Monday, July 11, 2011

Questions Awaiting Answers

I will issue an apology for this post up front. I am going to be flirting with some logical fallacies in posing my questions (somewhat rhetorical). I do so only because I have yet to come up with a better way to start the conversation. So I say the questions are somewhat rhetorical because I do feel they do need an answer at some point, but I don't think they can be answered simply, nor could someone answer them in a short conversation. However, we should be thinking about these questions.

My first question has to do with taxing the rich because of income inequality. I thought about this when I saw this tweet and the accompanying NPR story where the federal reserve is stating income inequality hurts growth. There can be some economic truth to this. I won't detail it, but let's assume the truth in the fed reserve statement that income inequality can hurt growth. The immediate response to this is we should tax the rich more to redistribute that money back to the lower and middle class to make the income more equal. This is where I have a problem. Are we really a free country when we have government deciding how much stuff is too much stuff?

(I am separating this since this is somewhat a straw man argument, but meant to provoke thought) If someone has a billion dollars, should we maybe tax their new income at 98% since they don't really need it, where as maybe we could tax someone just coming out of bankruptcy 0% to help them get ahead? What about if you own a speed boat, a fishing boat, and a pontoon boat? Maybe we should tax you more because you don't really need 3 boats? Maybe you should pay a fee every year if you own another freezer other than the one on your fridge since you can afford extra food and electricity, you must have extra money. You see how absurd these scenarios are, but that is the point. It might not sound absurd to charge a billionaire more than you, but it is so dangerous to let government with the power of force decide that. What happens when they decide it is a million dollars? $500,000? $150,000? $90,000? What if they decide 300% of minimum wage starts requiring equalization, so at $45,000 they start taking 50, 60, 80% of your income? That is my point, no one can tell me what level is fair, why it is fair, and even if it really even sounds fair once you start putting it that way.

The other part about income equalization is our income inequality is entirely our fault. We have become so entitled to anything and everything we want that we have made the rich very rich. I have blogged on this on a couple of occasions; we have the power to tax the rich. We will have to give up some convenience, perhaps put off some purchases. We might even feel a little pinch in our pocketbook for a little while, but if we buy local, bank local, save money, grow gardens, buy union, buy USA made and avoid those large corporations as much as possible, we would quickly transform our economy and put more money back in the hands of the middle class. When we say the rich are too rich and expect the government to take away their wealth, we are asking the government to take away money from someone by force that we all gave to them voluntarily by buying their products. If you don't want someone to be rich, don't buy from someone who is rich.

My other question about taxes in general is how much is enough? We have an aging population, so all of us are going to have to realize that we may have to go with a little less to take care of them. It is simply a matter of fact. Since we produce less in the US, we have less. Our population is aging, and has more needs. They are going to have to spend their savings on their care. People of my generation, we are going to have to help them, save for ourselves, and likely work longer than our parents. We have to change our entitlement mentality and realize we are going to have to sacrifice more for our parents, or grandparents, and our children. But how much of that should be done by the government? And how much do they need?

This is a bit of a straw man question as well because it isn't easy for someone to answer. But if there is anything I can't stand is how angry the liberals get with me when I ask them this question. It is an honest question. You can't take all of a rich person's money. You can't take all of my money. We shouldn't even take most of a person's money. We should take only what is necessary, and that should be applied judiciously. Not because the rich can't pay, but because we voluntarily gave the money to the rich by purchasing their product, it is unfair for us to then go reclaim our money by force through the government. So how much should we tax the rich without putting the freedom of the American Dream of becoming rich in jeopardy?

And Now For Something Completely Different

I wanted to put this in because I am often told I am too hard on the liberals. However, I found one of my favorite conservative libertarians falling victim to a myriad of logical fallacies recently, and it is only right I call him out on it.

Jason Lewis does a national radio show out of the Twin Cities. He is not quite as harsh as alot of other conservative radio hosts, so I have listened to him for about 6 months now and have found him entertaining and also educational. He does have a good grasp on economics and tends not to fall into the social issue agenda much as he feels those are issues left to the states to decide as he is a big states' rights person. However, because of his long-time relationship with the Republican Party, he has become friends with Michele Bachmann. He actually was the one who introduced her at her event formally announcing her presidential run. I have serious concerns as this has clouded his judgement.

The big issue I take with Michele Bachmann is her intellectual dishonesty. I personally do not believe in a personal god, but because the case for god is an unknown I don't have a problem with people having a faith or believing in religion. I do however have a problem when people who claim to be intellectual cannot reconcile religion and science. Ms. Bachmann believes that intelligent design should be taught in science classes. Even the Catholics have been able to reconcile the biblical story and the theory of evolution, but many Christians still want to deny decades of science and believe their non-scientist pastor that the earth is only 6000 years old and that we just appeared instantly on earth.

Where Jason Lewis goes wrong is he tried to compare it to the teaching of climate change. He calls climate change a "faith-based" movement in which only one side is taught in schools and even though "the science" says otherwise we don't let that science in the class. But we can't let a little bit of "faith-based" theory into the biology classroom. This fails on a couple of levels. First, climate change is not a "faith-based" movement. It is a working theory in the scientific community. I will grant him that the role of humans can be exaggerated (i.e. a political agenda) in the classroom. Mr. Lewis admits he is not a scientist, so he doesn't understand that the issue is still being studied and debated, and thus it should be presented that way in the classroom. Evolution is different. Although very minor details such as biological classifications are being debated and new discoveries do sometimes shift the evolutionary tree slightly, the overall theory is sound and has held up for 150 years through thousands of examples. There is no controversy in the theme. The same with the age of the earth. There are some details and questions on the scales of a few million years, but that amounts to less than 1% of the 4 billion year age of the earth.

So, Mr. Lewis - although I have normally trusted your logic, you are failing miserably in your support of Michele Bachmann. She does have fairly sound economic policy and seems like a nice person, but she also has admitted an underlying social agenda and religious agenda that undermines her intellectual integrity. It is one thing to have faith to guide you, it is another to have faith to lead you. The entire premise of her campaign is illogical, and I hope before too long you will see that to and not let your friendship with her blind you to that fact.

Comments from the wordpress version

John wrote on the wordpress copy of my blog:
Great questions Eric, and as you said, they are hard to answer and need to be asked. I have a question and would love to hear your thoughts on it. I agree with your idea on taxing the rich by buying local as much as possible and avoiding large corporations, but how do you do that with an industry like pharmaceuticals? I don’t know of many small, local companies that are developing/producing medications that many people need. I realize that is only one example from one industry, but how do we deal with situations where the only option is a large national/multinational corporation?
I love this blog and the intelligence and thoughtfulness w/which you approach these issues. Keep up the good work!
Here is my response:
Much like with any other corporation, we have to weigh out the cost benefit. The corporation is already doing the same with us. For example, let’s say a drug company makes a drug that prevents heart attacks. It could probably sell that drug for $1000/pill, but it wouldn’t sell too many pills at that rate because only a few people could afford it. So that person/company invests in a manufacturing process to get the cost down to say $1/pill and sells them for $3/pill. Now millions of people can take this medication, and the company and thus the CEO in charge will make millions. Obviously it is worth it to the consumer to make that CEO rich because you are extending your life, and I would offer the CEO deserves to be rich because he/she brought a life-extending drug to millions of people. Now take another drug like a migraine medication. This might be a more difficult decision. You can live without it, perhaps go in a dark room, use an ice pack, etc. You need to decide if an improved quality of life is worth making rich the person that invested the time and money making that drug. If you need the drug, the company and people involved in developing and making it did something really good – they are keeping you alive! I would say they deserve a few bucks for that. If they help with your ED at 70, well it is more up to you to decide if it is worth it.
In some instances where the government does play a role in oversight of safety and patent protection, we could partner with industry instead of being at odds with industry. In the relative scheme of things, the patent protection of a medication is relatively short. I have often advocated that the government could look at changing patent law on pharmaceuticals that would offer them a choice. They could either choose to keep the short patent life and be subject to the market forces that come with it (as it is now) or they could negotiate a price with the government and insurance companies that would give them some cost assurance in exchange for a longer patent period. This would give the company a longer stream of income and a longer-term profit and it would save all of us on health care cost since the initial cost would be lower (instead of waiting for a generic 20 some years later). Obviously this is a simplistic view, but what we do know is status quo on health care isn’t working all that well and new ideas would be nice.

With other consumer products, we are making similar choices. Is it worth making Paul Allen, Bill Gates, Steve Wozniak, Steve Jobs, Larry Page, etc. rich for the convenience and richness their products bring to our lives? We don’t have to buy iPods, use Google, etc., but we do. We make them rich because we enrich our own lives with their products, and they deliver a value to us. Walmart brings us cheap TVs. We don’t really need a TV. We really don’t need a 46″ TV. but we like them. We don’t really need to watch millionaires play baseball or hockey. But we like to. So we pay the ticket prices, buy the jerseys, and torture ourselves with the horrible advertising. We make choices everyday that make people rich. Even I am amazed sometimes when I think about it. Sometimes it is worth it. Sometimes, I just want it.

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