Arnold Kling  

An Inconvenient Question

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Glenn Reynolds asks,


If somebody offered us our current income tax system for the first time, would we buy it?

On another topic, but effectively asking the same question, Washington Post editorializes,

the policies and institutions that worked in the past are not necessarily optimal for the future...one program often contributes to a problem that other programs try to solve. Does the mortgage interest deduction divert resources from modest to expensive housing? If yes, the FHA must work that much harder to make housing affordable through guaranteed loans. Or Congress feels obliged to create an affordable housing trust fund, as it is doing in the latest legislation.

Go through a mental list of major government programs, and ask how many of them you would enact today in their current formats.

Social Security? Even if you like the concept, if you had it to do over again you would make it less susceptible to demographic imbalances.

Medicare? Agriculture policy? Energy policy?

If you step back and look at it, the problem of fragile by design that I wrote about concerning Freddie Mac and Fannie Mae is widespread in top-down solutions. And yet, like Charlie Brown getting ready to kick a football, we seem to have an infinite capacity to believe that it will be different this time. We think that the next top-down design introduced by government will work fine, it will never degrade, and we won't find ourselves ten or twenty years down the road wondering how such a mess was created.


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CATEGORIES: Political Economy



COMMENTS (10 to date)
Ironman writes:

I can't say that I have the answer for the other government programs, but if you'd like to take a stab at designing your own income tax for the U.S., here's the tool you can use to do it.

Drtaxsacto writes:

Even with that correct assumption about would you enact it today - you still run into what Tullock described as the Transitional Gains Trap.

ryan writes:

I feel obnoxious asking this, but when we're asking "If somebody offered us our current income tax system for the first time, would we buy it?", don't we have to "lose the we"?

Lord writes:

So we are now to expect omniscience from the political process? Time to climb down from your high horse and dig in the trenches. Certainly most policies can be improved with market solutions, but markets don't solve all problems or there wouldn't be government in the first place.

SheetWise writes:

Nothing will prevent the anointed from promoting home ownership. It essentially creates self-compliance with their laws.

Heaven forbid they should have to rule a society where people were free to keep less public assets. When you can't move or hide your biggest investment -- you have very little wiggle room when Big Brother calculates your tab ...

Public promotion of home ownership, the mortgage deduction, and the fiction of capital gains (should you decide to stray from the path), are all very secure.

Ron Hardin writes:

Social Security isn't exactly susceptible to demographic imbalances. Nothing prevents raising the retirement age, which completely solves the problem, and will eventually be done.

If you want to retire earlier, do it on your own dime to bridge the gap until the newer higher social security age. Privatize early retirement.

Greg writes:

Ron - That sounds great until you realize that we have already made promises to the elderly that we can not keep, but simply will because they vote in overwhelming numbers.

I am promised virtually no money by my retirement, even after sinking well into tens(hundred?) of thousands of dollars. No one in my age group expects anything from the system, and we won't get anything.

Bah, humbug I say.

Fat Man writes:

Its not a bug its a feature. Take the income tax, please.

Charlie Rangle threatens to amend the tax code so as to confiscate the winnings of the Hedge Fund managers. Chuck Schummer collects big bucks in the Senate Campaign Fund to shut Charlie up. Is this a great country, or what.

Freddy Mae & Fannie Mac were intended to be playthings for pols and their pals. Affordable housing? Don't make me laugh. The pols who play in the Freddy Fannie sandbox can afford houses, nice big ones, in fancy neighborhoods.

They got the goldmine, we got the shaft.

Fix it? Maybe term limits, residency requirements, and a better redistricting system would help. Maybe not.

The only real fix is to get the American people to reject socialism as a legitimate form of government.

michael geer writes:

Distributive processing is the key.

What? Hast you gone bonkers? What's network reliability got to do with Big and Bad government programs?

Well, "big" is the problem. Big government, big energy, big medicine, big education, big finance, big insurance, big agriculture, big aurlines ... you name it ... big is the problem.

Distributive processing showed us how to break Big into many many many smaller pieces to accomplish the misssion. Many small pieces that can individually be replaced or easily fixed if a problem or crisis arises.

The electrical grid is enormous, and consequently utterly fragile. Think distributive processing in terms of you, me and everyone else with a high efficiency solar matrix on our roof contributing to that grid and our own power. One unit goes down, no big deal ... the grid routes around the problem. The liklihood all hundreds of thousands of individual units going down simultaneously is too remote to do the calculus. Many many pieces make for a bulletproof grid, instead of relying on Big.

Think fuel for transportation. Distributive energy, let's call it. Every home has a stand alone hydrogen fuel cell station powered by solar hydrolysis. The way we create gasoline and diesel is stupid ... hueg centralized cracking plants, massive pipelines and thousands of tanker trucks constantly in motion to refill what we drain into our cars. Now ... think distributive energy. Stand alone hydrogen fuel cells at the point of use. No more massive and fragile grid of petroleum. Oil can be returned to making synthetics, instead of wasting it on fuel (because only a small percentage of its energy actually gets to the tractiuon point between tire and asphalt).

Anything you can point to ... Social Security. Dept of Ag, the Fed for pity's sake ... needs to be downsized and nroken up onto many and myriad independent but networked parts. Think distributive processing. After all, that's how the human brain works and it can sustain a lot of damage and still function by routing around that damage. Right now, parts of Congress are routing around the damage called Pelosi by continuing the business of the House of Representatives despite her being the clot in our national artery.

Can't stop the signal, Mal.

Tom Jackson writes:

Mr. Kling,
So how about if we get rid of every government social welfare program, and replace it with a negative income tax and more generous Earned Income Tax Credit, and then train EVERYONE to file a tax return? Wouldn't that reach more of the poor and trim the bureaucracy?

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