Topic: Government and Politics

Bruce Bartlett’s VAT Delusions

I’ve known and liked Bruce Bartlett for more than 20 years, so you can imagine my dismay that he is now arguing for a value-added tax (VAT). I’m not sure whether his mind has been captured as part of a remake of Invasion of the Body Snatchers or if he’s just been hanging around Washington for too long, but his implication that it is possible to be a pro-market conservative while supporting a huge new tax to finance bigger government is absurd.

Conservatives (not counting the big spenders who call themselves “compassionate conservatives”) share the libertarian goal of smaller government. And trying to achieve smaller government by raising taxes is akin to treating alcoholics by giving them keys to a liquor store.

The VAT is a particularly bad idea because it would be a huge new source of revenue, as Bartlett acknowledges in an article for Forbes.com:

Based on the experience in other countries, I estimate that a U.S. VAT could realistically tax about a third of the gross domestic product (GDP), which would raise close to $50 billion per percentage point. If we adopted Europe’s average VAT rate of 20%, we could raise $1 trillion per year in 2009 dollars.

He makes the point that a VAT does not do as much damage, per dollar raised, as the personal or corporate income tax, but so what? That would only be a compelling argument if the VAT was used to eliminate other taxes. At the risk of pointing out the obvious, that’s not what he’s proposing.

Interestingly, even though his core argument is that we should adopt a VAT to give the government additional revenue, Bartlett tries to be all things to all people by mentioning that a VAT could replace other taxes:

Replacing the corporate tax with a VAT would unquestionably improve the competitiveness of all U.S. exporters.

Even here, though, his argument is misleading. A VAT would have no impact on U.S. exporters. All the benefits would occur only because the corporate income tax would disappear. Not that this matters since Bartlett is not advocating for that position.

He then continues to muddy the waters by citing Senator DeMint’s legislation, presumably to make it seem as if his plan is good by association.

Sen. Jim DeMint, R-S.C., introduced legislation (S. 1240) to establish a business consumption tax that is, in essence, a VAT.

There is a gigantic difference, of course, between Bartlett and DeMint. The senator proposes to replace the internal revenue code, whereas Bartlett wants to augment it.

He then complains that supporters of limited government attack his plan for facilitating bigger government, but he offers no refutation. That is no surprise since Bartlett is throwing in the towel, saying we should have a VAT since it is hopeless to fight against growing government:

[W]henever I suggest the idea of a VAT for the U.S., I am attacked by supply-siders and assorted right-wingers. The other day my friend Larry Kudlow criticized me for wanting to “Europeanize the American economy.” Their concern is that the VAT is a money machine that will lead to higher taxes and bigger government precisely because it is such a “good” tax. I myself held this same view for many years. But eventually I decided that it was stupid to oppose something because of its virtues. Opposing a VAT because it’s too good is like breaking up with your girlfriend because she is too beautiful.

The last line is clever, but ridiculous. The more appropriate analogy is that you are married to the Creature from the Black Lagoon, and Bartlett wants you to take the Wicked Witch of the West as a second wife.

If you want the real story on the VAT, watch this video.

Attending to Business

In today’s Politico Arena, the editors ask:

Is Obama “dithering” on Afghanistan (Cheney) or fulfilling his “solemn responsibility” (Gibbs)?

My response:

President Obama got some adult criticism this week from Dick Cheney, none too soon.  While the risk to American troops in Afghanistan grows, Obama dithers, unable to decide whether to get in or get out — whether to be the one thing the Constitution authorizes him to be, Commander in Chief.  Yet he finds time to fly off to Copenhagen to promote Chicago for the Olympics, to insinuate himself in local political campaigns, to go on “Fox hunts,” yesterday excluding Fox News from the White House pool allowed to interview his executive pay czar, and now, we learn, to slash executive salaries at companies not only partially owned but simply regulated by the government.  Are there no limits to the man’s hubris?

Even the Washington Post this morning, no bastion of free-market fervor, noted that this “represents a signal moment in the history of the American economic experiment,” moving us ever closer to the European model.  But it was Arena contributor Allan Meltzer who yesterday hit the nail on the head:  ”All the noise about pay and pay cuts is part of an effort to divert the public’s attention from the main cause of the mortgage fiasco — the role that Congressman Frank and others had in creating the mortgage crisis by refusing to limit the activities of Fannie Mae and Freddy Mac after 2003.”  That these regulators will be able to calculate the salary that is appropriate to discourage excessive risk-taking is simply comical.

And so we have here a textbook example of modern government:  Obama fails to do or do well what he is authorized to do, yet he strides into matter far beyond his authority — or competence.  He seems not to understand the Constitution he once taught, and more recently promised to uphold.

Neoconservatism and Militarism

Matt Yglesias identifies a puzzle, comparing Cold War/Irving Kristol neoconservatism to today’s Weekly Standard Wilsonianism:

[E]ven though the high-level theoretical content of the realpolitiker 70s version of neoconservatism and the Wilsonian 2000s version of neoconservatism seem very different, the operational content is extremely similar. You have support for higher defense budgets, a tendency toward threat-inflation and hysteria, a belief in an aggressive military posture and extensive saber-rattling, hostility to negotiations, and hostility to international law both in theory and in practice. This was initially presented to the world as a “realistic” alternative to lefty critiques of US support for anti-communist dictators and more recently appeared as an “idealistic” critique of lefty reluctance to launch wars, but the continuity between the views is enormous.

What Matt doesn’t say is why the policy outcomes stayed largely the same despite shifting theoretical sands.  I think this piece by Brian Schmidt and Michael Williams can help shed some light on the problem.

Irving Kristol's Medal of Freedom Award (Paul Hosefros/The New York Times)Irving Kristol’s Medal of Freedom Award (Paul Hosefros/The New York Times)

Irving Kristol’s Medal of Freedom Award (Paul Hosefros/The New York Times)

A social order based purely on narrowly egoistic interests, neoconservatives argue, is unlikely to survive — and the closer one comes to it, the less liveable and sustainable society will become. Unable to generate a compelling vision of the collective public interest, such a society would be incapable of maintaining itself internally or defending itself externally. As a consequence, neoconservatism regards the ideas at the core of many forms of modern political and economic rationalism — that such a vision of interest can be the foundation for social order — as both wrong and dangerous. It is wrong because all functioning polities require some sense of shared values and common vision of the public interest in order to maintain themselves. It is dangerous because a purely egoistic conception of interest may actually contribute to the erosion of this sense of the public interest, and the individual habits of social virtue and commitment to common values that sustain it.

In this context consider the worshipful treatment of men like Teddy Roosevelt and Rudy Giuliani by neoconservatives, and neoconservatives’ utter contempt for libertarians and individualism.  For neocons, the higher defense budgets and militarism, the aggressive military posture and extensive saber-rattling, the nationalism, were in some sense ends in themselves rather than rationally calculated means to defend the country.  Without an enemy and a grand national project — note in the article to which Matt points Kristol’s admonition that “statesmen should, above all, have the ability to distinguish friends from enemies” — the society would descend into a variety of individual pursuits — family, profit, local community, learning — that provide no unifying politics.  Again, for Kristol, “a nation whose politics turn on the cost of false teeth is a nation whose politics are squalid.”  A grand national project, be it a global proxy war against the Soviet Union, a crusade to end terrorism, or even a recurring fetish for space travel, provides unifying substance for the country.

The trouble, as Matt rightly observes, is that you can’t explicitly just go around glomming onto whatever rationale provides the best argument for militarism and nationalism today. The citizens of the country seem unlikely to support costly and destructive policies based on the idea that it’s all for their own good.  I am reminded of Ed Crane and Bill Niskanen’s apt reference to neoconservatism as “a movement with a head but no body,” meaning that it lacked indigenous support at the grassroots level.  So the obvious play for neocons was to sew the neoconservative head onto the conservative nationalist body.  To justify endless war, the idea of “real America” being under siege by both an insular and tweedy academy (in Schmidt and Williams’ story, the scientific-rationalist realists) and an array of foreign devils allowed a group of radical ideas to strike a conservative pose:

In foreign policy as in domestic policy, neoconservatism claims to represent the majority of real Americans, to speak on their behalf, and to defend the validity of their beliefs in their virtues and values (and their place as the basis for the national interest of the United States), just as vociferously as it has represented those values against the depredations of elites in the culture wars. Although a high proportion of neoconservatives are intellectuals — and are often part of what would be considered an academic elite by any standards — they are able to represent themselves as outsiders shunned and victimized by liberal (and realist) intellectuals in precisely the same way that real people are, and for the same reasons — for expressing what the people really know in an elite cultural environment dominated by self-interested, self-righteous, and yet culturally decadent liberal elites.

In this reading, trying to ground the policy outcomes in a coherent theory of international politics is bound to be fruitless.  The policy outcomes themselves are designed to provide a centripetal counter to the polity’s natural tendency to fly apart.  On this point Schmidt and Williams cite Midge Decter (“domestic policy was foreign policy, and vice-versa”) and Robert Kagan (“there can be no clear dividing line between the domestic and the foreign”).  I think there’s something to this.

Obama’s Fall Offensive

In today’s Politico Arena, the editors ask:

White House Strategy: Will Obama’s effort to undermine critics undermine Obama instead? Is it overdue or overdone?

My response:

Obama is losing it. His increasing moves to marginalize his critics, richly detailed this morning at Politico, mark him as an amateur. America is not Chicago. Nor are those who oppose his agenda synonymous with the Republican Party. They’re far more numerous than that, and their numbers are growing.

Politics is one thing: “It ain’t beanbag,” Mr. Dooley noted. But scorched-earth politics is something else. It’s over the edge, like Nixon’s enemies list. It has no place in America, except in political backwaters like Chicago. (Personal note: In 1972 my wife and I served as Republican election judges in the first Mayor Daley’s Chicago. On election day, when we walked into the Hyde Park polling station at 5:30 a.m., the three Democratic judges looked at us in astonishment: “Are you real Republicans?” How else are you going to control the election?! Hamid Karzai has nothing on Chicago.)

As a practical matter, in our two-party system the Republican Party is the organizational antidote to this kind of abuse. But as the Wall Street Journal editorializes this morning, the party’s going to have to get its act together before that happens. It’s claim to be a party of principle has been seriously undermined in recent years by Republican officials at all levels of government. That leaves it to private individuals and organizations to call Congress and the administration on what they’re up to. And that’s why we too are in Obama’s cross-hairs. It won’t work – unless we let it happen. Thank you, Politico, for drawing these sad facts together in one place.

Our Inescapable President

I’m late to the pile-on because I’m a bad American, and I don’t watch enough football, but not quite two weeks ago, President Obama managed to politicize what for many is a hallowed Monday night ritual.

In the New York Post, the paper of record for those of us who grew up in one of the only red counties on the Jersey Shore, Kyle Smith notes that Obama’s ostensible purpose for inserting himself into Monday Night Football was to proclaim Hispanic Heritage Month, but the president put this in as well:

Our nation faces extraordinary challenges right now, and our ability to tackle them will depend on our willingness to recognize that we’re all in this together, that we each have an obligation to give back to our communities, and we all have a stake in the future of this country.

Generic enough, perhaps, unless you’re oblivious to the political backdrop of the president and his party pushing desperately to pass national health care.

Smith is rightfully exasperated by the perpetual campaign mode and Obama’s omnipresence in every broadcast medium. But–not that it’s a competition–I’d had more than my fill of this sort of thing eight months ago, a month into Obama’s presidency:

When there’s no escape from our national talk-show host-when he appears constantly above every gym treadmill-is it any wonder that we typically want his show cancelled just a few seasons in? Is it any wonder we get sick of him?

You can make too much of the notion of presidential “dignity.” It’s good when the federal chief executive officer fights against the royal aura that inevitably surrounds the office by, for example, walking his inaugural parade route (Jefferson) or buttering his own english muffins (Jerry Ford).

But it seems to me that doing a commercial for George Lopez’s lousy sit-com takes it a bit too far:

(When I saw this on TV recently, I was sure it was some kind of Forrest Gump cinemagic. Not so.)

More to the point, can the president give us an occasional break from his relentless omnipresence? Apparently not.

Six months into his presidency, the Politico reported, Obama had already “uttered more than half a million words in public.” In one whirlwind week last month, the president made his third appearance on “60 Minutes,” gave a major speech on the financial crisis the next day, and made a record five talk-show appearances the following Sunday. And on the eighth day, He did Letterman.

My suspicion is that as his popularity continues to drop, Obama is going to discover that there are diminishing returns to presidential media appearances, and that he might do better by letting the country forget about him for a while. But will he be able to restrain himself?

Nice Insurance Company. Shame If Anything Were to Happen to It.

Just days after the health-insurance lobby released a report criticizing the Senate Finance Committee’s health care overhaul (for not expanding government enough!), Democrats and President Barack Obama lashed out at health insurers, threatening to revoke what the Government Accountability Office calls the insurers’ “very limited exemption from the federal antitrust laws.”

Democrats say they’re motivated by the need to increase competition in health insurance markets.  Right.

According to Business Week:

David Hyman, a professor of law and medicine at the University of Illinois College of Law and adjunct scholar at the Cato Institute…considers it unlikely that repeal would fundamentally change the nature of the market. While it might increase competition in some markets, he says, it could actually decrease it in others, such as those where small insurers survive because they have access to larger providers’ data. Changes to the act could therefore hurt smaller companies more than larger ones, he says.

Because the act doesn’t outlaw the existence of a dominant provider but simply prohibits collusion, says Hyman, a repeal would fall short of breaking up existing market monopolies that are blamed for artificially inflating prices. The current move against [the] McCarran-Ferguson [Act], he says, “has more to do with the politics of pushing back against the insurance industry’s opposition to health reform than it does with increasing competition in health-insurance markets.”

Combined with what The New York Times described as the Obama administration’s “ham-handed” attempt to censor insurers who communicated with seniors about the effects of the president’s health plan – the Times editorialized: “the government’s Centers for Medicare and Medicaid Services had to stretch facts to the breaking point to make a weak case that the insurers were doing anything improper” – it’s hard to argue that this is anything but Democrats threatening to use the power of the state to punish dissidents.

When Republicans were in power, dissent was the highest form of patriotism.  Now that Democrats are in power, obedience is the highest form of patriotism.

Department of Bias

The Department of Justice just invalidated a move by the residents of Kinston, North Carolina, to have non-partisan local elections. Rationale?

The Justice Department’s ruling, which affects races for City Council and mayor, went so far as to say partisan elections are needed so that black voters can elect their “candidates of choice” - identified by the department as those who are Democrats and almost exclusively black.

The department ruled that white voters in Kinston will vote for blacks only if they are Democrats and that therefore the city cannot get rid of party affiliations for local elections because that would violate black voters’ right to elect the candidates they want.

This, coming from the same Department of Justice officials that wouldn’t know a civil rights violation if it picked up a club and barred them access to a polling place.