Iraqi Election!

Any person can have a wicked thought or dream. No person is always a good person. Democracy has the capacity to seperate evil dreams or aspirations from the power and capability to make those dreams come true.

This function of democracy acts as a natural constraint on the will to power. If the constitution can implement this with a reasonable amount of checks and balances, then never again can a man such as Saddam rise to power. So long as the people stand up for their freedom and defend it, they can live free of governmental control and oppression.

Inauguration Speech 2005

If the speech was a surprise, you haven't be reading your Rummel.

When both sides of a debate agree (Clinton and Bush), the policy is set and the direction clear.

World peace without world domination is entirely possible. The path to it is clear. What remains is to prove it.

Privatizing Social Security

The Cato Institute is hoping to save Social Security through privatizing as President Bush has proposed, in general terms.

Social Security is the largest government program in the world and was enacted during our great depression in 1935. The basic proposition is that the federal government's direct involvement in this is to be reduced, in fiscal terms, by about one third. The Bush Administration usually refers to this as a 2% reduction, though this may be confusing as what this 2% refers to is 2% of the 6% tax on income below the taxable level, therefore it is more rightly described as one third (1/3) of the tax revenue source supporting the payouts.

My view of the administration's policy motivating goals is that in general they are laudable and righteous:

• to restore Social Security to long-term solvency
• to provide a higher return on investment benefit to tax payers
• to allow low-income workers to accumulate real inheritable wealth
• to give workers ownership and control of their retirement funds

The Democratic party is expecting to oppose this privatization effort for lots of very good reasons as well:

• Social Security is intended to be the safest part of the retirement portfolio, guaranteed by the full faith of the US Government.
• There are less drastic ways such to address the problem such as means-testing benefits, prolonging retirement age, or raising payroll taxes (eww!).
• It is a policy designed to reward the powerful few (wall street), rather than the productive many who are the payers into the system.
• It is an expensive method to address to the problem and poor governmental fiscal responsibility.

Can the policy goals be reconciled with the reasonable opposition, and if so how?

I am in what is perhaps a minority within my party who believe that such reconciliation is possible, however I do not expect much will be achieved within the current Presidential administration. Reconciliation will require intense good faith negotiation between all sides on this debate, and historically Social Security is not an issue that receives such treatment swiftly. It is the proverbial "third rail" in politics (touch it and die).

Therefore, I will credit President Bush with heroically raising the issue's priority and fostering the discussion of partial privatization, (which I believe will eventually be a part of the solution), but I do not expect the optional 1/3 privatization proposal to survive intact. The proposal is a significant change in the structure and may be overly drastic in the near term. Also it is questionable as to whether the proposed mechanism ultimately meets the goals of the policy. Something more moderate, please?

What I will look for from my Democratic colleagues is more than just opposition. I will look for the good faith negotiation that can only come when both sides are eager to resolve a problem. The method of resolution may change, but the problem will not go away on its own.

One other answer to this issue is in means testing the benefits. Those of us who have acquired wealth through our labors, in general have less need of the social security benefit, and also generally better health. We also tend to enjoy those labors that have brought us the wealth and so we often do not mind postponing our retirement a little more than most. In light of this, would we be able to increase the solvency of the SSTF by starting the payments at a later time in the lives of those with more means? The actuaries should be able to formulate a graduated means test based on income tax returns to reduce the benefit to the most wealthy by simply start the benefit later in our lives.

Starting the benefit later seems very appropriate to me. The more successful people tend to live longer (so we get more years of the fixed benefit anyway) and we need the benefit less. The risk is that the benefit will acquire some social stigma damaging to the pride of our deserving older people. I see this risk as minor given this structure. There is value in keeping social security from becoming too much a wealth reapportionment scheme as the whole program will lose some support if that occurs.

Another method of resolution favored by Bill Clinton is increasing immigration for foreign workers as well as increasing the minimum wage. This increases the taxable wage base and evens out our population growth bubble. I can not find a significant downside to this. Unemployment is low already and has been for years, it would increase our productivity and our GDP as well as the tax base of workers supporting the retired. It also capitalizes on our increased border security of late, especially since 9/11.

Whatever we end up with will likely be a combination of balanced adjustments to our current social security/employment/benefit/taxation model. There is still too much socialism world wide (and too much poverty domestically) for us to be able to successfully carve out the program and maintain our immigration, so some compromise is a necessity. I hope our elected officials can come to reasonable terms.

Another great piece from Dr. Rummel

The good doctor Rummel has put something new on our reading list, The Case for Democracy: The Power of Freedom to Overcome Tyranny and Terror (New York: Public Affairs, 2004). Click the link to buy it from Amazon.

Interestingly, when I searched for the title in Amazon's site, I also found "The Case Against The Democratic State", Despite the title, this one is not against democracy per se, it just argues that democracy tends to enable socialism and to the extent that it does that it hinders freedom.

Strange as it may seem, both are true. Democracy is freer than Tyranny, but democracies have to always take caution not to over empower the state or they gravitate back toward tyranny.

No taxing overtime? Comsumption? States only?

Thanks to all of you for the grist. :)

"I have an idea for someone, anyone, running for public office and would appreciate you thoughts on it. No taxing overtime. That would be hourly workers. Not taxing any time worked after forty hours a week. This would put money directly in the pockets of people in need to help pay thier bills and also help generate demand in the economy. IMHO."
-Dougman

What I like about this idea (in addition to the goals you wrote) is that it may engender productivity increases.

What I don't like about it is the practicality of it. On its face it seems problematic for logistical and accountability concerns. If I have two jobs, which is my untaxed job, what system brokers it, etc? How do we catch the evaders who work 80 hours every other week on paper? It is the sort of structure that may become possible with increased technological implementations in the future, but it looks like a non-starter for today until some advances in made. Some of the required advances may also have privacy related concern that could slow them. (Workplaces do not currently have to report to the IRS the hours worked on a per week basis, for example.)
If I were to advise your friend, I'd probably tell him to keep this one in the breast pocket for now unless it were part of a bigger vision of changes and fulfilled a necessary role in the whole package. Floating this idea as a candidate may show your friend as a visionary but unrealistic candidate that is not very appealing to most constituencies.

Some tax thought items from Glitch:

1. Why not tax ANY Work based income? Why not tax consumption? I know this scares the heck out of people but c'mon, what would be more fair than that?
Ok, here's other ideas:
2. Citizens pay NO FEDERAL TAXES. States are the entities that pay FEDERAL TAX.
3. States tax citizens (income tax/property tax/consumption tax, whatever...).
-Glitch

Personally I do like the notion of taxing labor less, and adding a consumption tax may be a realistic means to achieve that, but making all labor tax free invites evasion. The system you propose is very close to what is done in the European Union. EU is very fond of the Value Added Tax (VAT) that is essentially a consumption tax. There the Nations/States collect the taxes rather than the EU itself and are responsible to the EU for the tax collection on their citizens, so your proposal looks very much like what you could in the EU already, just a slightly more extreme version of it. The good news is that it could work for the US, but I would not be very eager to try it.

In general, I don't much care for drastic changes in the tax structure. It tends to cause financial upheaval and unpredictability in the market engendering losses in productivity due to increases in uncertainty. I don't see new taxes (such as VAT, or luxury tax) as likely under the current administration at all, but if it were added in order to reduce tax on labor we would most likely still trend toward the target of 17-19% of GDP as taxes collected as we always have as a nation. We may see some productivity gains as a result from that but it is against the desired goal of "simplification".

If you will indulge me as I take a look into my crystal ball... Instead I see our current administration as more likely to be using the tax of inflation to fill the gap. Yes, inflation is a tax, and it doesn't require any big changes to collect it. When inflation is encouraged by things like low marginal interest rates such as we have today and devaluation of the dollar, the effect is that the US can collect more in capital gains taxes. If the price on an item rises and it is resold, there is a capital gain. It doesn't matter whether that price rise is due to a change in value or due to inflation, the difference is taxed as a capital gain. Essentially, the inflation tax is the tax of last resort. If we continue to run a current account deficit and take no actions to correct this, we get this tax added by default. I personally don't see it as a horrible outcome as its effects work through our bond, equity and commodity markets, (though as I recall, other voters were not very forgiving of Carter when we were last in this situation). Other jackasses disagree with me on my assessment of non-crisis (jackass is a term of endearment when used as only a loving Democrat could). One only disagrees with Jim Willie CB the at their extreme peril as he is very often the one who is correct at the end of the day! The man in an unqualified genius, but on this we differ.

Bush #41 was tripped up on his "read my lips" promise of no new taxes. I don't see Bush #43 as likely to add a new tax such as VAT to the mix even though it could help to smooth out our tax roll and reduce the tax on productive workers. The inflation tax is not a new tax, and if used moderately, most voters usually ignore it. Some work to set this up as our tax backstop was performed under Clinton/Greenspan by changing the quality adjustment of price index. Since many federal benefits (such as social security) are keyed to this index, it was also a way to cut these tax backed benefits and entitlements without most folks noticing. Clinton was often very clever in these sorts of ways. Bush #43 tends to be clever in many of the same ways so we may see this sort of thing again if the "above the table" tax simplification work stalls too much.

More blogs please :)

Hi folks,

Perhaps you have seen a ModDem post on another blog and you want to contact (or flame?) me directly?