Political junkies love to talk about demographics. It’s always fun to speculate about the future. One common train of thought is that younger voters are typically more left leaning, hence they’ll continue to vote that way when they get older. Which could be true. It’s not beyond the realm of possibility they always vote the same; however, young voters are easily the most uninformed voters.
Here’s a great video of some hipster dufuses who are involved in the the youth climate movement.
Yes, if only small communities would grow their own food that would solve all our problems. What problem? Oh yes, society is addicted to economic growth. What can you say about that? The same idiot who says we’re addicted to economic growth would likely be devastated if he couldn’t login to Facebook on his iPhone to bitch about Sarah Palin at the super hipster dufus hate page Intelligent Women and Men Against Sarah Palin.
I know a lot of people who are caught up in this nonsense. What drives seemingly intelligent people to waste valuable time worrying about imaginary problems while at the same time ignoring real problems? The defining issue of my generation isn’t the climate, it’s the real threat of worldwide economic collapse.
In the United States only about half the citizens pay taxes. Less and less of the population actually works for a living. Those who work are subsidizing those who don’t contribute anything to society. While one could argue that these free riders “paid their dues,” I don’t care. I’m paying my dues right now and there will be no glorious freebies when I’m old enough to collect.
If young people want to get involved they should quit wasting time with these dumb socialists and get informed about the nation’s fiscal nightmare.
The cover story for this week’s Economist deals with America’s fiscal hole. For the most part The Economist is dead right about this issue. Americans seem unwilling to pay higher taxes or cut down the size of government.
Cold arithmetic suggests that spending cuts alone cannot deliver enough. Changes to entitlements take effect only gradually. And the scope for slashing non-defence discretionary spending is limited, since it makes up merely one-sixth of total outlays. So Americans are stuck with a budgetary conundrum: they seem to be opting for more government, at least in health care, yet they do not seem prepared to pay for it. Their leaders have indulged this fantasy. Mr Obama has foolishly sworn off higher taxes on 95% of households, and Republicans will not countenance them for anybody. This newspaper strongly prefers small government and low taxes, but if Americans are to have bigger government and a sustainable budget, tax revenues will have to rise.
This is the defining issue of our time. Both parties seem unwilling to reduce entitlements. Democrats wish to raise taxes and Republicans are adamantly opposed. Republicans talk about reducing the size of government, but lack the willpower to actually do anything. Simply raising taxes on the rich won’t pay for everything. The Economist makes a great point about tax options. The United States taxes income too much and consumption too little. Everyone seems to agree there’s a savings problem in the United States. I’ve written before about the many inefficiencies of income taxes. A national sales tax is a much better solution. Unfortunately, we can’t trust the federal government not to abuse a sales tax while still levying an income tax. Plus, given America’s growing appetite for larger government taxes would continue to rise to pay for any new “rights” progressives dream up (the right to clothing, the right to food and shelter, the right to own a smart phone, and so on till we can’t get any of that stuff).
The table below is a great example of how much wealthier Americans are today compared to 50 years ago. Some of the economic malaise that’s gripping the nation today is due to the fact the press and left complained how bad things were for eight years. It reached a fever pitch during the election year. Now that a recession inevitably arrived we’re supposed to believe that our so called free market economy is to blame.
I say so called because the government is involved in almost every aspect of life. A free market economy wouldn’t subsidize corporations or farms. It certainly wouldn’t tax corporations at the highest rate in the industrialized world. What kind of free market economy wouldn’t allow competition in the airline industry? While American airline companies struggle to make ends meet the government in all its wisdom doesn’t allow competition for domestic flights. There’s a reason you can’t fly Emirates in the United States. It’s because the government doesn’t allow them to compete here. Imagine if Europe decided that they wouldn’t’ allow Coke or Microsoft to sell their products in that continent. Wouldn’t Americans be outraged?
Where’s the free market in the US dairy or sugar industries? There are regulations for almost every conceivable aspect of American life. The list goes on and on… city zoning, the Forest Service, IRS, and eminent domain. That doesn’t even scratch the surface. Since the New Deal the nation’s economy has grown despite the fact the government’s reach has grown ever longer. It’s incremental and it’s done by well intentioned people who think they have all the answers. The problems created by these stewards of ineptitude occur long after the bills are signed and the press releases are sent. Getting rid of these programs, bureaucracies, and entitlements are nearly impossible. The path to bankruptcy that they put us on is inevitable.
Despite that sad realization, the nation’s wealth has grown at rates never seen in the history of mankind. Economic growth isn’t automatically assured. Without liberty people aren’t free to pursue wealth. These entrepreneurs are the lifeblood of the American dream.
Hat Tip: Carpe Diem
Most economists are not huge fans of raising income taxes. There are plenty of reasons; the biggest being is that it hurts economic growth. Tax policy has always been one of the most fascinating parts of economics for me. It is a subject where a tremendous amount of bad information exists and is repeated. There’s a lot of debate about taxes, especially in our common day political battles, however most of these battles are ideologically superficial in nature. The nuts and bolts of tax policy are not always so simple. Raising taxes is never a popular platform, but Greg Mankiw makes some compelling arguments in the Wall Street Journal for raising the gas tax in the United States by $1 a gallon. He cites some environmental factors, but I’m unconcerned about Global Warming (from an economic perspective), it’s the other points that are more convincing.
Tax incidence. A basic principle of tax analysis — taught in most freshman economics courses — is that the burden of a tax is shared by consumer and producer. In this case, as a higher gas tax discouraged oil consumption, the price of oil would fall in world markets. As a result, the price of gas to consumers would rise by less than the increase in the tax. Some of the tax would in effect be paid by Saudi Arabia and Venezuela.
Economic growth. Public finance experts have long preached that consumption taxes are better than income taxes for long-run economic growth, because income taxes discourage saving and investment. Gas is a component of consumption. An increased reliance on gas taxes over income taxes would make the tax code more favorable to growth. It would also encourage firms to devote more R&D spending to the search for gasoline substitutes.
National security. Alan Greenspan called for higher gas taxes recently. “It’s a national security issue,” he said. It is hard to judge how much high oil consumption drives U.S. involvement in Middle Eastern politics. But Mr. Greenspan may well be right that the gas tax is an economic policy with positive spillovers to foreign affairs.
Is it conceivable that the policy wonks will ever win the battle with the campaign consultants? I think it is. Even after a $1 hike, the U.S. gas tax would still be less than half the level in, say, Great Britain, which last I checked is still a democracy. But don’t expect those vying for office to come around until the American people recognize that while higher gas taxes are unattractive, the alternatives are even worse.
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