Thursday, March 22, 2012

Why I Cannot Vote for Mitt Romney

#1. His actual policies suck.

Romney's tax policy is to:
- lower & flatten personal income tax rates,
- lower corporate tax rates,
- eliminate the "death tax" (i.e., the estate tax), and
- reduce [if possible, eliminate] taxes on capital income...

Ostensibly, he claims these policies would make the tax system "fairer" & "simpler".

But, effectively it is just another another thinly-disguised round of tax give-aways to the upper class at the expense of lower classes [who, assuming budget neutrality, either have to make up the lost revenues by higher taxes -or- receive reduced government transfers & benefits].  And/or a continuation of the "Starve the Beast" strategy for ridding society of publicly-purchased social insurance. 

The same exact policy trajectory of the movement conservative, government-is-bad, pro-business, free market fundamentalist Republican party of the last 30 years.  The same exact policy trajectory that [in conjunction with deregulation, cheap credit & privatization policies] led to asset bubbles and financial crises and the Great Recession that we are only now beginning to climb out of.

Haven't we learned anything?

By the way:  Flat is NOT [I repeat: NOT] Fair.
Even Adam Smith recognized the need for generally progressive taxation. 

Beyond the usual vertical equity arguments, there are many other principles & arguments for a progressive tax system:

- Dimininshing Marginal Utility 
The value of the next dollar to a high-income earner is less than the value of the next dollar to a low-income earner (because low-income earners generally have more basic human needs that remain unmet), so a higher tax on a high income earner's dollar produces the same pain/dis-utility of a lower tax on a low income earner's dollar.  (note: I am not a marginalist, which usually implies being an equilibriumist; but for those enamored of equilibriumist thinking, it has some suasion)

- Relative Socio-Economic Benefit
Those who benefit most [economically] from a society should contribute relatively more towards the support of government (incl. social insurance). 

- Relative Risk (Taxes as Insurance)
Those who have the most to lose [economically] should pay relatively more. 

For me, ultimately, the most persuasive argument is Adam Smith's:  Those who can most afford the tax burden (i.e., the rentier class) can & should pay a progressively higher tax rate than those whose means barely affords the costs of living (if that). 

You can't squeeze blood from a rock.

"Flat" is actually quite Un-Fair. 

A flat federal personal income tax rate would result in an overall national tax structure that is actually regressive - i.e., places the burden disproportionally on the lower income classes (mostly because the rest of the national tax system is based on sales taxes that fall disproportionally on the middle class and lower).

As a result, flat tax proposals -- e.g., Herman Cain's 9-9-9 plan being the most recent famous example -- inevitably result in a larger tax burden for the bottom 90% or so, and a lighter burden for the top 10%. 

And Flat is not to be conflated with Simple. 
Flat is NOT necessarily simple. 

Think loopholes:  all the deductions & exemptions & preferences & credits & accelerated write-offs & who-knows-what-else that riddle the tax code, e.g., the home mortgage interest & state/local tax deductions, the earned income credit, or the tax-free treatment for employer-paid health care benefits. 
The complexity of our tax code comes from these 'loopholes', NOT from the flatness or steepness of the slope of the marginal tax rate line. 

Changing to a single flat rate does NOTHING, in and of itself, to cure the underlying cause of tax code complexity. 

Romney, if allowed, would grant tax-free treatment to capital forms of income, which shifts the burden to labor income (wages & salary).   Guess who gets most of their income from capital forms of income?

If you guessed "Capitalists", ding ding sing we have a winner! 

Guess gets most of their income from labor forms of income?
The remaining 99% of us. 

Can anyone tell me why income earned as labor should be taxed at rates higher than income earned from capital? 

And simple need not be flat.
A progressively sloped tax rate is no more difficult to use to compute one's tax liability than a flat one... to repeat:  the complexity comes from the loopholes, not the number of brackets or rates!

And corporate taxes ~ or, alternatively, taxes on dividends & capital gains ~ are NOT a form of double-taxation, which is one of Romney's 'fairness' arguments.  Corporate income taxes are the price that corporations pay for the priviledge of personhood with limited liability.  And that's coming from a Republican (Taft, during the debates over instituting a federal income tax).
Ask any thoughtful capitalist if the price is worth the benefit.  If the price were truly too high, then capitalists would not choose corporate forms to organize their businesses. 

The truth is that the corporate form & limited liability provide such shockingly enormous efficiencies for capital formation, investment liquidity & wealth creation that modern capitalism literally could not exist without it. 

The question has to be asked:  Wealth creation for whom?  Those who benefit the most...

Besides tax policy, what's he got?

Jobs?  Romney's jobs plan is...  non-existent? 
Austerity is NOT Prosperity. 
It is, in fact, Anti-Prosperity, particularly at a time when:
- unemployment is stubbornly high,
- median wages/incomes are stagnant, and
- lost wealth effects & heavy private sector debt & tight credit [not to mention Euro zone problems, slowing Chinese & Indian economies, and high energy prices] all continue to drag on the recovery. 

Concern about far-term structural budget deficits seems misplaced (at best) when the near-term problems are so potentially dire. 

It's a bit like the doctor who, upon arriving on the scene of a multi-car accident and seeing blood & broken bones all around, starts dispensing warnings about cholesterol intake & smoking to the victims:  The advice is, perhaps, all well and good & worthy of attention at some point down the road, but not particularly relevant to the challenge at hand. Or worse, it might constitute negligent malpractice... if the accident victim dies as a result of injuries that the doctor should have addressed via the accepted standard of care.

Romney's embrace of Austerity (and its cousin, the Confidence Fairy) is a continuation of conservative economic policy malpractice that led to disasterous consequences in 2007-2009.  It is idiotic, it is bad economics, and it is bad for America.

Speaking of bad economic timing:  Mitt seems to want to launch a trade war with China.  Didn't we learn anything from the disaster of the Smoot-Hawley tarriff acts? 

Then there's his saber-rattling over Iran.  If he's serious, he's dangerous; if he's not, then he's lying about the efficacy & wisdom of Obama's Iran policy.  There is not a single thing that Romney would do about Iran that Obama is not already doing... short of, perhaps, launching a Dubya-esque premature pre-emptive airstrike.  I for one am very unhappy about the prospect of another ill-conceived war in the Middle East. 

On social issues, he's gone off the deep-end in his hunt for primary voters. 

Marriage Equality has already been decided (14th/16th Amendments).  If the State (or Feds) conveys benefits on its citizens, it cannot discriminate in the grant of those benefits. Bigotry and discrimination should not be the subject of [another!] Constitutional amendment.  Nor should basic human rights - esp. the rights of a minority group! - be subject to the vote of a majority... even if the tide of history ultimately brings the majority to support marriage equality.

On health care, he wants to gut the Affordable Care Act [even though it mirrors his own Massachusetts plan?], yet has no credible plan to actually bend the medical care cost curve.  The free rider problem & cost-shifting means that we are all effectively paying a tax now to cover the un- and under-insured, whether we recognize it directly as such or via higher insurance premiums & out-of-pocket deductibles. 

We, as a country, pay roughly twice as much more for health care than the next closest OECD/developed nation peer, and yet we get outcomes that are not demonstrably better (and in some cases, are demonstrably worse)! 

The only way to tackle the health care problem is to go to a single-payor system with capitated payments to providers based on outcomes (not fee-for-service).  Romney is going exactly in the opposite/wrong direction.

#2.  Romney is inauthentic.  Which leads him to make all sorts of astonishing lies.

It's worse than mere flip-flopping (Romney makes Kerry look like the epitome of constancy). 

Romney has no soul;  he is a mercenary, a hired gun whose allegiances shift with the political winds.  Can anyone tell me what Romney's "Vision" is?  I doubt it, since so far not even Romney's been able to voice it.

He makes it up as he goes along, and consistency & reality be damned.  Don't ruin a good story with facts. 

And so he makes all sorts of bullshit claims about how Obama has only made things worse, when clearly that is not the case. 

Obama's stimulus measures didn't prevent peak unemployment over 8% (*sigh* what adviser thought it was a good idea to voice a particular target?), but it did arrest the freefall and replaced some of the demand lost from the private sector.  We have seen steady, albeit still insufficient, job growth for more than 2 years now, corporate profits and profit margins are at historic levels, private credit has stopped contracting, and the housing market seems to have bottomed and begun a slow recovery. 

Not great, but not another Great Depression, either.

Which is what we would have had if the austerity-loving Hooverites -- like Romney (and Rand Paul, Paul Ryan, etc.) -- were in control of fiscal policy.

#3.  Romney is uniquely ill-equipped to deal with the biggest problems that face us as a country.

Modern, free market fundamentalist financial capitalism & the conservative corporatist plutocracy it disproportionately serves has failed to deliver widely-shared economic growth. 

The rising tide has not lifted all boats... just the yachts.

Which, in turn, has led to historic, unsustainable inequalities that threaten to evolve us towards a brave new world of economic feudalism.  Mitt Romney is the very poster-child for economic feudalism:  born into wealth, Bain Capital, tax-avoiding complicated trust funds, $10,000 bets, let Detroit go bust, liquidate the homeowners, end Medicare, yadda, yadda, yadda.

Supply-side economics does not work (if it does at all) when the fundamental problem is insufficient aggregate demand.  Romney's policy proposals are not even aimed at the right target.

#4.  Governance is not like running a business. 

Romney's unique selling proposition is that he has successful, executive-level business experience.  But, it's not IMHO relevant. 

Stimulating job creation economy-wide is a vastly different thing than earning outsized returns from making private equity investments.  Tackling the enormous income & wealth inequality gap requires different skills than those required to offshore jobs, close plants or negotiate LBO financing terms.

#5.  I'm holding fast to my vow to never vote for a Republicon again.

When Republicons abandoned their responsibility for governing in the best interests of the people as a whole (by refusing to allow anything to pass the Senate in order to deny Obama a second term), I vowed I would never vote for a Republicon again. 

And I mean it.

Friday, March 16, 2012

Economist's View: Per Capita Government Spending by President

Economist's View: Per Capita Government Spending by President

To all those turd-polishers who like to claim that Obama is the biggest spender in history:

Learn how to do some critical thinking.


Krugman Only Gets It half Right: Macro Retrogression in a Post-Keynesian World

Paul Krugman on Milton Friedman:
The truth, although nobody on the right will ever admit it, is that Friedman was basically a Keynesian — or, if you like, a Hicksian. His framework was just IS-LM coupled with an assertion that the LM curve was close enough to vertical — and money demand sufficiently stable — that steady growth in the money supply would do the job of economic stabilization. These were empirical propositions, not basic differences in analysis; and if they turn out to be wrong (as they have), monetarism dissolves back into Keynesianism.
It’s worth pointing out, by the way, that this time the Fed did all that Friedman denounced it for not doing in the 1930s. The fact that this wasn’t enough amounts to a refutation of Friedman’s claim that adequate Fed action could have prevented the Depression.
All well and good.  Krugman is almost certainly right... as far as he goes.

What Krugman doesn't acknowledge is that not only does Friedman's monetarism collapse back into Keynesianism by virtue of the failure of its assumptions (LM curve verticality, stable money demand) to stand up to real world scrutiny, but that the Hicksian IS-LM framework itself is an utterly unrealistic, fundamentally incorrect construct that does not at all properly represent Keynesian macro theory. 

Even the creator of IS-LM, JR Hicks himself, repudiated the model as virtual rubbish - over 30 years ago! - calling it nothing more than an interesting plaything useful only for classroom discussion. 

Thus the underpinnings of the entire modern neoclassical macro theory (i.e., mainstream macro since Patinkin's post-Keynesian synthesis) -- which includes not only the Freshwater versions such as Friedman's or Mankiw's, but also the Saltwater varieties of Krugman, DeLong & Summers -- are banished to the dustbin of history. 

Or, at least, they should be.