On the Issues: Economics, Politics and Happiness
Issue   |   Wed, 03/14/2012 - 02:37
www.politico.com

After picking the three topics I wanted to talk about in this article series — abortion, international humanitarian crises and the economy — I noticed that I had mirrored those three values articulated in the Declaration of Independence: life, liberty and the pursuit of happiness. In keeping with that theme, I’m going to take a look at the American economy in a way that’s a bit more skewed toward the human aspect of it rather than just doing number crunching.

To be honest, I didn’t even want to write about the economy. The reason it made my top three issues isn’t because it’s that important to me, but because it is to others. I tend to be a bit more laissez-faire; we may have created a bigger mess than usual, but cycles are natural in our economy, and government spending isn’t helping us overcome the ongoing “recession.” While I was less skeptical about President Bush giving money back to individual Americans, because it basically amounts to a tax break, the federal bailout of banks and other large companies such as General Motors was a bad idea. For the economy, it was ineffective and a waste of money; ideologically, it was another move toward socialism.

Of course, America is already fairly socialist. Social Security, Medicare/Medicaid and SSI planted us firmly in a mixed economy long before TARP and the individual mandate caused this generation to sound the death knell of pure capitalism in America. The main problem with this is, quite frankly, that I trust myself far more than I trust the government with my money. I’m not really libertarian, but I’m not a complete centrist, either. I want the federal government to have less money and fewer programs to spend it on, within reason.

I say “within reason” as a manner of opposing legislation such as the Balanced Budget Amendment. Mandating a balanced budget is a nice idea; the era of outspending our national income needs to come to an end. But this amendment is shortsighted: a balanced budget is nice during a time of peace, but war requires a serious increase in government spending. It’s perfectly normal to run at a deficit during a war, and that option should still be open. Besides, if we keep a balanced budget when we’re at peace, we can more easily take on the extra load when we need to spend for war.

Other changes could be a great boon to the country, though. The tax code, in particular, is an issue that desperately needs to be addressed. To have 17,000 pages of laws and loopholes is ridiculous, and it’s not getting money to the government. I appreciate the light brought to this issue by Herman Cain’s 9-9-9 tax proposal, but the value-added tax component of that plan is at least as invidious as our current tax code (here’s a hint: Soviet Russia used it). Instead, I’m a proponent of a flat tax. It’s pretty simple: the government takes a fixed percentage of the individual’s gross income, and it leaves everything else alone. This system, used by post-Soviet Estonia, is neither progressive nor regressive, and it doesn’t have any loopholes (so everyone can quit whining about Romney’s 13 percent tax and the far more ridiculous example of General Electric’s tax-free 2010). It doesn’t allow tax breaks for charitable giving, which is somewhat of a drawback, but it gives the government a clear income (say, a straight 20 percent) without needing to spend large amounts on collection and litigation.

In an ideal model, for me at least, charitable giving is important. I’m of the opinion that the government shouldn’t be responsible for welfare, but that the church should be. I’d like to specifically call out Christianity; Christians have a clear mandate to care for the poor, and we Christians have failed miserably. If one wants to talk separation of church and state, the church ought to get the state to step off of its territory and take over a responsibility that it has largely neglected. That’s not to say that churches don’t do things to help the poor; a few of the churches in Amherst are involved in running a local homeless shelter, for example. It’s on the macro scale where the church has failed; the whole church, Catholic and Protestant, needs to unite and take on its massive duties.

Some of these duties deal with things that the federal government hasn’t really touched, like the black market economy. The United States black market deals with an estimated $620 billion dollars annually, with income sources ranging from movie piracy to drug trafficking. In addition to that figure, human trafficking and sex slavery is endemic in the U.S., with tens of thousands of women being kidnapped or smuggled into America and forced into manual labor or prostitution. A few churches and religious organizations have attempted to fight against some of these practices, but without the power of the global church, they’re not gaining much ground.

The U.S. government has also attempted to combat these issues in various ways, usually with small legal gestures toward a better world, but it needs to do more. That extra money gained by denying super rich Americans the ability to evade a flat tax could be put to this use, rather than that of welfare, since I’m being idealistic for the moment. In addition, we Americans need to secure our southern border in some meaningful way to help stymie the drug trade (but that’s an issue for a different article).
None of these things are cure-alls for the economy; but I don’t really believe that there is a cure-all. I don’t believe that there should be a cure-all, because then the government is the one fixing the problem, and there are better things to put our faith in than the government.

I suppose that’s the best way to end a series dealing with issues for potential presidential candidates, a warning not to put our faith in them or their parties. Certain candidates could be better for the country, yes, but it’s likely that none of them will make a fundamental difference in our country. Is Obamacare bad? Yes. Is it fundamental? No. It’s the same story for the myriad of other talking points for every candidate except perhaps Ron Paul.

The government will limp along, just like it always has. It can’t ensure our happiness; as we’ve seen, it can’t even ensure that we have a steadily growing economy. But happiness has little to do with money, even though Americans are free to pursue happiness down that road. If you expect a politician to fix your country or repair your economy, or make you happier with life, you’re looking for a savior in the wrong place.

If you want to be happy and help the economy, give your money to someone who needs it (it’s like a mini Bush aid package). Just don’t hope too much in the government, and, for Heaven’s sake, don’t listen to the pundits. Neither the world nor the country will end in 2012, no matter who we elect.

Anchor
Comments
Class of '11 Alum (not verified) says:
Wed, 03/14/2012 - 16:09

I'm not quite sure where to begin with this article considering the goal of trying to cover the entire economy.

A:
"I tend to be a bit more laissez-faire; we may have created a bigger mess than usual, but cycles are natural in our economy, and government spending isn’t helping us overcome the ongoing “recession.”"
It's not necessarily a matter of government spending, but also a matter of the proper regulations. If you notice the trend, the less regulations on improper (by which I mean various ways of lying and cheating others to get ahead of the game) economic activity, the larger the boom and bust cycle is and the greater is income inequality in this country. While cycles are natural, when they grow as large as they have, they cause chaos that reverberates for years as is evident by the struggling U.S. economy, and the insanity of austerity that is Europe. I think we can both agree that simply letting the invisible hand dictate everything is a horrible idea because their are many negative externalities affecting the human condition. We tend to not consider the long term or downstream effects of our actions on others. In addition, stimulus spending is essential for, as is evident in the name, stimulating the economy during a downturn. It simply speeds of the process of recovery and can also stabilize things to prevent utter and total collapse. Furthermore, welfare programs are especially essential during these crises. Could they be much more efficient and have less bureaucracy? Of course, and I'd welcome it. But if people don't have enough money to buy food or keep their shelter, things will get a whole lot worse very quickly. And this money is immediately put back into the economy because these people need to spend it, as compared to tax breaks for richer people who are more likely to save or invest it in the long term (which can help the economy too, but won't lead to shorter term strengthening).

B:
"While I was less skeptical about President Bush giving money back to individual Americans, because it basically amounts to a tax break, the federal bailout of banks and other large companies such as General Motors was a bad idea. For the economy, it was ineffective and a waste of money; ideologically, it was another move toward socialism."

I am skeptical of the bailout of the banks, mostly because I'm not sure if the taxpayers actually got fully reimbursed and because I'm not sure if new regulations are strong enough to prevent this from happening again. But recent detailed stress tests of these banks makes things look more promising. And of course, many of them are still making an absurd amount of money by simply pushing money around. That being said, I don't think we had a choice in that the other option was let them collapse and bring down the economy even further with it. That's what happens when a few companies dominate the economy. Hence, the new regulations and stress tests to ensure these banks have enough capital to handle a downturn.

Bailout of the automotive industry: There are a lot of details on this, which I won't go into. Suffice it to say, the taxpayers have got most of their money back, and the auto-companies along with the unions have taken a lot of cuts in order to ensure stability and growth. The companies are profitable again. The alternative once again, was letting the companies completely collapse and declare bankruptcy. This would have let unemployment skyrocket even further, not just due to closure of auto plants, but also the other parts of the manufacturing economy that are directly connected to these auto companies' production. As for finances, this would have led to a ripple of chaos through the manufacturing economy, and we might still be in recession worse than before,
Here are some posts that discuss the finer points in a little more detail:
http://www.tnr.com/blog/jonathan-cohn/101000/romney-cnn-debate-gm-chrysl...
http://www.tnr.com/blog/jonathan-cohn/100757/romney-attacks-obama-gm-chr...

So, in terms of ineffective and a waste of money: So far, it seems to have been pretty effective to me, compared to the alternative of years of depression, unemployment, and chaos. And most of the money has been paid back, and there is economic growth once again. Pure economic theory starts to break down on the macro scale we are talking about - the complexities and externalities are so large that the invisible hand isn't going to do what is best - unless you think continued inequality growth is the best system. From a moral and nationalist perspective, I do not.

C:
"I trust myself far more than I trust the government with my money. I’m not really libertarian, but I’m not a complete centrist, either. I want the federal government to have less money and fewer programs to spend it on, within reason."

I would agree that in many instances, I trust myself with my money more than government. But government needs revenue to do important things that any individual person isn't going to do on his own. Furthermore, people once again are often bad at planning for the long term, hence the idea of social security for example. Furthermore, individuals are horrible at handling choices and information. That's why for certain parts of the free-market, government information, regulation, and some limited control is good. Healthcare is one area where no one is going to decide to not have a medical procedure they need to survive - nor will they know what a fair price is. States require everyone who drives to get auto-insurance as well. There are a plethora of examples. That doesn't mean entitlements don't need to be reformed. But medicare, medicaid, unemployment benefits, food stamps, etc. are critical to keeping anyone from falling down to the bottom of the economic ladder and giving these people the opportunities to be able to move up it. I'm a big fan of equalizing opportunities when possible, not outcomes.

We live in a representative democracy, where people vote on whether to enact these programs - many people support them and some people want to cut them completely. I think most people agree a middle ground of reform is best. And as an aside, government needs to invest more in infrastructure, science, and technology. What I would kill for fast light rail around major urban areas of the country.

D:
"Other changes could be a great boon to the country, though. The tax code, in particular, is an issue that desperately needs to be addressed. To have 17,000 pages of laws and loopholes is ridiculous, and it’s not getting money to the government…Instead, I’m a proponent of a flat tax."

I agree the tax code needs to be reformed - loopholes should all be closed except for maybe a few deductions involving families, children, maybe education? No one disagrees with that. But I am not a proponent of a flat tax. I do like that you seemed to be suggesting that capital gains and income should be taxed the same, though even I may think that the capital gains rate should be somewhat lower to promote economic investment and to compete with other countries. The progressive tax system exists because of how income is skewed in this country. If you make barely enough money to get by (food, shelter, transportation, some education), then your tax should be minimal because most of your money is going into the economy already and living on the street or being forced to quit your current job won't help the economy. As people start to make more and more money, they can afford to pay more and still live a pretty good life. It is money they might just be sitting on and not directly investing into the economy anyway, at least for short term gains. As you move up to the very top of the economic ladder (people making millions), you can afford to pay an even larger tax, and it won't really change your life at all. Sure, maybe you can't afford a fourth car, but you will still spend a lot of your money or invest it. When the super wealthy get tax breaks, they tend to buy luxury items, which don't contribute immensely to economic growth or just save it. The inheritance tax for extremely large amounts of money is a great thing - if you are getting an easy life simply because you were randomly lucky and born to such a rich person, you can afford to give a bit of that money to the government to help the country as a whole. Because different amounts of money will have significant effects on your well-being and livelihood, they should be taxed differently just as capital gains and income contribute in different ways to the economy and can be taxed differently.

We seemed to have forgotten our patriotism here - what happened to the days when people said "I'm a patriot, I pay my taxes!" We pay taxes because we believe in our current form of government and that we want to make our nation great. Given the opportunities this nation gives us, it's our duty to contribute so that our way of life continues. We are all in this together - no one exists in isolation.

E:
"In an ideal model, for me at least, charitable giving is important. I’m of the opinion that the government shouldn’t be responsible for welfare, but that the church should be. I’d like to specifically call out Christianity; Christians have a clear mandate to care for the poor, and we Christians have failed miserably. "

As a non-Christian, perhaps I don't want our entire safety net in control of a private religious group that can do as it pleases with the money people donate and doesn't have laws determined by a representative democratic process on what to do with said money. That being said, I'm all for private charity, whether from religious organizations or otherwise - I just don't trust it to address all the problems of poverty or have a vast enough network to handle the immense poverty in America, let alone the world. I am skeptical that if the government just cut medicare, medicaid, SS, unemployment benefits, etc., private charity would be able to pick up much of the slack. Maybe if it were extremely gradual, but again, I don't necessarily trust private organizations as they have their own interests as well. Also, you just said Christians have failed miserably in this task. How would you change the Christian establishment to make them do any different in the future?

Do these charities try to proselytize the people they help? I honestly don't know; I am just curious. Are their guidelines for Christian charities that impose their views on others? Obviously, I'm not suggesting Christians should just stop giving charity, but I'm just saying there are many questions to be considered.

In any case, why should Christians control charity and the safety net? What makes this religion better than any other, religious or secular, for providing for these needs? Given the laws that have been proposed and passed in recent months concerning women's rights, I don't know if I feel comfortable with a private religious organization having that much power. And I wouldn't want my own religion to either.

F:
" Is Obamacare bad? Yes"

Healthcare if a whole other issue beyond the scope of your article, but I disagree with this point. It has problems because it was created through a huge amount of complex compromise and will need to be reformed. That being said, we will have to wait many years to find out whether it's an overall net positive or net negative. But many people will get health insurance who could not before and will not go bankrupt from the luck of the draw that often is disease.

G:
"But happiness has little to do with money, even though Americans are free to pursue happiness down that road. If you expect a politician to fix your country or repair your economy, or make you happier with life, you’re looking for a savior in the wrong place."

I bet many people think there is a relation to money and happiness. I agree there is little correlation once you are making enough money to live a stable and relatively well to do life. In which case, no you are not expecting a politician to fix your life. But below a certain threshold where you are barely getting by despite working your hardest, you may want the government who you have a social contract with to provide assistance if you should require it, whether to keep from starving or to help provide opportunities to move up the latter, such as, for example, pell or other education grants and loans to students. It's hard to be happy when you have to worry every day whether you will have enough money for both food and rent.

H:
"If you want to be happy and help the economy, give your money to someone who needs it (it’s like a mini Bush aid package). Just don’t hope too much in the government, and, for Heaven’s sake, don’t listen to the pundits. Neither the world nor the country will end in 2012, no matter who we elect."

I agree on giving to charities of your choice if you want to more directly influence causes you care about. But taxes are still vital for much larger things and for filling in the gaps because there are always going to be some causes people won't care about or will forget.

The world nor the country will not end in 2012, you are correct. That being said, considering the crazy laws that have been passed in conservative legislatures as of late, it is a crucial election if we want to stem the tide of regression and move forward once again.

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