Those crazy [insert non-authoritarian entity here]

Tea Partiers, Republicans, Libertarians- these are all people which the authoritarian left dismiss as absolutely crazy.

But which is crazier:

Restoring the ideal of liberty and self-government that this country was founded upon, or;

Believing an autocracy of technocrats will be enlightened enough to take good care of their subjects without reverting to the same abuses of power and atrocities that every previous authoritarian state has succumbed to.

Which is more unrealistic: Great Society, or self-determination?

This progression towards authoritarianism which has accelerated so greatly over the past decade is like a drug. We tell ourselves it’s okay, because we need it, but we could stop anytime we wanted to. We tell ourselves that there’s no slippery slope down the road to serfdom, and so we take just one more step, and then another, and then maybe just one more, each time telling ourselves it will be the last. We gut the Constitution, surrender our liberty, and trust in our glorious leaders who know so much better than us how to live.

Because if we don’t, then the crazies will win. Then the hicks and the rednecks and the racists and the corporations and those scarily self-important Libertarians (who think they’re somehow better than us because they have “principles”) will all win. And all technological and economic progress will revert, because none of it could’ve ever happened without the government keeping those crazies in their place.

Freedom was a thing of the past. We’re done with that now. We’ve evolved beyond it. Just like the glorious Roman Empire. And anyone who thinks otherwise is crazy.

Equality Before the Law

John Adams defined a republic as “a government of laws, and not of men.” What this means is that the laws apply equally to all, and are not changed arbitrarily through the whims of some autocrat.

When George W. Bush selectively awarded no-bid contracts to companies that he favored, they called it “crony-capitalism.” So what do you call it when the Health Secretary is selectively choosing which companies the law does and doesn’t apply to? One thing I’m sure it’s not called: “Equality before the law.”

This whole situation reeks of being a “bill of attainder.” If Obama’s health care law doesn’t work unless his health secretary gets to issue waivers from the regulations to favored clients, then the law doesn’t work. Let’s repeal the law and bring back a government of laws, and not of men.

The Strongest Argument for Term Limits: Nancy Pelosi

Now I’m gonna try my best to give this argument elements that Republicans and Democrats alike can identify with. So if you don’t like what I’m saying at first, just bear with me and hear me out.

For awhile now, I’ve argued that strict term limits are necessary to ensure that representatives remain representative of the people. If we are continually selecting new representatives from the pool of the people, then we can ensure that our government will continue to be representative of our will, rather than having career politicians continually reelected through name-recognition and corrupt deal-making.

One argument against this that I frequently hear is that freshman politicians aren’t as good at getting things done. It takes someone with political experience to know how to make compromises, rally their base, and do all the politicking necessary to get bills passed.

Enter Nancy Pelosi. She is figurative poster-boy of “political experience.” Well-known for her ability to rally her base and do all the politicking necessary to push controversial legislation through, she is seeking another term as the House Democratic Caucus leader, which would make her the Minority Leader. However, because of her demotion from House Majority Leader to House Minority Leader, everyone in her chain of command is forced to take a demotion, and not everyone is happy about it. This presents Pelosi with a problem, because it means some of her fellow party leaders may set their eyes on the prize of a higher office- specifically, Pelosi’s position of Minority Leader.

However, doing what Pelosi does best, she found a compromise which all contenders for party leadership can be happy with: create a new office so that everyone can be in charge.  By creating a new office, she makes sure that all leaders in her party maintain positions of party leadership, preventing a power struggle which would’ve had the potential to unseat her.

So, with Pelosi’s vast experience at politicking, she has benefited herself and her fellow party leaders, but is this solution good for everyone? It’s certainly not good for the Democrats to have someone with a 21% favorable rating among independents (29% overall) to continue leading their party in the House after the massive shellacking they received. I mean, with such a massive election loss, which she completely did not predict, she must be doing something very wrong for her party. Keeping her on as Minority Leader is like Christmas for the Republican Party, because they can continue to paint the Democrats as “the Party of Pelosi.”

Another problem with this is that it indicates she’s willing to create new bureaucracy out of nothing, for no purpose, except to benefit herself and her friends. This demonstrates a capacity for corruption which needs to not be playing a part in the process of crafting legislation.

Pelosi’s political skill has been harmful to both her party and the people she represents. So, if giving incumbents the opportunity to be reelected selects for experience at politicking, then I think we should be doing everything we can to keep incumbents out of the election process entirely, enforcing strict term limits.

The goal of a representative democracy is not to “get things done.” It is to represent the will of the people as best as possible without making every single citizen take the time to read and vote on every single bill.

On Tax Policy

During a debate on tax policy, someone made this comment:

A tiny tax increase on a small percentage of the population is not “overruling the will of the individuals and satisfying governmental priorities.” It’s sane fiscal policy, and it used to be perfectly acceptable before lunatics and their useful tools like you took over.

I decided to give a full explanation of why raising taxes to generate revenue doesn’t make sense:

See, based on the fundamentals of economic theory which have stood the test of time over the last 200 years, I disagree that “raising taxes is sane fiscal policy.”

Here, let’s take a step back to a point where we can agree. Sane fiscal policy means collecting more revenue than we spend. Now, I know you’re not particularly fond of reducing spending, so let’s just ignore that option for now and assume that all that spending is absolutely necessary, and is a function of population. Bear with me, because this train of thought will take a little bit to lay out.

So, if we raise taxes on businesses and wealthy individuals, do you think the IRS will collect more revenue in the long run? Hauser’s Law empirically demonstrates that no tax rate in the US, from 28% to 90%, has ever generated revenue exceeding 20% of the GDP. To explain this effect, on a theoretical level, I can point to the Laffer Curve, and on a practical level, I can point to all the different ways by which wealth-creation mechanisms disintegrate in a country where it’s too expensive to do business (outsourcing, expatriation, decreased investment incentives, decreased trade due to the expense, etc.). But regardless of its cause, it’s a safe assumption to say that Hauser’s Law, for whatever reason, cannot be broken.

So, in fiscal year 2009, this country spent $3.518 trillion. The GDP for that year was $14.266 trillion. That means for that year, the government spent 24.66% of the GDP. If we freeze spending at that absolute level (meaning no increases in the dollar amount), we need to raise the GDP at least 25% in order to match revenues to costs without breaking Hauser’s Law. Additionally, the Reagan era showed us that we maintain revenue at the upper limit imposed by Hauser’s Law, even with a 28% top tax rate. Hence, the debate over what will balance the budget (and therefore, the question of what constitutes “sane fiscal policy”) comes down to a matter of what will raise the GDP the quickest, the most efficiently, and the most sustainably. This significantly simplifies our problem.

To answer this question, we have to decide where the wealth should be allocated in order to generate the most new wealth, dollar for dollar. If we raise the tax rate, then we’re putting a larger percentage of the wealth produced by investors and businesses in the hands of the government. If we decrease the tax rate, then we’re leaving a larger percentage of that wealth in the hands of the people who created it. So who is able to more efficiently create new wealth? The government, or the private investors who originally generated that wealth.

To answer this question, we need to consider the mechanism of wealth-generation. The following explanation is what you’ll learn in any introductory economics class. Every time you buy something without being deceived or forced through the threat of violence/incarceration, you are gaining something which is of greater value to you than the price you paid for it. Otherwise, you wouldn’t buy it. Hence, even though you’re giving up monetary wealth, you are becoming more wealthy in the general sense every time you buy something which is worth more to you than its price. Generalize this over the entire population, and you have the basis for wealth generation in an economy. Workers labor for an amount of money which they feel is worth more than their time, and they in turn spend that money on goods and services which are worth even more to them. Likewise, business owners give up a product for a higher price than the sum of the monetary cost and their investment of time. Investors give up their money for a more valuable opportunity to make money later.

What this means is that the more effectively money is being used to satisfy individual desires for value-increasing exchange, the faster the economic growth. Whoever knows an individual’s value system best is going to have the greatest capability to bring wealth to that individual through exchanges. And really, nobody knows a person’s value system better than the person himself. There is no possible way for the government to know more about the values and incentives for trade of the entire populace than the sum total of the individuals within that populace. Thus, every time the government takes money from individuals and spends it, instead of letting the individuals spend it on their own, some people will be less happy than others, and some may even gain negative utility as a result of the exchange. Hence, the government cannot possibly generate wealth off of money faster than the sum total of the individuals if that money is left with them. Friedrich von Hayek got a Nobel Prize for formalizing this idea (known as “The Knowledge Problem“).

Coming back to tax policy, what this means is that taxes higher than 20% (the limit from Hauser’s Law) are self-defeating. You actually decrease revenue if you raise taxes above that threshold for more than one year. On the other hand, the lower the tax rate (i.e. the more money we leave with the individuals in the economy), the faster wealth is generated, and the more efficiently the GDP will grow. This faster GDP growth, in turn, results in higher revenues (as an absolute dollar figure) for the government if you’re still collecting 20% of the GDP. This is what people are talking about when they discuss the “Revenue-Maximizing” and “Growth-Maximizing” points on the Laffer Curve. A flat tax of 20% puts you at the revenue-maximizing point on the Laffer Curve. The growth-maximizing point is somewhere even lower. Then, the fastest way to increase the revenue collected by the IRS (and therefore, by your admission, the sanest fiscal policy) is to set taxes somewhere between the growth-maximizing and revenue-maximizing points. When we need money fast, we should set it at the revenue-maximizing rate. When we are looking more towards long-term prosperity, we should set it closer to the growth-maximizing rate.

So that’s where my stance on tax policy comes from. I hope it sounds rational enough.

Dan Mitchell vs. Austan Goolsbee on Taxes

If you want to see what a debate between a Cato economist and a White House economist looks like, now’s your chance.

Judge for yourself: is Dan Mitchell being fair? Is Goolsbee representing the situation accurately? Who has a better grasp on the effects of tax hikes? Whose message do you buy into more? Is there anything you disagree with that isn’t addressed in this video?

The Economic Effects of the 2010 Midterm Elections

I think most people know what a Republican House coupled with a Democrat Senate and President means in terms of politics: absolute gridlock, lots of subpoenas, and a ton of meaningless rhetoric.

But what does this mean economically? How will the recovery trajectory of our country change as a result of this event?

First of all, the loss of single-party control over the government will reduce economic uncertainty. When the fear of new regulations that will increase costs prevents businesses from hiring, investing, or doing anything else with the slightest bit of risk, the best thing you could hope for is gridlock in the government. Businesses always have to plan for the worst-case scenario if they want to survive, so costly new taxes and regulations are priced into the market even before they pass into law. Then, if the efforts to pass them suddenly derails, the market gets a boost as that overzealous caution is lifted and market confidence returns. So, taken alone, this effect would result in a faster recovery trajectory.

On the other hand, the executive branch has no gridlock at all. The 111th Congress delegated a lot of “rule-making” powers to the executive branch over the last few years [insert Bush administration comparison here]. This means that, thanks to poorly-written laws like Obamacare, people like Health Secretary Kathleen Sebelius have the autocratic power to make laws on a whim, with nothing other than the President holding them back. This is extraordinarily dangerous, because the extreme reach of her control means Sebelius could single-handedly turn the economy on a dime with a bad rule, sending us back into a recession. Therein lies the danger of turning away from liberty-based representative democracy in favor of technocratic authority. Even without any further action by Congress, we’ve got boatloads of uncertainty hanging on the economy like a lead weight. We could get some (more) seriously messed up rules coming out of the White House, and businesses and investors will have to plan for that, but they also can’t plan for everything.

What all this means is that we may get a return to the “normal” sluggish growth that has characterized the last decade, but we’re certainly not going to get any sort of massive acceleration towards a full recovery unless the Democrats start accepting some of the calls to repeal costly regulations and give up executive power over transactions (not likely). Hence continues the country’s second Great Depression.