Posts Tagged budget

Applied Randology #4: Paul Ryan, Republican Microcosm

Well, Our L’il Aynie got her first (probably not last) dose of media attention this election season when potential Romney Veep Paul Ryan disavowed his formerly effusive love for her, an image-moderating act that signaled he wants on the ticket.

But the Atlas Society, which advocates for Objectivism, made sure the world knew it still supports Ryan’s budget proposals, and released audio of Ryan calling Rand his number one philosophical influence and the reason he became a politician (which is an… interesting interpretation of her text).

Nonetheless Ryan now claims he rejects Rand’s atheist philosophy: “On epistemology,” he says, “Give me Thomas Aquinas… Don’t give me Ayn Rand.”

Of course, as far as Ryan’s job as Chairman of the House Budget Committee is concerned, the relevant tenets of Objectivism are in economics and politics, not the more abstract area of epistemology. So that’s really a clever elision on his part — in reality it makes sense that Rand’s true believers can blithely dismiss his epistemic apostacy; his policy agenda is strictly by the book (in this case, Atlas Shrugged).

So to speak, anyway. It’s worth noting that in the book pretty much every single person who actively spends time or money on democratic political processes is a despicable soulless monster. In the Randverse, those involved with governance either preach liberal ideas as a form of denial about the damage they inflict, or are completely cynical two-faced operators.

To be fair, Paul Ryan might be a two-faced operator — all politicians are — but he’s not cynical. He, like Rand’s archetypal ‘evil progressive,’ is an ideologue in denial about the danger of his ideas; Ryan just comes by his ideology honestly.

And there are some other notable discrepancies between Paul Ryan and Ayn Rand: Ayn believes all religion is an exercise in covert nihilism; Paul is a well-read Catholic. Ayn believes all politics is an exercise in corruption; Paul is a politician. Ayn believed Objectivism as a whole “single-handedly solved an ancient philosophical puzzle” (atlassociety.org); Paul thinks he can selectively accept her conclusions about politics while rejecting the deeper philosophical premises on which those conclusions are based.

I think all this speaks to the factional tensions in the Republican party quite well. The party of old time religion has an economic agenda based on the philosophy of a radical atheist! Rather than render to Caesar the things that are Caesar’s and to God the things that are God’s (Mark 12:17), the theocratic wing of the GOP would render Caesar unto God, and the Rand-friendly wing would make a God of those things that ought be rendered to Caesar.

Rand, in her absolutism, poses a serious problem for those such as Ryan who would pick and choose from Objectivism like it was a buffet and not prix fixe. Hell, she poses problems for those like myself who would agree to disagree and just appreciate her as a champion of innovation, progress, and the spirit of willful individualism. The problem is summed up nicely by the caption on this XKCD comic:

“I had a hard time with Ayn Rand because I found myself agreeing with the first 90% of every sentence, but getting lost at ‘therefore, be a huge asshole to everyone.’ -Randall Munroe, xkcd

Commenting on that comic, Ari Kohen, who’s read Atlas, offers this critique:

Rand understood her novels to set the table for her Objectivist philosophy and, as a result, she intended for people who read her books to live their lives like [John Galt] … to think of other people as parasites and reject the idea that a political community binds people together in some morally meaningful way… One must be careful with this sort of thing because novels present their commentary and their conclusions without argument… she attempts to shape the way that people think about and interact with the world around them — to do political philosophy — without actually making any arguments for what are, ultimately, policy preferences with serious personal and societal consequences.

This is what is so alarming about the modern Republican agenda. It’s like the party is campaigning to bring about the Randverse, except the Randverse climaxes in economic apocalypse! To go back to a point I’ve made before (not to mention earlier in this post), politicians who employ rhetoric about restoring economic growth and making America great again even as they pursue policies that they must at least unconsciously know will cause society to collapse? They’re represented in Atlas Shrugged. They’re the villains.

You may say that this is painting with an extremely broad brush, but if you combine Paul Ryan’s draconian budget proposals with Grover Norquist’s perverse approach to tax reform (which he leads from an office at ‘Americans for Tax Reform’ in truly Orwellian fashion), the inevitable consequence is not fiscal responsibility but reckless debts and deficits, even default, that will provoke political and economic crisis. You cannot starve the beast and put it on a balanced diet at the same time.

To paint with a finer brush, it’s worth nothing that liberals too have grand thinkers who consider their approach the natural evolution of Western political philosophy. John Rawls, for instance, is a hugely influential high liberal philosopher who advocates for a low- or no-growth socialized economy to better realize an ideal of justice as fairness.

Except no real liberal politician would dare hijack American institutions in the name of a radical socialism, no matter what Fox News wants you to believe, because capitalism is too well-loved in our democracy for that to be politically viable. The ideological reverse, however…

There is a sane middle ground here. An overlap between the merits of libertarian economic efficiency and the virtues of the liberal commitment to democratic legitimacy. This space is explored in John Tomasi’s recent book Free Market Fairness.

Tomasi’s goal is conceptually ambitious but modest in its particulars and prescriptions. He builds a philosophically coherent argument that economic liberty and the democratic social contract need not be mutually exclusive propositions, need not be in contradiction. In fact, as the historical record shows, they are two great tastes that go great together.

Down that middle path lies the potential for compromises superior to either side’s unilateral positions, and that will be the subject of the next Applied post. But for now, I think it must be stated firmly and without equivocation that objectively speaking, it is the radical ideological purity demanded by Republicans, even as they insist that the compromising, weak-willed Democrats are the covert ideological radicals, that is the primary cause of our inability to achieve civic reforms and a stronger economic recovery. Furthermore, in their obstructionism the Republicans are performing the role of the looters from Atlas Shrugged, only with an inverted looter ideology that loots from the public coffers of a legitimate democracy, rather than from private coffers in the name of an illegitimate kleptocracy.

And Paul Ryan exemplifies this problem in that he is substantively committed to Objectivist values even as he maintains nominal adherence to a religion with a doctrinal tradition of social justice. Although he would make a great Republican VP candidate with his rep for fiscal responsibility, his specific plans (particularly in conjunction with Grover Norquist’s monopoly on tax reform) are not fiscally responsible. And that is what actually makes Ryan the perfect poster boy for today’s Republican Party: he seems like what’s right about it, when in fact he’s what’s wrong.

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Applied Randology #3: Taxation and Misrepresentation

So before we leave Part One behind, let’s add tax reform to the issues of health care, renewable energy, and the impact of lobbyists on our laws that we’ve touched on during this section of the book.

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.

See! What's so hard to understand about this?

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.

Bartlett is one of those moderate Republicans from the '80s who is far too reasonable for today's GOP.

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.

A completely flat tax would cut rates for the rich and raise rates for the poor.

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.

We are through the looking glass here, people.

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.

BOTTOM LINE: If the line goes higher than the top of the chart, America is truly fucked, like Greece. And literally the only way to bring the line down enough is to raise taxes and/or close loopholes.

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…

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