How Tax Rates Affect Economies

I finally picked up Jude Wanniski's "The Way the World Works" again. He makes an interesting case for low tax rates when describing the effects of tax rates on various economies following the first world war.

Britain, France and German maintained the high rates (70% on the wealthiest taxpayers) and the US and Italy slashed theirs back to pre-war levels. And which countries boomed throughout the twenties? The US and Italy.

His case is more detailed than that. For example, he cites speeches given by various US politicians who argued for cutting the rates because of the decline in total taxes collected on high incomes while the high rates were in effect. And how Congress continued cutting the rates as the economy revived. Ironically, the national debt DECLINED from $24.3 billion in 1920 to $16.9 billion in 1930.

Jude Wannaski is a conservative (he worked in the Reagan White House), but no apologist for the Bush administration (he actually wrote articles for Al Jazeera denouncing the war).

I also don't think cutting today's rates necessarily has the same effect. Rates are nowhere near as high as they were. But paying taxes does impede economic activity, especially when you can avoid getting taxed for gains not yet realized in a sale of assets. It pays to wait in many cases.

I wonder if a complete switch to consumption taxes (complete with a tax on income and profits leaving the US) would remove this friction from the creation of wealth. It ought to be a low tax (15% maybe?).

I also think there is a fair number of people who are just annoyed that the rich don't pay a lot more. Is it jealousy? Who knows. I do know that when a person has wealth, that wealth has to be earning a return somewhere and that means economic activity is happening and people are working. If you punish such investment with high taxes, such activity declines.

Jude Wanniski has Passed Away

Economist Jude Wanniski passed away yesterday. A very smart man. He was a visionary and had a great knack for explaining things. And he's spent quite a bit of energy lambasting Bush policies, particularily the war in Iraq.

Until I read his book "The Way the World Works" (still haven't finished it) , I'd always wondered what the deal with the gold standard was. He makes the case that it is the most stable of all commodities, as most of all the gold mined is still in existence and the supply cannot change by a great deal in a given period, making its value one of the more constant ones on the planet. In short, ideal as an agreed-upon exchange mechanism.

He will be missed.

A new model for the UN

I am thinking of a new model for a replacement for the UN, one that cuts out governments and lets the people directly participate. The people of each country would be represented if the government allowed its people to join and vote for representatives in this new body. This would mean ditching the unfair Security Council and encouraging democracy.

Proportional representation would keep the politicians from interfering with what the people really want, which is peace.

I can even see the possibility of setting up such an organization independently of the UN. If the people of the world were to form an organization outside of the existing framework, it could gain its own legitimacy by passing judgment on the issues on hand.

After all, what could be more legitmate than the judgment of all the free individuals in the world that care to express their opinions about an issue.

Facing Global Warming

Scientific American had an article on some research that indicates that the earth should already have entered an ice age and that this hasn't happened due to human activity, mostly agriculture that has been going on for thousands of years.

Natural cycles of the earth movement around the sun and other mechanisms are responsible for the cooling and warming cycles and I expect when the natural warming begins, along with our industrial activities, we are in for some problems.

We need to understand how these mechanisms work so that we can maintain the climate status quo. We can neither afford to ignore this problem or simply cease all industrial and agricultural activity. We must instead master it. There is no other alternative but to try.

Secession and the Right to Self Determination

One of the basic reasons for fighting wars is the desire to end a political union. The US, for example, fought a civil war that cost over 600,000 lives.

So it seems that real peace cannot be established in the world without addressing this issue. People have the right of free association and can freely form groups and associations. By banding together. those individuals do not lose this right. So these groups also have the right to enter into associations with other groups and to end those associations.

The right of peoples and territories to peacefully leave political entities is the ultimate way to make government accountable. To paraphrase a heavily advertised mortgage website, when governments compete, you win!

This is actually in practice in Switzerland. There, people in any area can vote to leave their canton (like a county or state, I guess) and join another or form their own. Government, since it is the user of force, has to be a geographic monopoly, but does not have to be a temporal one. Just like any relationship, there has to be an out. A contract without an exit clause is a recipe for disaster.

That doesn't mean there shouldn't be a protocol or process, or that territories can leave a union without taking their share of any debt.

A Smart Guy

George Kennan came up with the policy of containment that was the primary element in the United States' approach to dealing with the Soviet Union. I was impressed with him because he really could see clearly how our own leaders are often compromised by special interests.

This page has some audio files about his contributions.

It's a shame people like this guy don't have more influence.

Gerrymandering

American RadioWorks has an interesting feature on gerrymandering and its stifling effect on American politics. This practice is, of course, non-existent in a system of proportional representation that lets voters be accurately represented in a legislature.

Who is Purchasing Your Legislator?

The top 100 organizations buying political influence at the national level in the US.

But don't worry, the politicians insist they aren't getting any special consideration for their money.

Some More Crazy Taxi2000 Ideas

How about a low power electric car that get on a PRT line AND get charged while on it? It would have to be compatible, of course.

What is needed is the creation of standards for both hardware and software. Such standards may make it more difficult for one company to own an entire market, but the size of the market will grow much faster if anybody can build a PRT line or build cars for them to an open standard.

Such standards should also encompass automated inspections of both cars and lines by each other (cars would inspect lines and lines could inspect cars) for compliance to the standards.

I think the latter notion actually has some merit. While letting electric cars in is not very feasible, having a standard would certainly help comfort those who would pay for such a system.

Once purchasers see inertia building with several companies building cars and/or lines to a standard, the investment starts to look predictable and that is certainly needed here.

An open standard would encourage companies to get into the business as well.

I think its significant that Taxi2000 is a private initiative. Public works with access to your taxes frequently overlooks the simpler, lower-cost, strangely more elegant solutions. There is no pressure to find or create such alternatives.

One of the biggest boondoggles around where I live (San Jose, California) is the light rail system. Its positive effect on the traffic situation is minimal. Apparently, it costs at least 12 times to move someone on light rail as it does on the freeway. The federal incentives apparently make it easier to make bad decisions like this.

The future of transportation

Salon has an article (get a day pass by viewing an ad) about this on-demand, automated taxi monorail system that seeks to address the major problems of mass transit. The big annoyances seem to be that you have to wait a lot, you have to ride with a bunch of strangers and how expensive it is to build mass-transit networks that are easy enough to access.

These guys envision elevated tracks going everywhere, but I think the real deal will happen underground. The more places this system goes to, the uglier it will become.

I also see this system being used to move packages securely directly into the home. I mean, really, why should you have to move 3000 pounds around just to get some milk moved to your house? You do want that to be underground, or this world starts looking really ugly. In any case, FedEx starts looking redundant, as do half of the trips you make on the weekends to Home Depot.

I think that an underground system will actually end up being pretty competitive with air travel and will replace it all together for short to medium trips. No waiting! No terrorists traveling with you. No reservation required. And once you get smaller sections in place, it becomes easier to piece together a coast-to-cost system.

And when robotic tunneling and strong, flexible nano-materials become feasible, we should start seeing a wholesale replacement of the surface streets with an underground network. These underground networks might even be evacuated, making it possible to go extremely fast with no air resistance. Then we can get rid of all of those parking lots.

Doing Electronic Voting Right

To go along with the verification mechanisms in the voting system I proposed October 18th, here's an organization pushing for an open source system. Open source is the way to go, clearly.

Wikipedia on Proportional Representation

Thankfully a Decisive Election

I was gratified to see a clear, if not big, majority in the popular vote and electoral college in Tuesday's presidential election.

Of course, the appetite for "reinventing democracy" would be greater if there were a lot of turmoil again, but its probably not a good thing to make such changes just because circumstances are driving things. Its better if a concensus is reached that the system can and should evolve into something better.

Here's a more permanent link for the cost of the presidential race:

http://www.opensecrets.org/pressreleases/2004/04spending.asp

Its official: the 2004 presidential race is the most expensive in history, costing well over a billion dollars.

And to think, a lot of other countries just let the legislature pick their chief executives, which probably costs a lot less.

I think that approach would work fine if the composition of the legislature actually reflected the political will of the people. But without proportional representation, this is not the case.

Also, in the American system, the balance of the three branches of government would probably change because the chief executive would be selected by the other branch instead of being elected by the electoral college.

Technology for Voting

Image via Wikipedia

About electronic voting. It seems to me that technology should only be applied (at first, anyway) to the aspects of traditional voting that have proved problematic.

One area is in the balloting process, in which the voters record their wishes on paper or cardboard ballots.

A machine could present the options to the voter, allows the voter to specify his other choices and then records those choices on the ballot. All of the various rules could be enforced in the software. A ballot would not be released to the voter until it qualified to be counted. A unique ballot code based upon the name and social security number of the voter and the date could be encoded onto the ballot as well.

Once a ballot is released to the voter, along with a receipt bearing the unique ballot code, he or she should be able to take the paper ballot over to a completely different machine, perhaps even manufactured by a different company, and confirm what was encoded on the ballot. This is an unnecessary step, really, but would build confidence in the system.

Then the ballot could be given to the poll workers as is ordinarily the case or it could be placed by the voter into a machine that would transmit it to the central office. The paper ballot would be retained in case there is a need to recount the ballots.

Sampling could be done with these retained ballots to confirm the accuracy of the electronic transmission of each ballot.

Another area where technology might be useful is in allowing voters to verify that their ballots where counted and were not modified.

At any time, the voter should be able to check over the Internet that the ballot was counted using the unique ballot code. Not how the voter voted, but that the voter's vote was counted.

At any time, the voter should be able to go to the central office and view an electronic representation of the ballot by presenting the unique ballot code and identification. The name of the user and their social security number can be used to validate that individual is authorized to see the ballot.

Other than the date, no data should be stored with the ballot at the central office. A system at the office could use the voter information and the date to regenerate the code. If it matches the code recorded for the ballot, the voter would be allowed to view the ballot.

These mechanisms for confirming that one's vote was counted and for being able to view one's vote should go a long way towards increasing confidence in the system, while still protecting voter privacy.

I also think it would be useful if there were one publicly funded open source project for software AND hardware for such a system. This would keep things transparent and avoid duplication of efforts. Open source is working in the private sector; with some adaptation, it can work in the public sector as well.

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• We investigate: electronic voting (computeractive.co.uk)

According to Fairvote.org, John McCain supports instant runoff voting. Or at least he did back in 2002.

I think I first liked the idea of IRV because it greatly increases the chances that someone like John McCain would get elected.

He is so much more rational than the other candidates, is very respected by people of both parties and frequently disagrees publicly with his party when he feels that the issue is important.

I think we'd all be a lot happier with the outcome of elections we could choose a candidate that was more in tune with the majority of the people. Systems like IRV and approval voting bring us closer to such outcomes than the existing system.

I have two questions for those that think changing to proportional representation would be a bad thing.

Would proportional representation be more democratic than the way the US system currently works?

Would proportional representation give people their fair share of influence on the issues?

Of course, the answer to both questions, I feel, is yes. I think where people disagree is with the notion that people SHOULD have an equal share of influence or that more democracy is better.

There are those that think that concentrating power is better than distributing it around. And one can point to scenarios where thats actually been the case.

But experience has also shown that those societies that have opened up their systems to participation by more and more of their citizens have had greater stability, faster technological advancement and greater influence in the world.

I think Great Britain is the chief example of that. Not to say that oppression hasn't occurred (hey, I'm of Irish descent), but you can't really argue that that society hasn't been an astounding success in many respects.

Drug companies funneling money to politicians on the sly,
to make sure that drug prices stay high.

http://www.alternet.org/drugreporter/20007/

Another reason to go with proportional representation. If you can select who represents your interests out of ALL of the possible candidates, you can select someone that is commited to your agenda.

And if your elected representative understands that you'll switch your support to someone else if he or she fails to stick to that agenda, it becomes very difficult to sell his vote to the highest bidder.

And that candidate doesn't need as much campaign money to try to convince EVERYBODY to vote for him. He or she just needs to make plain his or her views and then convince those that share that agenda that he or she can move that agenda forward.

That doesn't mean that the drug companies won't have their interests represented. Their employees and shareholders can all vote too.