If War Is So Great, Why Won’t You Pay For It?

My suggested headline was above, but the editor went more confrontational.
UPDATE: A reader points out that the headline misstates my point. Republicans want to do things, and they need to support taxes to pay for the things they want to do. War may be necessary, but it isn't free. Voluntary donations, or spending cuts, won't do it; if they want war, they should take the political hit that would come from having to raise taxes to pay for the war. The headline makes is sound like even more of a flippant sauce-goose-gander argument than it was. It's more of the economics argument, that how important can the war be if it's not worth paying anything for? Too bad for readers; I finally write something with less snark and the headline makes up for it.

IF THE IRAQ WAR IS SO GREAT, LET ‘WINGERS PAY FOR IT
East Valley Tribune, Mar. 9, 2008

What’s the war in Iraq worth?

One of the more tired tropes of right-wing ideology is the voluntary “tax me more” account. “If you want the government to act,” they say, “send money. Once we get enough, we’ll raise teacher’s salaries or whatever else you liberals want.”

Of course, nobody contributes to these voluntary accounts, and conservatives crow, “See! Nobody wants to pay for your liberal claptrap.”

However, there are several flaws with voluntary payment accounts, which game theorists call the “collective action” problem. It may be worth $50 to me to increase teacher salaries statewide -- but that happens only if others also contribute. Otherwise, my $50 doesn’t buy anything; the donation’s value to me requires that everybody pay their share, because without collective action, there isn’t enough money to raise teacher salaries.

There’s also the free-rider problem -- why I should contribute so APS can pay lower property taxes? And, in Arizona whenever the economy turns south, there’s the budget shortfall problem. You’d be foolish indeed ever to contribute to a voluntary fund here, because the first thing the Legislature in a recession is grab all unprotected funds (like energy assistance or mental health research) to help close the budget gap. Of course, when times get better, the Legislature never seems to replenish those accounts, and merrily resumes cutting taxes on the richest.

But ignore those problems, and grant the ‘wingers their argument; nobody really wants these things because we’re giving them the chance to pay, and they aren’t. So let’s apply that thinking to the Iraq war.

None of the war’s supporters are willing to pay for it. It’s been 5 years of “emergency” spending, with no tax increase even remotely considered. As the leading House Republican said in 2003, “Nothing is more important in the face of a war than cutting taxes.” This would have been a shock to the Founders, who did impose taxes to raise an army to fight for independence. But apparently, paying for war is so old-fashioned. These days, you still may need money to pay soldiers, buy equipment, bullets, and bombs, and there are former Sunni insurgents to keep paying off -- but apparently it’s money war supporters have no desire to pay.

Look at presumptive GOP nominee John McCain’s policy positions. We have to fight the war, and have US troops in Iraq for 100 years if that’s what it takes, and we have to make the Bush tax cuts permanent, and cut all sorts of other taxes, too. We’re supposed to pay for all this by cutting spending, none of which is supposed to affect those getting Social Security, Medicare, or federal projects here in Arizona, like securing the border. The cost of the war is supposed to disappear somehow, and if anything is done to pay for it, it’s by having other people get less. But as far as what John McCain, or George W. Bush, want to pay personally, right now, for their war -- can you spell zilch?

If the war is such a great idea, shouldn’t its proponents be willing to pay something to pursue it? This isn’t like the collective action problem; those supporting the war are in a position to make sure everybody pays their share, and that the money contributed (in taxes) goes right where it’s promised (to Baghdad). Also, these people are supposed to be experts, and pride themselves on their ability to move public opinion. But raising taxes would burden the economy and their contributors, not necessarily in that order. It’s an odd position; the war is the most important thing, “defeat would unleash incomprehensible consequences,” but in dollar terms it’s all worth, well, nothing, actually.

I know ‘wingers find it tiresome when liberals prattle on about doing things “for the children.” But even they would have to admit that it’s better than the conservatives’ approach of borrowing all the money for their war. Instead of doing things “for the children,” the proper ‘winger approach is “stick them with the bill.”

Man Bites Dog: CEO Supports Democrat!

That was my suggested headline but the editor thought it was one joke too many, apparently. In case you want to (and you should) read the Mickadeit column, it's here. My column (newspaper version here) was linked to a Tibor Machan column telling you to vote for the (unnamed) libertarian in November if there is one on your ballot. We’ve thus come to the crux of the matter; libertarianism is a political philosophy without any people involved, politics without the polis. What could possibly go wrong?

NEWS FLASH! CEO SIDES WITH OBAMA
East Valley Tribune, Mar. 2, 2008

Independent “content” contractors like yours truly don’t get much access to our Orange County Editorial Overlords. Once a year or so, Prof. Tibor Machan, the home team’s “libertarian advisor,” descends from his ivory tower at Chapman University, the Harvard of the 92866 ZIP Code, and propounds the libertarian “less should be more” philosophy to us locals.

The Tribune’s Perspective section also participates in the Freedom Communications annual salute to R.C. Hoiles, the founder of the family-dominated corporation that owned this newsprint before selling it to you. It’s in November; you’ll want to buy those Ayn Rand books you’re considering for holiday gifts before demand soars in response.

But stuck here in the Arizona boonies, we lesser minions in the Freedom food chain missed the big corporate event last week, as described by Orange County Register columnist Frank Mickadeit. Freedom Communications sponsored the “Freedom Presidential Debate” between Prof. Machan and Freedom CEO Scott Flanders at Corporate HQ (in an Irvine office park; think Chandler, but with less convenient parking.)

Mickadeit figured a debate between Machan and Flanders over which libertarian to support for president in 2008 (of course there’s more than one libertarian running, it goes with the territory) wouldn’t be very interesting, but hey, a free sandwich and soda counts as a perk to a print journalist. And the first part of the debate was pretty run-of-the-John-Stuart-Mill, an abstract discussion of the practical versus philosophical approaches to politics.

Machan urged the audience to vote for the Libertarian Party candidate. While that candidate has roughly the same chance of winning as does Ralph Nader (assuming that Ralph Nader isn’t the Libertarian candidate; when you’re a vanity candidate, any platform will suffice), Machan thought it would be good to get libertarian ideas a wider hearing, to prepare for serious reforms, “maybe even a revolution.” (Since when is going back two centuries considered a revolution?)

Flanders took the other side of the argument, that it would be better to vote for the major-party candidate who would accomplish more for personal freedom -- in other words advancing libertarianism without Libertarians. Our CEO then announced that in 2008, the top issue for him is “who will get us out of Iraq.”

This is not news; as part of last year’s Hoiles hoopla, all the Freedom papers had editorials applying Our Founder’s philosophy to current issues, and guess what? The war in Iraq was a mistake, and we should bring the troops home: “Terrorists may ‘hate us for our freedom,’ but they are able to recruit people to attack us because we are in ‘their’ countries, trying to run them.”

So if your top issue is getting out of Iraq, for whom do you vote? Flanders risked the whole Hoiles legacy, not to mention his membership in the CEO Club, by saying he was going to vote for Barack Obama, even though he really does know that Obama is a Democrat.

Cool.

It’s not just the war; Flanders said Obama also would do the best job on three other top libertarian concerns, namely restoring the separation of church and state; reducing state exuberance in prosecuting victimless crimes; and cutting back the Patriot Act. Just ending the war, much less those additional issues, mattered to Flanders far more than whether taxes get (temporarily) raised or lowered.

Freedom doesn’t endorse candidates, so the fact that the CEO supports Obama tells you only that the CEO supports Obama. But it’s worth noting that neither the CEO nor the house philosopher thinks you should vote for the Republican.

This should not be surprising, because a political party that supports misguided and expensive ($3 trillion and counting!) wars, which wants to tear down barriers between religion and the state, and which thinks government knows best about everything but money, really isn’t a congenial home for libertarians.

If you like what Bush has done and what McCain promises to keep doing, fine -- but don’t call yourself a libertarian. Taxophobic, yes, but not a libertarian.

It's Only A Flesh Wound -- But It's My Flesh

It's hubris to think you can channel either Art Buchwald or Calvin Trillin, but I did get a compliment from a reader who appreciated how hard it is to do comedy. ("Ask me what's the secret of comedy!") Then a repeat 'winger correspondent wondered why I put in such obscure Republicans as Kyl and Shadegg but didn't mention McCain, although McCain's mentioned twice. Go figure.

The editor gave me top placement this week as Linda Turley-Hansen decided to write on how terrible it is that that Eve Ensler play is at ASU. Imagine that my column would outrank the anti-feminist version of "You kids get off my lawn!"

MAYBE YOU SHOULD HAVE GOTTEN A SECOND OPINION ...
East Valley Tribune, Feb. 24, 2008

I bumped into my old friend Wilfred J. Gullible, who hadn’t appeared in a newspaper column since Art Buchwald died. He looked just terrible. “What’s wrong?” I asked.

“It’s my absolutely necessary, life-saving medical treatment,” he replied. “It’s been an ordeal, and it isn’t over. And I’m not sure I can afford it. But I’m just grateful that I’ve gotten advice and treatment from the best doctors.”

“I’d want the best doctors, too,” I said. “What was wrong with you, anyway?”

Gullible explained that after a scare, he decided to see a specialist. “I asked around, and everybody who claimed to know about medicine -- you know, on cable shows where people yell at each other behind multiple layers of graphics -- said that the most experienced, the most serious doctors they knew were Dr. Bush and Dr. Cheney.”

“So I made an appointment, and they ran a couple tests, and said that while nobody had absolute certainty, they couldn’t rule out the possibility that my liver might develop dangerous lesions that, left unchecked, could destroy my body,” he said.

“Liver lesions?” I asked.

“Dr. Bush called them welts of mass destruction,” Gullible said. “He and Dr. Cheney said we simply couldn’t take the chance that the liver wouldn’t develop WMD capability -- so we had no choice but to go in and take it out.”

“So what happened when Dr. Bush removed your liver?”

“Well,” Gullible said, “It turns out that those liver bumps weren’t WMD after all, but just bumps. Then, my doctors had thought that the organs around the liver would be overjoyed by removal of the threat of liver-based WMD, but it turns out that the liver does all sorts of important stuff for your body. I now have to take expensive drugs and treatments for the rest of my life. Another doctor in their practice, Dr. McCain, said that it wouldn’t be a problem if I were on liver drugs for a hundred years. At least not a problem for him.”

I asked, “But how do you feel about living without a liver -- especially once you found out there were no WMD?”

Gullible replied, “Once we invaded my liver, we had no choice but to remove it all and substitute all these expensive drugs. The consequences of withdrawal would be too great. I’m just grateful that I used the most experienced and most serious surgeons for my treatment -- if I can afford it.”

“What do you mean, if you can afford it?”

“All of the surgery, and the rehab, and these liver drugs are pretty expensive, and my insurance gave out long ago. And it’s a double whammy for me, because my investment advisors, the firm of Kyl and Shadegg, took all my investments and made me a budget that didn’t include any of my medical costs.”

“These guys are serious, though. Apparently using their accounting standards, money spent chasing WMD simply doesn’t count. They’re on me every day about so-called “wasteful spending,” like getting a large coffee instead of a medium -- that’s 80 cents! But I’m spending hundreds of thousands on the costs of my liver surgery and drugs, but that’s just not registering with my advisors. But I still have to pay the bills, so my net worth is drying up,” Gullible explained.

“So what’s next, Gullible?” I asked. “Do you have any hope for recovery?”

“Bush, Cheney, and McCain now have me seeing a new doctor, who thinks he knows what I need now,” said Gullible. “It’s another really serious guy, Dr. Lieberman. He wants to take out my kidneys, because he thinks they represent the greatest threat to my health since Hitler.”

“Isn’t that what they said about your liver?” I asked

“Sure, but maybe this time, they’re right,” said Gullible. “And it would be important to keep all the options -- including radical surgery -- on the table.”

I replied, “But I thought doctors all took the Hippocratic Oath. You know, ‘first do no harm.’ Shouldn’t you try something else before more surgery?”

“Oh,” said Gullible. “That’s so pre-9/11. These days, it’s bomb first, think later.”

Life on the Margins, 'Winger Style

We’re doing the economic nerd thing this week. My original headline was above but the editor improved it.

REALITY IN THE MARGINS OF THE ECONOMY
East Valley Tribune, Feb. 17, 2008

This week’s column is indebted to the blog of Harvard University Prof. Jeffrey Frankel, which I stumbled upon while researching recessions. Frankel serves on the Business Cycle Dating Committee of the National Bureau of Economic Research. Rather than fixing up lonely graduate students, the committee reviews economic data and officially designates when recessions begin and end. It’s all retrospective; the committee announced the end of the last recession, in November 2001, in July 2003. NBER will tell us if we’re in a recession; unfortunately, they won’t tell us for 2 years.

Recent blog posts by Prof. Frankel also had some interesting insights into a bit of conservative dogma, the effect of marginal tax rates on work incentives.

You can take a basic principle -- people need to drink water -- but can push it to deadly extremes of water intoxication or hyponatremia (the physiological version of the fraudulent claim, “cutting taxes boosts revenue!”). So, too, with marginal tax rates. Yes, if additional earnings faced 100 percent tax, people would lack incentive to work more.

But we don’t have 100 percent rates, or anything close. Current rates, in the mid-thirties, don’t generate those outsized incentives. So while marginal tax rates affect behavior, the effects at current rates are rather small. Do you personally know anybody who stopped working because of a tax hike -- or who started working harder because of a tax cut?

Conservatives profoundly believe that marginal tax rates have a huge effect on work incentives, but they have a rather narrow attitude toward those affected by those incentives. It’s well-known that effective marginal tax rates on people at the bottom, trying to escape poverty, are often much greater than the rates on the really rich. Unfortunately, the tax cuts enacted by the Republicans over the past seven years went overwhelmingly to those at the top, and ignored those trying to lift themselves by their proverbial bootstraps.

It’s called the “poverty trap,” and Frankel and his colleague Jeffrey Liebman recount the story of a woman doing her part to achieve the American dream, but it was backfiring. She had a $25,000 a year job, then got a $35,000 a year job but had less money.

The new, higher-paying job cost her hundreds of dollars each month. She no longer qualified for Medicaid, and instead had $230 per month deducted from her pay for health insurance. Her subsidized rent increased by 30 percent because of her increased income. She also lost her access to child care vouchers, which helped subsidize her child’s after-school care by $280 per month. Her increased income also reduced her Earned Income Tax Credit payment by an additional $1,600 per year. The new job required a longer commute, with about $300 per month in gas and parking that she didn’t have to pay before. And, of course, her payroll taxes at the new job were higher. Add it all up, and her marginal tax rate was closer to 130 percent.

Maybe the heartless libertarians among my readers think the poverty trap is just big, bad government at work, and that there just wouldn’t be any disincentive for work if the single mom hadn’t had access to subsidized health care, rent, and child care. But then the single mom and kid couldn’t have survived at $25,000 a year. Maybe you consider their lives irrelevant, even disposable, simply not worth your time or taxes.

But wouldn’t your anger be better directed at those who did benefit so much from the tax cuts of the past 8 years, and their political servants who sent that largess to them? Wouldn’t it have been better to do something about the poverty trap than to shower yet more tax breaks on the wealthiest?

Was it really so utterly miserable to be a millionaire in 2000 that we just had to cut their taxes -- without doing anything to help the single mom with the new, better-paying job, who now has less money and can’t make ends meet?

Some Miscellaneous Stuff That Didn't Fit Elsewhere

1. I’m the D talking head on public TV's Horizon show (channel 8) both tonight at 7 pm and next Monday 2/18. Rep. John Loredo got sick and I was today's substitute Democrat. (Update: Here's the link to the video. I think.)

2. Roll Call is reporting that Rep. John Shadegg will announce his retirement tonight. This is for everyone who asked me if it made sense to give money to Bob Lord. Guess it did.

3. Sunday’s Arizona Republic featured a “news” article by “reporter” Matthew Benson, entitled “Obama’s loss in Ariz. Stings Napolitano / Governor campaigned for Ill. senator.” Sources quoted were the Washington Post political blog (the media quoting itself!), two GOP political consultants (two separate quotes from the one who ran the campaign of Napolitano’s unnamed 2006 GOP opponent), Napolitano’s press secretary (1 sentence), and the executive director of Arizona LIST, which is described as a group which backs “women in politics who advocate for abortion rights.” Arizona LIST is actually modeled after EMILY’s List, and on its website says it’s purpose is electing pro-choice Democratic women, but Benson omitted that fact so that the only people in the column given a party affiliation were the Governor and the GOP consultants.

Not only was there no polling data (how about state polls of Obama vs. Clinton both before and after the endorsement?), the need to ask a single Democrat qua Democrat about any fallout for the Governor apparently didn’t make the Republic’s radar. I’m waiting for a Republic article on John McCain that similarly only quotes Democrats. I expect to be waiting quite a while.

If There's A Forest of Bad Arizona Economic News, Will Any Dead-Tree Papers Print It?

I think of myself as an active consumer of local news, particularly the business section, and I’ve read lots about the ASU predictions of tougher, slower times but nothing about the U of A call that the state is already in a recession. I realize we’re all boosters here in Arizona, but occasionally it helps to let some of the bad news out early if it’s going to come out anyway.

Regarding the economy, did you know that the Rs don’t want to call it "employer sanctions"; the new politically-correct term is “worksite enforcement.” And what better way for our GOP-controlled legislature to deal with a recession than by (1) making it more cumbersome for businesses to hire new workers and (2) spending money locking up illegal aliens, increasing government expenditures and keeping them from earning money and consuming? Makes perfect sense.

My rushing-out-the-door suggested headline was “Recession? It’s Already Here,” but the editor gave me more space and more words. But weren’t most of the dinosaurs actually fast?

RELIANCE ON GROWTH, HOUSING HAS STATE ECONOMY SLOWING TO DINOSAUR’S PACE
East Valley Tribune, Feb. 10, 2008

It didn’t make quite the splash of the 1988 Barron’s article “Phoenix Descending -- Is Boomtown U.S.A. Going Bust?” but last week The Washington Post had a page 1 article with similarly bad news: “Housing Crisis Casts a Cloud Over Sun Belt / In Once-Booming Areas, Help Could Be Too Little, Too Late.” And the news is worse than 20 years ago.

The article focused on how the various stimulus packages being debated in Washington won’t do much to help housing rebound. But it’s not clear that any federal stimulus package (especially consumer-oriented tax rebates and business tax incentives) could re-inflate a burst housing bubble.

The really sobering lesson in the article has little to do with tax rebates, interest rate cuts, and overextended homeowners facing bigger loan payments on houses dropping in value. That’s the bad news. The worse news is what all of these factors mean for the overall Arizona economy.

In Phoenix, construction -- primarily residential housing -- represents almost 10 percent of total employment, 1.5 times the national average. The area’s total output, which grew by 7 percent last year, is expected to drop in 2008. (Even during the worst of the S&L era, we still had positive growth.) Some 13,000 homes in Maricopa County are in foreclosure. Our concentration in a rising real estate economy helped Phoenix boom while things were good, but now will make not-so-good times even worse.

While Lee McPheters at Arizona State University wasn’t willing to go as far, University of Arizona’s Marshall Vest already decided in December that regardless of whether the national economy goes into recession, Arizona, California, Florida, Michigan, and Nevada already were. For the Sun Belt states on that list, blame the collapse of the housing market; in Michigan, it’s the decline of the auto industry.

Another illustrative statistic comes from Forbes magazine. Using data from RealtyTrak, the magazine said Maricopa County ranks third in the country for the number of foreclosures with “negative equity,” where the amount owed exceeds the value of the house. The national leader is Wayne County (Detroit), Michigan, where the auto industry’s long-standing decline is reflected in declining home values. Nearly 40 percent of the houses in foreclosure have negative equity.

In Maricopa County, the percentage is much lower, 15.9 percent. But that number may be deceptive. Having such a low number of foreclosures with negative equity could mean that many homeowners with adjustable-rate mortgages couldn’t manage higher payments, and are walking away from their homes, unable to sell in a declining market, even though they’re leaving equity behind.

But it’s also possible that the property’s current appraised value (which RealtyTrak uses to calculate equity) is higher than the actual market value, and that as values continue to drop, the negative-equity percentage will increase. Appraisers in Detroit have had years of experience dealing with declining values, so their numbers may be more accurate than participants in the Phoenix real estate market, to whom declining prices are like snow, something we only read about.

Leave apart the irony of Forbes magazine -- Capitalist Tool! -- now offering readers handy tips on arranging a short sale. You used to hear a lot around here how we have a post-industrial, diversified, services-based economy. But it turns out that what the auto industry is to Detroit, residential home construction is to Phoenix. Maybe people, after a brief pause, will resume moving to a place dependent on the automobile, with half-completed infrastructure, little social capital and investment, lots of nearly-vacant edge subdivisions, a noisily-angry attitude about immigrants, and a weak governmental financial structure -- but that’s not a slam-dunk bet.

We’ve laughed for years at those dinosaurs in Detroit, dependent on the auto industry. Maybe our similar dependence on growth and residential construction just makes us slightly more modern dinosaurs. Sure, Michigan may be Jurassic, but what if we in Arizona are the lower Cretaceous?