OK, Economists, Have at it!!

So perhaps this is going back to an old theme, but yet more evidence that the US economy is pretty broken.  

http://finance.yahoo.com/banking-budgeting/article/107980/countries-with-the-biggest-gaps-between-rich-and-poor

The US ranks third in terms of most unequal distribution of wealth, based on Gini index.  This again indicates that the rich get richer, the poor get poorer.  Combine this with the recent news that wages are at their lowest level in 18 years, and that pretty much everyone in the country is trying to figure out how to actually generate jobs in an economy that has no significant industry (outside of some small specialty pockets) and we have a mess on our hands.  The destruction of the American middle class has long term economic impacts that may be irrecoverable.

I heard a discussion of a Value Added Tax recently.  VATs are used throughout Europe.  What is interesting is that they are a way of imposing a tariff without calling it such.  Idea is that we have a tax on all end use items.  Items for export are not taxed.  So anything sold in the country automatically has a significant subsidy, in the case of Europe 15%.  This provides a mechanism for protectionism that we do not currently use.

Similarly the idea of a nationalized health care system, which distributes the cost of health care across all persons and not simply focused on those who actually have jobs, is an economic advantage to industry that we again have failed to take advantage of.

The concept of absolute free trade is really interesting, and makes for a wonderful philosophy, but it implies that all economic activity moves to the places that are most efficient, i.e., least expensive.  This ignores any kind of domestic interest (nationalism?).  It suggests that if people want to work they should move to where the jobs are, i.e., China, Singapore, etc.  Which is, of course, silly.

So the challenge becomes, how do we defeat the "free trade" trope?  And it is simply a literary device, since there is only theory, and no empirical reasoning, behind it.  

So as we see the different legislation moving forward, slowly, I wonder whether we will ever reject the silliness that laissez faire economics, backed by simple and easy to sell, but ultimately destructive economic religion, will be rejected and we may actually THINK about economics rather than develop a theory then religiously apply it?

Comments

[Dianne Schmidley]

Well, As Ronald Reagan so famously said to Walter Mondale, "There you go again."

Didn't Ron Paul and Huckabee suggest a single tax national sales tax? If you can get that to fly, go for it.

The problem for me is not that certain things like health care don't require some change, the problem is what kind of change are you recommending? I don't have enough energy to debate health care in this forum, but a lot of folks have serious misgivings about some of the wild ideas that have been proposed.

There are many forms of national health care. Even Europe disagrees about the best way to do it. I suggest folks read T. R. Reid's new book on the subject. I like what the Germans have, don't like what the Brits have. Apparently, the Germans are not too happy with their socialistic system as they just reelcted Andrea Merckle. Seems like everyone but the US is getting more conservative.

Regarding subsidies, don't get me started. I will say this, Africa would do a lot better if Europe didn't subsidize its farmers. My Dad, who worked for USDA at one point, cursed farm subsidies up and down, but I don't know that I would eliminate the dairy subsidy to New England, after all school kids in NYC need their milk.

Wisconsin and California don't get a federal subsidy for dairy products as far as I know, but they are competitive on the East Coast anyway. As every Democrat knows, it pays to bribe a Senator like the guy from Vermont. Okay, you did get me started. Dianne

[Adrienne]

I don't think Wayne was implying a flat tax (because actually that is not an "efficient" way to distribute the wealth; 10% of $10 dollars is a lot more "costly" than 10% of a million dollars). Unfortuanately, the economists have done an outstanding job with deterministic language to sell in the "free trade mantra". This circles back to my issue with the term socialism. Again the discourse has been hijacked by idelogues where redistribution is BAD and free trade is GOOD. You know ask people about the gini index (do most people even know what this is?) and examine the abject poverty (and illness)in Sub-Saharan Africa And when you do, it is extremely difficult to claim that diminished aid is the answer (ESPECIALLY when "those" countries were subjugated and exploited - leaving NO orignial institutions of those cultures in tact to make it work. That is the difficult and uncomfortable story to be told.

[Dianne Schmidley]

Adrienne,
As you well know, the problems Africans face are many and varied. Dwelling on the past will not solve any of them. Focusing on the present like the effects of the drought in East Africa might be more important.

In the early 1970s when I attended Georgetown, I studied at the Joseph and Rose Kennedy Center for the Study of Bioethics and Human Reproduction. Sargeant Shriver headed the Institute which trained many Peace Corps, State Department and Public Health Care personnel. We learned much about Africa and its problems including its history. At that time, most of the African countries had been independent of their former colonial masters for about 20 years, and that was 40 years ago.

Within the Division, where I worked at the Census Bureau, we maintained an International group which conducts statistical work for the State Department and Homeland Defense as well as other agencies. This means tracking births, deaths and other vital information (including economic data) about all countries. These data are used by various US agencies to monitor conditions on the ground, and they are reported to the United Nations (check out the UN yearbooks). Among other things, the Census Bureau tracks worldwide AIDS cases as well as agricultural production.

Census Bureau personnel travel to Africa, Asia, South America, and Eastern Europe to teach statistics, conduct surveys and censuses, and assist governments in establishing the vital records statistical systems which they need to govern.

The upshot of me sharing all this information with you is to let you know that I am pretty well informed on the subject, and I concluded economic development was the only way forward for the people of Africa and has been for a very long time.

What happened during the Colonial Era was unfortunate. Many events may be viewed as exploitative; however, many things may also be viewed as positive, including improved health care and agricultural techniques.

Much of Africa remains troubled over 50 years after the European colonial powers departed. On the other hand, India, which was occupied by the British for hundreds of years, has managed to become a world economic leader in modern times (largely owing one suspects to trade and democracy). Thus I conclude colonialization cannot be used per se as an explanatory variable for understanding Arica’s current problems and conditions.

Economic progress, doesn't justify colonization, nor does colonization become the responsibility of people living today. Dwelling on the sins of the past whatever they may have been is non-productive to solving real problems in the present.

On another note, one thing I acquired at the University of Maryland in the Sociology Dept. was a good foundation in Marxist thinking, so I know socialism when I see it. If it walks like a duck and talks like a duck, then it must be a duck.

If free trade isn't free, whose fault is it? BTW, Timothy Garton Ash has written an interesting book on this topic, Free World: America, Europe, and the Surprising Future of the West, or if you prefer a more liberal perspective, try T. R. Reid’s United States of Europe.

I don't particularly care for a flat tax, so I won't defend it, but if you have ever paid VAT taxes, you know they can be a burden.....just ask the person who pays them. Call it the Vat or flat tax anything you want......... A tax is a tax is a tax.

[Wayne Z.]

Always interesting when people object to all taxes "A tax is a tax is a tax". Indeed this is correct. Of course, I don't apply a moral value to lower or higher taxes. Te question is what is best for the overall country and economy. I think it is easy to show that economic performance, over the long run, is at best not correlated with and maybe even inversely proportional to tax levels, especially taxes levels at the higher income brackets. Just my rough estimate, but I've not seen anything to convince me otherwise. Low taxes are used to help recover from a slump, then higher taxes to keep things from burning up in a fiery inferno. I know I've paid more than my fair share of taxes, and have no issue with it when they are used reasonably. In fact, I opposed the Bush Tax Rape (sorry, tax cuts) even though I benefited greatly from them. I also believe in a large estate tax and a lot of other measures that keep excessive wealth concentration from resulting. Overall a much better policy than continued increases in inequality and the destruction of the American economy we have witnessed the past three decades starting with St. Ronnie.

[Dianne Schmidley]

Wayne, Do you think the national debt started with Saint Ronnie or Lyndon's Great Society? The debt goes back to WWII. (BTW I did not vote for Ronnie in either election.)

I disagree with your statement concerning the correlation between a healthy economy and taxation.

Like you, I live in the People's Republic of Arlington, so I know how well the government can work when it has lower business tax rates. When I worked at Bell, we looked at this relationship ad naseum, and we did a study of tax rates to help "sell" Arlington County to businesses seeking to relocate in Virginia (which would boost our profits....you know, the multiplier effect), a place where taxes would not cripple them.

Quite frankly, I was shocked at the Arlington business tax rates, because Arlington is such a socialistic community, I thought for sure it would be the highest in the area. As you know Democrats control Arlington and have ever since I moved here in 1968, and yet it provides a welcoming climate for businesses....imagine that!!

Gee, maybe our local guys and gals on the County Board haven't got the word yet about taxation.

I do NOT have a problem with taxes per se, but we should look at the other side of the ledger occasionally and note where tax dollars are going, something apparently that is easier to do at the local level...

In a recent Gallop Survey, about a quarter of the respondents said they thought the government had its own money. Adrienne is correct, most folks do not understand economics.

As a business person and a taxpayer, I am sure you know that figures don't lie, but liars figure when it comes to filling out a tax forms. So, in addition to the 50 percent of the population that pays no taxes, we have a significant percentage who should pay taxes and don't.

I have always paid my taxes....in Arlington County since 1969, in Virginia since 1960, and in the US since 1958. Guess that makes me a tax payer, and I haven't even begun to list the other hidden taxes we pay every day on phones, electricity, water and sewage, automobile licensing fees, dog licenses, professional liceses, etc., etc. etc.

I do not have an inheritance nor will my kids get anything from me when I die, unfortunately. The one thing I was able to do for my grandchildren was set up VEP accounts for them when all four of them were under the age of eight (when their dad died).

Over the years, I have faithfully paid into these accounts, so now they get some loose change for books and other things....it sure won't cover tuition and room and board. As their stepfather makes too much for them to qualify for student loans, my daughter and her husband are forced to borrow and squeeze and skimp, and are managing to pay for one of the girls at Madison and the other at UVA (thus breaking all the rules about not going into debt to pay for your kids college education).

I think the death tax became an issue because it unfairly penalizes small farm owners whose children must pay taxes on the inherited land.

Dianne

PS So, when is enough enough?

[Lindsey Bestebreurtje]

I was talking to a woman in the health care profession the other day about the Public Health Option. She said she was against it. When I asked why she said "Did you know that when illegal immigrants come to the hospital we HAVE to treat them? Without proof of insurance. That means with this public option that will be true of ALL people and our tax payer dollars will have to pay to treat them."

She seemed to think that this would make me upset. I know that I look pretty conservative (I like Polo. So sue me.) but I have to be honest, I really don't care if my taxes go up. I truly dont. If my having less money in pocket means a poor child, or an illegal immigrant is helped at an emergency room, then that is what I want. If we had a public health option then fewer people would end up in the ER anyways because they would receive service earlier, before they got truly sick.

Tax away I say. I want my government to do a lot for me and so I have a responsibilty to pay for it. And so do those 1%ers who control our whole economy. A person only needs so much money before it just gets ridiculous.

[Dianne Schmidley]

Arlington County hospitals do not turn anyone away from treatment. Still Arlington County taxes are very reasonable.

I do care if we pay more in taxes. There is such a thing as rational care. Now I said rational, not rationed, so don't get me wrong.

We need preventative care, especially for children.

I did a study for my company looking at who used the health care (it is an expensive business cost) and found that most of the care (80%) was for about 5 percent of the employees, and the majority of them had drug and alcohol issues. Families living with folks with alcohol issues were significantly more likely to incur health care expenses. When folks stop using drugs and alcohol, maybe they won't need medical care as much, especially emergency medical care.