Cut off the money

Fellow blogger Amy points out an issue that she believes is under represented by the media and largely ignored by our politicians. She highlights the violence in Mexico and along the border that is attributed to the Mexican drug cartels. She is exasperated and searches for a solution. As unorthodox a solution as this might be, it may be time to consider legalizing and regulating drugs to combat the problems that the cartels create.

When trying to solve a problem, it is normally best to determine the root of the problem and mitigate that. In the case of drugs, the driving motivator is the money. These cartels wouldn’t have intense turf wars, kidnappings, murders, and corruption of officials if there was no money in it for them. As a case study, let’s consider the prohibition of alcohol. Most gangster organizations of the time were centered on bootlegging, speak easies, and selling of alcohol. A black market was created by making the substance illegal. Those markets attracted characters that were already shady and the money only enhanced their lifestyle. A direct correlation can be drawn to the cartels in Mexico. If the government were to create laws similar to alcohol and tobacco laws to regulate the sell and consumption of the products, the cartels would have to compete on the open market. A small black market may continue to exist, but it would essentially drop the bottom out of the current market. There wouldn’t be money in it any longer and those cartels would slowly dissolve on their own. The Federal Government would then be able to tax the sale of drugs as they do tobacco and alcohol. This would increase the revenue stream to the government. Freely available drugs would also drop prices for those that choose to use. This would likely drop the instances of burglary that those individuals cite as occurring because they are trying to support their habit.

I definitely don’t support the use of drugs. I don’t think even tobacco and alcohol are healthy habits, much less the harder drugs that are out there. But I do believe that legalizing at least some of the drugs would create market conditions that would eliminate the cartels in Mexico and have more benefits than detractors when evaluating the situation after the fact.

Too many pokers in the fire

Over the years the government has grown. It has become enormous in breath and scope trying to serve the people. New programs, expanded services, continuing and growing regulations, oversight, licensing, and numerous departments, task forces, bureaus, agencies, etc. are created and given more responsibility every year. It succeeds in some of these tasks. In others, however, almost everyone agrees that the government may not be the best entity to manage the endevour.

There is constant discussion and debate about making schools better for our children. Standards are created. Children are tested. Teachers are scrutinized. Schools are put on closure lists just to be re-purposed into another school with the same students and a different name. This seems to be an area where government has failed to live up to the expectations of its people. People are looking to create a system that works. To me, the private sector has created a system that works. Anecdotal and empirical data prove that, time and time again, private schools outperform public schools.

The majority of people agree that society benefits from educating our children. Government is efficient in funding schools, but I don't think they should run the schools. Possibly, we could create a system of vouchers or reimbursement to schools directly for the children that attend. There may even be a system that everyone could agree on to reward good grades. As a professional returning to college, I know that I am highly motivated to make good grades that result in my employer reimbursing me for a portion of my expenses. Parents could be incented to get involved with their kids school work if it lessens their tax burden or results in a higher valued voucher. Students would likely repay society in the long run by being more productive members of society. The free market would most likely clear out the poor performing schools. Teachers that aren't able to produce results would probably be weeded out as well. It may be time to bring this service back to the people and give our society a boost toward being as highly educated as possible.

Let's take it further

I completely agree with my fellow blogger that the tax code is ridiculously, and needlessly, complex.  Through favors to large donors, social engineering, pet projects, compromises, etc., the code has been made into an unwieldy conglomerate of worksheets, rules, schedules, adjustments, line items, etc.  Those who are most well versed in the intricacies of the code are able to manipulate it to such a degree that they are, in many cases, able to avoid most of, if not all of, their obligation.  This was brought to light by the events that were mentioned in the blog.  The large corporations are able to hire the most tax educated individuals to work the system to their advantage.

However, I would like to take their argument and extend it a bit.  I don’t think that the problem is that the businesses are exploiting the built in loopholes and tax breaks.  I think that the problem is the existence of those loopholes and tax breaks.  We need to simplify the tax code to prevent such “abuses”, for lack of a better word.

As is pointed out, the American public is who ends up footing the bill for corporations who avoid their obligations.  And I would submit that the public also pays for companies who fully pay their tax obligation.  I think anyone would agree that all costs are passed along to the public.  With that logic in mind, why wouldn’t we reduce the tax revenue stream to the common factor?  If I were to rewrite the tax code, I would simplify it to a consumption tax only.  Corporations wouldn’t have a tax burden to try to escape from.  They wouldn’t have to use shady, if legal, practices to avoid taxes.  Individuals would be able to see the cost of government in a transparent way when they purchase an end product.

An unintended consequence would possibly be creating a favorable business environment.  Most people agree that cost of business is what causes companies to relocate or establish themselves outside of the United States.  I think it would be a powerful move to make the United States a tax haven for businesses and bring jobs back here.  The United States would be the country that everyone outsourced to instead of the other way around.  I can imagine that this would go a long way to resolving our country’s financial woes.

Having a public who can see their taxes clearly every time they make a purchase would hopefully make them even more financially aware of government spending.  It would encourage accountability in our elected leaders and would encourage people to save.  With a consumption tax, you are only taxed when you spend.  If you save, you won’t be taxed.  You’ll have more money working for you and, when you do spend, more to spend which increases tax revenue for the government.

Limits aren't always bad

In the spirit of the change movement that has swept the country, I'd like to bring up a topic that has been discussed often, and then is just as often dismissed.  I'd like to remind everyone about the possibility of term limits for Congress.

We, as a people, have determined that it is the right decision to, generally, limit the President to two terms in office.  But we have had, or currently have, politicians who have served in the House and Senate for over fifty years.  On average, Congress is comprised of House Members that will have served five two year terms (ten years) and Senators will have served two six year terms (twelve years).

There are many problems that term limits could help address.  Spending in Congress has been out of control recently.  Term limits would naturally limit this spending due to the fact that the official wouldn't have to be concerned with re-election.  This would likely limit the use of earmarks or creation of tax loopholes.  Lobbyists wouldn't have the crucial carrot of money for leverage when they have an audience with our officials.  Bureaucracies would grow at a smaller rate, if at all.  And the individuals would be less likely to abuse their position as someone who has been in the system for much longer.

As with the Presidency, new ideas and plans would be introduced  on a regular basis.  More citizens will have the opportunity to be involved in the system and possibly serve.  The entitlement mentality of the current members would be gone.  No longer will the prerequisite for chairing a committee be the length of service, but the merits of the individual.  I believe this would set up a productive and competitive environment where the people's work would get done faster and smarter than in our current system.

Of course the problem with initiating such a system is that the individuals who would be voting for the measure would have the most to lose by passing it.  And, that being the case, you can see why this idea is dropped almost as soon as it is brought up.  We, the citizenry, would have to demand a change like this from our leaders.  We must remind them that they are elected to do our work.  And not as a career, but as a passion.  Given the chance, I'd vote for term limits today to create real change in our governing system.

Liberal Make-Work Policies Don't Make Sense

I completely agree with blogger Matthew Yglesias, a Fellow at the Center for American Progress Action Fund and holder of a BA in Philosophy from Harvard University.  We should not make work for the sake of making jobs.  And when the government does create a job, it should be scrutinized to make sure that it is competitive and required.  I think the government should strive to run as efficiently as possible.  The money being spent comes from the taxpayer and, therefore, should benefit the taxpayer to its highest degree.

As Yglesias tries to convey to the American public, it is correct to question whether the money being spent will impact the public in an important way.  If the answer is no, then the money should be either not be spent or be spent somewhere else.  He gives the example of firefighter’s pensions.  He contends that the lack of a pension wouldn’t affect the public safety.  That being the case, should taxpayer money go toward funding that pension?  Yglesias makes the great point, “…the point of our local transit agency is to provide transportation services, not to improve the living standards of bus drivers…”  And this logic can be extended to all our public agencies.

If there is no value in a job, it seems like it would be the same as paying the individual to do nothing.  Or it may equate better to a low-wage job being subsidized to a higher paying job for no reason.  I doubt any private business would opt to run that way and would suffer in the marketplace for doing so.  I think the government should adopt policies and practices much closer to what businesses use for job creation and hiring.  It would do all of us good.

Fair?

I’m constantly amazed at what different people define “fair” as.  In his commentary to rally Democratic support, Robert Reich, former secretary of labor during the Clinton administration, offers the opinion that “if the super-rich paid their fair share of taxes, government wouldn't be broke”.  Apparently, Reich’s version of fair means that those with higher incomes should pay a disproportionately large portion of the total income tax.  Referring to the IRS’s own numbers for adjusted gross income share by percentage and total income tax share by percentage for different segments of the top wage earners in the United States (rows 146-191 of the linked Excel sheet); you will see an interesting trend.  The tax burden on the richest of Americans has increased over the period of time that this table covers.  The year 2007, the most recent data available, shows that the top 0.1% of wage earners in the U.S. earned 11.93% of the total income but paid 20.19% of the total income tax collected.  In overly simplified numbers, the top 0.1% made 1/10 of the money, but was ultimately responsible for 1/5 of the income tax.  Reich refers to the richest 5% of Americans in his argument.  Their numbers don’t seem to be fair either.  They earn 20.53% of the total income and pay 37.44% of the income taxes collected.  Surprisingly, the top 50% of wage earners earned 87.74% of the total income in the U.S., but paid 97.11% of the income taxes.  Extrapolated out, that must mean that the bottom 50% of wage earners in the country only paid 2.89% of the tax burden.  I’m definitely not for kicking the small guy when he is down, but to make the assertion that the rich are not paying their fair share simply is not supported by the numbers.

How often do we hear politicians speak about the need and desire to cut spending to curb national debt?  Almost everyone agrees that there is a problem.  Check out the US Debt Clock for real time analysis of the current situation.  What is unfortunate is that if you reference the list of largest budget items on that website, Joe Scarborough of the Politico points out that neither major political party will consider touching any of those items.  Politicians only focus on discretionary spending items and ignore areas that could have the largest impact.  Until politicians are willing to start considering cuts to Pentagon spending, Medicare, Social Security, and other “off limits” expenditures, we are doomed to  digging a hole too deep to get out of.