Laughing at Laffer

So far, the campaign of distraction has been most impressive.  Especially enlisting armies of libertarians to march against the very same enlightenment institutions that made free markets possible.  By calling government the sole and only enemy of freedom, they manage to serve their masters well.

In fairness, Laffer does make a distinction worthy of some note, between an estate tax and an inheritance tax. The estate tax in effect puts the burden of proof on the IRS to prove that the money isn't in fact going to little Stanton III at Harvard, and if you're very rich you can hire better tax lawyers than the government can, thus giving you an advantage over the middle class woman who owns a small business and wants to leave it to her daughter.  The estate tax can thus be twisted to, in effect, work as a force to help create exactly the kind of dynasties we abhor.

The other kind of leveling is one that Americans find far less viscerally displeasing. Indeed, it has been the American consensus to pursue it, for generations. The very goal of Classic Market Liberalism (as envisioned by Adam Smith himself) was to maximize the feed stock of healthy, knowing and capable competitors that can enter into the mill of market capitalism. A little state intervention, in other words, with the clear goal of increasing the number and capability of competitive players. This is precisely the chief outcome of many liberal and progressive endeavors, from free public education to civil rights, to womens' rights, to the unleashing of the Internet. And many of them have been fantastically successful at pouring millions of new, avid players into the great, creative game of markets and enterprise.

Arthur Laffer is at it again. One of the core rationalizers in the push for a New Feudalism, he weighs in against the Estate Tax (ET), which is scheduled to go back to historically normal levels in 2011, after briefly zeroing out in 2010.

(In the Bush Era's final gift to greedy scions, 2010 is known as the year that Mom and Pop hide from their kids, lest they be tempted to hurry the parents along, for tax reasons.)

Laffer starts with the sly trick of offering up a strawman - claiming that top and only purpose of the Estate Tax is to redress a blatant unfairness of some kids inheriting vast fortunes that they never earned, while others languish in poverty. Yes, that is terribly unfair, and Laffer even concedes it. But then, he says, so is the unfair and unequal distribution of inherited talent, intelligence health, attractiveness. He implies that those who admire the Estate Tax are pure-pinko lefties, who want to level out everything, with inevitable homogenizing effects that lead to ruin, as in Ayn Rand's book "Anthem" or Kurt Vonnegut's story "Harrison Bergeron."

= Two Types of Leveling =

This is a standard neocon stunt, of course. Couch the debate in terms that none of your opponents ever dreamed of suggesting, then portray yourself as arguing sweet reason against a vile phantom. So, before getting to my main point about the Estate Tax, let's first deal with Laffer in his own, rigged playground, by considering the distinction between two types of "leveling."


The kind that right-wingers like Laffer accuse modern liberals of seeking -- confiscating and repressing the fruits of endeavor and successful competition, with the smothering, paternalistic goal of equalizing of all outcomes. Indeed if society ever plunged down that road -- eliminating all inequities and quashing of any natural competitive advantage -- that would, indeed, lead to a "Harrison Bergeon" world...

...and it is not at all what most American Liberals seek. Only a few ditzo, socialist-lefty flakes want that kind of foolishness, and those nuts have been marginalized, ignored by the vast majority of pragmatic liberals and democrats. (A far different situation than the one enjoyed by the nuts and flakes of the far right, who run, rule and dominate the GOP and have for decades. Indeed, the chief difference between Democrats and Republicans has much less to do with fundamentals of philosophy -- Europeans claim to be able to tell the two apart -- than it is simply this; in one party, the inmates have been allowed to run the asylum.)


In other words, "leveling" can be good and loyal to market capitalism, if it helps to increase the overall levels of vivid, vigorous and creative competition. This is the inherent complexity and irony that men like Laffer have deliberately obfuscated for two decades. One would wonder why... if one did not already know.

Think about it. In his article, Laffer deliberately uses his strawman to dodge the obvious question -- won't some of the funds gathered by the Estate Tax go toward helping other children better leverage their health, intelligence, etc? So long as the discussion is about children, helping them get to the starting blocks all together, to run a fair race, Laffer loses, bigtime, and he knows it.

So he strains to turn the question in other directions -- "we should focus on its impact on those who bequeath wealth, not on those who receive wealth."

You see, it is all about polemic. When the issue is kids, then disparities in wealth look unfair. But when you talk about adults, well, now those disparities were (to some degree) earned. And so, any attempt to take any of those earnings away is unfair confiscation of rightful earnings by a brutal state.

= Estate Tax vs Inheritance Tax =

An inheritance tax does the opposite.  Stanton has to prove that he's not getting the money--much harder to evade. All right. I am happy to argue details like that, in good faith.

But in fact, I am still falling for Laffer's strawmen. Because this clever master of distraction has done it again!

For the real issue, when it comes to the Estate/Inheritance Tax, is not about any kind of fairness and "leveling" the playing field, at all. No, those are diversions. Instead, our focus should turn to something else entirely, a matter of utter pragmatism -- the very survival of the Western Enlightenment, and the vibrant market-and-competition system upon which it is based.

For there is a ghost at the banquet. It is a stark and ironic truth... that only liberals want those markets to survive. And conservatives like Laffer are doing everything in their power to ensure that markets fail.

How can I say this? Well, one could start with the recent record. Across all the years since the second World War, almost every economic indicator has done better, on average, under Democrats than under Republicans. If you subtract three years of Reagan and three years of Eisenhower, then the correlation is near perfect.

But no, I want more history than that. A lot more. Will 4,000 years suffice? A historical record that spans every continent and every single civilization that ever had both metals and agriculture?

That long and brutal story shows, as Adam Smith very clearly described, that markets, democracy, science and everything we value has had one terrible enemy. A foe that is relentless, because it rises out of human nature itself, every time an elite forms at the top of any social order. It is an enemy that has ruined far more markets and systems of competitive enterprise than socialism or enlightenment governments ever did. It has been THE major enemy of human progress and freedom.

It is conspiratorial oligarchy. Feudalism. Under which the main and central goal of every aristocracy has always been the darwin-driven compulsion of elites to favor their own kin. To warp public policy in favor of cronies and offspring. To become top lords who are exempt from law and market rules, and then ensure that your children inherit your position, so that they can keep using those advantages, all the cheats that come with privilege, in order to keep augmenting that position, and become kings.

= Evolution in Action =

At one level, this is simple evolution-in-action... we are all descended from the harems of insatiable men, who succeeded at achieving this profoundly biological goal

Every effort of the right has been aimed, for 30 years, at bringing back a feudal-friendly regime.  Rationalizers and court apologists like Laffer cry out "class warfare" whenever anyone raises this overall issue.  Furiously, they distract attention from the blatant horror-story of human history, spanning every continent and every era, where oligarchs routinely shut down all competition, picking and choosing winners with far greater zeal than the most oppressive bureaucrat, ever.


In the short term. But not over the long run. Because they are fools if they think a limit won't be reached. We are starting to hear populist rumblings, and this time they are refusing to be diverted into silly-ass "culture war" distractions. The trick of turning rural folk against urban citizens won't work much longer, when both sets of red and blue middle class Americans start realizing and recognizing the Old Enemy.

Now is the time for Laffer's masters to ease off. To recognize what Franklin Roosevelt -- a man born to the top elite -- knew so well. That FDR's liberal restraints upon neofeudalism weren't "treason to his class."

Rather, they were a social compact that SAVED his caste and made America the safest place in all of history... to be rich.

========

See also: The Economy Past, Present and Future

A Little More Hormatsian Wisdom

I just have to keep kvelling over some of the remarks made by Robert Hormats in that paper I last quoted. Here's a little more, where he goes on to say:

"In my judgment, the single most significant piece of economic legislation in the last 60 years was not a particular tax cut. It was the G.I. Bill of Rights. It provided, for a whole generation of people, the opportunity to go to college. "

I would not only ditto this remark, but go on to suggest that it was not just an economic and education bill, but also the most successful piece of social engineering, ever.

What should "social engineering" aim to achieve?

First, I have deliberately used provocative language in even mentioning that phrase. At worst, the term elicits images of Big Brother. At BEST it rouses notions of meddlesome, paternalistic liberals sticking their noses into everbody's business.

And yet, are societies not fantastic machines that deliver justice, opportunity and - through markets - things to nourish every need except those of the soul? (And a fair amount for the soul, as well.) Anyone who thinks that these vast machines have not been "engineered" is naive beyond belief. One of the chief purposes of politics is to mediate conflicting views over how to fine-tune their operation.

In fact, as we speak, some powerful groups are trying to re-engineer our society's basic format, from diamond-shaped (emphasizing meritocracy, open competition, small business and a vibrant middle class) back toward a more traditional pyramid shape, emphasizing interlocking directorates of inherited privilege. Again, find me a culture that had metals and farms, across 4,000 years, that did not see this kind of attempt happen. Generally successful.

It was exactly in order to counter that ubiquitous and ever-lurking trend that so many experiments in "leveling" have been tried over the centuries, for example, by seizing assets from elites and distributing them to those below. Often violent, these rebellions never achieved their utopian aims - though the European revolutions of 1789, 1835 and 1848 did incrementally help farmers and foster some movement toward a middle class. Far more often, such revolutions simply replaced one set of repressive ideologically-justified overlords with another, as happened when horrible Czars were replaced by horrible commissars in 1917.

Here is where the American Miracle has truly made a difference. Yes, it is reliable that some fraction (not all!) of any decade's aristocracy will try to find new ways to cheat, using their privileged position to grab more. (Instead of competing fairly by helping to create new and better products and services.) But each generation of Americans has found clever ways to stave off this relentlessly consistent behavior. And it has been mostly done without very much in the way of confiscature or simpleminded class warfare. Indeed, it can be argued that we have followed Jefferson's prescription of "a revolution every generation"... with only a few of them violent at all. Most weren't even seen as "revolutions" but mere waves of tweaking and reform

Above all, it is vital that "social engineering" must pass the basic test of do no harm. In other words, while trying to achieve some desirable rebalancing of forces within markets or democracy, etc. it is essential not to harm other parts of the machine that are working well. Especially the market based incentive system that spurs creative competition into a cornucopia of new goods and services, propelling a fecund economy. The goose that lays all the golden eggs. Including the taxes that arise from burgeoning wealth, a fact that liberals seem all-too often to forget

This is exactly what the GI Bill did, and it perfectly exemplifies modernism at its best. (And is it any surprise that it had George Marshall's fingerprints all over it?)

First off, it devastated the tight grip that elites formerly held upon higher education, sending millions of motivated, mentally disciplined, veterans to land grant universities, which in turn attracted many of the best professors away from the Ivy League. One result was a burst of creativity and small business so huge that the middle class, always America's pride, so burgeoned in size and confidence that the whole ideas of "class" began to vanish from public awareness.

This bill, at low cost, achieved all of the beneficial effects of "social levelling" without any of the usual nasty effects on market capitalism, because it was not repressive but stimulative.

For nearly all our lives, we grew accustomed to there being very little effective difference between middle class americans and the rich. Socially - and even economically - this was largely true. Only people in their 80s can today remember how things were back in the 1920s and 1930s, when it was not.

That is, till now.

Look around and recognize what's happening for the very simple thing that it is. All administration policies fall into place in light of a vast raid by kleptocrats. Not the brightest portion of the aristocracy, only the most rapacious part, willing to send us into war (stupidly) but unwilling (for the first time in US history, to tax themselves to help pay for it.

(At even a hint that anyone wants to discuss this, they shriek: "Class warfare!" knowing that Americans despise social levelling. All of us fantasize about joining the ranks of the rich, not cutting off their heads. But of course, this attitude won't last, if this goes on. Proving that these frat boys really are the stupid wing of the aristocracy. The Warren Buffets of the world - who look forward more than a year at a time - are not on their side.)

I could go on about the GI Bill, whose effects were too numerous to elaborate here. For example, I believe it directly caused both the incredible richness of musical creativity by the sons and daughters of GI's - back in the 60s and 70s - AND the incredible deficit in new melodies being written and performed today.

But enough for now. I'll add one more Hormat's snippet later.

---

For now, let me conclude with a few fun links!


Hey Verne! Hurry and have a look at: http://www.nantes.fr/ext/royal_de_luxe_2005/ Maybe that Rutan guy is barking up the wrong tree with his rockets and composite hull material. Giant cannons, that's the ticket!

An interesting commencement address given by Steve Jobs at Stanford University: More humble and reflective than you might expect, filled with things you never knew about a modern Edison.

See the sci fi futurist "Year 2056 edition" of the Onion humor magazine at:  The Onion is normally terrific. But this special issue is just wonderful. Try looking at the choices of languages you can view the document in (supposedly). And the sci fi author-bases horoscopes. Dang. I guess I don't rate. Yet.

(#$%$#! I only 'algored' the whole Web in Earth.! And check out page 206 of The Transparent Society! How good a prognosticator do you have to be!)