Forever Running in the Wrong Direction

“Offshore tax havens and tax shelters let corporations and executives evade an estimated $20 to $40 billion each year-taxes that must be made up by other taxpayers or by government borrowing. And these offshore tax havens rob us of more than tax dollars, for they are where renegade corporations flee from all responsibility to shareholders, employees, rules of fair play, and their own country.” – John Kerry, 2003

If you’re scratching your head as to exactly who “John Kerry” is, it turns out he was the Democratic nominee for the presidency back in 2004. During the campaign, he made the above statement, lashing out at corporations who hide money in tax shelters to improve profit margins. Or, more to the point, he lashed out at corporations who (i) followed the law and (ii) maximized profits because they “flee from all responsibility to shareholders, employees, rules of fair play, and their own country.”

Kerry has hardly been heard from since losing to George W. Bush in that election. That is, until recently when he bought a $7 million yacht (did we mention that his wife is quite wealthy owing to money she inherited from her first husband – Republican senator John Heinz of Pennsylvania?). Anyhow, Kerry made waves by buying and docking his boat in Rhode Island rather than his home state of Massachusetts. Why would he do such a thing? Well, he saves $500,000 off the bat in sales taxes, and another $70,000 a year in excise taxes.

Personally, I think he did the right thing. If you can save that kind of cabbage by parking your boat one state over, then please do so. We have long known that progressive policies only survive in the absence of competition. If people can save this much money by moving their boats to Rhode Island, then Rhode Island will be a boaters haven (it is) and Massachusetts will lose a ton of tax revenue owing to onerous policies

The galling part of it is that John Kerry is perfectly willing to act rationally in his own best interest (which I think he should) and yet castigate the rest of America if they do the same. Talk of “responsibility” and “rules of fair play” – or another liberal canard “paying their fair share” – are easily applied to Kerry’s situation here.

A friend once asked my why I thought free-market capitalism was the best economic model. I noted that it had nothing to do with justice, mercy, or compassion. As a cold, calculating mathematician, I was able to say that it is the best model because it most accurately reflects human behavior – and uses that behavior as its driving force. People will act rationally in their best interest. Capitalism recognizes it and leverages it for economic efficiency.

Progressives are forever harping about how society, economy, and humanity are an extremely complex system (and they are). And yet, for all this complexity, humans are not always that difficult to understand … most of them anyway. When certain behaviors are incentivized you can bet that you will see an increase in those behaviors. Let’s consider a few examples.

During the housing bubble, Alan Greenspan and the fed incentivized reckless lending through easy money policies – and reckless lending is what happened (including some reckless, predatory lending).

The federal government has for some time incentivized being a single parent versus a married parent if you’re poor – they give you much more money if you’re single. Guess what that has produced – a dramatic rise in single motherhood and kids with no father in the house.

When you tax the most productive members of society and give the overage to the least productive, you are incentivizing non-productivity … and that’s exactly what you get. Now, progressives will retort “have you no compassion for people in need?” I do indeed. But compassion isn’t justice and harming the economy for the economic benefit of a few is hardly a good policy in the long run. (It reminds me of when George W. Bush claimed that he had to sacrifice his free-market principles to save the free market via TARP … thanks for playing George.)

People are at times like water. We will find the lowest point and achieve equilibrium. If you shift the rules so that we have to move to improve our standing, then move we shall. Punitive tax policies will draw avoidance. (Laffer was at least right about that.) Progressives are forever penalizing productivity and rewarding inefficiency. This has always failed at producing an efficient economy, and it will continue to do so.

But, I suppose economic efficiency may not be the only thing these guys care about. Progressives have an incredible knack for inducing envy and jealousy in the masses during their self-congratulatory rants against [insert people group that never had it as bad as the rest of us here]. Policies that keep the downtrodden as downtrodden will also keep a fairly stable voting bloc in the hands of progressives. Wisdom is justified of her children.

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5 Responses to Forever Running in the Wrong Direction

  1. Anon says:

    I don’t think many progressives would claim Alan Greenspan as their own. In fact, I think he’s a poster child for progressives; the predatory lending he oversaw has led to alot of government oversight of capital markets.

    Also, your single parent example: From a anti-abortion perspective, why wouldn’t you feel the government is incentivizing single parent families v. aborted pregnancies? If the government took away assistance to poor single mothers, do you think more wealthy 2 parent families, less pregnancies, or more abortions? I don’t understand why you aren’t aligned with progressives on this issue (and any other issue that reduces incentive for people to have abortions)?

    • nomasir says:

      “Anon” – thanks for the comment.

      First, let me make a few nomenclature remarks since I think we differ in degrees of definition. I am what Friedrich Hayek would have called a “classical liberal” – which is to say one who believes in liberty (not to be confused with a modern liberal, who believes in anything but). We have been called “conservatives” by some, but that tends to lop us in with Christian theocrats – who I would also call progressives, just not liberal progressives (note, I am a Christian – and a radical one at that – but I am no theocrat). We have been called “libertarians” – but that moniker too is unfitting as libertarians can sometimes fray at the edges towards anarchy. I believe that defense of fundamental human rights, which derive from life, liberty, and their attendant production (such as property, which derives from life and liberty) are the extent of good laws. To move beyond “for the greater good” is to oppress life, liberty, or property – and this is a bridge too far.

      As for Greenspan, he presents us with a spectrum difficulty. The political spectrum isn’t as simple as Republican/Democrat or even Conservative/Progressive – as I’m sure you’re well aware. (Even these dissections are not consistent – there are quite a few Republican progressives, such as John McCain.) The very existence of the federal reserve bank is a progressive policy. Greenspan, and Bernanke after him (quite possibly to a greater extent) love to lend money into existence, stuff it in the pockets of the banking elite, and then say they do it for the good of the rest of us and the overall economy. This is progressivism. Did it give rise to predatory lending? Yes! Why? People are hard to control. Progressives always institute policies to “make things better” finding that people act in their own self-interests instead of the “greater good”. So, progressives have to institute even greater controls (such as government oversight) – which may have been their intent in the first place. This too will prove a failure.

      As for the parenthood issue, I should point out that I try to avoid mathematical rigor in these posts (I’ve been told it doesn’t read well). Had I maintained rigor I would have said that governments incentivize single parenthood conditioned on parenthood itself. That is, given that there is a child, the government applies incentive to breaking up the marriage or possibility of marriage. The incentive is all but meaningless for the wealthy – but for the poor it is massive.

      As for single parenthood versus abortion, it would be quite difficult for the government to effectively incentivize the former. Kids are darn expensive (I have 3). The government doesn’t come even close to given people enough money to cover the costs. But why would they. The progressives have shown that they clearly intend to incentivize fewer people, particularly fewer poor people or people of certain ethnic backgrounds. (Margaret Sanger was quite clear about her desire to kill greater numbers of black children.)

      “If the government took away assistance to poor single mothers, do you think more wealthy 2 parent families, less pregnancies, or more abortions?” That would be a wild bit of conjecture, but I’m not opposed. There would be more 2 parent families (wealthy or not). Children who are raised in such families have much better upbringings (on average) and prove to be much more of contributors to “society” as it were. Would the families be more wealthy? Well, the country as a whole would be more wealthy if less money were doled out to non-productive ventures and allowed to remain with productive entities (through lower taxes). Would there be more abortions? Not sure.

      As for policies that reduce incentive to have abortions, let me note first that “reducing violation of rights” is hardly an impressive goal. Did we ask the Nazis to REDUCE the number of slaughtered Jews? Yes, we’d all like to reduce the number of pre-birth murders, but justice is justice and the laws ought to reflect such.

      As for policies in particular, I’m curious as to which progressive policies you feel have reduced the number of abortions? Progressives and liberal Christians are continuously discussion policies to reduce abortions. It’s hard to find any successes they can point to. I will point out though that the system is mean-reverting. People who oppose abortion are more likely to have their babies – more likely to raise them to value life – increasing the proportion of the population that chooses to not have abortions. This is undoubtedly the reason for the significant rise in those who claim to be “pro-life”.

      OK, I’ve prattled on long enough.

  2. beverlylynn says:

    As an aside, Kerry is claiming that he will voluntarily pay the 500,000 bucks to MA. http://www.boston.com/news/local/breaking_news/2010/07/sen_kerry_to_pa.html

  3. anon says:

    First off, thank you for the response.

    I do appreciate the thought you’ve put into your political beliefs. It seems like very few people actually take the time to think through their politics and derive rational conclusions to current events. My point on Greenspan was only that his policies reinforce many peoples beliefs that the government has an important role in regulating capital markets — which typically upsets many proponents of free markets. I think you trying to say that the very existence of the Fed violates your free market principles, and therefore voids any conclusions to be discerned about the free market from the Greenspan era. That’s fine — hopefully you can see how it’s confusing when a pro-market post emphasizes the inefficiencies of the Freidman-Greenspan policies.

    As for the later, I guess now I’m confused as to why you think it’s financially incentivized (note: I think I left the English language on that one) for families to separate. Ignoring rent, food, bills, etc… (which we really shouldn’t), the tax breaks for married individuals are significant. I don’t need to tell you this, but married couples get to choose whether to file as married or individuals…they get the best option. The federal government has been in the business of marriage for a long time. Family separation is economically irrational behavior. I’m confused how you’d think otherwise.

    I understand that wrt abortion, your focus is on justice as opposed to practical use of the procedure. I didn’t mean to be disrespectful to your viewpoint by trying to suggest abortion reduction as a positive step.

    As for your question about progressive policies that reduce abortion. First, I’m way out of my league trying to answer that question. Second, my first thought was the Obama health care policy (which you’ve written about opposing — again, makes sense. You want justice, not less abortions). A quick google search yields this analysis:

    http://www.washingtonpost.com/wp-dyn/content/article/2010/03/12/AR2010031202287.html

    (Note: I don’t know this guy, and I didn’t check his stats. He could be making it all up for all I know).

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