes centrists got centrist policies, but not enough centrist messaging (although I think that’s even disputable) while whining utopian leftists settled for compromised policies, but got all the messaging. Who’s place would you rather be in? He sees nothing wrong with the centrists and blames the left for Democrats’ predicament. Got it.

Categories: Clive Crook, Politics

The Wisdom of Silence

August 24, 2010 12 comments

Better to remain silent and be thought a fool than to speak out and remove all doubt. 

      Mark Twain 

When Twain made this remark he probably didn’t have American presidents in mind, but it captures an important lesson in an unintended way. Of course, Twain meant that if you’re a fool and you speak, your intellect will be more obvious to others than if you kept your mouth shut. Presidents often aren’t fools (yes, I did just write that) but speaking out even with wise words may be a foolish move. 

Over at The Economist’s “Democracy in America” blog, the writer, while staking out an odd position on gay marriage (one I happen to disagree with), observes that “for presidents, words are political actions.”

What would have been the actual political consequences of a decision by Barack Obama to come out in favour of gay marriage in the past year and a half? I don’t think there can be any doubt that such a move would have re-politicised an issue that, remarkably, has become steadily less partisan in recent years. Presidents can’t simply speak their minds. For presidents, words are political actions. A president who voices an opinion without considering the political consequences is acting irresponsibly. Presidents’ voiced opinions about social justice are very sharply constrained by whether voicing those opinions is likely to advance their visions of social justice at that political moment. And that means that presidents’ spoken views on such questions may lag far behind the pace of progressive opinion, and may become much less progressive when they are in power than they were before they were elected.

I happen to believe that Obama speaking out in favor of gay marriage would be beneficial to the cause (and would certainly put him on the right side of history), but it’s not preposterous to think that the opposite effect would result. There is no question that it would further politicize the issue just when a majority of Americans now believe in full marriage rights for gays and lesbians. 

On August 11th Matthew Yglesias wrote a post arguing that often presidential leadership can be counterproductive. He was talking about immigration, but this clearly applies to all issues. He was piggybacking off of Ezra Klein’s post on Francis Lee’s book Beyond Ideology which argues that “presidential positions” increase the partisanship on issues.

[The] American people — and the media — expect a lot of bully pulpit leadership. But that bully pulpit leadership polarizes the other party against the initiative, even when the messaging is effective.

Grasping this dynamic is key to understanding the wisdom of President Obama in not offering his full opinion of the Islamic center near Ground Zero. If anyone has any doubts of the effect, notice how the issue became more polarized when he just commented on the constitutionality of it. This isn’t to say that presidents shouldn’t ever speak out on controversial issues; it is to only notice that “A president who voices an opinion without considering the political consequences is acting irresponsibly.”

Given that, I think it’s unfair for writers on the left, right, and center to blast President Obama for being cowardly for not commenting on the wisdom of the choice or to give his personal opinion. Clive Crook’s latest FT column is a perfect illustration of this. This expands on his previous blog post on what Crook thinks Obama should have said. Of course, all this presumes Obama is, in fact, in favor of the mosque and thinks it is wise. If he thinks it is unwise and insensitive, does Crook still think it’d be unifying? Lee’s research suggests that had Obama spoken out by praising the wisdom of the mosque it would have made the polarization of the issue even worse. If he strongly argued that equating this mosque and Sufi Islam with the Islamic fanatics that attacked the US is completely irrational he would have been skewered for being insensitive to the 9/11 families. 

Presidents’ words also have effects diplomatically. Had Obama given too much sympathy for the sentiments of the 9/11 families by saying that it isn’t completely irrational to feel disgust at putting a mosque so close to the site of a horrendous attack by Islamic terrorists, how would that have played with our Muslim allies? To not consider the unintended consequences would be ill-advised. 

None of this is to argue that presidents shouldn’t take politically unpopular or politically dangerous stands if strong principles are at stake. Commentators just need to recognize the possible effects of a president’s words; after all, a president speaking out may be counterproductive to justice or diplomatic goals and these effects aren’t necessarily going to run in the same direction. Crook or Krauthammer or whoever can plausibly argue that the president should take a stand that they agree with because it is the right thing to do, but to argue that it is cowardly not to or that it would be “unifying” if he did is disingenuous or foolish – on this they’d be better off remaining silent. 

(image: abc news)

Can You Deserve Respect But Be Wrong?

August 3, 2010 2 comments

I think Kevin Drum and Matthew Yglesias are a bit too hard on Paul Ryan praisers (people like me). They basically argue against the efficacy of his policies – fair enough and keep it up. I know it’s a low bar but at least Ryan is making actual proposals to criticize. I’m not kidding when I say I’m thrilled a Republican is actually doing this. The modern Republican party and its supporters are so devoid of substance that being able to engage them on policy would help the country. Our political system is set up in such a way that it can’t function unless legislators are willing to compromise on policy disagreements. If the minority party doesn’t have any policies and just opposes everything the majority does the legislature becomes paralyzed. Do Drum and Yglesias really think that if we replaced all the Michele Bachmanns with Paul Ryans we wouldn’t be better off? It’s sad but it’s the best we can hope for right now. 

[Update: 4 Aug] Clive Crook weighs in.

Ryan is a good thing, and his Roadmap is very interesting. He is grappling with specific proposals, and his plan for long-term entitlement reform deserves a serious look. Note, though, that on plausible assumptions, it is not a deficit-reducing proposal: revenues would fall even more than spending.

More to the point, the party is not backing Ryan’s proposals. If conservatives who say, “Don’t raise taxes, cut spending,” were willing to contemplate Ryan’s approach to entitlement reform, well and good. Few are. The party as a whole is scared of it. Republicans in Congress understand how difficult it would be to get the country behind it. (If George Bush’s plan for Social Security privatisation, timid by comparison, got shot down, what hope is there for Ryan’s ideas?) Right now the party’s position is to reject every meaningful spending cut and any and all tax increases. That is not fiscal responsibility. It is complete nonsense.

Crook-ed Logic

I’m a big fan of Clive Crook, his policy instincts and analysis are usually spot on, but his political barometer may be malfunctioning. In his latest Financial Times column he makes the classic pundit mistake of mapping his feelings onto the electorate. Crook wasn’t happy with the way Obama sold his policies. He argues President Obama “should have chosen centrism unreservedly – as many voters believed he had promised during his election campaign. Then he could have championed, as opposed to meekly accepting, centrist bills.” Although Crook acknowledges that the economy is largely to blame for falling approval ratings (political scientists have repeatedly found this to be the case), he thinks Obama’s political loss with independents and centrists is due to his insufficient zeal in talking like a centrist. After all, Crook believes the policies themselves are centrist.

First of all it is not at all clear that independents are moving that fast away from the President. Here is my previous post on the recent steadiness in their support. 

And when you look at more polling from any drop in approval coincides with the dismal economic growth, not his legislative battles or perceived non-centrist speeches.

The healthcare bill, which Crook uses as an example, passed in March. Yet, from around the time debate started on the bill to its passage to now, Obama’s approval ratings among independents have moved rather modestly. And who is to say that any of that movement is even attributable to the healthcare bill at all? Polling on the healthcare bill specifically has actually gone up slightly.Trend: Reaction to Congress' Passage of Healthcare Reform Bill
It is also interesting to note that it is actually centrist Democrats who are more likely to lose their seats than more progressive Dems. I’m not sure how that fits into Crook’s picture. What is clear is that the electorate blames whoever is in power for the state of the economy which – except at the margins – is the only thing that really matters. 

Curiously, Crook also believes in further stimulus yet believes listening to the progressive wing (who wanted more and bigger stimulus) would have been a mistake.

The fiscal stimulus, too, was a centrist initiative. It was smaller than the left wanted, and included temporary tax cuts as well as increases in spending. 


If Mr Obama had followed the advice of the party’s progressive wing, he would have killed his administration’s electoral prospects – and his own hopes of a second term – stone dead.

It should be obvious by now that if a bigger stimulus had resulted in a better economy, Obama’s and the Democrat’s electoral fortunes would be better right now. If anything capitulation to the centrists has been self-defeating. 

Most people don’t pay enough attention to how politicians sell their plans for it really to affect their votes and when they do most just rationalize it to their bias anyway. Crook should remember voters are irrational and the economy matters more than political salesmanship. He should have stopped writing his column here:

The economy is much to blame, of course. The political effects are direct and indirect. Voters are unhappy, which hurts the party in power. The electorate understands that George W. Bush bequeathed the recession, but if 18 months of remedial action have failed to work as hoped, blame begins to migrate.

Crude Offender

FlowingData makes it clear that compared to even the low standards of other oil companies, BP is in a class of its own for negligence and disregard for the safety of its workers and of its wells. 

In The Sunday Times, Andrew Sullivan lets off some steam. (Whole column worth reading)

At first blush, the onslaught against BP does seem a little much. But once you examine its recent record, the cornercutting and recklessness that precipitated this calamity, and the company’s enmeshment with the regulators who are supposed to be keeping watch … well, you tend to get more angry, not less. Take a simple comparison with other multinational oil companies. Over the past three years, the US government department that monitors compliance with health and safety regulations has cited several companies for negligence or corner-cutting. Sunoco and ConocoPhillips have had eight “egregious, wilful” safety violations apiece. Citgo had two. Exxon had one. BP had … 760.


Alas, what won’t change is the oil addiction that has forced the US to drill deeper and deeper in more and more treacherous waters, where techniques carry more risks precisely because the terrain is brand new. If you want to assign real, structural blame, it belongs in the end to the American people, who simply refuse to wean themselves off carbon and want to continue having the cheapest petrol in the West. This habit bolsters America’s enemies, empowers oil-rich Islamic states and is slowly cooking the planet. 

Sullivan again endorses my favorite solution to our oil addition: a carbon tax

There is plenty to be upset about in this whole fiasco, but certainly one of those things isn’t Obama’s tone or emotion. Here’s Clive Crook in the Financial Times.

The criticism of Mr Obama’s handling of the oil spill has been especially and flamboyantly unreasonable. So far as capping the leak is concerned, the relevant expertise resides with BP and the other oil companies. The notion that they should be “pushed aside” is risible. In any case, of course, the administration is in charge – overseeing the operation, as opposed to directing it in detail, which is as it should be. A deepwater drilling moratorium is in place and a thoroughgoing review of the regulatory regime is under way. The White House has been active in mobilising resources to contain damage to the coastline.


The view seems to be that staying calm in a crisis is all very well, except in a crisis. Then, the president must radiate rage and fear, pretend to direct operations, race about uselessly, weeping and hugging as he goes, doing stuff that will not help and might make things worse. 

Crook has been very reasonable about this issue from early on. I’m sure he’d appreciate this video.

(video via Ta-Nehisi Coates)

VAT Watch, ctd: Responses to Critics

April 23, 2010 3 comments

I’m all set to attack George Will’s particularly bad column on the VAT and I get beat to it by more able writers.  Will disparages the idea of a VAT because he thinks adding it on top of the income tax makes our bad tax system worse. I agree with his central premise that having a VAT just replace the income tax would be best but the rest of his argument doesn’t hold up. 

Before I get to my main critique, here’s Bartlett teaching Will a lesson on the 16th Amendment:

The 16th Amendment issue should be seen for what it is: a red herring. If people don’t think we should have both an income tax and a broad-based consumption tax at the national level, fine. That’s a good debate to have and I for one don’t oppose abolishing the income tax and replacing it with a VAT. But the idea that we must repeal the 16th Amendment as a precondition for consideration of a VAT in order to prevent the possibility of having both an income tax and a VAT is not a serious proposal. It’s just a trick to put up an insurmountable barrier to adoption of a VAT without addressing the questions of how we will stabilize the national debt without higher revenues or why a VAT is a better way to raise those revenues than higher income tax rates, which is the default option in the absence of a VAT.

The 16th Amendment just clarified that Congress could tax income with direct and indirect taxes.  It’s a pretty complicated issue because the Founding Fathers never made it entirely clear what separated direct and indirect taxes. What’s important is that Congress can enact an income tax with or without the 16th Amendment.  
Bartlett in Forbes and Clive Crook in National Journal counter the odd argument that we shouldn’t enact a VAT because it works well.

In my opinion, opposing a VAT means implicitly supporting our current tax system, which imposes a dead-weight cost equal to a third or more of revenue raised–at least 5% of GDP–according to various studies. This is insane. The idea that raising taxes in the most economically painful way possible will hold down the level of taxation and the size of government is obviously false. It just means that the total burden of taxation including the dead-weight cost is vastly higher than it needs to be. If we raised the same revenue more sensibly we could, in effect, give ourselves a tax cut by reducing the dead-weight cost. 

Those who oppose big government would do better to concentrate their efforts on actually cutting spending. The idea that holding down taxes or insisting that we keep a ridiculously inefficient tax system because that will give us small government is juvenile. If people want small government, there are no shortcuts. Spending has to be cut. But if spending isn’t cut, then I believe that we must pay our bills. I think it’s better to do so as painlessly and efficiently as possible. That’s why I support a VAT.


But opponents of a VAT are surely under an even stronger obligation to say what spending they would cut, unless they are saying that a deficit of 6 percent of GDP is no problem. Let’s hear from them. Show us how to cut 6 percent of GDP from federal spending — approximately a quarter of the current total — without popular outrage and real economic distress. Show us how to do it without gutting Social Security and Medicare, or seriously compromising national security. And tell us how to make it politically feasible.


If blocking the growth of the state is your overriding priority, you might oppose a VAT precisely because, as taxes go, it is a good one. By the same logic, of course, you should strive to make the income tax even worse. The rule would be, collect revenue in the most damaging ways possible. That will raise the price of Big Government and tie the liberals’ hands. 

I’ll also continue to stress that despite Will’s claim that “adoption of a VAT would proclaim the impossibility of serious spending reductions” there is little evidence that not raising sufficient revenue by starving the beast stifles the growth of government.  We don’t have a VAT now and it hasn’t seemed to dampen anyone’s enthusiasm for adding new programs.  Maybe, as Crook points out, widening the tax base with a VAT would make more people understand that they actually have to pay for more government. I’d support that, but I’m skeptical of it having that effect. 

I’m also disappointed George Will (who I normally enjoy) has to disparage the motives of the Obama administration.  

Believing that a crisis is a useful thing to create, the Obama administration — which understands that, for liberalism, worse is better — has deliberately aggravated the fiscal shambles that the Great Recession accelerated. During the downturn, federal revenues plunged and spending soared. And, as will happen for two decades, every day 10,000 more baby boomers are joining the ranks of recipients of Medicare and Social Security, two programs with unfunded liabilities of nearly $107 trillion.

Really? There are plenty of respectable arguments for taking strongly different approaches to deal with the recession that wouldn’t have increased spending nearly as much (Mankiw and Ed Glaeser come to mind) but the idea that there aren’t mainstream economic arguments for taking exactly the approach Obama and his economic team took to save the economy (not destroy it) is ridiculous.  Maybe Obama actually wanted to improve the healthcare system to improve people’s lives – I don’t see much reason to believe he only wanted to put the country on a path to bankruptcy in order to raise taxes.  Will, no serious person wants to raise taxes or thinks they are a good thing in and of themselves.  Responsible governors just understand that we have to pay for the government we have not the government we wish we had.   

On a related issue, I want to direct readers attentions to Andreas Kluth’s tax day pitch for the FairTax. Maybe unknowingly he responded to my asking for ideas for a simpler tax: 

If someone has a better idea for a more efficient and simpler tax I’d be happy to support that. 

I remember reading about the FairTax years ago when Neal Boortz’s book came out and liked it then. Kluth makes the case in a way that only Kluth could.  Who else could advocate tax reform with allusions to Croesus and Diogenes!? I don’t want to excerpt any of it because the whole post is really worth reading. A familiar theme on Hannibal Blog is the value of simplicity and here the FairTax, as Kluth stresses, excels. I’d be happy to support a VAT or the FairTax. My main concern is that the VAT has a better political chance of becoming law. It’s been introduced before and at most received only 76 congressional votes. 

Mostly likely, a VAT could be enacted while dialing down the income taxes as necessary. For healthcare reform a new system developed from scratch such as voucher system like Zeke Emmanuel’s or a complete HSA system coupled with a national catastrophic fund would be vast improvements over any reform that keeps our current base model in place.  But that seems to be politically impossible. The lesson from healthcare is that the same is probably true (although I’d love to try) for tax reform. In America, even comprehensive reform has to be incremental. Get a VAT in there and then squeeze out the clutter.  Anyone think that Obama could sell the FairTax to enough on the left and right to pass it while throwing out the rest of the tax code (with all its political giveaways)?  Worth floating, at least.  

Clive Crook on Frum and Moderates

April 14, 2010 2 comments

Crook finds Frum’s thinking sound on the need for more moderate Republicans but fuzzy on healthcare:

He is simply inconsistent. On the one hand, Obamacare is a “vast new social welfare program.” On the other, “the gap between this plan and traditional Republican ideas is not very big…It builds on ideas developed at the Heritage Foundation in the early 1990s that formed the basis for Republican counter-proposals to Clintoncare in 1993-1994.” So was this a terrible plan that needed to be stopped? If so, the Republicans gave it all they had. Or was it a basically good plan that could stand some further improvement? If Frum thinks that–as I do–why would he have voted in the end to kill the reform?

I agree with Crook here that passing the bill could then be a platform for improvements to be added later. Frum is probably right that the Republicans could have achieved a more market friendly bill if they sought that during the fight. Does Frum think that the possibility of improving the bill after it passes in its current form is negligible or impossible? I suppose that would explain the inconsistency, but it wouldn’t be very persuasive. 

In the Financial Times, Crook also makes some further important points about the need to moderate the GOP

Meetings such as this are not campaign events aimed at voters at large. They are gatherings of activists, intent on maximum fervour. Even so, to call the Obama administration “socialist” is risible. If anything, “secular” makes even less sense. Do Republicans regard universal health insurance as a godless undertaking? And since when, even in the US, was “secular” an allowable term of abuse? 

A moderate and intelligent opposition to the Democrats’ policies is badly needed. Apparently, nobody in the Republican party aims to provide it. Republican leaders seem intent on presenting the party’s angriest, most stupid and least tolerant face. Some leading Republicans who are moderate by temperament and conviction – John McCain, for instance – are being pushed to the right in primary election contests with more conservative opponents. Others, such as Mitt Romney and Tim Pawlenty, are disowning their previously expressed views or just keeping their heads down.

Clive, it became “allowable” when the Republican Party became the party of the religious right instead of a party of conservatives. But, thank you, the question keeps needing to be asked. 

VAT Watch, ctd

April 10, 2010 Leave a comment

The Brookings Institution agrees with Paul Volcker and likes the idea of a VAT too.

First, if it were proposed this year or next but phased in slowly as the unemployment rate dropped, it would encourage more consumption as households rushed to buy everything from ipads to new cars while these goods were still “VAT-free.” Without higher spending by consumers, we face the possibility that the economic recovery will falter. Second, over the longer-run a VAT would encourage saving – just what the country needs if we want to remain competitive by investing in new technologies and new products. Third, a VAT is relatively easy to administer and more economically efficient than an income tax. It’s true that a VAT is regressive but this problem can be addressed by making other, more progressive, changes to taxes or spending. One option would be to reduce payroll taxes and another would be to provide refundable credits to low-income households. Ways would also need to be found to make a VAT consistent with state and local sales taxes, perhaps by allowing states to piggyback on the federal VAT or by returning some of the revenue to lower levels of government. 

Astute readers may notice that the claim that “a VAT is relatively easy to administer” seems to contradict my previous post’s linked claim that “the U.S. will struggle for at least two years and probably longer to implement a VAT” because of its start-up complexity. Well either a lot is contained in that qualifier “relatively easy” or maybe Isabel Sawhill of Brookings looks at a 2+ year implementation as a sliver lining to “encourage more consumption” in the short term. So can the problem be a feature? It appears to me that switching to a VAT wouldn’t be easy but once in place it doesn’t seem to have many administrative drawbacks. Reminds me of a large capital investment in few ways.

(h/t: Clive Crook)

VAT Watch, ctd

March 18, 2010 Leave a comment
Yglesias adds some thoughts on a VAT and specifically on Clive Crook’s advocacy of one.  He recognizes the need to raise more tax revenue but asks why a large carbon tax wouldn’t be sufficient.

So why “a 5 percent VAT together with a small carbon tax” instead of just a carbon tax high enough to raise whatever amount of money you would get with a 5 percent VAT together with a small carbon tax?

I certainly agree with the need for a carbon tax. Without looking at any specific economic analysis (so I could be wrong) on this question is seems plausible that a carbon tax just couldn’t raise enough revenue on its own (at least without too many negative economic effects). Our fiscal needs are so dire that a carbon tax at that level would just be too high to be effective.  Two obvious concerns I would have:

1. Businesses wouldn’t be able to adapt fast enough (or at all) to a carbon tax that high causing severe economic shortages.
2. Part of the rational behind a carbon tax is to reduce carbon usage, thus the tax becomes less effective as a revenue source the more effective its disincentive effects. 

A VAT however has been repeatedly shown to efficiently and sufficiently raise revenues which is why it is the tax of choice of so many countries with large welfare states. Since a VAT can raise comparatively more revenue at a lower marginal rate, a balanced approach between a VAT and a carbon tax still seems most persuasive. 
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