Tuesday, January 28, 2014

Five Terrible Ideas from Progressives and Conservatives

A recent article in Rolling Stone inspired a conservative writer to offer his own take on the piece. It's an nice demonstration of the fact that neither right nor left have a monopoly on bad economics. First, the liberal recipe.

Five Economic Reforms Millennials Should Be Fighting For

Jesse A. Myerson,  Rolling Stone, January 3, 2014

Guaranteed Work for Everybody

Unemployment blows. The easiest and most direct solution is for the government to guarantee that everyone who wants to contribute productively to society is able to earn a decent living in the public sector.
Actually not a bad idea, except for that one qualifier, "everyone who wants to contribute." Because as we see in the next topic, not everybody wants to. And a lot of the stuff we need done is decidedly non-glamorous
Imagine a world where people could contribute the skills that inspire them – teaching, tutoring, urban farming, cleaning up the environment, painting murals – rather than telemarketing or whatever other stupid tasks bosses need done to supplement their millions.
Chances are, if you know enough to be useful teaching or tutoring, or paint a decent mural, you won't be part of this work force. Urban farming and cleaning up the environment won't be all that fulfilling and the "stupid tasks bosses need done," like sweeping floors and cleaning, will still need to be done in the public sector, too. How does "cleaning up the environment" differ from "picking up trash?"

Okay, so what do we do with people who just plain won't work? No money? What if they have kids? Because if just plain not working is an option, well, read the next point.

Social Security for All

Actual human workers are increasingly surplus to requirement – that's one major reason why we have such a big unemployment problem. A universal basic income would address this epidemic at the root and provide everyone, in the words of Duke professor Kathi Weeks, "time to cultivate new needs for pleasures, activities, senses, passions, affects, and socialities that exceed the options of working and saving, producing and accumulating."
Put another way: A universal basic income, combined with a job guarantee and other social programs, could make participation in the labor force truly voluntary, thereby enabling people to get a life.
This takes us to the fringiest areas of progressive economics, the idea that work should be purely voluntary. Nobody says it better than Washington City Paper's inimitable Franklin Schneider. God, how I love this guy. If he didn't exist, I'd have to invent him, except I would never insult leftists by accusing them of thinking like this. If I simply attributed his words to leftists, I'd be accused of creating a straw man. I couldn't begin to parody leftist thinking this brilliantly, except he's for real. Either that or he's the greatest genius troll ever. Anyway, here's "Doing More With Less: In defense of creative loafing" (Washington City Paper, March 7, 2008)
I’ve been on unemployment three times in the past six years. Each time was better than the last, and each time I stayed on until the last cent was exhausted. I didn’t even try to get a job; it was a paid vacation. This is somewhat unusual from what I can tell. There’s a deep vein of antipathy in this country toward collecting checks from the government, especially in precincts that tend to skew rightward. Politicians imply that it’s un-American for an individual to milk the government, all while jacking up corporate welfare for their campaign contributors.
This brand of puritanism has gained traction among the gullible masses, including those I count as friends. .....Most of them stayed on unemployment for only a few scant weeks before getting another shit job they immediately began bitching about. When I asked why, they muttered various reasons like “not wanting to be on welfare” or “wanting to work for a living.” One even fretted about “what her parents would think.” 
Given a choice between getting a check every week for doing nothing and getting a check every week for flushing 40 hours of the prime of their lives down the toilet, they chose the latter. I mean, what kind of self-hating, masochistic Protestant bullshit is that?
Not only do I feel no guilt whatsoever about sucking from the state’s teat, I feel that I’m absolutely entitled to it. First of all, the employer that fired me pays for half of my unemployment, and fuck them.
Second of all, it’s really my money in the first place. See, your employer never pays you what you’re worth—there’s a surplus, some of which goes toward overhead and various other business costs, and the rest of which is kept as profit. (This is what Marx was referring to when he talked about “exploitation of the workers.”) A tiny fraction of this surplus—which, again, has been skimmed off of my labor—is put into a government-mandated account to go toward unemployment checks for fired workers. So yeah, it’s my money. Give it back. And since most people’s lives are so devoid of meaning that they’d rather go directly into another shitty job than be forced to confront the sheer emptiness of their existence, most of that money never even gets distributed.
There's simply not enough room here to analyze this gem in depth. As Gunther Stent noted in "Paradoxes of Progress," when people have their needs satisfied, they find not working to be a very viable option.

Take Back The Land

The most mainstream way of flipping the script is a simple land-value tax. By targeting wealthy real estate owners and their free rides, we can fight inequality and poverty 
Fascinatingly, this is identical to the conservative recipe below, with one teensy-weensy difference. Myerson wants it in addition to existing taxes and Mathews below wants it to replace existing taxes. Myerson is apparently unaware that there are already property taxes, which often enough have the effect of driving people out of their homes when their property values rise because of nearby development.

Make Everything Owned by Everybody

There's a way easier way to collectivize wealth ownership than having to stage uprisings that seize the actual airplanes and warehouses and whatnot: Just buy up their stocks and bonds. When the government does that, it's called a sovereign wealth fund.
Well, gotta give Myerson props for not calling for violent revolution. Buy up all the stocks and bonds. So simple. With what? Tax dollars? Or just print money? Ignoring for the moment the inflationary problem, let's say we buy up $50 trillion of stocks and bonds. Now, "we the people" own $50 trillion in stocks and bonds. In other words, pieces of paper. And the people who sold them now have $50 trillion in cash to buy ... land? buildings? water rights? mineral rights?

The successful sovereign wealth funds have a source of income, like oil. Creating one out of thin air will be an interesting feat.

A Public Bank in Every State

The Bank of North Dakota doesn't make seedy, destined-to-default loans, slice them up inscrutably and sell them on a secondary market. It doesn't play around with incomprehensible derivatives and allow its executives to extract billions of dollars. It just makes loans and works with debtors to pay them off.
No, the public bank in a state with a total population less than a medium-sized city probably won't, at least not now. Care to bet the City Bank of Detroit or the State Bank of Nevada won't? And just wait till politicians sell enough taxpayers on the idea of borrowing from the bank as opposed to raising taxes.

So as counterpoint, we have this piece, written in rebuttal to Myerson's.

Five Conservative Reforms Millennials Should Be Fighting For

Dylan Mathews, Wonkblog January 7, 2013

End the long-term unemployment crisis

Kevin Hassett, an economist at the American Enterprise Institute who was one of Mitt Romney's lead advisors during his 2012 run, has proposed that the government directly hire the long-term unemployed. This could be implemented  by simply paying businesses to bring on more workers, and then phasing the subsidy out over time.
Mathews tweaks Myerson's idea a bit. Subsidize businesses to hire workers and then phase out the subsidy. Since when has a subsidy ever been phased out? And when the subsidy is phased out, how long before the workers are unemployed again? Hint: look at the cities that have given subsidies to businesses to locate there, only to have the business fold, be sold, or move a few years later.

Tear down the welfare bureaucracy

Food stamps must be spent on food, but what if the family receiving them needs help on rent more? Why should the government tell them how to spend their money, any more than it should tell the rest of us? Worst of all, the current, hugely bureaucratic system props up a class of unionized government workers who can't be fired and who pension costs are bankrupting our states and cities.
He can't resist the talking point that pension costs are bankrupting our states and cities. No they're not. Not paying debts on time is bankrupting our states and cities. If states and cities had funded their pensions all along, they wouldn't be in trouble. They deserve no more sympathy than a homeowner who can't make his mortgage payments because he blew the money in Las Vegas.

Wonderful idea, and right in line with observations by progressives that poverty is simply lack of money. Mathews observes that food stamps give people help with food, but what if the critical need is rent instead? Ahh, but this reform comes with a hook in it. Just look at the complaints from people who see food stamp recipients buying junk food. Or the anger at the revelation that some people figure out how to swap benefits for sex, drugs, or alcohol. (Basic Econ 101: anything of value can be traded for anything else of value. The workarounds to evade restrictions on how the money can be spent add inefficiencies, and guarantee the middlemen will get a hefty chunk, while the welfare recipients will get a lot less buying power, is all.)

I guarantee that if welfare recipients had to go to a warehouse and pick up sacks of rice and beans for food, within hours somebody would be buying them at 75% of their market value, and the money would be spent on other things. Then, when the hunger began to pinch, they'd re-sell the rice and beans at 110% of market value to those same people.

So just imagine we give all welfare recipients unrestricted cash equal to the value of their present benefits. Then someone finds, about a nanosecond later, that some have spent it on booze, drugs or sex, leaving their kids hungry. Cue the calls to abolish welfare entirely in 3, 2, 1 ....  And of course, the kids who aren't being fed properly will have to be assisted, eating up the savings from eliminating the welfare bureaucracy, which will end up being re-established to make sure money intended to aid the poor actually reaches its intended recipients.

"Why should the government tell them how to spend their money, any more than it should tell the rest of us?" Because we have a lot of Puritanical voters and politicians who insist on it.

Eliminate job-killing income, payroll, and corporate taxes

Mathews' plan is a single tax on land, an idea that has been floated around forever and not implemented for reasons that have been obvious forever.

The most obvious reason why we don't have a single tax of any kind is that people would put all their money into non-taxed sectors. Go ahead, tax my land. I'll live in a bungalow on a small lot and make all my money from capital gains, which are not taxed, and when I want elbow room, I'll winter in Aruba. Meanwhile, farmers, with lots of land, get taxed like crazy, and end up selling to developers. The developers in turn subdivide, build houses and pay no taxes at all on the sales. It works that way whatever is your single tax. Tax gold? Fine, I'll put it all in art. Tax stocks? I'll hold gold. 

Another problem is that there's a limit to how much tax you can collect on land. Unlike, say, corporate profits, which keep coming in, land doesn't produce additional value. So the total amount of taxes that can be collected will be so small as to starve the government (gee, I wonder if they thought of that) or force landowners to sell, most likely at depressed prices, leaving land in the hands of a very small number of large landholders (gee, I wonder if they thought of that, too).

The other principal objection here is, what assurance do we have that the money freed up by eliminating income, payroll and corporate taxes will actually go into creating jobs? For that matter, where exactly is the proof that income, payroll and corporate taxes really cost jobs at all, apart from the unsupported claims of people who want to ban these taxes? Give me the computer code. Show me a computer model that accurately tracks the U.S. economy and show that it predicts job gains if we repeal taxes. You want that rigor for evidence of global climate change. Fine, produce an equally rigorous forecast for the economy. Put up or shut up.

Have Social Security invest in the private sector, not the government

This is a wonderful idea. Let's establish a few ground rules:
  • The value of Social Security accounts can never decrease.
  • No company that receives investments from Social Security may declare bankruptcy, and the FTC can suspend trade in that company's stocks if investors begin to bail.
  • No officers of any company that Social Security invests in may declare personal bankruptcy and they are personally liable for all losses.

Help small businesses grow

Mathews nearly repeats Myerson's argument for public banks, even going so far as to praise the same example. This actually makes me suspect it's the lone idea in these pieces that's viable.

Mathews, though, doesn't want the public banks to compete with private banks, but partner with them. So presumably that means not undercutting them on checking and ATM fees, just like banks bitterly resent the paltry competition from credit unions. And if public banks give out loans that private banks won't, isn't that competition?

So if public banks really take off and seriously cut into the business of Bank of America or CitiBank, look for pressure to mount on Congress to rein them in.

There's a Reason the Laws are Complex

Reality is complex. Simple solutions invariably create loopholes you can fly a 747 through.