The Ownership Society

Coming back from Thanksgiving, we found a nice little missive from our HMO. Apparently, I committed a heinous sin this year: I turned 30. The penalty for this crime? $1260 per year in incerased health care costs. Heaven help me if I have the bad judgement to turn 65; at that point insurance will cost about four times what it does now.

The health care system in the US is, in a word, nightmarish. I'm not talking about the doctors and hospitals, which are generally excellent. I'm speaking instead of the hopeless system that we've contrived to pay for health care. In the economic boom that followed World War II, it made some sense for employers to provide health care--it gave them a competitive advantage, and in an era of lifetime employment it even provided health care for retirees.

In today's world, that system is falling to pieces. First of all, most jobs simply don't last more than a decade at the outside; it's no longer considered even slightly unreasonable to lay off employees at the first sign of economic distress. "Taking care of your people," isn't considered a virtue in the business world just now. Worse, the advent of low-cost businesses like Wal-Mart has put many businesses in a hopeless position--they can either stop providing health care to their employees or lock themselves into a position where they get ground under by companies that simply don't need to spend as much per employee as they do.

The conservative solution to this appears to be (if any conservatives would like to correct me, I'd be more than pleased) to encourage people to pay for their own health care plans through tax incentives. There are a few basic problems here. First,
health care is quite expensive: for my family (two of us around thirty, one two-year-old) it's about $500 per month. For us, that's barely plausible; for lower-income families it's not even remotely possible. Worse, it gets progressively harder to afford health care as we get older; it's only by insuring twentysomethings at inflated rates that businesses could afford to insure their older empolyees.

The liberal solution to this is, of course, to raise taxes and move to either a "single-payer" system (that is, the government becomes the health-insurance provider for most Americans), or a nationalized system (whereby the government runs health care directly). Since the majority of hospitals and doctors are outstanding, most liberals are pragmatic enough to prefer the former.

A few quick responses to obvous questions:

"But won't increasing taxes cripple the economy?"

Not if the higher taxes are replacing a current cost. My taxes would have to increased by $6000 per year before I'd lose money on the deal. Moreover, the government would be in a much better position to bargain for prices than I am by myself! It would also remove a frightful burden from businesses, and remove probably the single most contentious issue from labor negotiations. (Do businesspeople really like being in the position of having to announce to their employees that they have to discontinue health care for their employees? Does that really help morale?)

"Won't this lead to rationed health care?"

Certainly, but that happens now with HMOs! (That's the entire point to HMOs--they ration care to keep their prices down.) The wealthy will still be able to purchase supplemental plans to pay costs beyond what the government is willing to provide.

"Why should I support health care for people too lazy to work?"

There are three basic answers here. First, many people without health care are working; they just don't make enough to pay premiums. Secondly, life is uncertain--anyone may be laid off at any moment, any small business may fail if times abruptly become tough, and anyone may suddenly become seriously ill. A smug assurance that one will never need such a system is foolish pride, not wisdom. Finally, a serious outbreak of an infectious disease will hurt everyone, not just those unfortunate enough not to have health care. An outbreak of whooping cough (for example) will not politely respect social lines, but will endanger everyone (that immunization you had as a child no longer protects you, by the way; we're all protected from whooping cough by the fact that most children are immunized). A drug-resistant TB outbreak would quickly become terrifying for everyone.

Comments are welcome, as always!

Thanksgiving Day

Well, my absolutely favorite holiday of all has come: Thanksgiving. No real mythology to speak of, no-one insisting that you focus on the real meaning of the day--just family, food, and gratitude that we live in a wonderful place.

Have fun, everyone!

How to make chopped liver (in case there are still a few cubic millimeters of space in your stomach unaccounted for):

Hard boil two eggs.

Chop a couple of onions. Glaze in butter (well, properly speaking schmaltz--rendered chicken fat--but butter'll do in a pinch).

Add the liver to the pan. Cook in the butter.

Pour liver and onions into a wooden bowl. Add the eggs. Chop until your arm falls off (or until things are looking yummy).
Spice with paprika, garlic, and pepper to taste.

Chill and serve.

We'll get back to politics on Monday, after we're all just that much more spherical.

Guns and the Deep Blue

Gun control is one issue that has reached the absurd point where the people on each side are speaking only amongst themselves. Part of the problem is that each side is unwilling to recognize that the role of guns is very different in rural areas compared to urban areas.

To see the problem, let's look at the deepest blue regions in the country. Instead of looking by state (which is very misleading; much of California by area is red, while there are deep blue pockets throughout the South.) Let's take a few representative areas:

Massachusetts (62% for Kerry), Rhode Island (59% for Kerry), New York City (72% for Kerry), Los Angeles County, CA (63% for Kerry), San Francisco City&County, CA (83% for Kerry), Alameda County, CA (75% for Kerry), Contra Costa County, CA (62% for Kerry), Marin County, CA (74% for Kerry), San Mateo County, CA (70% for Kerry), Santa Clara County, CA (64% for Kerry), Santa Cruz County, CA (73% for Kerry), Monterey County, CA (60% for Kerry), Sonoma County, CA (67% for Kerry), Napa County, CA (60% for Kerry), Washington, DC (90% for Kerry), and Cook County, IL (59% for Kerry).

The first thing you'd have to note is that these areas are geographically tiny; if you shaded them blue on a map you'd have to look hard to notice that anything (outside California) was even shaded.

The second thing you'd have to notice is that these areas have an enormous population density. All told, the above geographical smidge is the home of some 38,481,933 people. That's about the same as the populations of Virginia, North and South Carolina, Georgia, Alabama, Mississippi, and Arkansas combined.

What does this mean? It means that residents of the deep blue don't generally think about rabid wild animals as a serious concern--they have urban animal-control departments to deal with such problems. Their police protection is typically a civic police department that's close at hand, not a small, underfunded rural sherrif's department patrolling a huge area. While crime is certainly a serious problem in the deep blue, isolation isn't a factor in it.

By the same token, rural folks don't usually stop to think through the implications of having more people than live in the state of Virginia jammed into Los Angeles County (and roughly the population of Alabama living in the city proper). In Los Angeles, 118 people were treated at one hospital in Los Angeles in the years 1985-1992 for injuries due to falling bullets--that is, bullets fired into the air to celebrate holidays falling again and hitting people. 38 of those people died. A bullet fired completely at random in an area like Los Angeles has a really, really good chance of hitting someone by blind chance. A gun in the hands of someone who can't hit a target in Los Angeles is a terrifying thing.

Can we have a middle ground here? No-one in their right minds would advocate keeping rural residents from owning guns---they need them to protect their families and (in the case of farmers) livestock from feral animals and from criminals. By the same token, completely unregulated gun ownership in major cities is a recipe for disaster.

The path forward might come from the first thirteen words of the second amendment: "A well regulated Militia, being necessary to the security of a free State..." Militias were a sort of military equivalent to the volunteer fire departments that one frequently finds in rural areas. In a militia, most male residents of an area were required to provide themselves with a firearm, register for the local militia, and drill periodically. They weren't out of the control of the government--they were part of it. A hothead could be "drummed out" of the militia (for brandishing his weapon during a bar brawl, for example).

What would the modern equivalent of that be? Local governments could issue firearms licenses (that would be the equivalent of militia membership). Those licenses could be revoked permanently with cause (that would be the equivalent of being "drummed out"). The licenses could require a certain degree of marksmanship and gun safety knowlege (that would be the equivalent of the drills that were required.) If we want to preserve the fundamentally local quality of the old militias, we could require that the local registration files not be centralized beyond the state level (that should answer the usual worries of conservatives that the licenses would serve as a prelude to seizing weapons). That would also allow different regions to regulate weapons in a manner appropriate to local conditions (you'd want tighter controls in LA County than would be necessary in Alpine county, for example).

Red/Blue silliness

Let's take a quick break from policy.

Catherine Seipp, in an article on the National Review Online, has created one of the sillier arguments to hit the Web this week. In her first paragraph, she argues that Blue-Staters don't understand Red-Staters, but that, "small-town red staters are exposed to big-city blue-state values every time they turn on the TV."

Is she serious? Is she really trying to argue that what Hollywood is producing is an accurate reflection of blue-state values?(Well, more correctly urban values, as is clear from any look at a county-by-county map.)

I live in the San Francisco Bay Area, one of the bluest areas of the country. Kerry carried my county by more than a fifty-point margin---and that wasn't the biggest margin up here. Strangely enough, life here doesn't resemble the sort of television fare I assume she's referring to. What exactly is she talking about?

This strange notion that blue-staters are living some sort of alternate, amoral lifestyle is terribly destructive. It feeds this new tendency to speak as though the two (enormously artificial) regions are separate countries forced together by an accident of history. The only real difference between the regions is population density. About as many people voted in my county, for example, as live in Wyoming. More people voted in Los Angeles county than live in Arkansas. More people live in Los Angeles county than in the state of Virginia. "Values," though? Do folks in the South actually imagine that life in San Francisco is one long episode of Charmed, minus the witchcraft?

I can see why you'd be disturbed (and a tad jealous), but for better or worse that's not how it is.

The Complexity of Simplification

Tax simplification sounds terrific--none of us likes the long, tedious hunt through old receipts at tax time. There are two huge drawbacks, though, that you have to watch for:

Most of the complications are deductions and credits

Once you know your adjusted income, computing your tax is trivial (flat or not)--you look up your income in the table, and enter your tax. Simplifying the tax code almost has to mean eliminating deductions. Thus, unless you simultaneously cut tax rates, you're actually increasing taxes as you simplify the code.
(The big exception here is the AMT, which I'll discuss in a future post.)

The tax code is complex precisely in an effort to make it fair. If you're a freelancer, for example, some of your expenses are related to your business. Properly speaking, the government taxes profits on businesses, not revenue, so those expenses ought to be deducted from your income. Removing the deduction but dropping rates would have somewhat ludicrous effects on small business owners--for example, people selling cheaper products would get taxed at a lower rate than people selling more expensive ones.

"But," you might say, "we wouldn't lose those deductions!"

You're almost certainly right. But then the tax code remains complex, and you don't get to throw away your CPA's business card.

The law of unintended consequences

Recently, the current administration floated a proposal to remove the deduction for businesses that pay for their employee's health benefits.
That would certainly simplify computing taxes for businesses. It would also remove a major incentive for them to provide health benefits.

Yes, this would help the federal government's bottom line. If it increased the number of uninsured, though, it would dramatically hurt the states financially. Lower federal taxes in return for higher state taxes doesn't sound like nearly as good a deal.

Secularism

     As the government of the United States of America is not in any sense founded on the Christian Religion, as it has in itself no character of enmity against the laws, religion or tranquility of Musselmen, and as the said States never have entered into any war or act of hostility against any Mehomitan nation, it is declared by the parties that no pretext arising from religious opinions shall ever produce an interruption of the harmony existing between the two countries.
--Article 11 of the Treaty of Tripoli, signed 1796, ratified 1797.

The Democratic Party of the United States has recently come under attack by a number of pundits as a "secular" party--one that derives much of its support from folks that don't go to church much (if at all), and one that tends to run candidates that don't discuss their faith openly. I (along with most liberals) don't find this trend disturbing--indeed, we find it entirely in accord with America's long tradition of separation of church and state.

To understand why we have such a tradition, it's important to remember that the founding fathers were Englishmen, with a rich sense of the debacle that state control of religion had created during the reign of the Tudor and Stuart monarchs. Moreover, the Union was to be of states with a variety of religious traditions: Puritan Massachusetts, Catholic Maryland, and so forth. The first amendment allowed the states to unite without a messy, destructive fight over which faith would become the "official" doctrine.

Have two hundred years of official governmental neutrality on religion crippled American Christianity? If anything, the opposite is true. America is easily the most religious first-world nation. Indeed, this is true even after forty years in which the first amendment has been interpreted more strictly than ever before (for much of our history, many individual states used the school system to teach a sort of generic Protestantism--this was the origin of the outstanding system of Catholic private schools in this country.)

Official secularism is no threat to religion in this country. Instead, it leaves religion free to persuade (judging by the results, religion can be very persuasive indeed).

Where do secularism and religion collide? I can think of four main issues: prayer in public schools, religious displays on public land, abortion, and homosexuality ("blue laws"--laws enforcing public morality--would once have been a fifth, but I believe a general consensus has emerged against these). I'll talk about each specifically in future posts. In general, though, liberals believe that preventing religion from entering the public sphere protects its ability to work privately.

On flat taxes

The federal tax structure is, as I've said in a previous post, progressive. This means that the wealthy are taxed at higher rates than the poor. This structure, perhaps of the greatest liberal triumphs of the last century, attempts to tax people according to their ability to pay. Progressive taxes attempt to take into account the fact that the fraction of a person's income that they can afford to pay in taxes gradually increases with income---that is, taxing someone making $30,000 at 20% (leaving them with $24,000) is in effect a much harsher tax than taxing someone making $300,000 at 20% (leaving them with $240,000).

This structure strikes many conservatives as unfair. They see it as contributing to the overwhelming complexity of the tax code (which it does--consider the simplicity of paying the flat social security tax in contrast). They also complain that it punishes hard work by increasing taxes on higher-income Americans. To fix these problems, they frequently propose replacing the graduated income tax with a single, flat tax rate (frequently coupled with an exemption for some initial amount of income, as with the current tax code).

What's wrong with flat taxes? Let's look at 2001 tax information (the most recent complete information that I could readily find) to see:

In 2001, Americans with the highest 1% of incomes (that is, with incomes over $238,000 in 2001 dollars) paid an effective tax rate of 24.5% (that is, once deductions were accounted for, they paid on average 24.5% of their income in taxes). Because their incomes were very high, they paid about 30.3% of income taxes in that year.

If we were to flatten taxes, we could do it in one of two ways. We could either flatten taxes at the 24.5% they paid (which would ammount to a huge tax increase for most Americans), or, more likely, we'd flatten it below that level. If we flattened it below that level, we'd immediately reduce the government's revenue by a sizable amount (remember, this income group pays almost a third of all income taxes!) To make up the lost revenue, we'd have to either increase taxes on lower wage groups (which would hurt the economy badly--remember, it's consumer spending that's currently driving the economy, and consumer spending doesn't rise linearly with income), or go further into debt.

I simply don't see how to resolve this without a tax hike on most other Americans. (The tax rate I've seen bandied about on conservative sites is 17%, with most deductions eliminated. This would be, on average, a tax cut for people earning $80,300 or more, and a tax hike for everyone else. Remember that your average rate isn't your "bracket"--see the post below--but the amount you actually pay in taxes as a fraction of your income.)

Comments from conservatives on how this could work are certainly welcome.

Figures in this report are from Effective Federal Tax Rates, 1979-2001 by the Congressional Budget Office.

Update: The income figures in this article aren't family incomes, they're "adjusted incomes." To find yours, take your family's income and divide it by the square root of the number of people in your household. Thus, if your family income is $70,000 and there are three of you, your adjusted income is about $40,415. For a family of four to be in the highest 1% of incomes, that family must make at least $476,000.

On Impugning Motives

I'm going to take a break from arguing policy for the moment to talk about politeness.

I'd long resisted creating a blog myself. I finally decided to create The Polite Liberal because I was worried about the tone that political discourse in this country was sinking to. The most obvious problem is the hurled insults--it's hard to talk about policy when conservatives and liberals are simply seeing who can scream about "liberal elites" or "redneck racists" the loudest. There's a second problem, though, which is at once more subtle and more damaging.

The problem is that neither side is willing to assume that the other side is being honest about its motives. This leads liberals to screech that the war in Iraq is an excuse to grab that nation's oil, or conservatives to suggest that gun control is a prelude to seizing all guns in the country and imposing tyranny. It led a previous commenter on this site to write, in the middle of an otherwise reasonable disagreement with my last post:

"Is it possible that they are using my hard earned money to buy votes, to create a class of citizens dependent on the federal government? "

This sort of thing makes honest debate impossible. If we really want to debate policy, we have to assume that both sides are acting honestly, and are genuinely trying to create a better United States of America. We strongly disagree as to the means, but very, very few of us (on either side) are acting dishonestly. You can argue that welfare doesn't help the poor (this was in fact the thrust of the aforementioned comment), but not that liberals don't intend it to. These are all matters about which good people may in good conscience disagree.

Those of us on my side are political liberals, not the fifth column of the Red Army. Those of you on the other side are political conservatives, not aspiring brownshirts or corporate shills. We are all of us Americans, here. Let's act like it.

Federal Taxes

Author's Note--There's much too much to say about taxes to put into one post, so I'll break this up into several related posts. I'll start today with the basic idea of progressive taxation; tomorrow I'll discuss conservative proposals to simplify the tax system, then go on to social security

If there's one thing that liberals have been beaten about the head and ears with in election after election, it's that we're the philosophy of high taxes. As with all good insults, there's a grain of truth there--but not as much as is commonly assumed.

First of all, there's a key quesion which isn't commonly addressed--"as opposed to what?" That is, if you aren't in favor of raising taxes in the current situation, what are you in favor of? The usual conservative response is "cutting the size of government," but we haven't seen any sign of the current government doing that, despite nominal conservatives controlling both houses of Congress and the presidency. If you're in favor of increasing the deficit instead (which is what's happened so far under the tax cuts favored by Mr. Bush), how do you forsee returning the budget to balance? Or do you forsee doing so? (The current plan for "cutting the defict in half" requires that Congress not make the most recent tax cuts permanent. Since that doesn't seem to be what the President intends, what is the alternate plan?)

The federal government is principally financed through two taxes: the federal income tax, which is progressive (that is, tax rates increase with income), and a Social Security Tax (also called the "self-employment tax" when freelancers pay it) which is flat (it's the same rate no matter your income).

The progressive nature of the federal income tax is frequently misunderstood. Income is taxed at different rates depending how much income a person makes--the first seven thousand dollars that a single person made in 2003 was taxed at 10%, the next $21,400 at 15%, then 25% up to $68,800, 28% up to $143,500, and so forth. The problem is that people tend to speak as though they were in the tax brackets--so a person getting a raise from $68,000 to $69,000 often will say, "I'm in the 28% bracket now," as though they previously paid 25% on their entire income (that is, 25% of $68,000) and now pay 28% of $69,000.

That's not how the tax code works. At $68,000 of taxable income, you pay 10% of $7,000 ($700), 15% of $21,400 ($3,210), and 25% of $39,600 ($9,900), for a total tax bill of $13,810 (I'm neglecting exemptions and deductions here, for simplicity). This would be an overall tax rate of 20.3% (again, neglecting deductions and exemptions). At $69,000, you pay an extra $800 at 25% ($200) and an extra $200 at 28% ($56), for a total tax bill of $14,066, and an overall tax rate of 20.4%.

Conservatives frequently attack the progressive tax structure as "unfair," becuase it taxes higher-income people at a higher rate than lower-income people. Liberals (this author included) tend to favor progressive taxation, on the theory that it correctly reflects how much a person can afford to pay taxes. The first portion of anyone's income--rich or poor--can be thought of as going to essentials--food, clothing, and shelter. The difference between $17,000 and $18,000 in income is how many meals a family can afford to eat. The difference between $68,000 and $69,000 is a certain amount of comfort. The difference between $300,000 and $301,000 is nearly irrelevant.

Are there problems with progressive taxation? Yes--there are three. First, if a person holds a lot of different jobs, witholding the correct amount of money from a paycheck becomes tricky; unless one is organized it's easy to withold too little. Secondly, it tends to lead some people to treat the wealthy as an endless conucopia of tax money. This can lead to a lack of concern for what government programs cost, which in turn leads to bad policy. Finally, it tends to lead to a complex system of taxation, which gives rise to a lot of "gamesmanship" by people and corporations.

Veterans Day

Today was Veterans Day. We honor their service.

Deficit Spending

Let's start this off with a subject of considerable current import: deficit spending.

There was a time in the not-to-distant past when the Democratic Party was considered the party of deficit spending. We were, after all, the party most commited to Keynsian economics--the idea that recessions should be handled by having the government pump money into the economy by spending more than it recovered in taxes, then keeping the economy in check in good times by raising taxes.

Since Mr. Clinton's presidency, most liberals have more or less abandoned Keynsian economic theories. Under Mr. Clinton, the budget came into balance as the economy boomed; by 2000 the government was running a considerable surplus and beginning to pay down long-term debt. Keynsian economics had two practical problems. First, the US government moves very slowly by design, so by the time the deficit spending designed to fight a recession began, the recession was often over. Worse, it's much easier for the US government to begin deficit spending than to end it--tax cuts and new services are almost universally popular, while service cuts and tax hikes are almost universally unpopular.

What's wrong with the government running in deficit, as it has done throughout Mr. Bush's presidency? If deficits are small and for specific, nonrecurring purposes (to fight the Iraq War, for example), deficit spending makes some sense; it allows the government to pay for crisis over a long period of time. Unfortunately, the bulk of the recent deficits have been caused by the tax cuts Mr. Bush has implemented. This means that the government is running a structural deficit--that is, it would be in deficit even if we weren't fighting a war. Structural deficits, if they aren't addressed, eventually make bond investors wary; to protect their investment they may begin to demand higher interest rates. At that point we have a serious problem--either consumer interest rates go up (making life very difficult for homeowners with adjustable-rate mortgages and for anyone with a lot of credit-card debt) and the deficit gets much worse (because the cost of "servicing the debt"--paying interest on the existing debt--increases), or the government simply prints a lot more money, causing sharp inflation.

Note that this is one issue on which libertarians and liberals actually have more in common with one another than with conservatives. Libertarians generally want a very small government indeed, paid for by small (but adequate for the task) tax rates. Liberals generally want a larger government, financed by taxes more like those we had in the 1990s. Conservatives want the larger government as well (judging by their actions since they won effective control over the government in 2002), but want lower taxes; they theorize that these lower taxes will cause an economic boom that will actually increase tax receipts. Sometimes this works (it did under Mr. Reagan, although the government grew faster at the time than did tax receipts), but so far it hasn't under Mr. Bush.

It is, broadly speaking, the liberal position that increasing interest rates are a much greater threat to the economy than taxes at 1990s levels were. Moreover, it the tax cuts were aimed at boosting the economy in the short term, they weren't structured well. The problem here is philosophical--if you want to pump up a faltering economy, should you aim tax relief primarily at families that earn $30,000-$100,000 per year, in hopes of boosting spending, or at families earning above $200,000 in hopes of boosting investment. Mr. Bush's administration has opted for the latter course, with predictable results; the stock market has been booming, but working families are struggling. Liberals would have opted for the former course.

Welcome to the Polite Liberal

In the aftermath of the 2004 election, it's become clear that many people have simply never heard a straightforward, polite explanation of a liberal political position. I'm hoping to remedy that here.

A few ground rules:

(1) For the most part, I'll focus on policy and not politics. There are many, many other blogs that follow the mechanics of our country's incessant political campaigning better than I ever could (or would want to).

(2) I'll adopt an unusual convention and always refer to political figures formally: Mr. Bush, Ms. Clinton, and so forth. I'm hoping that this will force a slighly formal tone on the site, and avoid name-calling.

(3) Because the Democratic Party is enormously fragmented, I'm sure many liberals will disagree with my depiction of a "typical liberal viewpoint." So be it; where disagreements occur I'll try to mention them.

(4) Rude emails and comments will be periodically mocked. Positions won't be.

I'll start tomorrow.