Monthly Archives: May 2013

End the Duocracy

If you are gay in America, then you pretty much have to be a Democrat – even if you are a gay entrepreneur wondering how your business will survive ObamaCare.  Likewise, if you are black – even if you are a black evangelical Christian.  Among Republicans, it’s the same story.  If you believe in free enterprise, then you have to accept some unpleasant social policies.

This means that no one in America is properly represented.  No wonder few people bother to vote.  Below is Jeremiah’s fantasy chart of representative democracy in the Senate.

Senate2

This is based on a rough analysis of our current Senate.  Of the 53 Democrats, 7 are New Democrats.  We added the two Independents to this party, and hived off a few Greens for good measure.  Of the 45 Republicans, 5 are declared Libertarians and roughly half are Moderates.  That means the hypothetical Conservative party, including the religious right, is smaller than the Libertarian party.

Jeremiah would actually prefer fewer Socialists, but you get the idea.  Only when we end the two party system will we have true democracy.  The next time you feel like Occupying something, or Tea Partying – the next time you are called to march for the red or the blue – think first about breaking the duocracy.

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Language Lesson

Jeremiah has a new pastime, trolling partisan blogs for the fascism debate.  Here we have Mother Jones defending the IRS, of all things, and then the community flaming one lonely centrist.

Where was your outrage when Bush used the IRS against Greenpeace?

This is healthy for young people who don’t remember the Watergate hearings, or maybe young liberals who came of age during the Bush administration.  In time, they will learn that surveillance and intimidation are always evil – no matter who’s in the White House.

Meantime, we have cracked the fascism comes from the left question.  It can’t, by definition.  The right calls it “tyranny.”  What we learned from the partisan blogs is that each side has its own language, which prevents them discussing a mutual danger.

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Sugar High

WillyWonkaYou are paying twice as much as you should for sugar and sugary foods.  That’s fine, you say, sugar is dangerous and ought to be heavily taxed.

Well, no.  The fact is that your tax dollars are used to support the price of sugar.  If you are both a taxpayer and a sugar user, you were dinged twice – once when the USDA took a loss on the sugar, and again when you overpaid for it.

Last year, the price of sugar around the world averaged 26.5 cents per pound, compared with 43.4 cents in the U.S.

The high cost of American sugar is backed up by tariffs on imported sugar, ostensibly to protect 140,000 jobs in the domestic sugar industry.  This year, said protection will cost taxpayers about $80 million.  It varies from year to year.  Call it $1,000 per job.  That’s not too bad, by Washington standards, and Jeremiah is not dogmatically opposed to price supports.

On the other hand, manufacturers now have a powerful incentive to build near cheaper sources of sugar.  This means a jellybean factory in Thailand, for example.  That’s probably a net loss of jobs and revenue for America, but ­– maybe it’s not about jobs.  Maybe it’s about pork for the eighteen sugar states, and $5 million in campaign donations.

The sugar lobby and the candy lobby are engaged in a bidding war for Congressmen, over corporate welfare.  That’s democracy at work.

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Repeal the Sixteenth Amendment

Shortly after we published Jeremiah’s call to End the IRS, Ron Paul wrote roughly the same thing.  That link is here.  Dr. Paul points out that the IRS is a bipartisan weapon, and has been put to evil purpose by both parties.  The very existence of the IRS, he writes, is an attack on your civil rights.  The IRS, as everyone knows, is a recent invention, intended to be temporary, and not supported by the Constitution.

The US flourished for over 120 years without an income tax, and our liberty and prosperity will only benefit from getting rid of the current tax system.

We want to emphasize that ending the IRS is a realistic proposal.  Ending the IRS would actually save money, and it’s pretty straightforward.  Congress just has to repeal the founding law of the IRS, and roll back to the prior system.

The prior system was for the states to pay tax to the federal government.  Each state already has a tax agency, so the IRS is redundant.  America’s founders never intended the federal government to reach over the states and tax their citizens directly.  That’s an obvious source of abuse.

The real problem is that this is a federal program, wherein the states spend “federal money” under federal direction.

Paying tax only to your state means that you don’t encounter an omnipotent federal agency.  It also frees the states to collect tax any way they choose.  Your state may have a personal income tax – not all do.  It may rely on a corporate tax, a sales tax, a property tax, or the lotto.  This is the states’ traditional role as laboratories for new policy.

One way or another, your state taxes would go up, but your federal tax would go to zero – and there would be one less giant bureaucracy to support.

See also:  President Guts Welfare Reform

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Generational Conflict

The letter from Clara we published last week sets out the markers in a generational conflict that dominates our debate about class and wealth.  Political pundit Stephen Colbert says much the same thing here, and here is a blogger who writes that Social Security promises are null and void in the new economy.

promises made when the economy was growing by 4% a year and the next generation was roughly double the size of the generation entering retirement cannot be fulfilled

On the flip side, people retiring today have been paying into this failed system all their working lives.  Is it fair that Mr. Colbert’s generation should be the one holding the bag?  As Sami Karam observes in his own Clara piece, demographic challenges can be foreseen far in advance.

the number of people aged 40 in the United States twenty years from now is roughly the same number of people aged 20 today

Jeremiah does not blame greedy oldsters for wanting “their” Social Security payments.  He blames the political class for not reforming the program.  The housing bubble may have been a surprise, but this crisis has been brewing for twenty years.  To reform Social Security, it pays to understand where the program went wrong.

  • Passthrough funding seemed like a clever idea when the dependency ratio was low.  It allowed the program to show immediate benefits.  The adverse trend in this ratio was predictable, though, and funding should have been shifted to an investment model.  This would mean positive returns to the program, and it would also fund economic growth.
  • Social security holds its deposits in a special class of Treasury debt, which means free funding for the government.  It should be in an age-weighted portfolio, like any private pension fund.  The administrators should have a stake in obtaining positive returns on investment, and against the Fed’s policy of financial repression.
  • It is irresponsible to go on making promises about benefits, while not investing and not planning for population trends.  The program ought to work more like a defined contribution fund, regularly publishing changes to benefits and the retirement age, depending on the health of the fund.  This would give the public an interest in how well the program manages its money.
  • One goal of the program is redistribution.  People with good jobs would prefer to fund their own IRA, but they face an individual mandate to join Social Security.  We should allow them to opt out, fractionally, in exchange for lower benefits.  This would cost the program some funding, but it would add diversity and reduce total size.

Finally, the administration of Social Security needs to be reformed.  Its three main operations are funds collection, investment, and disbursement.  The latter two could easily be outsourced, taking care to end the Treasury’s conflict as a borrower from the fund.  Jeremiah would also like to see collections handled by a different agency than the IRS, because the IRS is unspeakably evil.

See also:  Age Shall Weary Them

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Filed under Finance

End the IRS

By now, you know that the IRS has been targeting certain groups for harassment.  You know that the IRS can read your email, and you have seen IRS chief Steve Miller testify to Congress that this is all just fine by him.  In fairness to Mr. Miller, he did allow the IRS was guilty of “poor service.”

IRS Howitzer

This is like having the government aim an eight inch howitzer at your yoga studio.  The question is not, why don’t they like yoga?  The question is, why does the government have a weapon like this in the first place?

If you run a small business – that is, if you are one of the rare people actually providing jobs in this wretched economy – you know what the IRS can do to you.  The IRS can put you out of business instantly, take everything you own, and throw you in jail.

Contrary to your constitutional protections, you are presumed guilty unless proved innocent.  Meanwhile, they impound your house and freeze your bank account.  Good luck defending yourself in court.  You don’t even have clean clothes to wear.  Oh, and the IRS has their own special court.

Many of the non-economic reasons people expatriate are due to tax enforcement policies and a culture of fear encouraged by the IRS.

It’s like a little piece of Nazi Germany went through the time machine and came out in America.  Phil Hodgen, who runs a law practice for Americans looking to flee the country, specifically mentions the “jackboot approach to enforcement” by the IRS.  Phil’s blog is one horror story after another.

So, we have well meaning Paulites and Occupy kids calling for an end to the Federal Reserve, while a much larger menace stalks the country.  Yes, Uncle Sam needs the money, but – we are pretty sure taxes can be collected without the Gestapo.

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Letter from Clara

Last week, we cited the famous Letter from Clara to President Hollande of France.  Below, we have obtained an English translation, so you can enjoy the letter in its entirety.  This appeared in Le Point magazine earlier this month.  If your French is up to it, you might also enjoy reading the comments.

Monsieur le Président de la République,

First, let me introduce myself: Clara G., 20, sophomore in History at Sorbonne University.  I am writing to explain why I would like to make my life elsewhere than in France – like the majority of young French people, if you believe the results of a survey done by Via Voice in April.  To the question, “if you could, would you like to leave France to live in another country?” 50% of those aged 18-24 and 51% of those 25-34 said yes, versus 22% of those over 65.

You see, times have changed.  My grandparents of 1968 wanted a revolution; I want expatriation. My grandparents, who have a nice retirement cottage in the country, dreamt of transforming French society.  I think only of escape.

This may shock you, but my reasons are financial.  Not like Jerome Cahuzac, I assure you, but simply because I don’t feel like working my whole life just to pay the interest on 1.9 billion Euros of debt that your generation has kindly left us as our inheritance.  If you had invested a little of this money in improving the country, so that I might have some chance of enjoying the benefits, then I would not mind paying it back.  But it has only permitted your generation to live above your means, enjoying generous social benefits that won’t be there for me.  It gave you a life I would call “cushy,” but I guess that word offends you.

My work and my taxes must go not only to pay for your retirement, which you did not bother to plan, but also for the health and welfare of additional old people who, in less than twenty years, will make up the majority in our country.  So, how much money will be left for me to raise my children?  I recently read a study by the economist Patrick Artus, which gave me chill, “given the weak growth potential and the aging population, young French people can look forward to continued stagnation of their purchasing power throughout their working lives.” I am not overjoyed by this prospect.

But the most depressing part is, I know exactly what will become of my life, if I stay in France.  Once my studies are over and I have my lovely, useless diploma, I will spend years in the ranks of internships and temp jobs.  I will become, as the experts say, a “variable expense” in the sort of work deliberately organized to exclude young people and protect the salaries of those already in place.  With my tiny, precarious job and bad pay, it will be impossible for me to convince any banker to give me a loan for an apartment in Paris.  And if ever, by some improbable miracle, I manage to make a lot of money, I know in advance that I will not only have to give up most of it in taxes, but I will also endure the general reproach of my compatriots and your personal contempt.

This is why, Mr. President, I wish to leave France.  This is also why your charming Minister of the Interior, Manuel Valls, should be less concerned about the dangers of immigration, and more about the emigration of the youth of the country.  Where will I go?  To Germany perhaps, of which you often speak ill, but which strikes me as a country with self confidence.  Or maybe farther, to Canada, Australia.  Or maybe to a developing country.  In Africa, why not ?

Thus – as indicated by the Via Voice survey – I am like all young French people.  I do not see globalization as a threat, but as an opportunity. But it is surely not in a France which does everything for its own protection, where your ministers and socialist comrades spend your time saying it is absolute evil, that I will be able to profit from it. So, yes, I am ready to go live in a country where there is growth, where salaries are rising, where to be rich is not considered a mortal sin, a country above all where there is a sense both individual and collective that things will be better tomorrow than today.

You may say that I am lacking a basic sense of national solidarity, that I am frightfully materialistic and self centered.  There is some truth in that.  But my selfishness is nothing compared to the egotism shown by you and your predecessors, who have sacrificed our generation by wasting public money instead of taking the difficult decisions.

All the same, Mr. Hollande, I say that you will indeed “shake things up,” that you will give some hope to a youth that cannot do without it.  I see today that, despite your grand fiery speeches about youth, in one year France has aged ten.  She withers, freezes, and stiffens at full speed.  What a pity! 

That’s what I have to say to you, Mister President, the unhappy citizen who wants to be an expatriate.

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