Sunday, May 2, 2010

ALERT! George Will Speaks the Truth (Sometimes)

Read carefully between the lines of the typical conservative invective, and you find that George Will (Inland Valley Daily Bulletin, 4/18/10) actually believes a few things that are accurate.

First, he believes that a Value Added Tax (VAT) has merit, at least under certain conditions. (He doesn't mention that all members of the European Union -- including (gasp!) France!! -- have a VAT. There's only so much truth the average Will reader can bear in a single column.)

Secondly, he admits that the "Great Recession" resulted in a fiscal shambles. (He doesn't mention, of course, that the Great Recession was caused primarily by lack of regulation and capitalists pursuing the American Dream, both legally and illegally. See rationale for this omission in previous paragraph.)

Thirdly (hold onto your keyboards, my friends), George Will admits that "some taxation is necessary." OMG!

Alas, these kernels of truth are sandwiched between the usual poisonous slices of egregious eyesores of expedient and excruciatingly erroneous evasions of rational thought.

Without eliminating the income tax, Will says, "a VAT would be just a gargantuan instrument for further subjugating Americans to government" (emphasis added). In other words, we poor freedom-deprived Americans have already submitted to the giant altar of government control and interference in our lives -- lives that should instead be full of liberty. Yes, every time I drive on a taxpayer-financed road and obey the regulations imposed by traffic signals, I get sick to my stomach.

Manipulating the concept espoused by President Obama's Chief of Staff Rahm Emmanuel that "you never want a serious crisis to go to waste" (Wall Street Journal, 11/2/08), Will recklessly charges that the Obama administration believes that "a crisis is a useful thing to create." But I will sleep well tonight, knowing that intelligent conservatives will easily see the difference between taking advantage of a crisis created by someone else and deliberately creating your own.

Democrats pushed health care reform, according to Will, because of liberals' tendency to "lunge to maximize government growth." Presumably, it was irrelevant that insurance companies were acting like bandits, taking policy-holders' money and then withholding services when people got sick, and that millions of Americans were dying prematurely because they didn't have access to quality medical care.

Will refers several times to the "political class" without defining it, but obviously, from the context, he considers it less desirable than, say, the club that backdates stock options. Members of this class "delight" in the "stealthiness" of incremental tax increases, show favoritism (by exempting "green" goods from VAT taxation, for example), and engage in "bossy" behavior by using the government code to regulate social behavior (e.g. taxing cigarettes and outlawing murder).

Finally, catastrophizing beyond the scope of any disorder described in the DSM (that's the Diagnostic and Statistical Manual of Mental Disorders, for you non-psychologists), Will claims that introducing a VAT without repealing the income tax "would be the obituary for the Founders' vision of limited government." Presumably he means the government that was created to "establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity." Correct me if I'm wrong, but that sounds like a pretty tall order -- one that requires people who want it to be successful to be willing to help foot some of the bill.

By the way, it is possible to write an article about the VAT that is informative and balanced. Witness "Much To Love, And Hate, In a VAT," by N. Gregory Mankiw, in the business section of today's New York Times.


  1. So an economist performs a better analysis of economic policy than a political hack...colour me shocked.

    As to the desirability of a VAT, I am skeptical. It mostly seems like a way of trying to dodge difficult problems of deciding how much we're willing to accept in the form of transfer payments from some people to others.

    That is, the federal budget has four main parts. They are in order of dollars/yr: Medicare/Medicaid, Social Security, The US military, and other safety net programs (welfare, the EITC, food stamps).

    Combined these constitute 75% of the budget, though they will shrink a bit proportionally in 2014 when the new health care bill kicks in. The transfer components (all of the above less the military) comprise 55% of the budget.

    Most federal spending therefore does not pay government employees, rather it is sent from some citizens/residents to other citizens/residents.

    If we do some back of the envelope calculations then, using 2007 (the bailouts bias things alot), we see that (2.78*.55)/13.82, or 11% of the US economy consisted of money transferred via the US Government. (2.78 trillion was the federal budget for 2007, 13.82 was the GDP)

    Given the current budget scenario then, we see that any tax increase will be a transfer of money from those whose taxes are increased to those who benefit from the programs listed above. Since a VAT is highly regressive, and these programs are mostly transfer payments designed to help people whose income is insufficient to support themselves, it seems we'd be just taking from the give right back to the poor, with a nice dose of inefficient paperwork in the middle.


  2. Sorry, I should have linked to my sources above. is where I got my data

  3. Peter,

    Although I appreciate the compliment, my doctorate is in clinical psychology, not economics, so perhaps I understand the behavior of people better than I understand the behavior of money. (Alas, as recent events demonstrate, money behaves to a great extent in the manner instructed by its owners.) In any case, George Will comes a lot closer to being an economist than I do, with a Master's degree in PPE (politics, philosophy, and economics) and a doctorate in politics. He has also won a Pulizer Prize, an award that continues to elude me. LOL

    Given Will's obvious capabilities, one can only wonder why he doesn't pen more convincing arguments and why he contrives such undocumented and illogical assertions as I described in this blog post. I assume, by the way (as economists are known to do), that since you didn't bother to comment on my specific criticisms of Will's unfounded allegations (e.g. about the Obama administration desiring to CREATE crises), and since you would have if you had thought my criticisms invalid, that therefore, reducto ad absurdum, you also find Will's logical lapses impossible to justify.

    Moving on to the substance of your argument, I find that, first, you assume that a VAT is a regressive tax. It is true that it can be; it is also true, analogous to exempting food from the sales tax, that it can be developed in a fashion that is not regressive at all. Hypothetically, although I don't propose this as useful public policy, one could impose a VAT only on the construction of luxury yachts. Somewhere in between that ridiculous extreme and imposing the VAT on everything lies a potentially useful public policy. (Of course, if a VAT is imposed on everything, then it can be attacked as regressive; if it's not imposed on everything, then the legislators face accusations of social engineering. Nobody wins an argument with a zealot.)

    I think our philosophies differ most significantly in the proportionate weight we would respectively give to economic policy as a component of PUBLIC policy. You imply (do not state directly, but seem to believe) that the two should be synonymous. I believe, rather, that the study of economics should INFORM public policy but not dictate all the results. Almost by definition, economists (at least in their professional capacities) don't factor in the human consequences of their theories. They wouldn't admit it, of course, but I sense a philosophy of "If the free market theoretically results in the most efficient economic system, then by golly, that's what we should have, and if a few million people end up homeless or dead, and if we kill off the planet a few thousand years early, well, golly, that's a shame. At least, while we were here, the people able and willing to work will have enjoyed their iPODS and their liberty."

    As I've stated before, I'm not willing to go there. I'll accept a little inefficiency in return for a little human caring. And by the way, if the free market were sufficiently caring, then we wouldn't need these transfer payments. But voluntary charitable giving doesn't cover a fraction of the cost of what most people would consider basic human support if their brother or sister were the deserving recipient.


  4. Ron,

    Actually, we did exactly what you propose in putting a tax on luxury yachts. It was done in the 1980s. It was a massive failure (and is still on the books, and continues to be a massive failure). Wealthy Americans imported their yachts from abroad, and many shipyards in the US closed down. So pretty much, middle class people took it in the teeth. This is mostly to say, no you cannot engineer the VAT to do what you want. It will be regressive. If you exempt specific industries, you will see substitution effects and paperwork games, making alot of tax lawyers rich...and everyone else poorer.

    I am not saying that efficiency is the end-all-be-all of policy. I am saying that the policy results you desire may not be possible. You simply can't redistribute wealth past a certain point. People will not cooperate with the regime required to do it.


  5. Just curious, when you say "millions of Americans were dying prematurely because they didn't have access to quality medical care.", where are you getting those numbers? The numbers I've seen range from 18,000 to 45,000 per year, depending on who they're counting. I'm not saying that's acceptable, but I think you're misrepresenting the facts a little.
    Unless you're counting from when you could still smoke in hospitals, in which case I don't think the lack of quality care was all the insurance companies fault...

  6. I don't think the only reason why conservatives see the free market as a better economic policy is because it is more efficient, even though it probably is. When the phrase "unsustainable debt" gets thrown around on a daily basis, I think it took more than just "a little" inefficiency to get there. I think it has to do with a basic difference in ideology. It's the idea that instead of giving smart, capable people an endless supply of "help", you create an economic environment where smart, capable people can "help" themselves. Theoretically the free market does that.

    To be honest I don't think I have met a conservative who thought that ALL social programs should be abolished, or who disagree with the idea that we should take care of people who can't take care of themselves.