Fox News, the bastion of modern neo-conservatism, is knee-deep in stupid:
Soft drinks have unfairly become the whipping boy of most anti-obesity campaigns. Maybe friends shouldn’t give friends Big Gulps, but to my knowledge, no one’s ever been forced to buy and drink one. People who want sweet drinks will find and consume them, regardless.
There’s an element of personal responsibility and control that this law and others like it don’t even attempt to address. At the end of the day you end up with a well-intentioned law that oversimplifies the problem and provides a correspondingly oversimplified solution.
No one’s denying that that we’re in the middle of an epidemic. Twenty-five percent of applicants are deemed too fat to serve in the Armed Forces. The implications for the defense of the country as well as for the future competitiveness of the American workforce are catastrophic.
But taxing, limiting and legislating soft drinks will not solve this crisis. Our history of isolating, demonizing and replacing ingredients in a quest for health proves that.
Here’s the thing: the government pays for health care* and as a natural consequence is the one who gets to create ways to keep down the cost of paying for said health care. Most people understand this when it comes to families: daddy pays the doctor bills, and so daddy makes little Tommy eat spinach and beets instead of Snickers and Butterfingers because daddy doesn’t want to pay for diabetes meds for little Tommy for six, ten, or fifteen years. No one has a problem with this because everyone understand that whoever pays the bills makes the rules.
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Of course, the government is the one paying the doctor bills. If it assumed that legislators actually represent the people who elect them, the government is paying the doctors’ bills at its citizens’ request. Thus, it is well within the right of the government to limit what people consume because the government is stuck paying for the consequences of people’s consumption. When fatties decide to load up on sugary soft drinks, it’s the government that pays for diabetes medicine and cavity fillings.
It would be irresponsible for the government to let costs get out of control, and there are only two ways to prevent it: the government can stop paying for health care or the government can try to prevent people from needing health care in the first place. My personal preference is that the government simply does not pay for health care at all. However, if people demand that the government pays for health care, then I’m going to demand that the government find some way to limit costs.
The problem, ultimately is that conservatives, like liberals, have unreasonable expectations. We cannot have everything we want. There are limits. These limits can be self-imposed voluntarily in the market, or they can be imposed coercively by the state. But make no mistake, these will be imposed at some point. Thus, it is foolish and unrealistic to demand a system that has no limits. And yet, this is exactly what conservatives want.
* And don’t give me any nonsense about Obamacare. The government has been paying for health care on a large scale in some form since the advent of Medicaid and Medicare, both of which receive strong support from conservatives.
The guarantee of landline telephone service at almost any address, a legal right many Americans may not even know they have, is quietly being legislated away in our U.S. state capitals.
AT&T and Verizon, the dominant telephone companies, want to end their 99-year-old universal service obligation known as “provider of last resort.” They say universal landline service is a costly and unfair anachronism that is no longer justified because of a competitive market for voice services.
The new rules AT&T and Verizon drafted would enhance profits by letting them serve only the customers they want. Their focus, and that of smaller phone companies that have the same universal service obligation, is on well-populated areas where people can afford profitable packages that combine telephone, Internet and cable television.
Disclaimer: I don’t know if Johnston is a liberal. I do know that this opening sentence personifies quite nicely liberals’ view of rights.
The liberal dichotomy—and corresponding hypocrisy—is typified by how they desire for everyone to have everything while simultaneously condemning everyone for materialism (talk about projection!). In this case, liberals would agree with Johnston’s assertion that basic telephone service is a right. This positive view of rights implies that someone will have to provide them with the service, even if it isn’t profitable.
This view of rights extends to everything—education, health care, internet service, wages, employee benefits, etc. Everyone should have everything they want.
Unfortunately, not everyone wants the same things, and so what people do with their newly-acquired positive rights is try to get whatever they can for themselves. This behavior is individualistically rational, and entirely predictable. It also tends to promote materialism, which is often condemned by liberals.
The modern condemnation of materialism is seen in the environmental movement.
Consumption is condemned, as evidenced in the condemnation of burning fossil fuels, which is an essential source of energy, particularly in regards to the propulsion of automobiles.
The solution to our current environmental problems is to burn less fuel in particular by driving less.
Interestingly, one reason why we drive so much is because it is cheaper to live in areas that are not as population-dense, thanks in no small part to federal subsidies. One contributing federal subsidy is that of mandated telephone service (seriously, how many people would live in the country if there were no communication infrastructure?). There are other subsidies besides this, like FDR’s programs to bring electricity to rural areas, or other programs to bring urban levels of infrastructure to rural areas.
And so, this is liberalism’s incoherence in a nutshell. First they demand all sorts of subsidies for everyone (like with phone service), then they get upset at people being wasteful. Solving the first “problem” begets the latter problem and also its solution. Ironically, they’d have what they wanted if they simply left everything alone. Of course, I’m assuming that they want a specific outcome, and not merely the power to control other people’s lives.
While the findings are not directly comparable because of differences in methodology, the new study suggests that the recent recession did not cause any significant increase in the share of benefits flowing to the poor, as might once have been expected.
The study found that older people received slightly more than half of government benefits, while the nonelderly with disabilities received an additional 20 percent. These benefits are not means-tested – indeed, better-paid workers get more in Social Security.
My general point from before still stands, as removing illegal immigrants, reducing immigration, and cutting down the guest worker program will cut the labor supply, making American workers more desirable to employers, and thus reducing unemployment, which in turn reduces safety net spending.
What’s more depressing is that a good portion of safety net spending has increased because the Boomers have finally decided to claim their government benefits. The only way to reduce this spending is to cut the benefits (which hilariously is more likely under Obama than Romney, at least if Romney is to be believed) or kill the recipients. On the hand, we’ll reduce government entitlements; on the other hand, the Boomers will be dead. Frankly, this is not a bad choice to have.
One thing’s for sure: with the increase in federal safety spending being due to changing demographics, this trend is unsustainable. The end of this trend will not be pleasant.
I’m not going to post the whole letter here — you can read it at Independent Political Report. And you should. As a teaser, here’s the opening:
Main libertarian objections to the Fair Tax:
1. The prebate would start a new welfare entitlement.
2. The transition would redistribute from savers to borrowers.
3. There is a danger of getting BOTH an income AND a consumption tax.
4. Advocates disingenuously quote a 23% rate when it is actually 30%.
5. Advocates use protectionist rhetoric to sway populists.
Also well worth a read is Jason Gonella’s open letter to Johnson, which covers some other issues.
And two pieces on the “Fair” Tax by LP presidential nomination candidate R. Lee Wrights (here and here).
And finally, while I don’t by any means claim to be “the father of libertarian opposition to the ‘Fair’ Tax,’” I can claim to have done a bit of writing on it long before it became a football in the Libertarian Party’s 2012 presidential nomination process — see here and here.
In 2001 and 2003, former U.S president George W. Bush signed Economic Growth and Tax Relief Act (EGTRAA) and Jobs and Growth Tax Relief Reconciliation Act (JGTRAA). EGTRAA reduced personal income tax rates, increased child tax credit, decreased estate tax and introduced a various range of tax-favored retirement savings plans. In 2003 when EGTRAA was enacted, the Congress cut the top capital gains tax rate from 20 percent to 15 percent while the individual dividend tax rate was reduced from 35 percent to 15 percent.
Bush tax cuts are set to expire in 2011. Hence, a bold increase in marginal tax rates is expected. David Leonhardt recently asked whether the Bush tax cuts were good for economic growth amid the fact that under Bush administration, the U.S economic growth was the lowest since the World War II. Eight years of Bush administration were known for the largest expansion of federal government spending compared to the six preceding presidents. In eight years, President Bush increased discretionary federal outlays by 104 percent compared to 11 percent increase under President Clinton.
Under Bush tax cuts, the reduction in personal income tax rates was imposed across all income brackets. Tax Policy Center estimated that extending Bush tax cuts in 2011 would increase the after-tax income across all income quintiles but it differed substantially. For instance, the increase in after-tax income in the lowest quintile would represent 12.19 percent of the increase in after-tax income of the highest quintile. The average federal tax rate would decrease by 2.5 percentage points. The reduction in average federal tax rate would be the most significant for top 1 percent and 0.1 percent cash income percentile, -3.8 percentage points and -4.4 percentage points respectively. Assuming the extension of the Bush tax cuts, the average federal tax rate, which includes individual income tax rate, corporate income tax rate, social security, Medicare and estate tax, would be substantially lower compared to Obama Administration’s FY2011 Budget Proposal. The increase in the average federal tax rate would be roughly proportional across the cash income distribution. The federal tax rate would increase by 1 percentage point for the lowest quintile and 3.1 percentage point for the top quintile. The federal tax rate would for earners in top 1 percent of cash income distribution would increase by 4.2 percentage point. The chart shows the distribution of average effective tax rates and current law and current policy of Bush tax cuts not assumed to expire in 2011. The current proposal would increase the effective tax rate across all income quintiles. The highest increase (3.3 percentage points) would hit the earners in top 20 percent of income distribution.
Effective Tax Rates: A Comparison
Source: Urban-Brookings Tax Policy Center Microsimulation Model
The expiration of the Bush tax cuts would substantially increase the effective tax burden across the cash income distribution. Recently, Center on Budget and Policy Priorities estimated that letting the Bush tax cuts expire would create a net gain of $22 billion in economic activity. Hence, allowing high-income tax cuts expire would, on impact, result in a net gain of $42 billion in economic activity which is about five times the economic stimulus from extending high-income tax cuts.
The years of the Bush administration were earmarked by the escalation of federal government spending both in absolute and relative terms. The growth in federal government spending was driven mostly by discretionary defense spending while non-discretionary federal outlays increased as well. Since 2001, the federal government spending in the Bush administration increased by 28.8 percent with a 35.7 percent growth in non-defense discretionary spending. The growth of the federal government under Bush administration was the highest since the presidency of Lyndon B. Johnson and Richard Nixon. The Independent Institute compared the growth of federal government spending from Lyndon B. Johnson onwards.
Letting the Bush tax cuts expire would probably not impose a negative effect on small businesses since less than 2 percent of tax returns in the top 2 income brackets are filed by taxpayers reporting small business. William Gale contends that the Bush tax cuts significantly raised the government debt. The economic consequences of the 9/11 and wars in Iraq and Afghanistan were detrimental. William Nordhaus estimated that the total cost of war in Iraq between 2003 and 2012 could exceed $1 trillion in 2002 dollars considering unfavorable and protracted cost scenario. To a large extent, the wars in Iraq and Afghanistan have added substantially to the increase in government spending. However, even after excluding defense outlays from the spending structure, the increase in non-defense discretionary spending exceeded the growth of the federal government spending by 5.6 percentage points. Between 2000 and 2008, the number of federal subsidy programs increased from 1,425 to 1,804 – a 26 percent increase compared to 21 percent increase during Clinton years.
The Bush tax cuts failed to result in a Laffer curve effect mostly because they were implemented alongside a bold and significant increase in federal government spending. Had a substantial reduction in government spending been enforced, the tax cuts would not place should an enormous weight in the growth of federal debt. Higher federal debt would inevitably ponder the structural fiscal imbalance. Since debt interest payments would increase, a combination of tax cuts and spending growth would stimulate investment demand, creating an upward pressure on interest rates, especially during the economic recovery when the difference between potential output and real output is expected to diminish.
Critics of the Bush tax cuts often claim that cuts amassed a growing fiscal deficit. However, in 2007, the fiscal deficit stood at 1.2 percent of the U.S GDP while in 2009, the deficit increased to 9.9 percent of the GDP as a result of $787 billion fiscal stimulus from Obama Administration. Since tax cuts were enacted in 2001 and 2003 respectively, something else is to blame for the deficit.
U.S Federal Debt: Long-Term Forecast
Source: Office of Budget and Management; author’s own estimate
The main premise of the economic policy of the Bush administration had been a significant increase in federal government spending. Spending policies were mostly aimed at covering the growing cost of the Iraqi war. In addition, domestic non-defense outlays on social security and domestic priorities grew significantly, creating an upward pressue on federal debt. The growth of entitlments such as Social Security and Medicare poses a serious long-term risk regarding the sustainability of federal government spending. In the upper chart built a simple forecasting framework to estimate the long-run level of U.S federal government debt as a percent of the GDP. Surprisingly, time trend accounts for 85 percent of the variability of the share of federal debt in the GDP. A more robust framework would include the lagged dependent variable and several regressors in the set of explanatory variables to increase the share of variance explained by independent effects of regressors. The results indicate that by 2020, the federal debt could easily reach the 90 percent thresold.
The growing stock of entitlements such as Social Security and Medicare are central to understanding the looming pressure on federal budget to tackle the challenges of ageing population and demand for health care. The tax cuts imposed by the Bush administration reduced average federal tax rates across quintiles in cash income distribution. However, tax cuts were no supplemented by the reduction in federal government spending. Consequently, the growth of federal government spending increased future interest debt payments and failed to take into account the long-term pressure of Medicare and Social Security on federal budget set. Extending the Bush tax cuts would be superior to letting them expire. But lowering tax burden should nevertheless be comprehended by the reduction in federal government spending.