Mike Konczal wrote a critique of Mitt Romney's plan to convert unemployment insurance into something that more closely resembles a 401(k) -- the idea being that everyone should have the "freedom" to manage their own unemployment insurance in accordance to how they assess their own personal risk. Of course, as Konczal notes, it would also help erode the idea that government exists in part to provide a general social safety net and aggregate social risk efficiently in order to defray it -- conservative thinking is that individuals should bear all of life's risks themselves. The private-account gambit is one of the quintessential neoliberal policy moves, ostensibly ending government "interference" in the labor market by making sure workers are as insecure as possible.
Conservatives favor these sort of arrangements, Konczal suggests, because "people will look at private savings accounts and think that the government isn’t doing anything." This furthers their arguments for dismantling the services government provides to all straightforwardly while protecting the "submerged" benefits that the rich, savvy, and well connected are better positioned to exploit through knowing how to take advantage of tax loopholes -- a phenomenon explored in this American Prospect essay by Suzanne Mettler and elaborated here by Henry Farrell. It reminds me also of arguments Dean Baker makes in The Conservative Nanny State (pdf) and Jamie Galbraith makes in The Predator State (excerpt here). They argue that the rich have figured out the government exists to be looted, and the key political question is how to perpetuate and mask that process at the same time. One good way of doing that is through expanding the "submerged state" and generating policies that confront people with decisions that they are not sophisticated enough to make on their own and make them into more vulnerable prey. Private retirement accounts, for example, are far more lootable by financial advisors, etc., than the guaranteed-benefit pensions they have supplanted. (In the mean time, conservatives have succeeded in convincing many of us that our Social Security benefits are insecure and that the U.S. government is perfectly capable of simply reneging on its debts.)
If neoliberal reform is intended to let markets govern more and more of our everyday lives, then it's not surprising that the tactics of exploitation rife in market exchange -- things akin to price discrimination and exploiting asymmetrical information and implementing hidden fees through confusing contracts -- will also come into play. Markets are often good at incentivizing complexity, which produces the ignorance they need as an alibi. Cell-phone service providers, mortgage originators, used-car salespeople, the travel industry (hotels, rental cars, airlines) are the classic exemplars of these tactics, but they are endemic in a consumer economy whose firms frequently depend on stratifying customers to maximize profits. But when applied to the distribution of tax obligations and government services, these tactics become the legitimized means for reproducing and expanding existing disparities between classes while making it seem as though that is the fault of the disadvantaged -- it's their fault for being ignorant, too "lazy" to master the tax code, or to drive hard bargains of their own.
In his response to Konzal's post, Corey Robin notes the needless complexity of the arrangement, "all the time and energy we as individuals now have to devote to doing the things that the state used to do for us" thanks to neoliberalism and privatization. Robin adds, "The right thinks of that as freedom—they hear the words 'state is doing for you' and they imagine patients etherized on a table—but I think of it as tyranny." Peter Frase concurs in this response, pointing out that "in a highly unequal society, greater complexity in the institutions of the state will generally favor the interests of the rich." He concludes that "the right has gotten a lot of mileage of out of the demand for small government. Maybe it’s time for the left to make a bigger deal out of simple government." That seems like a pretty good idea to me, though the logic may lead to supporting policies like the flat tax. Also, our tendency to overrate our pleasure in making decisions for ourselves (and underestimate the problem of ego depletion) makes us vulnerable to believing that it is generally simpler for us to do things ourselves and assume total responsibility for them. The celebration of individualism in American society is such that there is already ideological momentum behind the idea that self-managing everything is somehow always convenient, even in the face of frustrating experiences to the contrary, which are seen as isolated exceptions.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Friday, August 19, 2011
Tuesday, August 2, 2011
Rent revolt (4 Nov 2009)
A useful myth took definitive hold in the Reagan years about taxes: the government steals our income through taxes and helps the lazy poor with massive transfer payments. Liberals have never managed to effectively counter this nonsense, perhaps in part because they are bought off by actual massive subsidies of their own, which arguably come at the expense of the poor. (Dean Baker and James Galbraith each have good books on how this works.)
Home-owning subsidies are maybe the worst of these. Justin Fox linked to this Congressional Budget Office report about the government subsidies in housing, which estimates that (as Fox notes in his post's headline) that only 20 percent of the federal housing aid goes to renters. The remaining 80 percent goes to homeowners, mostly in the form of mortgage-interest tax deductions. Another way of putting this is that America uses policy to create a rentier society, subsidizing landlords and creating property bubbles for their short-term benefit. And meanwhile, the report tell us, "The burden of housing’s costs is more pronounced among renters than among owners: In 2007, 45 percent of renters (compared with 30 percent of owners) paid more than 30 percent of their income for housing."
The alibi for these subsidies to those who are already relatively privileged is that homeownership is an inherent good in its own right, a widely disputed claim. It is neither economically efficient, environmentally sustainable, nor the facilitator of more livable communities. (America's fixation on single-family homes gives us anomie and exurbs.)
I wonder what renters like me can do about this. I have no interest in home owning, but feel like a chump for missing out on the gravy train. I'm like a middle-class person who insists on riding the bus instead of buying a car like society seems to be insisting I must. It grows tiresome to go against the grain of what society tells you someone in your class should do; to persist in it we probably need to link isolated individual behavior to an organized movement. Otherwise it seems like pyrrhic self-importance.
Home-owning subsidies are maybe the worst of these. Justin Fox linked to this Congressional Budget Office report about the government subsidies in housing, which estimates that (as Fox notes in his post's headline) that only 20 percent of the federal housing aid goes to renters. The remaining 80 percent goes to homeowners, mostly in the form of mortgage-interest tax deductions. Another way of putting this is that America uses policy to create a rentier society, subsidizing landlords and creating property bubbles for their short-term benefit. And meanwhile, the report tell us, "The burden of housing’s costs is more pronounced among renters than among owners: In 2007, 45 percent of renters (compared with 30 percent of owners) paid more than 30 percent of their income for housing."
The alibi for these subsidies to those who are already relatively privileged is that homeownership is an inherent good in its own right, a widely disputed claim. It is neither economically efficient, environmentally sustainable, nor the facilitator of more livable communities. (America's fixation on single-family homes gives us anomie and exurbs.)
I wonder what renters like me can do about this. I have no interest in home owning, but feel like a chump for missing out on the gravy train. I'm like a middle-class person who insists on riding the bus instead of buying a car like society seems to be insisting I must. It grows tiresome to go against the grain of what society tells you someone in your class should do; to persist in it we probably need to link isolated individual behavior to an organized movement. Otherwise it seems like pyrrhic self-importance.
Monday, August 1, 2011
Cheap and fat (17 Sept 2009)
Vox EU posted a study by Neil Gandal about the relationship of obesity to price sensitivity.
Eating badly can seem like an ignorant thing to do, and conservative types tend to assume that the poor are poor because they are ignorant as well. So it seems to make ideological sense to them that the poor make bad eating choices out of the same supposed myopic ignorance that has made them "choose" poverty. They aren't forced by straitened circumstances to eat unhealthy food; they choose it. The study could be distorted to support that view. But the study also would seem to suggest that some of the wisdom and economic common sense that the poor are sometimes presumed to lack -- being more rational in the marketplace, finding good deals, being thrifty, etc. (the imprudence that allegedly keeps them poor) -- is precisely what's correlated with the unhealthy eating, that bargain hunting and obesity stem from the same miser pathology. What's clear is that the rationale of the market wreaks havoc on whatever our body might otherwise tell us about what we need nutritionally. We make market-based decisions about what body needs, letting the market dictate those needs, to our body's detriment.
The context for the study is the proposition of taxes on sugar drinks. Gandal notes that "Drewnowski and Barratt-Fornell (2004) conducted a simple "experiment" in a Seattle supermarket and found that, per calorie, carrots cost virtually five times more than cookies or potato chips, and orange juice costs virtually five times as much as soft drinks." One of the reasons for this, as Michael Pollan has argued and as Gandal notes, is U.S. agricultural policy:
The Economist's Free Exchange blogger puts the findings in perspective and makes a good point: the U.S. should take on the irrational agri-subsidies first before levying nanny-ish taxes on unhealthful consumer behavior.
Is increasing obesity due to changes in relative food prices? High-energy density foods are less expensive per calorie than fresh fruits and vegetables. Using data from Israel, this column shows that price sensitivity has a significant impact on obesity. In fact, price sensitivity may be more crucial than income.... We find that women who stated that price was not important at all when purchasing food products had a BMI 1.3 units below those who stated that price was “very important.” A reduction of 1.3 units in the BMI for all obese women would move approximately 25% of women who are in the "obese" category to the "overweight" category.In other words, according to this study, people who are cost-conscious while buying food tend to be fatter, even after controlling for income. (So perhaps commentators should be careful about reflexively linking poor and fat together; fat and cheap is the proper knee-jerk insult combo.) It seems to suggest by implication, too, that being poor doesn't necessarily make you more cost-conscious about food, which seems a bit hard to believe. Perhaps you don't self-report as "cost-conscious" when you can't choose to spend more on food even if you wanted to.
Eating badly can seem like an ignorant thing to do, and conservative types tend to assume that the poor are poor because they are ignorant as well. So it seems to make ideological sense to them that the poor make bad eating choices out of the same supposed myopic ignorance that has made them "choose" poverty. They aren't forced by straitened circumstances to eat unhealthy food; they choose it. The study could be distorted to support that view. But the study also would seem to suggest that some of the wisdom and economic common sense that the poor are sometimes presumed to lack -- being more rational in the marketplace, finding good deals, being thrifty, etc. (the imprudence that allegedly keeps them poor) -- is precisely what's correlated with the unhealthy eating, that bargain hunting and obesity stem from the same miser pathology. What's clear is that the rationale of the market wreaks havoc on whatever our body might otherwise tell us about what we need nutritionally. We make market-based decisions about what body needs, letting the market dictate those needs, to our body's detriment.
The context for the study is the proposition of taxes on sugar drinks. Gandal notes that "Drewnowski and Barratt-Fornell (2004) conducted a simple "experiment" in a Seattle supermarket and found that, per calorie, carrots cost virtually five times more than cookies or potato chips, and orange juice costs virtually five times as much as soft drinks." One of the reasons for this, as Michael Pollan has argued and as Gandal notes, is U.S. agricultural policy:
Between 1985 and 2000, fruit and vegetable prices in the US increased by about 40%, while the price of soft drinks dropped by 23%. These seem like large changes in relative prices. According to Pollan, the change in relative prices is in large part due to the US farm bill, which provides generous subsidies for corn and soy, which are prime ingredients in high-density “processed food.”
The Economist's Free Exchange blogger puts the findings in perspective and makes a good point: the U.S. should take on the irrational agri-subsidies first before levying nanny-ish taxes on unhealthful consumer behavior.
Thursday, January 13, 2011
Gasoline gouging (21 May 2007)
A column by Edward Andrews in Sunday's New York Times cast a gimlet eye at the notion that consumers need to be protected from price-gouging oil companies.
I used to much more sympathetic to the logic behind Casey's proposal, seeing profit as something unfairly extorted by the powerful, who exploit a particular moment in time. If you isolate gas prices from everything else in the economy, maybe you can make some kind of case for some "natural" level of profit beyond which a company becomes unduly rapacious. But ultimately, there is no coherent logic for where to draw the line regarding what level of profit is excessive, particularly when you consider a corporation's guiding principle of maximizing value for stockholders. I'm not saying that excuses all forms of greed a corporation exhibits, but the whole reason for organizing corporations, though, is to produce entities capable of overriding mere human morality by dispersing ethical responsibilities across an institution. Where you stand toward this depends on how you view the prosperity such amorality produces along with the callous indifference to human needs.
Anyway, one can't isolate the significance of the price of gas from the rest of the economy; it indicates not merely the demand for gas relative to its supply, but the value of gas relative to other energy options and other goods generally. Were we to make gas cheaper than the market would bear, this would distort signals across the entire energy economy, and tend to reinforce the inefficiencies that are already making gas inexpensive, requiring more state intervention to inhibit gas-price inflation, and so on, and the next thing you know we are on the road to serfdom. Okay, well, maybe not, but if the market can bear the profit margins oil companies want to pursue, it's a signal not of their greed (after all they are only doing exactly what's expected) but of a drastic overreliance on gasoline best addressed through other means. Expensive gas makes other forms of energy seem more cost-efficient; obviously this compensatory fact is not true if the state intervenes to upset the price system. Taking a windfall tax on oil companies' excess profits and investing it in alternative energy seems sort of a backwards way of accomplishing what the market's logic would push for anyway. (Maybe I have been reading too much economics.)
Also, environmentally minded liberals should be aghast at the idea that gas prices would be lowered by state fiat, which essentially means the government would be (further) subsidizing rampant carbon emissions rather than incentivizing conservation like it pretty obviously should be. It's not quite a Pigovian tax, internalizing the external damage wrought by gasoline consumption, but it at least has the similar effect of discouraging consumption and dislodging the stubborn inelasticity of gas demand. Yes, higher gasoline prices more severely afflict the lower and middle classes who are trapped by a species of path dependency into needing gas-burning autos to maintain the standard of living they are used to, but the cycle needs to be broken somewhere. And is there any aspect of society that is not improved by people using their cars less often?
if the oil industry is so powerful, why did it let gasoline prices fall through the floor throughout the 1980s and part of the 1990s?
For that matter, why did it let gasoline prices fall sharply after they spiked in 2005 and 2006?
Many Democrats, and a much smaller number of Republicans, remain convinced that there is a villain.
One freshman senator — Bob Casey, Democrat of Pennsylvania — has introduced bills to tax the “excess profits” of oil companies when oil sells for more than $50 a barrel.
I used to much more sympathetic to the logic behind Casey's proposal, seeing profit as something unfairly extorted by the powerful, who exploit a particular moment in time. If you isolate gas prices from everything else in the economy, maybe you can make some kind of case for some "natural" level of profit beyond which a company becomes unduly rapacious. But ultimately, there is no coherent logic for where to draw the line regarding what level of profit is excessive, particularly when you consider a corporation's guiding principle of maximizing value for stockholders. I'm not saying that excuses all forms of greed a corporation exhibits, but the whole reason for organizing corporations, though, is to produce entities capable of overriding mere human morality by dispersing ethical responsibilities across an institution. Where you stand toward this depends on how you view the prosperity such amorality produces along with the callous indifference to human needs.
Anyway, one can't isolate the significance of the price of gas from the rest of the economy; it indicates not merely the demand for gas relative to its supply, but the value of gas relative to other energy options and other goods generally. Were we to make gas cheaper than the market would bear, this would distort signals across the entire energy economy, and tend to reinforce the inefficiencies that are already making gas inexpensive, requiring more state intervention to inhibit gas-price inflation, and so on, and the next thing you know we are on the road to serfdom. Okay, well, maybe not, but if the market can bear the profit margins oil companies want to pursue, it's a signal not of their greed (after all they are only doing exactly what's expected) but of a drastic overreliance on gasoline best addressed through other means. Expensive gas makes other forms of energy seem more cost-efficient; obviously this compensatory fact is not true if the state intervenes to upset the price system. Taking a windfall tax on oil companies' excess profits and investing it in alternative energy seems sort of a backwards way of accomplishing what the market's logic would push for anyway. (Maybe I have been reading too much economics.)
Also, environmentally minded liberals should be aghast at the idea that gas prices would be lowered by state fiat, which essentially means the government would be (further) subsidizing rampant carbon emissions rather than incentivizing conservation like it pretty obviously should be. It's not quite a Pigovian tax, internalizing the external damage wrought by gasoline consumption, but it at least has the similar effect of discouraging consumption and dislodging the stubborn inelasticity of gas demand. Yes, higher gasoline prices more severely afflict the lower and middle classes who are trapped by a species of path dependency into needing gas-burning autos to maintain the standard of living they are used to, but the cycle needs to be broken somewhere. And is there any aspect of society that is not improved by people using their cars less often?
Friday, November 5, 2010
Fat taxes (18 October 2006)
Everybody's getting in on banning trans fats: New York City, Chicago, Disney, Pepsi, Wendy's. But why impose a ban when you could generate some revenue with a tax?
On his and fellow conservative Richard Posner's blog, (which is totally bizarre from a rhetorical point of view; it seems as though it were written by Spock), Gary Becker, an economist famous for treating human beings as a commodity (human capital), and performing economic analyses on drug addiction (it's rational) and domestic life (it's a factory), mulled over the implications of a tax on fat, which would be a less paternalistic way of ridding the world of trans fats (a.k.a. hyrdogenated oils) that clog arteries and cause obesity. (Some health officials go so far to compare hydrogenated oils to the threat posed by lead paint, but I think I'd feel substantially more comfortable with children eating doughnuts than paint chips.)
Becker is skeptical that the danger outweighs the social pleasure afforded by hamburger sandwiches and french-fried potatoes, and suspects that obesity is more attributable to kids' propensity for such "sedentary activities" as "listening to music on iPods and other devices." Kids spend too much time in front of computers, he suggests, and we wouldn't want to start imposing Pigovian taxes on Internet usage, would we? This seems like a red herring to me -- to find something more appealing to substitute for fat in order to make the argument against social engineering through taxes seem more salient. The same goes for when Becker, evoking the idea that obese citizens may stress the publicly financed health care system and should therefore be taxed to compensate for that (a la one of the rationales for cigarette taxes), shifts the subject to health-care savings accounts and consumer-driven health care, the preferred conservative nostrums for America's health care crisis.
Posner, in his reply to Becker, seems more cogent on the subject. He raises the point that obesity is correlated with poverty, so a fat tax would likely be regressive and would possibly fail to achieve its intended effect.
As much as I don't think the government should be telling people what they can and can't eat, it's hard to see the harm in disincentivizing food that makes for fat children. But the problem seems larger than the junk-food industry, which arises in response to generalized time crunch and the devaluation of time spent sharing a meal. I don't think the poor are necessarily ignorant about the ill effects of junk food, but they don't have the time to put into policing these questions or pursuing the frequently labor-intensive alternatives. We have developed a food infrastructure premised on the idea of delivering filling calories quickly to serve the need for convenience rather than nutrition. What may be needed is a proposal that could provide incentives for convenience, which is almost impossible to imagine, seeing how convenience virtually has become the definition of incentive.
On his and fellow conservative Richard Posner's blog, (which is totally bizarre from a rhetorical point of view; it seems as though it were written by Spock), Gary Becker, an economist famous for treating human beings as a commodity (human capital), and performing economic analyses on drug addiction (it's rational) and domestic life (it's a factory), mulled over the implications of a tax on fat, which would be a less paternalistic way of ridding the world of trans fats (a.k.a. hyrdogenated oils) that clog arteries and cause obesity. (Some health officials go so far to compare hydrogenated oils to the threat posed by lead paint, but I think I'd feel substantially more comfortable with children eating doughnuts than paint chips.)
Becker is skeptical that the danger outweighs the social pleasure afforded by hamburger sandwiches and french-fried potatoes, and suspects that obesity is more attributable to kids' propensity for such "sedentary activities" as "listening to music on iPods and other devices." Kids spend too much time in front of computers, he suggests, and we wouldn't want to start imposing Pigovian taxes on Internet usage, would we? This seems like a red herring to me -- to find something more appealing to substitute for fat in order to make the argument against social engineering through taxes seem more salient. The same goes for when Becker, evoking the idea that obese citizens may stress the publicly financed health care system and should therefore be taxed to compensate for that (a la one of the rationales for cigarette taxes), shifts the subject to health-care savings accounts and consumer-driven health care, the preferred conservative nostrums for America's health care crisis.
Posner, in his reply to Becker, seems more cogent on the subject. He raises the point that obesity is correlated with poverty, so a fat tax would likely be regressive and would possibly fail to achieve its intended effect.
Indeed, high-caloric "junk food" might conceivably though improbably turn out to be the first real-world example of a "Giffen good," a good the demand for which rises when the price rises because the income effect dominates the substitution effect. A heavy tax on high-caloric food might so reduce the disposable income of the poor that they substituted such food for healthful food, since fatty foods tend to be very cheap and satisfying, and often nutritious as well.But his main contention is that the rationale for a fat tax relies on the belief that people who eat fatty food are making informed rational choices and revelaing a preference for Ho-Hos and Doritos over broccoli. Posner, somewhat surprisingly, is willing to throw rational choice out the window here:
I don't think the fact that obesity is correlated with poverty is due entirely to the fact that fatty foods tend to be cheap as well as tasty and satisfying. I suspect that many of the people who become obese as a result of what they eat do not understand how, for example, something as innocuous as a soft drink can produce obesity. I also suspect that producers of soft drinks and other fatty foods are ingenious in setting biological traps -- designing foods that trigger intense pleasure reactions caused by brain structures formed in our ancestral environment (the prehistoric environment in which human beings attained approximately their current biological structure), when a taste for fatty foods had significant survival value.Because of these biological traps, and the imperviousness of poor neighborhoods to nutrition education, Posner is willing to consider a ban of deceptively innocuous products like soft drinks: "And while generally parents know better than government what is good for their children, many parents who permit their children to drink soft drinks do not."
As much as I don't think the government should be telling people what they can and can't eat, it's hard to see the harm in disincentivizing food that makes for fat children. But the problem seems larger than the junk-food industry, which arises in response to generalized time crunch and the devaluation of time spent sharing a meal. I don't think the poor are necessarily ignorant about the ill effects of junk food, but they don't have the time to put into policing these questions or pursuing the frequently labor-intensive alternatives. We have developed a food infrastructure premised on the idea of delivering filling calories quickly to serve the need for convenience rather than nutrition. What may be needed is a proposal that could provide incentives for convenience, which is almost impossible to imagine, seeing how convenience virtually has become the definition of incentive.
Subscribe to:
Posts (Atom)