Monday, April 15, 2013

Can Tax Cuts Beat Global Warming? My Tax Day Interview

Most people hate paying taxes, especially today, Tax Day.  So please check out and share my Tax Day interview below with NobleProfit's awesome CEO, Amy Seidman, for thoughts on how to save the planet by giving taxpayers a break on green energy investments.

Here is the YouTube Link:

Here is the CSRwire link:

Here is a version of the accompanying NobleProfit article:

NobleProfit Interview with Rod Richardson: Can Tax Cuts Beat Global Warming?

Most people hate paying taxes, especially today, Tax Day. In this video interview, Rod Richardson, the blogger behind Green Energy Tax Cuts, puts forward a planet-and-taxpayer-friendly idea: fight global warming by eliminating all taxes on green energy investments. Rod argues this will lead to a massive influx of new investment in clean energy, and produce less pain and more prosperity than any existing policy alternative, with an appeal across party lines... because it won't cost taxpayers a dime.

The Green Energy Tax Cuts proposal fuses a traditionally liberal passion about global warming and clean energy with a traditionally conservative love of tax cuts and supply side economic policy. In this interview, Rod explains some of the barriers to liberals and conservatives coming together on this issue, and shows a possible avenue toward political consensus. He also explains why it is painless and far more effective to grow the clean energy sector rapidly by eliminating all investment, capital gains and estate taxes on green energy.  Doing so would attract billions in new investment to successful business models, while other more punitive and costly approaches ultimately promote failure and attract opposition.

Wednesday, December 12, 2012

Why We Are (Probably) Leaping Off the Fiscal Cliff

It seems to me highly likely that both Republicans and Democrats will, by design and mutual agreement, allow the federal government to go over the fiscal cliff.

It won't be by accident, or because they could not agree on a deal.

It will happen (probably) because doing a deal will be easier AFTER we fly over the fiscal cliff.

The reason is simple.  Most Republican's have signed Grover Norquist's "Taxpayer Protection Pledge" to never raise income taxes.  Tax rates today are lower than they will be on January 1, 2013, if we go over the fiscal cliff.

Therefore, if a deal is made and signed into law today that involves setting tax rates at a rate anywhere between today's rates and the Jan. 1 rates, it is a tax hike, and violates the pledge.

However, if the exact same deal is made on January 2, 2013, then it is a tax cut, and does not violate the pledge.

No Republican wants the stigma of having violated the pledge.  Yet they realize that the Democrats and Obama simply will not agree to a deal without some tax increase, and the Republicans will take a large share of the blame if they do not find a compromise that raises some tax revenue.  They can dodge both bullets if they wait after Jan. 1 to sign any deal into law.

Obama, I believe, realizes this, and prefers to have a negotiating partner that can more easily agree to a tax increase above today's rates.  So he too may be more than willing to let the New Year pass without signing a fix into law.

Mind you the deal may happen before the New Year.  But I doubt anything will become law until January 2 or later.

But what should the deal be?  Stay tuned for the next 21st Centrist post, where we lay it all out...

Sunday, December 2, 2012

So-Called "Balance" and the Fiscal Cliff

Here at 21stCentrist, balance matters.

So I pay attention when I hear folks talk about balance.  It comes up a great deal with the fiscal cliff.

Some deficit hawks insist we need to balance the budget.  President Obama and the Democrats disagree, and instead insist on a "balanced approach" to deficit reduction, meaning, per their latest proposals, $1.6 trillion in tax hikes, plus $400 billion in yet-to-be-agreed spending cuts.  (Apparently, there is a new definition for "balanced:" utterly lopsided.)

It seems both sides use the word "balance" to give an appearance of prudence and fairness.  But they are not saying the same thing.  In fact, they are at opposite extremes.

Balance is not such a simple thing.  It requires a real grasp of complex forces pushing against each other. A sailor, for instance, has to intuitively balance wind, water, helm and sails – each against the others, each with unique force characteristics – in order to keep a true course and even keel. 

Taxes, spending, debt and investment flows are all like the various forces and physical systems a sailor faces at sea, each with different strengths, effects and characteristics.  The effect on the economy of $1 of tax does NOT equal the effect of $1 of spending.  Government debt has an effect on private investment, but not 1:1.  So balance in fiscal governance and economics consists in understanding the differences in these flows, how they act on each other, and applying that knowledge with finesse, trimming taxes and spending, as a sailor trims sails and heading, to keep the national finances and economy on a even keel.

Economists are only just beginning to understand the interplay of these forces.  New research is reversing text-book economics on some key points, and refining our understanding of the impact of debt, taxes, and spending.

Three key pieces of new research in particular have a lot to say about how these forces play out, and how we should best handle the debt/fiscal cliff problem. Here they are in brief, with links and a headline each:

1)  Set a Safe Debt Target:  Keep Debt Well Below 90% of GDP At All Costs.

Economists Reinhart and Rogoff, authors of This Time It Is Different: Eight Centuries of Financial Folly, have produced compelling evidence, based on centuries of economic data, that debt levels over 90% of GDP either trigger or are associated with shrinking GDP.  That means hardship for everyone. There is some debate about which causes which, or if it is a vicious cycle.  That hardly matters, says Rogoff.  The risks of something going wrong are just too great at that level, so it is prudent to stay well below it.

Total US Federal debt stood at about 97% of GDP in 2011, and Wikipedia reports as of Feb. 2012, total public debt for all levels so government stood at 115% of GDP... and still growing! (Yikes!!)  So we are definitely into and above the 90% danger zone with our debt levels, however you want to look at them.  And, as predicted, no surprise, we are now experiencing slowing growth.

Rogoff and Reinhart's research presents a compelling, evidence-based middle ground between those who argue for balanced budgets, and those who say debt does not matter, so spend freely.  But as the above chart shows, even "safe" levels of debt can expand rapidly, given the right mix of wars, recessions and financial crises... and that is nothing compared to what could happen if interest rates begin to rise above 15% as they did in the 1970's.  

In the short term, we need to get back under the 90% mark as soon as possible, say within three years. But that is achievable, and reasonable.  In order to fix our debt problem permanently, Congress needs to pick a target 10 years out for Federal debt as a percent of GDP, probably ≤ 50%, so that in the event of a national emergency, there is room to take on debt without going into the danger zone.  The US need to adopt a 10 year debt/deficit reduction plan to reach that goal, and thereafter stay in that zone where debt ≤ 50% of GDP (or a rolling average thereof) absent a national emergency.

(2) Do What Hurts Less: Cut Spending, Because Tax Hikes Hurt 3x More

So if a balanced budget is not necessarily the only path to stable prosperity, what about Obama's "balanced approach" to deficit reduction?  The argument sounds reasonable: since the spending cuts we need hurt the poor and middle class most, we must tax the rich more, to be fair, so they share some of the pain.

The problem with this argument is the assumption that taxes on the rich only effect the rich.  Is that true?  And if there is an effect on everybody else, is it really a toss-up between tax hikes and spending cuts as to which is more painful?

Those questions were answered decisively by a recent IMF study.  Tax hikes reduce GDP 3x more than spending cuts.   As reported by Garrett Jones of George Mason University:
"The economists looked at 173 "fiscal consolidations" in rich countries, times when governments decided to reduce the long-run deficit.  They then checked to see whether consolidations based mostly on tax hikes turned out better or worse than ones based on spending cuts (Inside baseball: They followed a version of the Romer and Romer event study methodology, but applied it to exogenous-looking fiscal tightening instead of exogenous-looking monetary tightening)  
"Here's my favorite graph...[]  It shows what happens to consumer spending and real output after the two different kinds of fiscal tightenings.  Time in years on the x-axis, percentage changes in spending on the y-axis:
"Both GDP and consumer spending tell the same story: Spending cuts are the less painful path to fiscal rectitude.  When countries tried to get right with the bond markets, this IMF study found that  nations that mostly raised taxes suffered about twice as much as nations that mostly cut spending.   
"We might want to meditate on Figure 9 out here in the reality-based community, since both the U.S. and Europe will be spending some time this fall wrestling with how to get our fiscal houses in order. A benevolent social planner would like to take the least-cost path to solvency, a path probably based on spending cuts and loose money.  
"Keynesian Coda: Notice that the graphs are saying that the tax multiplier isbigger than the spending multiplier, at least in these settings.  Quite the opposite of undergraduate Keynesianism.  This isn't the final word on the matter, but if you'd like to see another study of multipliers that doesn't fit neatly into the Keynesian box--and written by top New Keynesians--check out the abstract and conclusion of this paper by Blanchard and Perotti." 
This is just one of several recent empirical studies suggesting that taxes are actually the strong fiscal force, and spending the weak fiscal force, either for stimulus or debt reduction.  The new evidence finds tax cuts give the economy a bigger lift than the same amount of spending, and tax hikes depress the economy more than spending cuts, which is the opposite of textbook Keynesian theory.  (Greg Mankiw, Chariman of the Harvard Economics Department, gives a good overview of the new research here.)

3) Do What Works: Cut Spending... It Works, While Tax Hikes Historically Fail.

If tax hikes significantly hurt the economy, it is possible that GDP and tax revenues will actually fall despite – or because of – a tax hike.  In which case, an attempt to reduce debt via tax hikes would fail, while the nation suffers more and more.  

"Over the years, many economists have looked at what other countries facing our current debt problems have done. A review of the academic literature on this issue shows that successful debt reduction measures are mostly made of spending cuts rather than a mix of spending cuts and tax increases. For instance, in a new paper, “The Design of Fiscal Adjustments,” Harvard economists Alberto Alesina and Silvia Ardagna provide yet new more evidence that fiscal consolidation based mostly on the spending side are more likely to lead to a permanent and long-lasting reduction in debt-to-GDP. 
"As Kevin Hassett and Andrew Biggs of the American Enterprise Institute have shown, a staggering eight of every 10 attempts by countries to reduce their debt-to-GDP ratios are failures. This means that even in a time of crisis (or especially in a time of crisis), lawmakers prefer politics over solid, pro-growth policy.  The United States seems poised to do the same. 
"What is the impact of spending cuts or tax increases on the economy? First, agreement among economists on the impact of budget cuts on growth is far from being settled. However, a few lessons have emerged. Fiscal adjustments achieved through spending cuts rather than tax increases are less recessionary than those achieved through tax increases. Alesina and Ardagna's research also reveals that private investment tends to react more positively to spending-based adjustments. Thus, they argue that spending cuts are more sustainable and effective in reducing debt and raising economic growth; thus expansionary fiscal policy becomes possible again. 
"The bottom line is that Obama's "balanced approach" more closely resembles the historic failures -- the fiscal adjustments that don't successfully reduce a nation's debt-to-GDP ratio. What's more, history reveals that the balanced approach generally results in tax increases but rarely delivers on the spending cuts. That's unfortunate, considering that if the government could actually collect $1.6 trillion over 10 years from tax increases, this amount still wouldn't be enough to fill in the projected $6 trillion cumulative deficit over the period."
So Obama's approach is not only entirely unbalanced, it is exactly the wrong thing: hiking taxes a lot and cutting spending a little sets us up for failure and disaster.  We need to do the exact opposite, at least in broad outline, if we want to reduce suffering, raise the general prosperity and erase the debt successfully.

But that is just a broad outline.  None of this, by the way, is to say we can't raise some taxes and some revenue, but it is a question only of how to do it in a manner that most promotes prosperity and not contraction.  So too, how one cuts spending will make all the difference between cheating millions of vulnerable poor out of promised benefits, and reforming the structure of those benefits so they become sustainable, reliable and an incentive to responsibility and prosperity.  True balance in cutting the debt -- balance between maximizing prosperity and expanding our humanity -- is going to be in the details.

But more about that in a future post...

Monday, November 5, 2012

Obama vs Romney: Why We Need a Centrist Party

This presidential election offers America two possible paths: the road to serfdom or the road to plutocracy.

That at least is the fear that Obama and Romney spark in their opponents... and yes, the risk really is there.

For Obama, it is a textbook case: the path he is on -- bigger government programs, bigger government debt -- are possibly the early stages of the sort of statism that was described by von Hayek in The Road to Serfdom.  His policies certainly seem to lead to widespread unemployment, government dependency and European style economic anemia.

For Romney, the government-by-and-for-the-rich suspicion is warranted by the candidate's famous inconsistency, by his lack of the common touch and by the huge amounts of money he has raised from extremely wealthy individuals... which leads to a suspicion that his real core principle is to say whatever gets him elected, and that he has a class interest in protecting and expanding the power and privilege of the extremely rich.

Not a great choice for the apprehensive centrist.

Personally I keep hoping for a better choice, for a centrist candidate and party that manages to blend concerns for liberty, humanity, the environment and fiscal responsibility better than either candidate or party are doing now.  I believe there are a huge number of Americans who would support a party that was fiscally conservative but socially liberal, that addressed problems like the environment and health care with better more efficient solutions that work well, take care of everyone's needs, but keep government small and local, and do not bust the bank.

That third party may not presently exist.  But it should.

I don't want to vote for Obama or Romney.  I want a better choice.

Friday, November 2, 2012

Centrists Worth Supporting!

John Avalon has a great article about centrist candidates worth supporting.

But let's put our finger on the crux of the problem, the real reason why centrists are better for the country than conservatives or liberals: between them, right and left, Republicans and Democrats, have ripped the Declaration of Independence in half.  The right has grabbed the right to life, liberty and the pursuit of happiness as its rallying cry, the left has grabbed the appeal to justice, fairness and equality.  The two party system creates a standoff: it's liberty vs. humanity.  

But America needs ALL these founding values if it is to thrive and survive as the founders intended.  Only Centrists care about these values equally. They put humpty-dumpty back together again.

All these guys really should get together and form the American Centrist Party, and expose Republicans and Democrats for the unbalanced extremists they are.

Also, while reading up on centrism, David Brooks has a great article about what it takes to lead and make laws that win support across party lines .

CNN iReporters describe why they call themselves "independent."

How About a NYC CleanUp Marathon?

Instead of just canceling the NYC Marathon as he just did this afternoon amidst a growing chorus of criticism, Mayor Bloomberg should seize the opportunity to declare a "New York City CleanUp Marathon."

All the Marathoners have made plans to come here anyway.  And now they suddenly have a free Sunday on their hands.  So why not just host a huge Clean Up Party on Sunday instead?

Heck, we have 35,000 superfit runner jocks hanging around doing nothing, plus 12,000 well-organized volunteers, and another 2 million spectators.  Add on to two-thousand overtime police offices assigned to the Marathon. Why not repurpose that whole efforts to aiding the folks in Staten Island, Queens, Brooklyn and other stricken communities?

What our hurricane victims really need is a thousands or millions of fit, well-organized, disciplined folks, with a combined life experience of some 50 million years, coming to their destroyed homes and saying: "How can we help?  What can we do?  Clear that debris?  No problem.  Let's go, guys, heave-ho!"

That's how it is done.  I know.  Because I was a 9/11 guerilla volunteer, and that is how we did it.  Helping is not rocket science.  You just need to find out what is needed, and get the job done.

9/11 and Katrina proved that guerrilla volunteers fix problems fast, and and get in where help is needed most, while rule-bound organizations like the Red Cross and FEMA are generally slow to fix immediate problems, and too rule-bound to be flexible.  That is why guerilla volunteers were among the  most important first responders on 9/11, and why their help is needed now.

Ever since 10,000 Athenian private citizens defeated and army of well over 100,000 invaders, the name Marathon has been synonymous with heroes, and volunteer heroes, at that.  We need those heroes now.  And thank God, we have them here, right now, when we need them.

All the Mayor needs to do is give them a clear invitation to help, and make sure the police help, and do not hinder, the efforts of hordes of private volunteers.

Thursday, May 10, 2012

Bullseye! Obama & the Equal Freedom to Marry

Yesterday, for the first time, President Obama announced that he now fully supports same-sex marriage, moving beyond his previous partial support limited to same-sex civil unions.  

Some analysts see this as a move to the left, playing to his Democratic base.

In fact, this is a move to the American center.  Just consider the core values at issue here: liberty, claimed by the right as their most cherished principle, and equality and social justice so dear to the left. At the end of the day, we are talking about the freedom of two consenting adults to enjoy the same equal rights as everyone else to marry and use the word "marriage" legally, regardless of their minority group.  So liberty and equality are both at issue.  

Religious taboos and prejudices aside, in terms of political values, this falls smack in the middle.

In this respect, same-sex marriage is much like the more severe issues of slavery and civil rights, in that, what was at stake at the heart of those issue too, were the core American values of both liberty and equality.  

Now, obviously slavery and the wide-spread suppression of civil rights for a large minority appear far more violent and heinous abuses, harming far more people in a more bloody and pervasively damaging manner, than the denial of just one set of rights – marriage equality – to a small minority.  But the principles and dynamics are similar.

Like same-sex marriage, slavery and civil rights were both highly contentious issues at the time they came to a head (1860's and 1960's respectively).  In each case, Christians were vocal leaders on both sides, with the distinction that reforms were opposed by traditionalists who looked to the Bible and past social traditions of inequality to support slavery and bigotry, while reformers similarly looked to the Bible, but also, most importantly, to the message of freedom and equality in the Declaration of Independence to support their cause.  

Despite the violent controversy, within just a few years after each crisis, the center of American opinion had entirely shifted to a new consensus on these issues.  The center shifted so quickly for one simple reason: the new consensus in each case (anti-slavery and pro civil rights) was indeed entirely in line with the basic values of the Declaration of Independence: freedom, equality, humanity, justice.

Same-sex marriage is also entirely in line with these basic values from the Declaration of Independence, the ur-text proclaiming core American principles.  Christians are on both sides of this issue as well.  Again, it is also opposed by the same kind of traditionalists, who look mainly only to the Bible and social traditions to support the notion that some folks are inferior, and do not deserve equal rights.  Here too, the reformers look both to the Bible and the Declaration of Independence in support of the equal freedom to marry.

The outcome, predictably, will be the same as in the struggles over slavery and civil rights, because the values behind the equal freedom to marry are core, central, American values.  Year by year, support for marriage equality is steadily growing for the simple reason that it is already well centered in the core American values of liberty and equality.  Therefor, it will see growing support, year by year, from courageous, clear minded people, not just on the left, but crucially, on the right, too.

By taking a stand for FULL freedom of marriage equality for same-sex couples, not just the neo-equality of civil unions, Obama has just stepped away completely from the forces that oppose freedom and equality for minorities, and placed himself squarely in line with the founding fathers, Lincoln and Martin Luther King in advocating the extension of freedom and equality even to small, historically despised minorities.  That is right at the center of American values.

Further, he has done so in nuanced way that fully respects the principles of Federalism and religious liberty.  In an email yesterday, he fleshed out his new position a bit more:
"I respect the beliefs of others, and the right of religious institutions to act in accordance with their own doctrines. But I believe that in the eyes of the law, all Americans should be treated equally. And where states enact same-sex marriage, no federal act should invalidate them."
So Obama is not proposing a federal law creating federal gay marriage, which would be an overreach, but merely respecting the rights of states to decide the issue without being overridden by the federal government.  That is, in fact, a more moderate, federalist position – clearly more in line with the wishes of the founding fathers – than the so-called "Defense of Marriage Act" which rides roughshod over states rights.  

Reader's of this blog will know am a certainly no member of team Obama, and quite willing to take him to task for fake centrism and bad policy.   But let's give the man his due: he just hit the bullseye on this one, dead center.  

[Pause here for a moment of appreciation.]  

Too bad however, he does not do this, for real, more often.  Too often Obama's policies do not balance American core values, but rather push equality, humanity and social justice at the expense of liberty.  Republicans often do the exact opposite.  Both would do well to craft new policy options (such as Green Energy Tax Cuts or Pro Bono Health Care Reform) that balance and promote liberty, humanity and equality all at once, without sacrificing one for the other.  

During its short history, the United States has faced four major political showdowns over the question of individual rights where liberty and equality were both at stake: the American Revolution, the Civil War, the Suffragette and the Civil Rights movements.  In each of these cases, forces that favored traditions opposed the logical extension of core American values were soundly trounced, shown the door and ultimately rejected as essentially un-American.  This next showdown, over the equal freedom to marry, tho' on a smaller, less violent scale, is not going to be any different.