What I Think Tank

Archive for the ‘Politics’ Category

The Peculiar Practice of Taxing Public Worker Income

with one comment

Income tax. Image by alancleaver_2000 via Flickr

With the demonstrations by public sector trade union workers going on across America, there are several thoughts on the topic that have popped into my mind as of late. While the topic of Wisconsin’s public trade union workers is tempting, it’s not my concern right now.  What caught my attention today is the connection between public sector jobs and income taxation. There are many things you can say about income taxes, and there are many things you can say about public sector jobs. The first is immoral, unjust and disruptive to the productive sector of the economy. The latter is where the taxes are inevitably spent. While a discussion on whether or not taxes should exist or whether or not we need public sector jobs is a fair discussion, we’ll leave that for later.

For now, please think about the following question: Why do people in the public sector pay income taxes?

A silly question, you might think. You may also say it’s obviously easier and also fair not to distinguish between private and public sector jobs when taxing people. That is, however, besides the point. What is the economic benefit of having all people employed in the public sector paying taxes? The endless amounts of administration that goes into keeping the system up is already profound, but the waste of collecting taxes from people payed 100% from previously collected taxes is at best a big drain of resources. If those employed in the public sector payed no taxes, there would be less administration going into collecting taxes from these people. Much less paper work and less public sector jobs needed to be filled.

I think all taxation on income should be abolished for everyone, especially for those working in the private sector, but as it stands, the paradox of taxing public sector income baffles me. Why not just pay people in the public sector what they get after tax and not tax them at all? And should these people have tax deductible expenses they today could get back, why not just give these expenses as a bonuses on their salaries if necessary? I don’t like the concept of tax credits – it only creates extra layers of bureaucracy that dabbles in social engineering, but since it already exists, giving bonuses would virtually have the same effect as today’s system. There is to me two very good reasons to why this would make sense to do. First, the administrative costs you’d save by not having to pay attention to taxing public sector employees. Second, if people were given a tax relief, this would only apply to private sector jobs, giving only private sector employees more money in their own pockets. Public sector jobs would never be affected by tax reliefs and this would result in them having received a permanent pay cut. It would also lessen the apparent numbers that make up the excuse by government for receiving smaller tax revenues to use in their spending. Perhaps this would also add another inhibition to increase spending (obviously not the case, since deficit spending rules supreme, but still…). The actual revenues of government would also not be affected, since the only resources they have at hand are what they take from the productive sector of the economy. As mentioned, whatever public sector employees earn is what has already been taxed. There are no real “losses to revenue”, only savings in administrative costs, which should result in more tax cuts for the private sector.

Downsides? Harder to rally public sector employees to the cause of electing politicians that wishes to cut taxes. You would likely also create an even more polarized population dividing the private vs the public sector into more distinct political factions than they are today. Those working in the public sector wouldn’t think twice about raising taxes for their political goals, as higher taxes wouldn’t concern them. The possible good things about these downsides? The enemy is easier to spot and the private sector would be willing to stand more united against government oppression. If supporters of the public sector wished to increase taxes, they would not be able to hide behind the mask of “altruistically suffering from the same taxation”. They would more directly become enemies of the private sector, and unable to portray themselves as servicemen for it. There would be a deadlock between political factions, and raising taxes could become far more unpopular than it is today…

… Or it wouldn’t worry people too much after all. Who knows? It will never become a reality, but I find it a peculiar phenomenon, and the “what if” fascinates me.

Written by Morten Rolland

February 23, 2011 at 2:54 pm

The Future of the New Republicans

with 2 comments

So the Republicans just won a landslide in the midterm election. Can’t say it was very unexpected, but it’s important to note that it’s apparently the biggest chunk taken into Congress since 1948. But what will the future bring these newly elected Republicans in the House and Senate?

First of all, they need to understand that the people means no bullshit. Many new candidates got elected only because of all the individuals across America who wanted to see changes in the ways of government, by strongly cutting government spending and by making notable tax cuts for all Americans.  Second of all, they will have to make a lot of effort in repealing Obamacare as quick as possible. If not completely, at least remove the most important negative portions of the bill that will hurt low and middle income Americans the most. The mandate instantly comes to mind.

But what if this new generation of Republicans won’t stand true to their word? What if they get sucked into the political establishment machine? Then things will not look good in 2012. It’s difficult to understand how voter frustration can possibly show itself in the face of being disappointed and screwed over by both parties at the same time, but it surely is the setup for a certain win for Obama. He will be able to point to the Republicans for failing to stand up and do what they were told to do by the country, and since Republicans are sure to mess up any attempts from Obama, he will also blame them for being too partisan and for failing to take part in leading the country. He will try to divide and conquer Republicans if there is any weakness among them.

What do I think? The new generation of Republican Tea Party candidates need to stick together and prove to their voters that they are going to Washington to do what they promised. In my view they should begin already now to form ties, to plan on cooperation and form a faction within the Republican Party that will stay strong on their issues in an effort to change the hearts and minds of the party as a whole, so that they can prove to America that they mean business. If old Republicans will tremble in fear over the new Republican take-over of their establishment stability and if old Republicans will move towards moderation and cooperation with Democrats, then voters will know for sure who to kick out in 2012, and that’s when the small government movement has the best chance of rising to power. Along with a true small government candidate for Presidency that has always stayed true to his ideals since the day he came into politics, and you will have the recipe for the biggest spending cuts the world has ever since.

And to end on an untraditional low note, there were some sad news from the elections: Barney Frank, Harry Reid and Nancy Pelosi will still be with us for another term. I guess not everyone in Massachusetts’ 4th district, Nevada and California’s 8th district came to their senses.

Written by Morten Rolland

November 4, 2010 at 12:53 am

Will President Obama Serve A Second Term?

leave a comment »

Official presidential portrait of Barack Obama...

Two term President Barack Obama?

Political debates and forecasts are as heated and “in the air” as never before, and one question surfacing is whether or not President Obama will be elected for a second term in 2012. It’s an interesting question both in terms of political strategy and economic policy, regarding the troubles and toils America is faced with, not to mention the distress among people animating itself in Tea Party rallies and anti-establishment candidates rising up before this 2010 election.

At the first glance, many would probably think President Obama wouldn’t be elected for another term, simply because so many people are worried about the economy and future, and also because we’ve yet to see things turn around for the better. Then again, President Obama is still quite popular, although his popularity in America has surely withered some since he came to power. Gallup recently reported that for the first time in his presidency there are more people who regard him unfavorably than favorably, but he is still on par with many presidents before him, like Ronald Reagan and Bill Clinton, who were both quite popular two term presidents. Obama as a person is also likable, tolerant and well spoken – much like the two others mentioned, and such charisma can go a long way.

But unlike all other elections for the past three decades, there is one issue that may trumph everything else put together the next time around: the economy. Unlike how this issue has been debated during the recent years, the coming debate will not only revolve around creating jobs or trying to get us out of a recession; the debate this time will be about the causes of economic downturns, the role of government in said economic downturns, how government and the Federal Reserve destroy more than they create, and how government burdens coming generations with a devalued dollar, huge and misguided government programs and gross deficit spending. On this issue there is one future uncertainty that can wreck all of President Obama’s chances for reelection, or may very well save his political tooshie: Will he and the Federal Reserve Chairman, Ben Bernanke, be able push the coming depression enough ahead of them to avoid having to face judgement before the next election?

The reason everything depends on this fact is that despite what the White House and many Ivy League economists would have you believe, the economy simply isn’t recovering and hasn’t seen any true growth for possibly the past 10 years. The actions of the federal government echoes those in the 1930s; actions that exacerbated the problems and created a depression lasting for much longer than necessary. The view that government cause economic turmoil and exacerbate the problems is supported by those who warned about and forecasted the Great Depression of the 1930s and those who warned about and forecasted the Recession of 2008 by explaining exactly what would happen if government would act in the way it indeed ended up doing. Now as then, we have seen a federal government help inflating an economic bubble and help fueling the fire by increasing the money supply and intervening in markets, and we have seen a federal government attempting to keep the bubble from bursting as it must, or re-inflate it if it does, expanding the reach of government power and burdening the citizens and the private sector with more taxes and weakened purchasing power. One key difference, however, is that America in 2010 has the biggest deficit of any nation on the planet throughout history. This was not a worry people had to take into consideration after the second world war when America emerged to become the greatest creditor nation in the world. To put it differently: The private sector is sucked completely dry this time around, unlike in the 40s and 50s when they had plenty of juice to serve.

If the answer is ‘yes, they will be able to push the depression enough ahead of them to let President Obama campaign on being the savior, rather than a clown’, then you can expect the following words to be the core of President Obama’s strategy in the coming campaign:

We just went through the worst economic downturn since the 1930s, but we were able to avoid another depression. We’re still recovering, but I tell you this: had it not been for the quick, decisive and necessary actions by government, it would have been much worse. That is why it’s important for us to not disrupt the recovery at this point. We must stay our course and do what is necessary, because we will face disasters much worse if we lose our focus now.

Author’s comment: I have a feeling I will be able to quote myself on this in 2 years time, and if I’m not already worrying enough, this makes me truly worry about how life will be in 6 years. It took only 6 years to lay Europe completely to waste 70 years ago, after all. Humanity may not have learned from history when it comes to economic issues, but you better well hope that humanity have learned enough from history to not start another world war over it.

It’s not hard to imagine that he will be able to win in 2012 based on this. Of course, President Obama, with the help of Chairman Bernanke’s printing press, is only delaying the inevitable. But if President Obama serves another term and continues his current policies, we will be faced with troubles much worse than what we see now, something not he nor his possible successor will ever be able to explain away, which may by 2016 unfortunately result in the possibility of civil unrest and a large portion of the population with complete distrust in the political system. It’s important to note, though, that the possible civil unrest may not necessarily be aimed at the President in particular. Echoing the tendencies of the Tea Party rallies, you are more likely to see it aimed at Washington in general, but fueled by economic distress rather than any political disagreement. It will not matter who they are and what party they belong to; if they have been in Washington for some time they will be blamed for all the horrors. They can only hope, for their twisted political sake, that people will forget instead.

However, if the answer is ‘no, we will clearly see the storm coming over us before the next election, the depression has become a fact rather than a possibility, and economic distress will sweep the country into fiscal responsibility’, we will likely not see President Obama serving a second term, depending on the Republicans being able to nominate a true fiscal conservative that will stay true to his words. Throughout history Americans have always tended to change their leaders when faced with economic turmoil. Americans have also always elected the candidate campaigning peace and diplomacy when exhausted by continuous wars. This time we are faced with both extremes at the same time, much more so than any other time since the second world war. The sad part is that we this time around do not have a party that advocates peace and thus cannot advocate real fiscal responsibility.

Democrats have never truly advocated that America should stop their military interventions around the globe. Bill Clinton frequently deployed the military on glorified missions to police the world, and President Obama never kept his promise of leaving Iraq, even advocating for an expansion of the war in Afghanistan throughout his whole campaign and to this date. Republicans on the other hand have constantly been advocating military expenditures since the days of the Cold War (Reagan’s Peace Through Strength), and have long been advocating military intervention, especially since 9/11 (Bush’s War On Terror). Not willing to build down the military imperialistic character of the United States, Republicans face a hard task in promoting the necessary fiscal responsibility to tackle the deficit and let the country climb out of an economic depression. Some are calling for the possibility of a third party candidate rising to the occasion, but taking into consideration the numerous laws biased in the support of the current two-party-system, we are not likely to see a third party candidate do anything more significant than stealing just enough votes from one candidate that the other will get ahead, if we were to face a close election.

What do I think? For non-interventionist small government advocates there has never been a better chance in recent history to spread their message of peace and economic freedom, but gathering the people around one candidate that can sway the minds of Americans will be the true task at hand, and it will be crucial for their goal of economic recovery to elect a president with the integrity to stay clear of political corruption and avoid falling for the temptation of turning on the voters when in office, like so many presidents have done in the past; a president that has the courage to clean out the administration and bureaucracies of established “big government values” that will disrupt any attempts of restraining the federal government by building down Washington and pull back the interventionist powers of the executive branch.

At present time there is still only a single politician in America that fits this description, and by 2012 his name is sure to be on everyone’s tongue, but only time will tell if politicians, voters and the political system in general will have the courage to bite the dust and wholeheartedly support him, and if his vitality and mind will stay as young and vibrant through a possible campaign and presidency as it is today, considering his age. I will let time be the judge of this.

Written by Morten Rolland

October 24, 2010 at 7:33 am