Taxed Enough Already? Or Not?

Here on Jefferson Street we payed less in taxes this year. For the first time in years, we got a refund, instead of scrambling to pay tax we still "owe." This is mainly because our income plunged in 2009. But we also benefited from the maze of tax credits Obama brought in to nudge, wheedle, and bribe people into forms of behavior that he likes. One of his favorite theories is that everyone should go to college. Since we have a kid in college, we got an Obama pat on the head for that.

On tax day, Obama said that he was "amused" by the tax protests going on all over the country. Given that so many are paying less this year, "You would think they'd be saying thank you."

I'll give him one thing, at least: If you are worried about big government, taxes aren't really the problem. The real problem is spending. Every time the government spends more, it must do one of three things, all of which are bad:

1) Yes, it can raise taxes now. That is apt to be problematic, both on grounds of efficiency and those of distributive justice. Efficiency: it prevents you from spending your money on things that you would choose to spend it on and directs it instead toward things that, for whatever reason, you did not choose to spend it on. Does the person who gets your money value it more highly than you? Maybe, but probably not. That's a net loss of happiness in the world. As to distributive justice: taxation takes money from the productive and in many cases gives it to the unproductive. Further, this money was taken from you by force, and in my opinion it takes a lot to justify using force. Whatever they are spending your money on, it had better be very, very important. My point though is that the government can cover new spending in two other ways, in addition to presently raising your taxes. As ethically problematic as this alternative is, the other two are much worse.

2) It can go further into debt. This means taxing you and future generations later on, and with interest. To the distributive justice problems involved in taxation itself, it adds two others. The future generations who will have to pay this debt off will be suffering costs without reaping most of the corresponding benefits: they will be paying for things that were gobbled up and pissed away long ago. Public debt is a sophisticated way to carry out one of the oldest and shabbiest functions of government: shoving one's costs on to other people. Moreover, when your grandchildren finally do pay your bills, the people they will be paying their money to may be people you do not feel are more deserving than they, such as corrupt crony-capitalists in China.

3) Finally, the government can cover new spending by inflating the currency. This is in effect the most dishonest, chaotic, and unjust form of taxation. It benefits borrowers at the expense of debtors, those to consume at the expense of those who save, and injures the old more than other age groups. Moreover, it disproportionately benefits people who receive money directly from the government: they are spending the extra dollars on things that have old, low prices. As the money ripples through the economy, it drives prices up and ends up in the hands of people far from the government money-faucet, who also have more dollars, but who by now are buying things that cost more dollars. They do not come out ahead. And people who do not get any extra dollars, because they live on fixed incomes, actually come out behind. (Hat-tip here to Ludwig von Mises.)

The root of all these evils is spending, and obsessing too much about taxes will cause the two even-worse options to be taken. This is hardly an idle point, as obsessing about current taxes, current tax hikes, and possible tax cuts is one of the cardinal sins of the Republican party.

The question in the title of this post is really the wrong question. But I think the tea party protesters basically understand this better than the Republicans do. If you look at the signs at those rallies that are attracting thousands upon thousands of first-time activists, or this statement of principles based on half a million online votes, what these people are so heated up about is the spending -- the bailouts, stimuli, and gigantic new entitlements. Obviously, these things haven't resulted in new taxes -- yet. But that only means that what will happen, eventually, will be even worse than immediate tax hikes. Unlike Obama, these people are looking at the future.

Government is Unfair

Here is my old friend from my days as a Minnesotan, Danny Shapiro, talking about his critique of the welfare state (sadly, this video is not embeddable). His thesis: just about every welfare state policy is inferior to some alternative, even by the standards of those who advocate such policies, including the standard sometimes known distributive justice (or "fairness").

A glaring example, possibly different from the sort he cites, just popped up in a Madison WI newspaper.

First, a word of explanation. One way to grasp the idea of distributive justice is to think of the phrase from The Communist Manifesto, "to each according to his ____." How you fill in the blank varies -- according to his moral virtue, talent, contribution to society, effort, or maybe (Marx and Engels' favorite) need -- but the basic idea is that your wealth, income, or whatever, ideally ought to be part of an ordered response to characteristics people have which indicate that they "deserve" the income, etc. Discussions of distributive justice commonly take place with the following sort of background assumptions: There is little chance that free markets will conform to any of these ordered patterns. If distributive justice makes sense, then the government should step in and fix the situation. The question is whether it does make sense and if so which form is the best (to each according to his ... what?). That is how Robert Nozick discusses it in his classic Anarchy, State, and Utopia (1974).

People seldom ask whether government itself is distributively just. Take a look at this list of the 20 highest paid municipal employees in Madison WI last year:

John Nelson, Bus driver, $159,258

Dean Brasser, Comptroller, $151,551

Noble Wray, Police chief, $143,585

Michael May, City attorney, $143,434

Carolyn Hogg, Assistant city attorney, $138,084

Mark Olinger, Planning and Development director, $136,787

Randy Gaber, Assistant police chief, $136,248

Debra Amesqua, Fire chief, $136,163

John Davenport, Assistant police chief, $134,382

James Keiken, Assistant fire chief, $133,589

Michael Dirienzo, Assistant fire chief, $133,144

Paul Bloom, Assistant fire chief, $132,873

David Dryer, Traffic engineer/parking manager, $130,831

Tom Carto, Overture Center president, $129,566

Carl Gloede, Police Captain, $128,750

Katherine Noonan, Assistant city attorney, $126,709

James Hess, Monona Terrace director, $126,593

Roger Allen, Assistant city attorney, $126,592

Brad Murphy, Planning unit director, $126,363

Greg Tatman, Bus driver, $125,598

Note that two of them, #20 and, astoundingly, #1 are ordinary city bus drivers. Mayor Dave Cieslewicz did not earn enough to make it on to this list. Now, I'm not anti-bus-driver (my grandfather drove a bus in Detroit MI all his working life) but surely there is no sane version of the distributive justice idea that can justify this arrangement.

The above-linked article, by the way, explains why this odd distribution of income happened: Bus drivers, unlike mayors, are unionized, and the Teamsters got the municipal bus drivers a contract with lavish pay for overtime, and apparently no limits on how much overtime any one employee can accumulate. The article also mentions that this situation last came to John Q. Public's attention in1998, when it caused a bit of a flap. Obviously, the resulting public ire had absolutely no effect on the situation during the twelve long years that have crept by since then.

I draw two conclusions:

1. Government can be distributively unjust, even absurdly so.

2. It can be very, very difficult for John and Jane Public to do a damn thing about it.

I Attend a "People's Town Hall"

That's what they are calling them. In areas, like mine, where the representatives in congress are refusing to meet with the people, some folks are hiring halls and inviting them -- and bringing in their own speakers. I attended one in Madison WI last week.

An organization called Americans for Prosperity brought John Stossel in to speak, and invited Representative Tammy Baldwin and both our senators to speak. None of them responded.

I got there almost half an hour early, and already the huge Mariott parking lot was full. I parked next door. All around me were people walking toward the conference center. On my left was a young blond woman in leopard-patterned toreador pants and high heels. On my right, a middle aged guy in a baseball cap. I have been to many political rallies and demonstrations, beginning in 1964, but they never had people who look like this.

Who are these people, I wondered? During the event, one speaker asked, "How many of you own a small business or work for a business of 50 employees or less?" About half the room raised their hands. How many of you have never been to a political event before the past year?" Over a third of the audience raised their hands.

That speaks volumes about who these people are and why there are here. A business man on the panel that spoke after Stossel said that the business community is deeply divided on Obamacare: "It's not a left versus right thing. It's a big versus small thing."

Here are my notes on Stossel's talk:

There are portions of our medical system that are still in the free market system [that we began to destroy in the sixties.] Plastic surgery is free market, and it is cheap, efficient, and constantly improving. Doctors in that market give patients their phone numbers and emails. Do you know your doctor's email? When we made a documentary about the Canadian medical system, we found a clinic that was open 24/7. But you had to be a dog or a cat to be treated there. In Canada, veterinary medicine is still private. And it works fine.

Why is Obama only talking about insurance, as if that were the solution? Insurance is the lowest form of capitalism. It's a third payer system. The insurance mentality is actually the problem.

Because it is a third payer system, you don't usually even know what your care costs. If you did try to pay for it, the exchange might go like this:

"How much does this procedure cost?"
"$400, but why do you care?"
"Wow! Does it really have to cost that much?"
"What difference does it make?"
"Well, I was thinking of paying for it now."
"Now? You mean, like, today?"
"Yes."
"Okay, $150."

Insurance should be catastr0phic only. There should be high deductibles. The result would be that you would be spending your own money on your medical care. Nobody spends your money as carefully as you do. The result would be a dramatic reduction of costs.

But Obama says you shouldn't have to pay anything: he thinks deductibles are just wrong. He is going in exactly the right direction.

There should be no government mandates. One reason insurance is so expensive is that governments force insurers to provide services you may not want to pay for. In Wisconsin, you can't buy medical insurance without paying for other peoples' chiropractic treatments. If you could buy insurance from other states, you could escape from doing so. But that is one more thing you are not allowed to do.

[Personal note: I had a lengthy experience with chiropractors when I was young. I have regarded them ever since as charlatans on a level with Medieval bloodletters. Forcing me to pay for their services is an injustice similar, given my values, to forcing me to pay for abortions. Of course, the justice or injustice of it is not what Stossel is taking about.]

Here is a small businessperson (a baker) from Sonoma County at a regular town hall in Northern California:

Another Reason for Government Rationing of Medical Care (According to Singer)

In the article I blogged about the other day, Peter Singer gives an interesting argument to the conclusion that (to put it one way) Sarah Palin's grandmother and son ought to be discriminated against in a nationalized medical system.

Here is how it goes. First, he asks you to imagine having to make a certain sort of choice about your own life. Speaking of ways we might compare the value of different allocations of medical resources, he says:

How can we compare saving a person’s life with, say, making it possible for someone who was confined to bed to return to an active life? We can elicit people’s values on that too. One common method is to describe medical conditions to people — let’s say being a quadriplegic — and tell them that they can choose between 10 years in that condition or some smaller number of years without it. If most would prefer, say, 10 years as a quadriplegic to 4 years of nondisabled life, but would choose 6 years of nondisabled life over 10 with quadriplegia, but have difficulty deciding between 5 years of nondisabled life or 10 years with quadriplegia, then they are, in effect, assessing life with quadriplegia as half as good as nondisabled life.

From this this thought-experiment about choices you would make for yourself he draws a conclusion about how we ought to treat other people. He puts it in terms of the specific issue he was just talking about like this:

If that judgment represents a rough average across the population, we might conclude that restoring to nondisabled life two people who would otherwise be quadriplegics is equivalent in value to saving the life of one person, provided the life expectancies of all involved are similar.

More generally, the idea seems to be that our social calculations should be based on the idea that one more year of life for a quadriplegic has half the value of one more year for a non-quadriplegic (other things being equal). We should assume that for purposes of distributing medical care, it takes two quadriplegics to equal one healthy non-quadriplegic. Such a system discriminates against the disabled and, for similar reasons, against the old. What is wrong with his reasoning, if anything?

Something about it really bothers me -- not the conclusion, but the reasoning itself -- but I don’t think I have completely figured out what.

One point that is relevant is made by philosopher Tom Regan in another context. Singer's way of thinking reasons from the fact that I can enjoy twice the value that you can enjoy, to the conclusion that in our social calculations my life has twice the value that you have. It views humans as receptacles of value, but does not view them as having value in any other sense. We should respect the value people consume, but not the value that they are. That is how Singer is thinking. On the other hand, if you think that humans have value in and of themselves (if you believe in what Kant called “human dignity”) that gets in the way of sacrificing one person for the sake of another, which is what Singer (as I interpret him) advocates. So you can admit his premise but deny his conclusion.

Another thing that can block the inference that Singer makes is the particular way one might understand the first of these two sorts of value: the value that we consume. If I decide whether I would prefer ten years as a quadriplegic to four years of non-disabled life, I am judging what has the greatest value for me, or to me. Well, what if we all, quadriplegics included, preferred experiencing non-quadriplegic to quadriplegic life at Singer’s fanciful rate of two to one? Couldn’t quadriplegics still consistently deny that other people’s interests should be preferred over theirs at that same rate?

I think it is obvious that they can, though it is not so easy to say exactly why. It seems to have to do, though, with the fact that the two judgements are about profoundly different things. Thoreau would say the first is about expediency, and the second is about right and wrong.

Keep Worrying about Death Panels

The following was written before the administration hinted it would stop insisting on a "public option" in the health care bill. I am now in South Dakota. Given that the idea of greatly expanded government provision of medical care is obviously not going away, I think the following still has interest, even if the hints are correct.

Last week Sarah Palin caused all kinds of upset when she said on Facebook:

"And who will suffer the most when they ration care?" She asked. "The sick, the elderly, and the disabled, of course. The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s 'death panel' so his bureaucrats can decide, based on a subjective judgment of their 'level of productivity in society,' whether they are worthy of health care. Such a system is downright evil."

This is hot-button rhetoric, but it did more to spark useful discussion than any one thing anyone else has said in this whole shallow, manipulated, spin-doctored debate. I think that the discussion soon became side-tracked, however.

It ended up with whoever is in charge of the mysterious "Senate bill" supposedly saying that payments for "end of life counseling" are out of the bill. End of discussion of that issue.

No, not end of discussion. Palin's comment was not about end of life counseling, it was about the broader issue of rationing. Now, to avoid sounding dense: Yes, I do see the connection between this counseling and rationing. If health insurance encourages these sessions (and why is "insurance" paying money for something that does not reduce risk to the insured?) more oldsters will think of alternatives to imposing heavy costs on loved ones (and taxpayers) with an endless series of surgeries with little promise of great benefits. Maybe you should just take a pain pill, or buy a nicer wheel chair. The saved money will then be spent on those who can get more out of it. The result would be a redistribution of death, to the old and ugly from the young and cool. That is one of the things that rationing does.

But it is not the only thing, nor is this the only reason to worry that this system would involve, or soon evolve into, rationing. Another reason is the well established mindset of those who push government health care.

You non-academics may not know this, but there is a sort of academic cottage industry called "medical ethics." The people in it often give seminars in which the sole question discussed is something like "which form of socialized medicine is the right one?" Yes, they are overwhelmingly for it, and they work without ceasing to impose their paper utopias on the rest of us. They are intensely dedicated, and absolutely convinced that their views are enlightened and sophisticated, and that those of us who disagree are a bunch of moral troglodytes.

A commonplace idea among them is that, once we have government health care, we should not indiscriminately give medical care to anyone who "needs" it. What is the point of government control, if we fail to organize the system more rationally than that? A term of art that is often used here is that of the QALY, or quality adjusted life year. This means that if we are thinking of investing money on a medical procedure for you, you lose points the older you are and the fewer years of life you will get out of the procedure, and you also lose points if the quality of the additional years is impaired somehow -- because you will be in pain, or are already missing a couple of limbs, or are retarded.

If the "experts" who have been pushing government health care for sixty years have their way, Sarah will basically be right. Both grandma and Trig will be in trouble.

Peter Singer's Defense of Death Panels

Okay, he doesn't call it that, but, unlike Obama, he is honest enough to call it "rationing."

His argument, as often with Singer, is simple and not very original, but I find his recent article in the NYT is eminently worth reading. It is helping me to identify the real issues involved in the medical care debate.

"Health care is a scarce resource," he says, "and all scarce resources are rationed in one way or another." Free markets determine that some people get the good and some do not. The British National Health Service does the same thing. One difference is that it is obvious that the NHS is doing this:

Last year Britain’s National Institute for Health and Clinical Excellence gave a preliminary recommendation that the National Health Service should not offer Sutent for advanced kidney cancer. The institute, generally known as NICE [I love that acronym!], is a government-financed but independently run organization set up to provide national guidance on promoting good health and treating illness. ... NICE had set a general limit of £30,000, or about $49,000, on the cost of extending life for a year. Sutent, when used for advanced kidney cancer, cost more than that, and research suggested it offered only about six months extra life.

The recommendation was later rescinded, after a public uproar. Not an attractive picture. That judgment would have been a death sentence of sorts for people with advanced kidney cancer.

But markets, he says, do the same thing. It is just much harder to figure out who the victims might be. He quotes a study of Wisconsin emergency room patients who had been in auto accidents. The study "estimated that those who had no health insurance received 20 percent less care and had a death rate 37 percent higher than those with health insurance."

[Rather confusingly, he also quotes with apparent approval a study that concludes "there is little evidence to suggest that extending health insurance to all Americans would have a large effect on the number of deaths in the United States." This seems to conflict with the Wisconsin study. Anyway, I am concerned with the moral principles that underlie his argument, and not with the alleged empirical facts.]

Both systems withhold care from some people, who die (or die earlier) as a result. The difference (this is not how he puts it, but this is what he means) is that when bureaucrats decide who must die, it represents a conscious decision, so that the people who die might actually be the ones who ought to die.

When the market makes the determination, more often than not, the wrong person dies. The Wisconsin ER patients had an average of 3o more years of life to live, if they had received the care that would have saved them. Compare the people sentenced by NICE: they had an average of only six months, and not a good six months at that.

Socialized medicine is superior because, in it, (at least if the right people are in power) it is more likely that the people who die are the ones who ought to die. What we need (again, this is my wording, not his) is a redistribution of death.

(I urge you to read his article to see if my characterization of it is unfair.)
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My initial reaction to this:

To call both what the market does and what the English death panel does "rationing" is close to verbal trickery. It smuggles in the idea that these two processes are on an equal moral footing, without having to argue for it. I call what the market does "allocation" and only call what the government does "rationing." The reason I use different words for them is that I see a big moral difference between them.

Part of it is a matter responsibility. The death of the untreated English cancer victim is somebody's doing. This person dies because someone decided this person should die. The death of the American auto-accident victim is -- an accident.

There is another difference that underlies this one. Singer thinks it is good, and not evil, for NICE to take responsibility for deciding who shall die because he thinks there is such a thing as the one who ought to die.

This is what I deny. I deny that the cancer victim ought to die, but it is not because I think that the accident victim ought to die. I think it is monstrous to judge that any innocent person ought to die.

Further, it is monstrous arrogance the think you have the right to decide who ought to die. And to act on that decision is tyranny itself.

The Public Option is a Trojan Horse: Reason #2

Yesterday, I explained a reason why the health insurance "public option" in American Affordable Health Choices Act of 2009 is a Trojan horse that is likely to result in most Americans, like it or not, being dumped into the hands of the government. It had to do with the fact that the some or all of the costs of this service would be transferred, by means of taxation, onto people other than the individual consumer, making the cost to them relatively low. Thus the government insurance company would tend to crowd out the private ones.

According to this study there is another reason it would tend to shove private health insurance out of the picture. It has to do with the way in which the plan would combine government medicine with a certain feature of the present system, a feature that the study describes like this:

In today's system, hospitals and physicians provide a substantial amount of free care to uninsured people called "uncompensated care." Also, payments for Medicare and Medicaid are usually less than the cost of the services provided resulting in payment shortfalls. Hospitals and physicians cover the cost of uncompensated care and payment shortfalls under public programs by increasing charges for private health plans in a process known as cost-shifting.

Since we can expect the "public option" -- a vast expansion of Medicaid -- to continue the same pricing policies, this will shift further costs to the shrinking number of people who still have private health insurance. This of course would increase the price gap between public and private insurance, driving even more people into the government medical system.

I expect the result would be a system in which the majority have crummy medical care but at low cost to them (until tax time) and a wealthy minority have much better care -- maybe something very much like the sort of care that most Americans have now.

This is why the town hall protesters keep mentioning the fact that members of congress will not be taking the public option for their own medical insurance. They all have private insurance now, and they are too wealthy to be driven into our part of the system.

Isn't it ironic? If you believe in equality and "fairness," the ideas the drive government health systems, you ought to be against this one!

Piracy: The Free Market Solutions

What did the captain and crew of the Maersk Alabama have in common with the victims of the Binghamton murders?

Both were unarmed and defenseless against evil.

In the Binghamton case, this probably had to do with the fact that government offices, such as immigration services centers, tend to be no-gun zones. In the case of the commercial ship, the reasons are more complex.

Jane Jacobs told a story in a brilliant book years ago that is very much to the point here. During the Middle Ages, she says, the rising merchant class of the island nation of England found that to really prosper they had to cross the seas to conduct trade in other lands. But the seas were swarming with pirates, and they lost ships and treasure. But they found a solution. Pooling their resources, they built a flotilla of armed ships. Then they gave the ships as a gift to the king, with the request that his men go out and clear the seas of pirates.

Why, having the resources and the ships, didn't they themselves go out and kick pirate butt?

There are at least two sorts of reasons. First, trading and fighting force with force are two very different skill sets. The solution to the problem of the Maersk Alabama is not to say to the crew, "Here, have some guns!" They are not trained in their safe and effective use. There are indeed a number of reasons why they don't want to be so trained.

As Jacobs points out, traders and professionals in the use of deadly force follow moral codes that are profoundly different, and they generally do not mix very well. Trade is based on on a respect for human rights -- the main ones involved admittedly are property rights, but they are rights nonetheless. To trade valuable goods with a complete stranger who is armed would mean worrying about whether he might just kill you and take your goods for free. If the Maersk Alabama had been armed, there are ports in the world that would not have allowed it to dock. Its mere presence would constitute a security risk.

What is the alternative to do-it-yourself security? There are plenty of people who are saying that the only long-range solution is to go in and "fix" Somalia. I think these are the same people who "fixed" Iraq, Afganistan, and Vietnam. Remember them? I think such people are much more dangerous than the pirates. If they have their way, they will take far more lives and destroy far more treasure. Come to think of it, they already have.

But there is a third way. For a fee, private firms who specialize in protective services, will protect your ship. Depending on the policy you purchase, they may put armed guards on your ship or, if for any number of reasons you don't want to do that, you can take out a fancier and more expensive policy and they will escort you with a convoy of armed boats through pirate infested waters. The latter sort of policy would solve the unable-to-dock problem. You can rendezvous with your guard boats at a pre-arranged point and part with them after passing through the dangerous waters, at which point their check will presumably be in the mail.

Like everything else in life, the third-party security alternative has both positive and negative aspects. But with time it may prove far preferrable to both alternatives: either continuing to count ransom and pirate violence as an expense of doing business, or allowing liberal imperialism to shove us into yet another political black hole in the Middle East.

Either one of the main free market solutions have one big advantage over any government solution: They will be paid for by the people who benefit the most from them. And they will be paid for if, and only if, they are worth the cost. And that's something you sure can't say about Vietnam, Iraq, or Afghanistan.
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Added later: I just found this on the web (hat-tip t o Lew Rockwell):



Here is an article in Politico about Rep. Paul's proposal.