Thursday, November 18, 2004

The Easy (braindead) solution to Social Security 

The solution, as proposed by a member of the Clinton administration's Social Security Advisory Council:
1) Raise the cap on income, effectively raising taxes on those earning over $87K.
2) Cancel a rollback on the estate tax, taxing homes upon death. This usually means taxing the homes so much they must be sold to pay for the additional taxes.
3) Mandate that state and local workers join Social Security. After all, you're forcing everyone else, why leave some exempt? Let's here it for Federalism! Or perhaps this would highlight the pyramid scheme which would normally be considered fraud if it weren't done by the government.
4) Use more accurate cost-of-living estimates, i.e. lower benefits.

There you have it, the inevitable downward spiral of raising inputs and lowing outputs in a government program.

By that's not all. The following things are bad ideas:

- Raising the retirement age, because some people who retire early really need to. Can't you just keep the early retirement constant (62) and raise the real retirement age (say 67 to 70 gradually).

- Privatizing accounts, because they'll be, err... private, and people might make mistakes. We can't let 'em! How pro choice...

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Wednesday, November 17, 2004

Flat Tax 

Andrew Sullivan descibes why a flat tax works, both from a fiscal policy and political point of view. This is related to what Arnold Kling wrote recently about taking into account both economic and political incentives into drafts of fiscal policy.
From a political perspective, however, having four broad-based taxes with low rates would help to discourage lobbying. The incentive to lobby for an exemption is much higher when marginal rates are 35 percent than when rates are 8 percent.

For example, consider the corporate income tax. As it stands now, the social cost of the corporate income tax (including compliance costs, the costs of rent-seeking as K Street lawyers lobby for exemptions, and the costs of economic distortions) exceed the revenue that it brings in, which is why it is reasonable for economists to support abolishing the corporate income tax altogether. My hypothesis is that with a tax rate of 8 percent, the K street rent-seeking would diminish sharply, compliance costs would decline because of reduced complexity as well as reduced incentives to dodge the tax, and the economic distortions would be reduced as well.

Reducing the marginal tax rates on personal and corporate income from 35 percent to 8 percent would reduce the value of tax exemptions by 80 percent. I think that this would shut down the K Street tax lobbying industry, or at least curtail it sharply. Even the real estate lobby might decide that the mortgage interest deduction is not worth fighting for when the marginal personal income tax rate is only 8 percent to begin with.

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Thursday, November 04, 2004

Bush on Social Security 

I haven't made any comments here on Bush's victory. I am happy about it. First because people like this are happy, for a good reason. Second because of this plan to immediately start work on personal retirement accounts replacing Social Security. [more on Social Security privatization].

There are other reasons, but I'd rather you follow those links than stay here.

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Friday, October 29, 2004

Mental Steroids 

Should We Fear 'Cosmetic Neurology'? No.

Unfair competition in sports hurts the meaning of the game. Given a distributed system of competitive advantage, mental steroids would increase overall productivity, and standard of living, significantly.

If there were a pill with few side effects (unlike anything today) which could raise my IQ by 20 points, I would immediately get it.

This should be incorporated in models of singularities. If knowledge is increasing as a function of current knowledge and human capabilities, and human capabilities begins to increase as a function of knowledge, the differential equation will certainly lend itself to models of singularities.

A plausible example: bio-med researchers develop just such a thinking drug, those researchers take it, and engineer a better drug faster, those working on neural-computer interfaces achieve their goals even faster, distributed SETI-in-brain-like systems start solving the really hard problems. We have a singularity within 20 years.
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Wednesday, October 27, 2004

Marginal Tax Rates 

Punishing the wealthy. If earning $200K gets you a 30% tax rate, and earning $250K gets you a 35% tax rate, what does that mean for your incentives to work harder?

You pay $60K & $87.5K in taxes respectively. This means that the last $50K was taxed $27.5K, or 55%*. This is called a "marginal tax rate".

Studies show that increasing the marginal tax rate has very negative effects on an economy. The incentive to work is lowered, so people take more vacations, work shorter hours, and take pay in warping ways, like lush benefits packages. It lowers investment, lowers the number of goods offered in the market, and also often yields lower tax revenue, because of the incentive to avoid paying taxes.

So what will Kerry's plan on taxes do? First, like a good class warrior, he will raise taxes on those earning more than $200K. This increases marginal tax rates. He will also decrease taxes on the 'middle class'. This will also increase marginal tax rates.

A more flat system is more equitable, and would actually yield higher tax revenue in certain cases.


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Musing The Best Political News of 2004 

"What's that?", you ask, "Good news?" Yes: peaceful, fair Afghan elections, as William Safire points out.

I've thought for some time that it is difficult to defend our system of government and tolerate interactions with corrupt regimes such as China & most countries in the Middle East. Little is done when we need to maintain a stable status quo.

We supported reform in the former Soviet block nations to help bring about that empire's collapse, then did nothing to promote those seeking democracy in the former Yugoslavia, when it didn't serve our interests. We supported Afghan fighters against the USSR, again, when serving our interests. The rise of the Taliban should never have been tolerated.

This makes me wonder about the proper roll of a powerful democratic state in the face of countries that repudiate the ideas. Most will concede that acting to defense makes sense, even in a cold war, where we had interests to spread democracy to stop the spread of communism.

Far fewer would agree that this effort should be pro-active. I would be one of those. The situation in the Middle East, where most nations are not democracies, there is little governmental value in individual freedoms, and corrupt law machines are oiled more by bribes than justice.

I think this is intolerable for humanitarian reasons. It is also intolerable from a security standpoint. I would venture that an open society is explicitly threatened by closed societies, on a long enough timeline. The motivations can be benign: the west has gotten richer as a result of our system, while the ME has degraded, being an emaciated oil-junkie. This is a threat, and we are only coming to realize that. The thought that those systems can exist in they own world, and not metastisize & spread or reach a boiling point like Al Queda, is a myth.

Most describe the current War on Terror as a civil war within Islam. This makes sense, but in order to have the modern side win, we must understand the motivations. There is a medieval side only because the public sectors there are too corrupt to stop it. You can't win a culture war if the incentive system creating the problem doesn't change.

Does this mean I'm advocating more invasions? Not necessarily. It needn't come to that.

It could come in the form of a simple statement that most in this divided country could agree with. For example: "Saudi Arabia, you should hold elections, let women drive, and stop funding fundamentalist schools which breed hatred of the United State."

Will this have an effect? Maybe. If there are business consequences, I think it would be more meaningful. Take China, where anecdotes abound of miscellaneous businessmen mentioning in passing the plight of a political prisoner. While the diplomats and translators insert apologies to water down the sentiment, the statement causes a small ripple, and the prisoner is released to secure the deal.

Apply this to the above statement by appending, "or company XYZ won't get a subsidy to invest in your infrastructure".

At the very least, we'll sleep better at night.
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Tuesday, October 26, 2004

The fixed quantity of wealth fallacy 

Interesting. More people should read this.
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Wednesday, October 20, 2004

Vote Bush 


-- War on Terror --
Bush understands the stakes, Kerry doesn't.
Vision: Bush sees a future where the War on Terror is over because the governments that spawn Islamic Fascists are reformed or smashed. This is the only way to bring an end to the threat. To achieve this goal, Bush is consistent in his efforts to keep on the offensive, work with foreign governments for internal reform, and will never capitulate.

Kerry has claimed that another attack would be followed by a counter attack, forgetting 9/11. He has claimed to be for unilateral pre-emptive action, but claims that there is a global test needed to take that action. Even if figurative, the assertion is ridiculous. He fails to see how a democratic Iraq will change the uniformly corrupt non-democracies in the area, calling it the “wrong war, wrong place, wrong time”. In the face of Jordanian al Qaeda lieutenant, Abu Musab al-Zarqawi, who was in Iraq before the war started, Kerry fails to see the connection between corrupt regimes and terrorists.

Bush is working closely with allies & the UN to disarm Iran. Bush is fostering a strong, grass-roots democracy campaign, supporting the millions of students who demand reform there. Kerry’s solution is to GIVE Iran nuclear material, a test which, when failed, we all lose. Kerry has never mentioned any plans to achieve democracy in Iran.

Bush is pressing North Korea, leveraging the influence of China, Russia, Japan, and South Korea. Kerry’s plan is to start bilateral talks, which failed horribly under Clinton. Where is his beloved global test and multilateralism now?

The Kerry plan to get more allies will fail. France and Germany have already declared they will not give troops, even if Kerry wins. Meanwhile, France, German, and Russian government officials and oil & arms traders are all under investigation for violating UN sanctions on Iraq & possible involvement in a corrupt Oil-For-Food program multi-billion dollar bribe scheme to keep Saddam in power. While the United States was trying to ensure its security and free millions of people, our ‘allies’ where bowing to backhanded oil interests of the then corrupt status-quo.

-- Social Security --
Currently, the government does not count what it owes to future seniors as 'debt', though these obligations are very real. Take those into account, and the federal government is TRILLIONS more in debt than can possibly be paid for with the current system.
Bush wants to reform Social Security, to break the pyramid scheme that fails when you have a Baby Boom. Bush has a plan for the nation’s youth, with personal retirement account, which can never be threatened by irresponsible politicians, and don’t depend on anyone else paying into the system.

Kerry ignores the future and suggests cutting benefits to the prudent senior who "don't need" what they are owed, because they saved smartly for retirement. Also, while promising to not raise taxes on "the middle class", Kerry plans on great tax increases, a rollback not to Clinton-era, but pre-Reagan era taxes, by raising the cap on social security taxes.

-- Health Care --
Have you ever wondered why you have “insurance” for something you know you’ll need, like a periodic medical check-up? A third-party payer system is the #1 problem with today's health care system. Tax structures and government price-setting through Medicare warp the free market, and prevent the innovation and cost cutting of a free market.

Bush wants to make tax-free medical savings accounts, so there would be no greater incentive for a company to give you health insurance as to give you cash. You can use this to purchase catastrophic health care, and purchase the rest out-of-pocket. This will revolutionize the system, allowing for a normal market exchange, where you can choose any doctor, and they have an incentive to provide the lowest price and best quality. In today’s system, when you aren’t the one paying, you don’t care about real price, and the payer, either an insurance company or the government, does not care about quality as much as you do.

Excessive regulation is another huge problem, keeping our health care system from innovating and providing low cost health care. Bush supports sane regulations, including tort reform. Kerry wants more regulations, and trial lawyers make up Kerry's #1 paying constituency.

-- Free Trade –
Free trade is the most empowering tool for the world’s poor and the best friend of both working class Americans with limited budgets and employees hoping their company expands into the global market place. Though foreign corporations pay workers in 3rd world nations TWICE the national average, Kerry wants these companies to go against a system that benefits everyone, by warping tax systems to avoid this synergy. I care more about people entrenched in poverty abroad than obsolete workers unwilling to retrain themselves domestically.

For more resources & info:

For social security information:
here and here

For information on medical savings accounts:
here and here

For medical deregulation:

For information on free trade:
here and here
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The great (well, ok) space debate 

Discussion on Kerry-Bush space policies. It has already been said that a Bush re-election would be very, very good for space robotics.
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