Archive for March, 2012
Sorry, no new posts this week! 2:2 is a huge chapter with the second most important speech in the book (Frankie D, represent!). Since I was already crunched for time and don’t want to half-ass this one, I decided to give myself an extra week to tackle it properly.
Atlas Clubbed will return on April 2nd to examine the relationship between money and morality. Oooh, substantive…
Last “season” on ATLAS CLUBBED:
America faces a dark and vaguely science-fictional time. Nations all over the world have turned to socialism because nobody can deny any longer that the planet is running out of fossil fuels and important mineral resources, and somebody has to ration the remaining supplies. …right?
Luckily, in the U.S. the libertarian state of Colorado has kept the American tradition of innovation alive. Gas prices have been kept in check because a self-made man named Ellis Wyatt has developed frakking techniques to tap fresh oil near the Rockies. A small car company has sprung up in the mountain west to fill the void after GM went under without a government bailout ten years ago. Colorado is, in short, the country’s — and perhaps the world’s — last hope for saving post-industrial civilization from collapse.
Into this dire picture, enter Dagny Taggart and Hank Rearden. Rearden has just invented a new alloy, rMetal, that is stronger and lighter than steel and will last three times as long. It’s a revolution in sustainable development, and Dagny, VP of Operations at the Taggart Transcontinental Railroad, wants to refit her Colorado line with Rearden’s game-changing product. Because the energy crisis has hobbled the auto industry and commercial flight, the railroads of the previous century are still America’s main mode of transportation, and updating them with high-speed tracks and trains could be a huge boost to the economy.
Unfortunately, the president of Taggart Transcon is Dagny’s brother Jim, a cowardly man with a vicious entitlement streak and no creative vision. Terrified of the future, he and a small group of CEOs from the country’s other major corporations decide to flood Washington with well-funded lobbyists and strings-attached campaign donations, in order to buy laws that favor their interests. These laws effectively give the largest corporations government-sponsored monopolies, and confiscate resources from the creative Rearden to hobble him in the “free” market and prevent him from toppling their older businesses.
Despite this corporate/government conspiracy to cling desperately to the unsustainable status quo, Dagny and Rearden manage to build one railroad made of rMetal to ship Ellis Wyatt’s oil out of Colorado to the rest of the country, buying everybody more time to solve the industrial crisis.
On the day their track opens, Dagny and Rearden finally give in to their mutual attraction and begin an affair that wracks the unhappily married Rearden with guilt. But in the wake of their commercial success the freshly-minted lovers go on a secret road trip through the midwest to celebrate, and there, in the barren ghost towns around GM, they discover the junked prototype of a brilliant invention: a motor that could literally run on air — the static electricity in the air — solving all the world’s energy, environmental, and economic problems in one fell swoop… if it hadn’t been gutted and left for dead.
While Rearden returns home to make sure his marriage is still falling apart, our all-business Dags stays on the case of the miracle engine.
The trail leads her to a philosophy professor slumming it as a short order cook out west. He is just one of many elites from around the country who have abruptly disappeared from the public eye in the past ten years or so — about the same time the motor was invented and GM collapsed. It is only now that the energy crisis has become severe that a hidden pattern has begun to emerge out of their mysterious absences.
If nothing else, Dagny knows that there is some kind of shadow game being played among the country’s leaders. And perhaps the biggest wild card on the table is her former lover, Francisco D’Anconia. He was once as driven and ambitious as she was, but he’s spent the last decade doing nothing but blowing his family’s centuries-old fortune on gaudy luxury and partying.
Now he has re-entered Dagny’s life, and he’s acting very strangely, even laughing his ass off while his own business collapses. Dagny suspects he has sabotaged his own company and the global economy on purpose, by joining with corrupt Jim and his cronies on major investments that he knew would fail.
Before Dagny can pursue her leads any further, Congress grants absolute power to the former lobbyist Wesley Mouch to take over the Colorado economy. In retaliation the oil man Ellis Wyatt sets fire to his own fields and joins the ranks of the disappeared.
Why is Francisco inflating and popping market bubbles for no explicable reason? What unspoken philosophical schism could be driving America’s elites into covert camps that wage war over an irreconcilable divide?
And most urgently of all, can Hank & Dagny still save the country now that the oil supply has been torched by the supplier himself?
What does it all mean, man??
All these questions and more will be answered over the next 10 weeks, as we dive further into the alternate-but-uncomfortably-familiar universe of Ayn Rand’s Atlas Shrugged.
NEXT — 2:1, “Storms A’brewin”
After all, Dagny spends Chapter Ten unraveling the mystery of how GM (or 20th Century Motors, as its known in the Randverse) went bankrupt, and what she discovers is that new management introduced a socialist pay scheme that basically acts as a morality play about income taxes. And here’s how:
If the Motor Company were a government, then what it did was allow tax rates to be set by simple majority rules democracy. If the hardest workers logged overtime or asked for a raise, the extra money was taxed at over 100% — for every dollar they earned, they had to pay more than a dollar back to management. Their paychecks shrunk the more they worked. The company then took the tax money they collected and gave it to the poorest workers as bonuses, so that the poorest effectively paid negative taxes.
The biggest difference between this and the U.S. tax system is not the over-the-top extremity of the rates. It’s that the Randian nightmare scenario is easier to understand than the real tax code.
The real tax code is a giant convoluted mess with an endless list of credits, deductions, and subsidies, some permanent and some scheduled to be for a limited time only. Most people are probably aware of marginal rates — your first $15,000 is taxed at 10%, the next $10,000 is taxed at 15%, etc. But those numbers don’t end up being the actual percentage of your income you pay.
In fact, that percentage can vary a lot within and between those tax brackets. Instead of your effective tax rate starting at zero if you’re poor and moving up in an arc the richer you get, the system ends up working more like a game of chutes and ladders. Thanks to all the intricacies of the tax code, if you move two spaces forward at the pre-tax level, you might find yourself moving three spaces backwards at the after-tax level. Like if you got a raise worth $500 but that put you above the limit for a $1000 tax credit, your taxes rise by more dollars than you get from the raise. The money from the raise was effectively taxed at >100%, just like it was for Rand’s hardest workers.
On the other hand, you might find that after deductions and whatnot your effective tax rate goes down and you’ve moved an extra space forward at the after-tax level. For example, if you move from the 25% bracket to the 35% bracket, every dollar you deduct saves you 35 cents in taxes, whereas the same deduction before only saved you 25 cents on the dollar. With enough deductions, your rate actually goes down when you cross into a new bracket. But the richer you get within your bracket, the more your taxes rise back up.
And if you are extremely poor, your tax credits could easily exceed your taxes owed, such that your effective tax rate is negative, and just like Rand’s poorest workers, for every dollar you make, you get money from the government. According to the Tax Policy Center, in 2010 the government effectively gave the poorest 2% of Americans an average of nearly 40 cents per dollar on their earned income.
Obviously, these examples are a major oversimplification, and if you want more specific details I recommend reading Bruce Bartlett’s book The Benefit and the Burden. But the key point here is that unlike Rand’s nightmare scenario, in our real-life tax board game the chutes aren’t all at the top, and the ladders aren’t all at the bottom. They’re scattered unpredictably all over the place.
It’s also worth noting that this dynamic is what conservatives are talking about when they say welfare makes people not want to work. For a lot of people at the low end of the board, moving from a negative rate to a positive rate means their newly improved pre-tax income ends up being lower after-tax because of the credits they lose when they stop being so poor. They essentially get a small ladder at the start of the game, but it puts them on a space where they’d need to roll a five or a six to avoid landing on a chute and sliding backwards — any raise would have to be unrealistically large to bring the effective tax on any new money below 100%.
The error in the conservative argument is that it only calls this dynamic economically oppressive when it applies to people in the middle class or higher. According to conservative rhetoric, the poor person facing four chute spaces in a row is just a lazy moocher for taking that first tiny ladder.
If we want to reform our tax system, we could either get rid of the chutes and ladders altogether (the flat-tax conservative solution), or we could arrange them in a more recognizable pattern (the progressive-rate liberal solution). The fiscally responsible compromise would be to get rid of the ladders (close tax loopholes) and keep a few of the chutes (maintain multiple tax brackets instead of moving to a completely flat rate). But getting rid of the ladder loopholes basically means a tax hike for everybody, so no politician in their right mind would ever vote for it outside of an acute crisis.
The only actual tax changes that can make it through the normal political process are the opposite of the fiscally responsible compromise. Getting rid of the chutes is okay, because that’s cutting taxes. Adding ladders is okay, and you can even call that cutting taxes if you design the ladder as a tax credit or a deduction instead of straight spending. But just like what I described above when you try to get rid of all the ladders, even getting rid of one ladder de facto raises taxes on some class of people or other. And the more money would be freed up to reduce the deficit by removing the ladder, the more people are facing that de facto tax hike. So it’s a political no go.
If this dynamic sounds familiar, that’s because it is. It’s another step on that slippery slope towards fiscal crisis that we discussed in Hayek Anxiety and which conservatives always warn about.
But also like in Hayek Anxiety, even though politicians from both parties face these perverse incentives, today’s Republican party takes the perversity to a whole new level by campaigning on the problem (those aforementioned warnings) and governing in a way that makes it worse.
In fact in the case of tax reform, there is one specific lobbyist who wields dictatorial power over any reform proposal that crosses his desk, which is eerily similar to the villainous Wesley Mouch of the Randverse, the lobbyist-cum-bureaucrat to whom Congress grants dictatorial power over the economy.
This real-life Wesley Mouch is Grover Norquist (that’s him in the picture). He’s the leader of the Americans for Tax Reform interest group. Norquist has successfully taken over the conservative party on this issue by getting nearly all GOP congresspersons to sign a pledge to never raise taxes. The goal is to keep tax revenue low so that if congress wants to balance the budget it has to do it by cutting spending.
But that goal is different from simplifying the code, a.k.a. removing chutes and ladders from the board. And history has proved that in practice it doesn’t work — even as tax revenues drop, spending just keeps going up. Not only that, new spending is often misleadingly designed as a new tax deduction or credit, a new loophole, that can technically be called a tax cut.
Norquist is fine with adding more of these loopholes because it lowers tax revenue. But these loopholes increase inefficiency in the economy and make the deficit worse — the exact same effects that Wesley Mouch’s socialist policies cause in Atlas Shrugged and which real-life conservatives blame liberal policies for creating. For all Norquist’s success in monopolizing power over tax reform, he has completely failed to reform taxes in an economically responsible way.
If this trend is not reversed, it will eventually cause an economic crisis worse than 2008 and similar to the one that was hinted at when the GOP threatened to limit the debt ceiling last summer. But politically speaking, it is in nobody’s individual interest to address the problem until the crisis happens, because whenever somebody does the right thing on this issue they lose their next election.
So where does that leave us heading into Part Two? Rand’s vision of dystopian socialism does have analogues in the real America, vis a vis bizarre tax rates and potential economic collapse. But the injustice doesn’t fall so neatly along class lines, and the collapse is being brought on by today’s conservatives as much as by liberals, since the conservatives should be the libertarian, fiscally responsible party, but they have abandoned the policies and kept the rhetoric in ways that make the problems far worse.
As referenced earlier this week, Part Two is titled Either/Or, but the options Rand offers are a false choice. You can see this problem of illogic in our politics as well. The object of Applied Randology during the Either/Or chapters will be to reintroduce middle ground where Rand works hard to exclude it. If we succeed, we should be able to tie together all of the issues we’ve talked about so far into a crude vision of a progressive libertarianism that is not, in fact, a contradiction.
See you next week…
PREVIOUSLY: Dagny launched a one-woman investigation into the history of the mysterious clean-energy motor. Hank had a fight with his wife that may have broken the camel’s back. The Bureau of Economic Planning drafted several bills that would effectively stifle the booming Colorado economy.
Dags commences her investigation by meeting with Lawson, the former banker who now works for the Econ Bureau. She wants info on the condemned GM plant where she found the motor; he keeps throwing out irrelevant defenses of his piss-poor record as a banker. He did not know any of the R&D engineers at the plant but the company that ran it when he held the mortgage, the last company to run it before it went bankrupt, was
Bain Capital Associated Services. The head of A.S. was named Hunsacker.
Dagny tracks Hunsacker down in Illinois, where he’s now living as a lowly boarder and drafting an autobiography about which no one will care. He’s even more of a lousy whiner than Lawson. He recalls that when he first tried to raise the funds to purchase GM he applied for a loan from Midas Mulligan, the world’s richest man and one notorious for his impeccable investment record. One can only assume he paid less in taxes than his secretary.
Anyway, Mulligan turned him away for having no collateral or prior achievements and he sued Mulligan by exploiting an anti-discrimination law that was intended to protect day laborers. One Judge Narragansett ruled against him, but a higher court reversed the decision. Shortly thereafter Mulligan disappeared mysteriously forever. A few months later Judge Narragansett did the same. But Hunsacker got his loan from Lawson in the end, which worked out real well until they both went bankrupt.
Yeah yeah whatever, did Hunsacker spend much time at the R&D lab? No, not really. The founder, Jed Starnes, who was a self-made man (obviously), he was quite the innovator. But when his heirs took over some kind of wackness went down at the plant and the research staff abandoned ship. Hunsacker didn’t feel the need to reinvest in that department. The Starnes heirs? Oh, they live low-profile in Lousiana now. That’s all the info Hunsacker’s got. Dagny bolts.
Deep in the bayou our heroine uncovers the next lead. One of the Starnes heirs is a bitter drunk; another killed himself several years back; the third, Ivy, lives in a decrepit old manse studying Hinduism and, I’m just going out on a limb here, smoking a metric ton of weed. Ivy Starnes explains that she and her brothers also neglected the research & development team. Their innovation as managers was to implement a Marxist payroll structure where checks were written “from each each according to his ability, to each according to his need.”
Basically everybody at the factory voted monthly as to who needed money the most and who worked the hardest. The hardest workers were expected to log overtime hours without pay to cover the neediest employees’ generous salaries. If the industrious didn’t meet the output expectations of the payroll votes, they were fined to make up the difference. Dagny is apalled. Probably because this makes absolutely no sense. Everyone knows that communist countries didn’t abide by democratic votes! Allegory fail.
But I guess that’s kind of besides the point, which Dagny gets because she’s trying to drag the conversation back towards the R&D staff. The only name Ivy’s ganja-addled brain can remember is William Hastings, chief engineer. She remembers him because he quit pretty much immediately after the commie pay scheme was enacted.
Wyoming now, and Dags knocks on the door of Mrs. Hastings, who is the first dignified person she’s yet encountered in this little adventure. Unfortunately, Mr. Hastings passed away five years ago of a heart condition. But the widow Hastings remembers the last few years of his life quite well, and is happy to regale Dagny with the tale.
William ran R&D at GM for nearly two decades. Towards the end of his tenure he had a young assistant whom he constantly called a genius. The assistant had an idea for a revolutionary new motor, and Hastings helped him complete a prototype. But Jed Starnes died less than a month later and his hippie heirs with their naive ideals showed up to implement socialist theories of compensation, and so Hastings quit and refused to take another job.
He didn’t quite disappear mysteriously forever, though. Disappeared, sure. Mysteriously, yes. But temporarily, always. See, he and the missus continued their life together as usual except for a month every summer when he’d go on a vacation from which he returned in the fall sans explanation.
She does remember picking him up once and catching a rare glimpse of his enigmatic associates. One was the assistant engineer in question, the other a dignified older gent. Though she never learned their names, by pure coincidence she happened to run into the older guy again not too long ago. She remembers it clearly, because she was shocked to see such a dignified character working as the short-order cook in a roadside diner in Bumblefuck, Wyoming…
Bumblefuck, Wyoming. Dusty road, nothing for miles, just this one crummy diner. Dagny pulls up, steps inside, and orders a hamburger. She has butterflies in her stomach. This is it, she can feel it. The case is about to crack wide open.
There are two truckers at the counter and she waits for them to leave before she strikes up a conversation with the cook. “This is the best hamburger I’ve ever eaten,” she says. “Thanks,” he replies.
She sizes him up. “Come work for me. I’ll pay you $10,000 a year.” That $75,000 adjusted for inflation, by the way, but he turns her down flat. She doesn’t understand why. ‘I hate to see ability being wasted!’ she cries, and he says ‘So do I.’
She can tell by his tone that they’re simpatico and is suddenly overwhelmed with how much bullshit she’s had to put up with lately. She spills to him how impossible it is to find anybody worth dealing with anymore and how she’s trying so hard to make something good happen but everybody along the way is a total fucktard.
He takes all this in rather serenely and then asks what exactly it is she came here looking for. “Did you know the last man to serve as the assistant R&D engineer at GM?” He cautiously admits that he did. What’s it to you, lady? “He invented a motor. It’s vitally important I find him.”
The cook asks who she is and she tells him she’s Dagny Taggart. This whole scene makes a lot more sense to him now but he tells her ‘Give it up, Miss Taggart.’ He will not give her the name, or even tell her if the man is alive or dead. This is the end of the road.
“Who are you, anyway?” she asks him. “The name’s Akston. Hugh Akston,” comes the nonchalant reply.
Dagny’s mind is blown. “Hugh Akston the philosopher? Hugh Akston, Francisco’s former mentor? Hugh Akston who disappeared mysteriously forever years ago? What the hell are you doing frying eggs in the middle of the desert?! None of this makes any sense!”
Hugh Akston leans back against the counter and takes out a pack of cigarettes. He offers her one and then lights them both up. “I told you you hit a dead end. But I’ll give you one clue. There is no such thing as a contradiction. Only faulty logic. If your conclusions make no sense, go back and check your premises.”
A bell rings in Dagny’s head. Francisco told her the same thing when trying to explain his behavior the last time she saw him. She thanks Akston for the burger and the butt and leaves. As she steps into her car she stops to examine the cigarette in her hand. It belongs to no brand she can recognize. The only insignia is a tiny golden dollar sign stamped above the filter.
The time has come to give up and go home. Dagny arrives at the Wyatt Junction station to wait for the Galt Line to take her back east. But there is hubbub on the platform and she overhears somebody saying they don’t think Rearden will be able to follow all the new regulations at the same time. Some other guy is like “Hey fuck him, he’s rich. He can figure it out.”
Dagny’s blood freezes and she grabs the nearest newspaper. The Congress has given Wesley Mouch blanket authority to issue economic directives. He has placed production caps and price controls on nearly everything and levied extra taxes on Colorado businesses to subsidize the rest of the country’s failing infrastructure.
The memory of when she first met Ellis Wyatt leaps into her brain, the time he stormed into her office and threatened to fuck her up if she fucked around with his business. Another sudden recollection: the time he furiously smashed his glass after they toasted the opening of the Galt Line.
In a panic Dagny races for a pay phone, unsure what she’s trying to prevent but determined to do something. She dials Wyatt and starts screaming ‘Ellis, don’t! Don’t!’ but reaches only a dial tone.
Behind her, just past the station, the rolling hill with Wyatt’s estate and the vast expanses of his oil fields suddenly explode into a teeming wall of flames. All of the silhouetted derricks go up like torches. Dagny drops the phone in despair. He’s not there, she knows that much. He’s disappeared mysteriously forever. This is just his parting gift. One last “fuck you” for The Man. No more oil for you! Try running a techno-industrial economy now, sorry motherfuckers! Peace out.
REFLECTIONS ON PART ONE: The Logical Downfall of Ayn Rand
PART TWO, CHAPTER 1: “Storm’s Abrewin'”
(OR, How Conservative Arguments About Birth Control Really Mean They Wanted More Radical Obamacare)
So contraception’s been in the news lately, and I could tell right away that the debate about it was relevant here, since the blog is about where progressives and libertarians meet and the debate is about that exactly. But I haven’t had the time to address it here until now, so let’s do this thing:
The issue has been framed two ways — one as a matter of women’s rights, and the other as a matter of religious freedom. For those who’ve been following this blog, these two views represent the two different types of liberty (which I discussed here).
Basically, when you consider the issue as one of reproductive rights, it’s a matter of positive liberty because you’re saying a woman has a right TO something. Considered as a matter of religious conscience it’s about negative liberty because you’re saying an employer has a right to be free FROM something.
So if the government guarantees women access to birth control, it is protecting their right to choose at the expense of their employers’ right to choose, but if the government leaves the employers free to choose, it will take choices out of women’s hands.
Rather than get bogged down in arguments about whose rights take priority, however, we could just acknowledge that this entire debate would not exist if individuals didn’t rely on their employers for health insurance.
Again, if individuals had any kind of negotiating power in the health care market, there would be no conflict of interest here. If we had, oh I don’t know, some kind of clear relationship between health care services and every single payer, differences in the moral beliefs of employers and employees that have no bearing on their business relationship would have no bearing on their business relationship. Women’s rights wouldn’t conflict with religious liberty at all.
So conservatives worried this is an attack on religious freedom are actually making a good argument that Obamacare wasn’t liberal enough.
Let’s, er, apply Ayn Rand as an example. The official Ayn Rand Lexicon entry on birth control proves that Rand would have been on the progressive side of this argument — as if her hatred of religion and love of kinky sex hadn’t made that abundantly clear already. Yet in this case, protecting a woman’s right “to her own life and happiness” (Rand’s phrasing) would mean government interference in the economy, which she hated. So we know already that the current conversation is a tangled mess.
Let’s clean it up, shall we?
To start with we have individuals and doctors. Currently between them are employers, insurance companies, and government, all negotiating amongst themselves what the individuals and doctors can do. Despite all the controversy over Obamacare, that basic framework was true before it passed and it’s still true now.
The most radical liberal option during the health care debate would have been to break the backs of the insurance companies and replace them with a single-payer system that would remove employers from the equation too, leaving only one arbiter between people and their doctors, and the same arbiter for everyone, thus radically simplifying people’s interactions with health care providers and making it clear who to petition for changes in the system in the future. Counter-intuitively, even though this would be the ‘big government’ solution, it would in many ways increase individual liberty — positive liberty.
But that course of action wasn’t on the table. A ‘public option’ would have essentially been a single-payer system competing against the insurance companies in the free market, which is a more American approach to reform anyway. But that would’ve meant the insurance companies would have to actually, you know, compete. So powerful corporate interests that they are, they mobilized an army of lobbyists (like Rand’s Wesley Mouch) to water down the law as much as possible and stop it from being too innovative or efficient. The individual mandate, which is obviously a huge infringement on negative liberty, was originally a Republican idea in the ’90s and basically hands the insurance companies lots of new business.
Which means, if we review the chain of events really quickly, well-established corporations with well-funded lobbies and a status quo bias (the villains in Atlas Shrugged) were facing upstarts who wanted to boost efficiency (just like in Atlas Shrugged), and they sabotaged this effort by helping to rewrite the law in their own interests (just like in Atlas Shrugged), the results of which have led to unnecessary conflicts and limits on freedom (just like in Atlas Shrugged), conflicts now blamed on those who were attempting reform in the first place (just like in Atlas Shrugged), reformers who in this case were progressive elected officials (the exact opposite of Atlas Shrugged).
So. As I have pointed out on multiple occasions, people who claim that real life since 2008 is just like in Atlas Shrugged are actually on to something in terms of the plot, because that comparison is revisiting the book in reality’s terms, retrospectively. But taking Rand’s political prejudices in Atlas Shrugged and prejudging real people by them in terms of character, the comparison is reframing reality in the book’s terms, which is just failing to face reality on its own terms.
And in that ideological mismatch, Rand fans end up supporting policies and politicians that only worsen the economic problems that scared them in the first place… which is just like in Atlas Shrugged.