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Updated: 2 hours 36 min ago

Disagreeing with Liberal Socialism, Despising Marxist Socialism

Thu, 08/31/2017 - 12:29pm

wrote last week about evil of totalitarian ideologies such as communism and fascism and pointed out that both antifa and Nazis should be treated with complete disdain and ostracism.

And that led me to find common ground with my left-of-center friends, even though I don’t like many of their policies.

I don’t like redistribution…programs are financed with taxes and that the internal revenue code is enforced by coercion…if you catch me in a cranky mood, I’ll be like the stereotypical libertarian at Thanksgiving dinner and wax poetic about what’s wrong with the system. That being said, I much prefer the coercion found in western democracies compared to the totalitarian versions of coercion found in many other parts of the world. At least we have the rule of law, which limits (however imperfectly) capricious abuse by government officials. …our Constitution still protects many personal liberties, things that can’t be taken for granted in some places. Moreover, there is only a trivially small risk of getting abused by the state in western nations because you have unpopular views. And there’s little danger of persecution by government (at least nowadays) based on factors such as race and religion. This is what makes liberal democracy a good form of government (with “liberal” in this case being a reference to classical liberalism rather than the modern version). Unfortunately, there are some people in America that don’t believe in these principles.

Now let’s look at an aspect of this issue from a left-of-center perspective.

Writing for the New Republic, John Judis analyzes the different types of socialism. He starts with some personal history of his time as a socialist activist.

In the early 1970s, I was a founding member of the New American Movement, a socialist group… Five years later, I was finished with…socialist organizing. …nobody seemed to know how socialism—which meant, to me, democratic ownership and control of the “means of production”—would actually work… Would it mean total nationalization of the economy? …wouldn’t that put too much political power in the state? The realization that a nationalized economy might also be profoundly inefficient, and disastrously slow to keep up with global markets, only surfaced later with the Soviet Union’s collapse. But even then, by the mid-1970s, I was wondering what being a socialist really meant in the United States.

He then notes that socialism has made a comeback, at least if some opinion polls(but not others) and the campaign of Bernie Sanders are any indication.

…much to my surprise, socialism is making a comeback. The key event has been the campaign of self-identified democratic socialist Bernie Sanders, who almost won the Democratic nomination and is now reputedly the most popular politician in America. Several opinion polls have also found that young people now think favorably of socialism and ill of capitalism… For the first time since the ‘60s, socialism looks like a politics with a future in the United States.

But Judis notes that it’s unclear what socialism means.

The old nostrums about ownership and control of the means of production simply don’t resonate in 2017. …In the 2016 campaign, however, Sanders began to define a socialism that could grow… I think there is an important place for the kind of democratic socialism that Sanders espoused.

He says there are many flavors of socialism, but ultimately puts them in two camps.

There is no scientific definition of socialism… It’s a political tradition with many different flavors—Marxist, Christian, social-democratic, Fabian, Owenite, Leninist, Maoist. In looking at the choices facing American socialists now, …a choice between a socialism rooted in Marx’s apocalyptical promise of revolution, or the abolition of capitalism and a socialism that works more gradually toward the incorporation of public power and economic equality within capitalism. One could be called “Marxist socialism” and the other “social democratic”—or, to borrow from John Maynard Keynes, “liberal socialism.”

And “liberal socialism” basically means capitalism combined with European-style redistributionism.

In Western Europe, …socialists were forced to define their objectives more clearly. And what has emerged is a liberal conception of socialism. …social democracy has probably reached its acme in the Nordic countries, where the left has ruled governments for most of last half-century. …That’s not Marx’s vision of socialism, or even Debs’s. In Europe, workers have significant say in what companies do. They don’t control or own them. Private property endures. …private capital is given leave to gain profits through higher productivity, even if that results in layoffs and bankruptcies. But the government is able to extract a large share of the economic surplus that these firms create in order to fund a full-blown welfare state.

Which means “liberal socialism” is, well, liberalism (the modern version, i.e., statism, though Thomas Sowell has a more unflattering term to describe it).

By the standards of Marxist socialism, this kind of social democracy appears to be nothing more than an attenuated form of capitalism. …But…As the Soviet experiment with blanket nationalization showed, it can’t adjust to the rapid changes in industry created by the introduction of automation and information technology. …the market is a better indicator of prices than government planning. …the older Marxist model of socialism may not even be compatible with popular democracy. …What’s the difference between this kind of socialist politics and garden-variety liberalism? Not much. …American socialists need to do what the Europeans did after World War II and bid goodbye to the Marxist vision of democratic control and ownership of the means of production. They need to recognize that what is necessary now—and also conceivable—is not to abolish capitalism, but to create socialism within it.

For what it’s worth, the leftists I know are believers in “liberal democracy,” which is good, and they also are believers in “liberal socialism,” which is good, at least when compared to “Marxist socialism.” Sort of like comparing Barack Obama and Hillary Clinton to Nicolás Maduro and Kim Jong Un.

I disagree with Obama and Clinton, of course, and I would argue that what they want is bad compared to small-government capitalism.

But I utterly despise the totalitarian regimes in Venezuela and North Korea.

Let’s conclude by highlighting a key difference between “liberal socialists” and supporters of small government. My leftist friends are content to allow capitalism so long as they can impose high taxes on “economic surplus” to finance lots of redistribution.

They think that such policies don’t cause significant economic harm. I try to explain to them that punishing success and subsidizing dependency is not a good recipe for long-run prosperity. And I also tell them that demographic changes make their policies very unsustainable.

But at least these decent people on the left are not totalitarians. So when I look at this amusing image from Reddit‘s libertarian page, I agree that everyone who supports big government is a collectivist of sorts. But “Social Democracy” (assuming that’s akin to “liberal socialism”) is not really the same creature as the other forms of collectivism (assuming “social justice” is akin to antifa).

Which is why this image is more accurate.

 

 

The bottom line is that Nordic-style big government is misguided, but state-über-alles totalitarianism is irredeemably horrible.

Will Unresolved Issues Sink Tax Reform?

Wed, 08/30/2017 - 12:21pm

While I realize there’s zero hope of ripping up America’s awful tax code and getting a simple and fair flat tax, I’m nonetheless hopeful that there will be some meaningful incremental changes as part of the current effort to achieve some sort of tax reform.

A package that lowers the corporate rate, replaces depreciation with expensing, and ends the death tax would be very good for growth, and those good reforms could be at least partially financed by eliminating the state and local tax deduction and curtailing business interest deductions so that debt and equity are on a level playing field.

All that sounds good, and a package like this should be feasible since Republicans control both Congress and the White House (especially now that the BAT is off the table), but I warn in this interview that there are lots of big obstacles that could cause tax reform to become a disaster akin to the Obamacare repeal effort.

Here’s my list of conflicts that need to be solved in order to get some sort of plan through Congress and on to the President’s desk.

  • Carried interest – Trump wants to impose a higher capital gains tax on a specific type of investment, but this irks many congressional GOPers who have long understood that any capital gains tax is a form of double taxation and should be abolished. The issue apparently has some symbolic importance to the President and it could become a major stumbling block if he digs in his heels.
  • Tax cut or revenue neutrality – Budget rules basically require that tax cuts expire after 10 years. To avoid this outcome (which would undermine the pro-growth impact of any reforms), many lawmakers want a revenue-neutral package that could be permanent. But that means coming up with tax increases to offset tax cuts. That’s okay if undesirable tax preferences are being eliminated to produce more revenue, but defenders of those loopholes will then lobby against the plan.
  • Big business vs small business – Everyone agrees that America’s high corporate tax rate is bad news for competitiveness and should be reduced. The vast majority of small businesses, however, pay taxes through “Schedule C” of the individual income tax, so they want lower personal rates to match lower corporate rates. That’s a good idea, of course, but would have major revenue implications and complicate the effort to achieve revenue neutrality.
  • Budget balance – Republicans have long claimed that a major goal is balancing the budget within 10 years. That’s certainly achievable with a modest amount of spending restraintAnd it’s even relatively simple to have a big tax cut and still achieve balance in 10 years with a bit of extra spending discipline. That’s the good news. The bad news is that there’s very little appetite for spending restraint in the White House or Capitol Hill, and this may hinder the passage of a tax plan.
  • Middle-class tax relief – The main focus of the tax plan is boosting growth and competitiveness by reducing the burden on businesses and investment. That’s laudable, but critics will say “the rich” will get most of the tax relief. And even though the rich already pay most of the taxes and even though the rest of us will benefit from faster growth, Republicans are sensitive to that line of attack. So they will want to include some sort of provision designed for the middle class, but that will have major revenue implications and complicate the effort to achieve revenue neutrality.

There’s another complicating factor. At the risk of understatement, President Trump generates controversy. And this means he doesn’t have much power to use the bully pulpit.

Though I point out in this interview that this doesn’t necessarily cripple tax reform since the President’s most important role is to simply sign the legislation.

Before the 2016 election, I was somewhat optimistic about tax reform.

A few months ago, I was very pessimistic.

I now think something will happen, if for no other reason than Republicans desperately want to achieve something after botching Obamacare repeal.

FCC Should Empower Private Sector to Bring Broadband to Rural America

Tue, 08/29/2017 - 12:11pm

Originally published by Townhall on August 28, 2017.

It’s difficult to participate in the modern world without access to affordable, high-speed internet. As the economy becomes increasingly digital and solutions to everyday problems continue to be found more and more online, lack of access to broadband threatens to leave millions behind.

While much progress in expanding access has been made, growth in broadband adoption has slowed in recent years. The FCC’s 2016 Broadband Progress Report estimates 34 million Americans, 10% of the population, lack access to the minimum broadband speed of 25Mbps. Further, over 46 million homes have access only to a single broadband provider and thus lack the price-reducing benefits of market competition.

Much of the challenge in spreading high-speed internet is due to the sheer size of the nation and the low population density of so much of the heartland. It has not typically been economical to build the infrastructure needed to provide broadband access to much of rural America. Thankfully, that need no longer be the case.

The FCC is in the process of repacking the broadcast spectrum to make way for more wireless broadband. As part of this process, “white spaces” found between TV channels will be available for public use. And one exciting possible use for this spectrum is to deliver broadband to rural America.

Many Americans already benefit from unlicensed spectrum through the use of Wi-Fi. However, Wi-Fi operates at very high frequencies and thus cannot travel far, often not even entirely throughout a single home. TV white spaces, on the other hand, are found at lower frequencies where a broadband internet connection can cover 9 miles.

Microsoft recently unveiled a rural broadband initiative to leverage private investment and use TV white spaces to expand broadband access to rural America. But Microsoft and other companies first need regulatory certainty before that investment can be unleashed.

The FCC can provide the certainty needed simply by finalizing several rules currently under consideration that would preserve three white spaces channels in every market for public use. Knowing that access to this spectrum will be assured going forward will allow private sector innovation to solve a pressing public problem. Economic analysis suggests doing so could lead to $28.4 billion in additional output per year and an increase of about 358,000 jobs.

Broadcasters are fighting to convince the FCC to close off public access to these critical unlicensed bands. Despite controlling 92 percent of the spectrum in the tv band, heavily subsidized broadcasters are pulling out all the stops, even spreading unsubstantiated scaremongering about potential interference with medical devices, to deny the preservation of just a tiny bit of spectrum to help expand broadband access to millions of Americans.

Thankfully, a large, bipartisan Congressional coalition is calling on the FCC to ignore these special interest pleas and help make expanding broadband through TV white spaces a reality. And FCC Commissioner Ajit Pai has spoken repeatedly about the need to expand broadband access. He and the FCC need to stick to their guns in the face of special-interested pleading and finalizing the rules to preserve tv white spaces for public access.

Personal Accounts Are the Best Way to Ensure Safe and Secure Retirement Income

Tue, 08/29/2017 - 12:04pm

Most people understand that there’s a Social Security crisis, but they only know half the story.

The part of the crisis they grasp is that the program is basically bankrupt, though I doubt many of them realize that the long-run shortfall is a staggering $44 trillion.

The part of the crisis that generally is overlooked is that the program is a lousy deal for workers. They pay record amounts of tax into the system in exchange for a shaky promise of a modest monthly check. For all intents and purposes, they are being charged for a steak, but they’re getting a hamburger (with Medicare, by contrast, people are charged for a hamburger and they receive a hamburger but taxpayers pay for a steak that nobody gets).

For groups with lower-than-average life expectancy, such as poor people and minorities, Social Security is even worse. They pay into the system throughout their working lives, but then they don’t live long enough to collect a decent amount of benefits.

I narrated a video that was partly focused on how people could have more retirement income if we shifted to a system of personal retirement accounts, but this video from Learn Liberty directly addresses this issue.

By the way, I have one minor complaint with this excellent video. Social Security is not “forced savings.” There’s no money set aside. Yes, there’s a “trust fund,” but it contains nothing but IOUs. And if you don’t believe me, see what the Clinton Administration wrote back in 1999.

It would be more accurate to say the system is a pay-as-you-go, tax-and-transfer entitlement.

But I’m digressing, so let’s focus on some potentially good news. Americans actually have a pretty good track record of saving for their own retirement. Indeed, total pension assets (measured as a share of economic output) in the United States rival those of nations that have mandatory private retirement systems.

So it presumably shouldn’t be that difficult to transition to a private retirement system in America, which was a key takeaway from a column in the Wall Street Journal last week by Andrew Biggs of the American Enterprise Institute.

He starts with a pessimistic observation on how major politicians have addressed the crisis:

During last year’s presidential campaign, the candidates promised not to cut Social Security benefits (Donald Trump) and even to increase them (Hillary Clinton). …the Trump administration should reconsider its pledge not to cut Social Security benefits. The program is 25% underfunded over the long term, the Congressional Budget Office projects.

But the good news is that many Americans already are saving for retirement, so it wouldn’t be disruptive to extend personal retirement accounts to the entire population.

…private plans such as 401(k)s have allowed more people than ever to save for retirement…61% of workers… Contributions to private plans have…risen from an average 5.8% of wages in 1975 to 8% in 2014. …in 1984 only 23% of households received benefits from private retirement plans. By 2007 that had risen to 45%. Moreover, during the same period the benefits that the median household received from private plans rose by 141% above inflation, versus only 25% for Social Security benefits.

This is a system that should be expanded, with a prudent transition from a bankrupt Social Security system to a safer and more lucrative system of personal retirement accounts.

And that would be a much better outcome than what the current system will give us.

…Scandinavian-level tax rates or multi-trillion dollar unfunded entitlement liabilities.

P.S. Responding to those who worry about stock market downturns and the implications for retirement income, my colleague Mike Tanner showed that even people retiring after the 2008 crash would have been better off with personal retirement accounts.

Teaching Economics to Texans: Three Cheers (and Three Videos) for Price Gouging

Mon, 08/28/2017 - 12:49pm

I generally use Texas as a good example when discussing public policy. Particularly compared to places such as California.

I like the sensible attitude about guns, but the absence of an income tax is particularly admirable when considering economic issues, and I confess to being greatly amused when I read about jobs and investment escaping high-tax states like California and moving to the Lone Star State.

But being more pro-market than California is a low bar to clear. And I’ve written that government is too big in Texas.

And now, because of Hurricane Harvey, I have another reason to criticize the state.

Texas has a law against “price gouging,” which means politicians there (just like the politicians in places like Venezuela) think they should get to determine what’s a fair price rather than allow (gasp!) a free market.

The state’s Republican Attorney General is even highlighting his state’s support for this perverse example of price controls.

>Price gouging by Texas merchants in the path of Hurricane Harvey has drawn the attention of Texas Attorney General Ken Paxton, who said Saturday that his office is looking into such cases. …”We’ll be dealing with those people as we find them,” he said. …Paxton issued a warning about price gouging Friday as the hurricane approached the Texas coast. Texas law prohibits businesses from charging exorbitant prices for gasoline, food, water, clothing and lodging during declared disasters.

Paxton is right about Texas law, but he is threatening to enforce a terrible policy.

To help explain why Texas law is bad and why the Attorney General is misguided, here’s a video from John Stossel on so-called price gouging.

It’s disgusting that Mississippi arrested John. The guy should have received a medal for putting his money at risk to serve others.

To augment Stossel’s analysis, here’s a video from Learn Liberty that explains why politicians shouldn’t interfere with the price system.

And here’s Walter Williams discussing the role of “windfall profits” and how high returns encourage the reallocation of resources in ways that benefit consumers.

The bottom line on this issue is that buyers understandably want low prices, particularly in emergency situations.

But that makes no economic sense. However, since buyers generally outnumber sellers, politicians will always have an incentive to demagogue on the issue.

I’m not surprised when we get economic illiteracy from certain politicians. Nonetheless, it’s very disappointing when Texas lawmakers sink to that level. I hope Mr. Paxton at least is feeling guilty.

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