Questions for conservatives

[ag]

Well, I don't mind the estate tax.

1. Right to work. Designating a workplace as "unionized" is not really any different from designating it "Republican". Would you be ok, if, in order to work in a given factory, you'd be forced to contribute to the Republican party and volunteer for the campaign events of its candidates? You know, you could always quit and go to work elsewhere - especially in a single-company town. And, if you are fine w/ that, what about designating it Catholic, or Jewish, for that matter? You know, it's not such a big deal to part w/ some skin from your penis - and if you don't want doing that, you could always choose another job, couldn't you?

2. Oh, yeah, US has comparative advantage in a lot of stuff. BTW, you seem to be badly confusing comparative and absolute advantage: as one of the most productive countries in the world, US has absolute advantage (i.e., is better at) producing most things. However, it's not the absolute advantage that matters here. What the comparative advantage says is that you should specialize in what you are RELATIVELY more efficient in. So, if US is disadvantaged in something, by definition it must be advantaged in something else.

In any case, forget the theoretical issues. In practice, blocking free trade would mean that a US consumer would, on average, have lower income and would have to pay more to get the goods s/he likes. And, of course, it would also mean higher rents that for inefficient domestic monopolies can suck from the consumers - historically, it's the big business that loved high tariffs. And, of course, it would also mean impoverishment of US trade partners - illegal immigration from Mexico would skyrocket.
US could, possibly, benefit if it managed to somehow close its domestic market without encountering the reaction of trade partners. Of course, the benefits of such an action would, mainly, accrue to businesses - consumers would merely face higher prices - but you could argue that employment could grow in the protected industries. In practice, of course, other countries would immediately retaliate by closing their markets to US goods and services, screwing American workers in the process (in fact, to bring the point home, I would bet they'd close the markets that would hurt US especially strongly). The result would be unpleasant for all involved.

In any case, at present the world free trade regime is no longer a matter of bilateral deals. China has accessto the US market not as a matter of any privileged trade arrangement, but as part of the WTO. US was instrumental in negotiating the agreements that made this organization possible and these are, in fact, quite heavily slanted in US favor: trade has been, primarily, liberalized in areas where US is very competitive, while liberalization lags behind in areas of interest to, say, developing nations. So, abandoning WTO would be extremely costly - and trying to build new barriers in trade w/ China without doing so would result in heavy punishments within the WTO rules.

Of course, you could argue that the US could leave the bilateral agreements, such as those recently signed w/ Columbia. But these (w/ the possible exception of NAFTA w/ Mexico and Canada) are largely inconsequential for the US, given the relatively small size of those economies and limited role these countries play in US trade. So, the primary effect of withdrawing from such agreements would be a) replacing imports from those countries w/ imports from China and b) destabilizing the economies and the governments generally friendly to the US.

[ag]

1. So, would it be ok for me to open a restaurant and announce that I hire only Jews? To be on the safe side, I will allow those who've gone and got converted - by a good Orthodox rabbi. And, if it is ok for me to hire only Jews, would it be ok for me to put a sign at the door saying: "only Jews will be served"? (I could even allow the goyim to get my gefilte fish from a take-out window, as long as they do not sit down) And, if the former is ok, and the second is not, what's the difference?

2. What transition? You honestly think that the high rates of unemployment right now in the US are due to free trade?? Wow!

Anyway, it wouldn't be to difficult to shift all sorts of manufacturing imports from Mexico to China (though, of course, in the process you'd give a major boost to Mexico's cartels: they'd switch from drugs to manufacturing products). But closing off China, without a major disruption to the US economy, is near impossible.

[ag]

I am, emphatically, not a libertarian, but a free-market liberal (European usage of the word). I have nothing to say about what Ron Paul thinks - we, most definitely, are not on the same page on pretty much anything. We wouldn't even recognize each other's support of free markets, as we would fundamentally disagree on what IS a free market. I have no clue what makes sense to Ron Paul - he, sure, does not make any sense to me.

You can change religions, you can change political parties - no problem. I guess, you think religion is different from a party (as an atheist, I fail to see how, but ok). Fine.  Let it be the Republican party. So, once again, would a restaurant that only hires Republicans and only serves Republicans (and asks you to show a confirmation of a financial contribution to that party) be ok? You know, there are other restaurants in town - you can always go there. And if a restaurant is ok, why not a big plant or a school district? I am the boss of the major employer in town, I agree to give all my employees a 15% raise, as long as they spend half of that raise on contributions to Republican candidates, and I fire everyone who doesn't contribute. You know, you are a registered Republican, so you can vote in a primary and have an impact on who the candidates are. And, sure, you can go work for the Salvation Army if you don't like my factory. What's wrong about it?

[ag]

Are service jobs more sensitive to the economy? I don't know. At least, I haven't seen a study that says they are. Probably, depends on which service job and which manufacturing job you are talking about. Yes, of course, there is a long-term shift away from manufacturing. As a result, you can, actually, breathe in most US cities now - you've sent all the smog away to Beijing. Why is it bad?

US remains, by far, the richest major country in the world. Poor people from all over still try to get into the US - clearly, there is a huge demand for their labor there. Yes, the unemployment is up - but that's just the cycle. A few years ago it seemed to have reached levels previously thought impossibly low - all in the midst of expansion of free trade. What is it exactly that you don't like? Affordable fruits and vegetables from Mexico or affordable manufacturing goods from China? You really want to pay more for them?

[ag]

So, I guess, I should conclude that you would allow an employer to only hire people who agree (in a binding contract) to make donations to the Republican party and its candidates. Of course, they'd be able to participate in choosing the Republican party leaders an candidates. I got your point.

Of course, everything is a matter of opinion. In my opinion, it is higly disagreable to be effectively forced into an association I would not like to be a member of (on the pain of being excluded from employment). You find this unobjectionable. That's the fundamental difference.

You know, in the USSR of my youth you didn't have to join the Young Communist League.  Of course, they wouldn't let you go to college if you didn't - but, hey, not everybody has to go to college, there are other, equally good careers, especially in a proletarian state. You could become a night watchman or a cleaning lady, or whatever. Or, for that matter, you could go to a seminary and become a priest - who says there was no career path that didn't require joining the League.

[ag]

..and yes, we need to get used to higher unemployment numbers.  They will continue creeping higher and higher as we become more and more efficient.  This is (overall) a good thing.

This is nonsense: both because efficiency doesn't mean higher unemployment and because higher unemployment is, most definitely, a bad thing. Though, of course, that's a subjective statement: may be you like people suffering, I don't know. So let me modify this: it's a bad thing for those of us who are not sadists.

[ag]

I'm afraid this is too stupid to be worth my time in responding. I suggest you take a basic course in economics (or maybe just try thinking a little) and you might get how this actually works.

It's NOT stupid at all. It's an empirical issue, not a theoretical one, and the empirical evidence is still mixed, as far as I understand. Do people really care about their kids and, if they do, how much and in which sense is very much an open issue. I wouldn't make categorical statements either way.

[ag]

Do liberals realize that all of one's estate has already been taxed, in some cases multiple times already, and an estate tax is ultimately one last tax for dying?

I am not a liberal (in the US sense of the word), but why is that even relevant? What's wrong w/ taxing things in different ways - especially if some of these happen to be relatively non-distortionary?

[ag]

That there would be no effect on the margin goes against pretty basic theory, I'd say. I never quantified my statement. To take one example and think that it proves that there is no effect indicates having no understanding of how economics works.

That's the danger of basic economics ) It makes things look simpler than they are.

Constructing a theory where it would even have an opposite effect wouldn't be difficult at all. Suppose I don't really like my children, but want everybody to think I like them. A large estate tax would give me an excuse to spend the money on myself or to donate it to my favorite cause - you know, kids, the government would have taken it all, anyway. But that would, actually, increase my incentives to earn: I'd be spending on my own precious self, not on those stupid kids.

Or, for that matter, how about this one. Expectation of inheritance could destroy incentives kids of rich people have to work: why bother, if I am going to have more money than I could possibly spend in a lifetime. If you think that children of good businessmen might inherit their parents' talents, this would be outright waste.

In fact, I could write zillions of fairly basic theories that could go either way. In principle, I could even find parameters under which even without any esoteric considerations of the sort mentioned above you'd be working the more, the higher you are taxed (income effects could be funny). True, you would be unhappier - but you would, actually, create more jobs ))

Or, for that matter, I might simply not care about kids. Yes, of course, people leave inheritances. But whether they do this for the sake of the kids, or because they don't know when they'd die and do not want to be penniless if they happen to live long, is not such a simple issue to resolve (I've seen some studies, and, if I recall correctly, there might be some bequest motive detected in them - but it is, definitely, not something easy to resolve).

Which one of these theories is right is not something you could resolve by thinking hard. You need to test it with real data. And doing that is not easy.

BTW, even if there is a distortionary effect of estate tax that would have people work less, there is no reason to believe that this distortion is bigger than the distortion from the income tax. So, given that, in any case, taxes should be collected, it could well be more efficient to tax estates more and incomes less. Once again, I am not claiming this - I don't know. But there is nothing so special about the estate tax that would make it obvious that it is something not to be done.

[ag]

To sum up, I am the econ prof here and I suggest that the claims of stupidty stop ))

[ag]

I can certainly confirm that I would far rather the government get it than any members of my own family.

Nothing under the current US law, unless I am sadly mistaken, would prevetn Your Lordship from making arrangements to that effect while you are still with us.

[ag]

This is nonsense (what Politico says). Dead people do not pay taxes: once you are dead, you don't do anything. The taxes are paid by the heirs. In fact, estates are already treated very lightly. The logical thing would have been to treat any estate income as income, at the normal rates for the income tax.

Also, there is every reason to believe that this tax is both less distortionary and less unpleasant for those that bear them, than the regular income tax. While the bequest motive might be there, it is also pretty well established that the big chunk of estates are left because of the precautionary motive: people don't know when they'd die and would like to have some wealth around in case they happen to live long and need expensive services as they get old. What you propose is to tax people, while they are alive: i.e. make them pay when they are old and might need these resources themselves, make it difficult for them to make savings for when they are at their most vulnerable, pushing them towards dependency in old age.

To sum up, this nonsense about "taxing death" is both bad policy (from the conservative standpoint) and sickening demagogy (from any standpoint).

[ag]

Well, the simplest reform to get rid of the issue of the "estate" being taxed would be to treat inheritance just as if it were regular income, to be taxed at a regular income tax rate. Of course, this would, in practice, mean sharp INCREASE in estate taxes in most cases. Which only serves to make the point: inheritances are not really much taxed. Which, from the standpoint of optimal taxation, would seem to be rather strange: taxing inheritance income would seem to be a less distortionary way (in comparison w/ taxing investment or wage income) of financing WHATEVER the level of public expenditure you'd think is optimal.

[ag]

I can certainly confirm that I would far rather the government get it than any members of my own family.

Nothing under the current US law, unless I am sadly mistaken, would prevetn Your Lordship from making arrangements to that effect while you are still with us.

yes, american law is terrible on that front - inheritance should be stipulated by law, not left up to the individual.

Well, unless you find costs of making a sworn will prohibitive, it would seem that now your Lordship shifts from making a statement about what you'd like to be done w/ your own posthumous assets to what you'd like to be done w/ those of other people. As your views, clearly, are only shared by a minority of US citizens, I can only advise you that, perhaps, you could issue appropriate regulations to deal w/ the estates of your serfs.

[ag]

While that is all true, people do find it tasteless for emotional reasons which is a large part of the explanation for why estate taxes are controversial. It's been the same in Sweden with property taxes. Despite being a good tax it was abolished simply because people were too mad about it.

This is why, rather than taxing estates it would make sense to tax the income the heirs get from the estates. This, purely formal, change, would have the impact of switching the default. Rather than taxing something otherwise not taxed, one could offer steep discounts off the regular income tax rates )

[ag]

Actually, in the US gifts are taxable, I believe.

The simplest arrangement, of course, would be to treat gift and inheritance as income in the year you obtain it. Not that hard to monitor: your great-aunt has died and left you USD$50,000 in a year in which you earned USD$20,000, so your gross income should be USD$70,000 and that's it. Then, of course, you could have different rates not only for wage and investment, but also for inheritance income. But the default should be that it is your income, period.

[ag]

Well, unless you find costs of making a sworn will prohibitive, it would seem that now your Lordship shifts from making a statement about what you'd like to be done w/ your own posthumous assets to what you'd like to be done w/ those of other people. As your views, clearly, are only shared by a minority of US citizens...

No, I'd just like there to be clear orders of inheritance - directly to the offspring, wife, etc, by strictly regulated shares.  None of this leaving it to favorites, cats, or the Philharmonic.

And I do love my cat.