To hell with fairness

Listen to just about any liberal speak about the budget and taxes these days, and it won't be long before you hear the phrase "The rich need to pay their fair share." This is one of those standard lines in politics that has become so universal and commonplace in the progressive world that it's barely noticed any more. It's a mental checkbox that everyone on the Left ticks without thinking about it. Of course the rich should pay their fair share: only a sociopath would disagree with a statement like that, in the abstract anyway.

But there's the rub: the statement is only widely acceptable because everyone gets to define it however they like. "What's fair is fair," we sometimes say. Well, not really…

Frankly, for a while now, the call for "fair share" taxation has been making me vaguely uncomfortable every time I hear it. Whenever some liberal icon like Paul Krugman or Bernie Sanders would repeat it, I'd give the obligatory mental nod, but somewhere in the back of my mind I'd feel a tiny tug of rebellion—and then I'd dismiss it and move on with whatever I was reading or listening to. To the extent that this feeling received conscious articulation, it was along the lines of "They need to come up with a better argument than 'fair share'."

And they do. Because—it should be obvious, really—it's going to be a frosty day in Miami before Americans achieve anything approaching a consensus about what constitutes an appropriate tax level for the top echelons of society. And while a majority of Americans agree that the rich should pay more, the devil is in the details of just how much more would be "fair."

We all believe that we care about fairness. But it's such an inherently squishy concept that it can be used to justify virtually anything. I suspect Hitler sold his ideology on the grounds that it wasn't "fair" that Jews should have power or influence in Germany. Closer to home, we hear that it isn't fair to make employers who have a religious objection to contraception pay for its coverage in their employee health plans. The basic formula seems to be: it's fair if you support it; it's unfair if you don't. And good luck ever getting the rich (with a few honorable exceptions) to support higher taxes on themselves. Why, that would be unfair!

So, basically, we're stuck. We might be able to enact the President's goal of bumping up taxes a bit on the wealthy, but we'll never get them to agree that this is anything but a totally unwarranted and unfair confiscation of their property. Which means, of course, that the "fair share" argument will only work on the people who are already convinced. And the 1% will continue to wield their daunting and ever-growing influence to subvert any further attempts to augment government revenue at their expense (as Krugman has noted, this has become practically the entire reason for the existence of the Republican party). Thus my sense that the Left needs to come up with a better argument for anything more than token tax increases. When all is said and done, the fairness argument is a loser (Have you ever heard a conservative use it when advocating lower taxes? I don't think I have; they're too savvy to get caught in an endless and ultimately fruitless wrangle about what's fair. No, conservatives tell us that lowering taxes will boost the economy, that a rising tide lifts all boats, and that ultimately we'll all be better off. "Fairness" doesn't even enter into it. If you accept their framing, it's all about enlightened self-interest.)

Then, some days ago, something crossed my inbox: a piece in the American Prospect by Liam Malloy and John Case entitled "Want Less Inequality? Tax It". It recast the whole fairness issue in a new light, and pointed the way to the solution I'd been wishing for. In a word, the answer to the "fairness" problem is to ignore it. Let me explain:

I'm going to touch only lightly on the article's opening section, which recounts the career of British economist Arthur Pigou. Pigou was once considered that country's leading economist, but these days his chief claim to fame is that he was a mentor of the legendary John Maynard Keynes. He was, say the authors, "one of the earliest classical economists to notice that markets do not always produce the best possible social outcomes." In fact, markets often give rise to externalities, or unintended side effects that can impact—either positively or negatively—people who aren't involved in the original transactions (the classic example of a negative externality is pollution from a factory, which affects everyone's health but isn't accounted for in the price of the factory's products).

Pigou said, very simply, that society should deal with externalities by taxing the bad ones and subsidizing the good ones. This may seem obvious today, but was a novel idea in the early 20th century. Among the modern incarnations of the principle is the carbon tax, which is designed to make companies pay for the privilege of dumping greenhouse gases into the atmosphere we all share.

Now along come Malloy and Case, proposing to treat out-of-control income inequality as a problem of externalities. They argue that excessive wealth concentration imposes costs on all of society, and that society should therefore act to discourage it, namely by taxing the wealthy more aggressively.

What exactly are these negative externalities that concentrated wealth leads to? The authors offer three examples, which I have rephrased somewhat and augmented with a fourth:

1. Workers are deprived of sharing in the fruits of their labor. Back in America's "Golden Age" (the post-WW II era up until about 1973), workers' pay tracked their growing productivity closely, doubling the median income and creating a broadly shared prosperity. Since then, productivity has nearly doubled again, but wages are up only 20%. Meanwhile, the average income of the top 1% has tripled. If the income distribution during the Golden Age still held, the median income today would be over $86,000 instead of $50,000. That yawning gap is a direct cost imposed on the 99% by the outsized incomes of the 1%. 
2. Society loses the skills of many talented people to the narrow goal of getting rich. The more rich people there are, and the more wealth they have (and the lower their taxes), the more attractive the idea of getting rich becomes. It's been argued that the decline of American manufacturing is due in part to the "brain drain" that leads our most capable people to pursue the much bigger rewards of the finance industry. In 1986, only 18% of Harvard graduates planned a career in business. Last year, the figure was 41%, with 17% going into finance. And the prospect of making a ton of money—and getting to keep most of it—provides a powerful incentive to pursue high-risk deals with potentially disastrous consequences (see: the recent financial crisis).
3. The rich gain undue power and influence. We've seen ad nauseam how politicians march to the beat of the wealthiest segment of society. Members of Congress have to spend hours every day cultivating the well-to-do. The richest banksters got a taxpayer-financed bailout—seemingly without much effort—while the rest of us were left to fend for ourselves. And there has been essentially zero accountability for the Masters of the Universe who crashed the economy in the pursuit of obscene wealth. As Joseph Stiglitz writes in his new book The Price of Inequality: "Political rules of the game have not only directly benefited those at the top, ensuring that they have a disproportionate voice, but have also created a political process that indirectly gives them more power." And every perk and government preference the rich engineer for themselves is both a threat to our democracy and a net loss to the rest of us—another negative externality. We should ask ourselves: is "too big to fail"—one of the consequences of wealth concentration—really the best way to structure our economy? 
4. Entrenched wealth and power act to suppress innovation. Great wealth will make a conservative out of almost anyone. We've seen plenty of examples of how the rich use their influence to promote conservative causes and attack progressive ones. People and companies at the top of the economic pile, raking in huge profits, have little incentive to innovate, and large incentives to keep the gravy train rolling. Often they get laws and regulations passed to perpetuate the status quo, protect their monopolies, and suppress upstart competitors and fresh-thinking innovators. Again, the rest of society loses when they win. 

Take another look at these four points, which we might collectively refer to as costs to society of not doing anything about wealth concentration (no doubt there are others, too). Notice something? The word "fair" doesn't appear anywhere in them. And in a way, that's the whole point: when excessive wealth concentration is objectively and demonstrably detrimental to a democratic society, then society can, and should, act to reduce that harmful concentration. And the way to do that is with higher—in some cases, much higher—taxes. Fairness. Be. Damned.

Notice another thing: this line of thinking doesn't come within a mile of the argument that the government needs more revenue and the rich should supply it. It says nothing at all about what the government should do with the money. In fact, the main goal of this policy—to reduce the concentration of wealth—would be achieved if the additional tax revenue was simply poured down a rathole. Of course that wouldn't happen, and progressives have plenty of ideas about what to do with it. My personal choice would be to mount a serious assault on the problem of global warming, a truly life-threatening emergency that the "free market" has so far failed miserably to address. But, as they say, that's another discussion.

On the surface, of course, this new regime of taxation would look very much like just about any other progressive tax, with a series of brackets and rates that increase for higher levels of marginal income (and, for perspective, we shouldn't forget that the top tax rate in the Eisenhower "Golden Years" was 91%). The difference—which has more to do with how we talk about the plan than with what the plan looks like—is to be found in its philosophical underpinnings:

• First, as I've already alluded to, is the stated purpose of the plan. Emphatically, it is not to make everyone pay their "fair share." Its purpose is simply to reduce harmful levels of inequality. We don't have to defend it on any other basis. 
• Second, the plan is designed to achieve its purpose by changing incentives. A series of higher and higher tax brackets would essentially put a "soft cap" on income. Multi-hundred-million-dollar compensation packages would lose some of their appeal—both for the CEOs who get them and for the companies that pay them. Talented people might consider something besides their personal bottom lines when choosing how to deploy their talents. 

But would limiting pay this way deprive us of the talents of our best people? Well, first you have to ask whether engineering ever more complex and risky financial deals is the best use of that talent for society, and secondly, past experience suggests that we would still have plenty of qualified applicants for the top jobs. There would still be no shortage of super-rich Americans, and the top earners could still enjoy a lifestyle the rest of us can only dream of. And remember, in America's heavily-taxed Golden Age, we still managed to enjoy the strongest quarter-century of growth in our history. Evidently the incentives were adequate to keep American business humming.

Economists have studied the impact of taxes on productivity, and there are actually two countervailing forces in play. One is the notion beloved of conservatives that taxes reduce the incentive to work. The other is the motivation to work more as taxes rise, in order to maintain your current level of take-home pay. According to Malloy and Case, for most workers these two effects roughly cancel out, meaning that people tend to produce the same amount, independent of changes in marginal tax rates. They concede that high earners may dial back their efforts a bit as their tax rates go up, but in many cases this doesn't have the expected effect of reducing total output of the economy. The explanation is that a lot of what the rich do consists of "zero-sum" activities, in which one person's loss is another's gain. In fact, Malloy and Case note, "some individuals in the top income group pursue quite a number of activities that others might be glad to see them spending less time on." Examples might include increasing corporate earnings by holding down wages, or lobbying Congress for protection from competition. The bottom line is likely to be a welcome increase in earnings for the middle class, with essentially no effect on overall output.

Malloy and Case acknowledge that the kind of tax reform they envision is, for the time being, off the table. Their near-term hope is that citizens may begin to see the continuing concentration of wealth at the very top as an externality with broader negative consequences—almost like, say, pollution—and to entertain the idea of fighting it the same way we might fight pollution, by means of the tax system. As they put it, "the lack of any limit to outsize economic rewards turns out to have a measurable cost, which Americans who aren't so wealthy keep getting asked to pay." Their recommended tax strategy "might start to do what has lately seemed impossible: give the best-paid Americans an interest in common again with the men and women with whom they work, and remind us that we're all in this together."

And to hell with fairness.

Blogging for The Century Foundation

Recently, out of the blue, I was invited by The Century Foundation to become a guest contributor to their Blog of the Century. 

I hadn't heard of TCF before, but they describe themselves as a non-partisan progressive think tank, founded in 1919, and their trustees have included people like Arthur M. Schlesinger Jr., John Kenneth Galbraith, William Ruckelshaus, and Daniel Evans (Hmm. I guess some of these people would qualify as a member of that extinct species known as moderate—or "not-insane"—Republicans). 

My first piece is up now, if you'd care to check it out. 

Why have they gotten so blatant about it?

Has anybody else noticed that the filthy rich and their bought-and-paid-for politicians seem to have gotten a lot more blatant lately about just telling the rest of us "Screw you. We're no longer even pretending that some gift we want will have those wondrous (if elusive) trickle-down effects that will benefit you too. We're taking what we want because we can, and that's it. If you don't like it, move to France, loser!"

I mean, remember when Dubya was first trying to sell his huge tax cuts? He said—lying with a straight face, of course—that "most of the benefits go to the middle class." That's sort of been the norm for a long time: if you're a Republican trying to push some pro-rich policy, you have to at least make a token argument that you're really doing it to help the little people. That's what all the bogus crap about the rich being "job creators" is about. And sadly, no matter how fatuous your case was, you could depend on the media's obsession with false balance to make them present your argument without openly mocking it—which is all you need to cover yourself.

But we seem to have entered a new era. Sure, we still get lectured about the necessity of coddling those job creators, but more and more, it seems like they're just throwing things out there and telling us to like it or lump it:
• Sorry, we can't afford a safety net; end of discussion.
• College too expensive? Tough—borrow a bunch of money from your parents and start a business.
• Drowning in an underwater mortgage? Hurry up and get your ass out of that house so the investor class can snap it up cheap, get your equity for free, and make a killing when the market recovers.

The poster boy for this "new callousness" is, of course, Mitt Romney, and I guess you could just write it off as the inept messaging of a staggeringly out-of-touch and tone-deaf rich guy.

But I think something else may be going on, and it's this: the Right has simply picked all the low-hanging fruit in their campaign to restore feudalism. All they've got left are things that are so egregious that there's simply no way to put a middle-class-friendly face on them. Thanks to their BFF Supreme Court, they can now buy any election they want, so why waste time even pretending to care about the 99%?

Either that, or they're waiting for an even-more-brilliant successor to Frank Luntz, who will crank out messaging miracles that will make us lambs positively enjoy our trip to the slaughterhouse.

Hooray for Fraud and Waste

Seen this?

Synopsis: Beacon Power got a $43M Dept. of Energy loan guarantee to develop its concept for spinning flywheels to temporarily store excess electricity and release it when needed (This is a big problem, especially with solar and wind power that are not available 100% of the time; the conventional power plants that are fired up to meet demand peaks are typically the oldest and dirtiest).

Then Beacon Power ran out of money and filed bankruptcy. OMG, another Solyndra! Government meddling in the "free market"! Fraud! Waste!

Except not. Under the new deal, the government will get 70% of its money back. And Beacon Power will live to fight another day, even announcing plans for a second plant. The net of it all is that the government invested $13M to get a promising energy technology launched. And this is bad why?

I was glad to hear Obama caution us in the State Of The Union address that some of the government's investments would fail. Duh. Here's the deal: government may not be the ideal risk-capital investor, but we've got ourselves an emergency here, and if private capital won't step up and shovel money at every energy technology with a reasonable chance at success, then that leaves good old Uncle Sam.

And yes, there could even be some of the dreaded "fraud and waste" involved. Tough: that's the price we pay for letting our energy problems fester since the Carter era, for God's sake.

Karl Rove, Master Psychologist

I'm a big fan of Steven Pinker, the Harvard cognitive scientist who's given us such great books as The Language Instinct, How the Mind Works, The Blank Slate, The Stuff of Thought, and his latest, The Better Angels of Our Nature. All highly recommended if you're interested in what makes us humans tick.

One of Pinker's core tenets is that evolution has equipped us with a set of "mental modules"—specialized bits of programming that endow us with basic human traits. There's one for simple math, another for finding our way home, another for detecting when other people are lying, one for handling language, and so on. Since these modules have essentially been layered on top of each other through the eons, they don't always mesh very well, and sometimes are in outright opposition (which can explain why we often feel conflicted about things).

The sum total of all these modules is what Pinker calls "human nature," and it's remarkably constant through (recent) time and throughout cultures worldwide. You can study it, figure out how it works, and use it to make predictions about how people will react in a given situation. One simple example will suffice: everywhere in the world, people have sensitive "unfairness detectors," and if they perceive that someone is being greedy, they will try to punish that person—even if it costs them something personally. (The technical term for this trait is "altruistic punishment".)

All of which is a long setup for my recent thought about that guy progressives love to hate: Karl Rove. The master political strategist responsible for putting George W. Bush in the White House and keeping him there for 8 years.

Here's the puzzling thing about Rove: how does he get away with the stunts he pulls? He promotes outright falsehoods with impunity, and never seems to pay a price for it. He attacks his political enemies viciously and generally leaves them with their jaws wagging, babbling incoherently and ineffectually. He seems immune to counterattacks. How does he do it?

Well, I was reading some blog yesterday and came across something called Karl Rove's 3 Principles of Politics (I'd provide a link but don't have one). And it made me think of Pinker and his notion that humans are essentially pre-programmed to respond in certain ways to situations.

So I dropped Steve an email. And here it is (minus some irrelevant chitchat):

Dear Dr. Pinker,

This message is prompted by something I just saw on a blog,
called "Karl Rove's 3 Principles of Politics". They are:
1. Attack your opponent's strength from your weakness.
2. Accuse your opponent of doing what you're doing.
3. Be worse than anyone can imagine.

It seems to me this gets it about right. Rove's remarkable
success is mystifying, since by all normal standards he
"shouldn't" be able to get away with saying the things he
does. Pondering the above principles, it occurs to me that
Rove has figured out how to use our innate cognitive
faculties against us.

An example of what I mean: let's posit that humans innately
(and in this case, rationally) believe that an opponent
would normally only attack from a position of strength
(barring cases of "backs against the wall" desperation).
So if Rove accuses, say, Democrats of being captive to
special interests, we intuitively feel "He wouldn't say
that if he was himself vulnerable to the same accusation."
And therefore we tend to lend undeserved credence to his
claim. Outraged Democrats may attempt to point out the
deception (though they too seldom do), but Rove has already
won the argument.

Same general idea with the "Be worse than anyone can imagine"
principle: when Rove says something particularly outrageous,
our innate tendency is to think "Wow, nobody would say such a
terrible thing if there wasn't some truth to it!" We literally
can't imagine that it could be a total fabrication—nobody is
that brazenly dishonest. So once again he wins before the
argument even starts. And of course he phrases his attacks in
such a way that the victim is forced to respond with sometimes
complicated explanations of the actual facts, and as they say
in politics, if you're explaining, you're losing.

So I'll end by restating the premise/question: Can Rove's
remarkable and seemingly unlikely success be explained by the
fact that he has learned how to hijack human cognitive biases
and use them against us to advance his positions? And if this
is right, how could anyone effectively answer him, hopefully
without sinking to his level?

I haven't heard back yet; if I do I'll update this.

Update: I received this from Pinker on Jan. 6, 2012:

Thanks for sharing that insightful analysis, which I agree with. The strategy, of course, is a risky one, as big lies are the easiest to refute, and cannot survive forever. Rovism was defeated in the Congressional elections of 2006 and the presidential election of 2008, and therein lies a ray of hope.

You heard it here first: Occupygate

Just as, after the Watergate episode, every scandal now ends with the nonsensical "gate", it now appears that every political or even quasi-political protest involves "occupying" something—I just read about "Occupy Flash"—referring to an obscure bit of computer technology.

So the first time one of these protest movements gets embroiled in a scandal, we'll be seeing—you guessed it—Occupygate!

The problem with conservative arguments

Many years ago I read a quote (no idea by whom) that went approximately like this:

The fundamental, fatal problem with conservative arguments is that they address a reality that no longer exists.

My favorite example is the fond desire among conservatives for "abstinence-only" sex education. The raw fact is that, no matter what some moralizing preacher may say, kids today don't practice strict abstinence (if they ever did), and there is no realistic scenario under which they will start. So arguing that we should rely on teaching it is just whistling in the wind: you might as well argue that we should all live like Amish people.

Now, living like the Amish might be a fine idea, but the fact is that it just ain't going to happen. Staking your worldview on something like abstinence is doomed to fail, is a waste of time, and in fact, relying on it would only increase the demand for the social conservatives' biggest target: abortion.

I guess what you could perhaps say is that adhering to these reactionary positions may serve to "move the Overton window," in other words, may shift the center of gravity of the debate in their desired direction. Maybe some conservatives are realistic enough to realize that they are advocating hopeless positions for strategic reasons. But I tend to doubt it.