Wednesday, December 12, 2012


Interludes & Reflections

Like many others, I was wrong in expecting that the election would lead to a Romney victory or a close result. The Obama campaign built a successful coalition in almost every single battleground state. While Mr. Romney won handily among independents, he did not build a winning coalition.  Since Nov. 7, I have focused on understanding why, speaking with citizens of many political persuasions and many walks of life.
First, let me share several observations.  First, it’s hard to beat something with nothing.  Mr. Obama’s record and spoken priorities show what he would do in a second term: while the prescription of higher taxes, regulation, and staying the course is unappetizing to many, it is a path. Although Mr. Romney towards the end came up with a 5 point plan, most people never really had a handle on what he would do or how his measures would help.  He likely did not go into specifics out of caution not to antagonize voters, but that was not a good thing for a candidate already thought of as a flip-flopper or slippery.  Gov. Romney reminded me of Kerry vs. Bush in 2004, where a flip-flopper from Massachusetts was running with the principal message that the incumbent is doing a bad job on the issue of the day.
Second, Mr. Romney did not run an inclusive campaign.  His primary opponents did not unite behind him, which goes a long way to explain why his vote total this year was less than Mr. McCain’s in 2008. And while Mr. Obama ran a negative campaign and Mr. Romney had to respond in kind, there was not a sense of positive vision offered by Mr. Romney.  The Republican party periodically had vile outbursts that were antagonistic to women and Hispanics, and Mr. Romney was never able to counter or dissociate himself from those elements of his party. One of the most striking things about the election results was that Asian-Americans broke 3 to 1 for Mr. Obama.  In my own friend circles, Asian-Americans tend to be professionals with good jobs, not on welfare, and fully understanding of the higher taxes that will hit them under Mr. Obama.  Further, quite a few of them are social conservatives as well. Nonetheless they vote for Mr. Obama because they felt that Republicans had an uncomfortable proportion of irresponsible firebrands who were tribalistic in their antipathy and xenophobia.   While I am sure Mr. Romney personally does not espouse the views of Messrs. Akin, Mourdock, Broun, he really hurt himself by not distancing himself from that segment of the party strongly or early enough. 
Third, Mr. Romney was not the right candidate to take on Mr. Obama on health care or foreign policy. He alternated between ineffectual attacks or blurring the differences between them.  His tendency to try to figure out what an audience wants to hear and then saying it is not unusual among politicians; in this case, it backfired, as he came across as Obama-lite.  With a reputation for having the backbone of a jellyfish when it comes to convictions, this was probably the last straw. 
Of course, I should not put everything on Mr. Romney.  The Republicans failed in the ground game and wasted a lot of money in ineffectual ads when they should have been party-building in both traditional and new ways.  The party never lent its enthusiastic support to the campaign and egregious statements of a few of its members cost Mr. Romney dearly. 
Enough with the post-mortem. What to do? Although I count myself as a classical liberal, sadly the Democratic party has largely left those principles behind, and the country badly needs a constructive conservative counterbalance.  Let’s start with some ideas on core areas of jobs, economics, energy health, education, environment, and foreign policy.

1.       Jobs:  Current policies discourage employers from creating jobs and workers from taking them.  For example, payroll taxes (employer and employee Social Security and Medicare contributions) cost about 16% on top of salaries upto $108,000, and health insurance often tacks on an additional 15% or more.  Meanwhile, extended unemployment benefits, traditional welfare, food stamps, disability, and housing benefits have become $450 billion of incentives not to work.  Medicaid is another substantial benefit to not working.  We need to reverse many interlocking parts here and realign them to craft a pro-jobs , pro-growth set of policies:
·         Remove the caps on payroll taxes while cutting the total payroll tax rate to 10% (equally distributed between employer and employee)
·         Let employees see how much health insurance costs and let them have the option of using employer-based health funds (along with their own money) to buy private insurance, Medicare, Medicaid, or have higher take-home pay.  This would be part of a larger health care overhaul (see below).
·         Make the criteria for unemployment and disability benefits far more stringent with stronger verification of assets/income and real disability status to forestall abuse
·         Tie food stamps, housing benefits, and traditional welfare to work or public/civil service (e.g., infrastructure projects). 
The focus here is on increasing jobs and stable employment, growing the pie and creating wealth for the long term, and shifting the argument away from how to slice up a dwindling pie.

2.       Economics:  Taxes should serve 2 purposes: discourage “bad” activities and reflect a return on investment to the government for state programs which serve the public good.  They should not serve for one person to take advantage of another’s productivity, and everyone should pay a fair share across the board. When you tax something, you get less of it. As we tax work and investment and far higher rates than consumption or stock market gambling, we have a lot more consumption and stock manipulation than we do work or investment, hence the staggering levels of public and private debt which will slowly but surely strangle our economy and future prospects. My plan can be called the 10-10-10 plan:
  • ·         Let’s cut taxes on income, saving, and long-term investment (defined as >5 years) to 10%. Remove all deductions except for charity and children. Let’s tighten up the charitable deductions to only organizations that don’t engage in political campaigns and make the child deduction a deduction (not credit) upto $30,000 per child.  
  • ·         Let’s eliminate corporate income taxes but also eliminate corporate welfare and subsidies (such as for sugar, corn, and oil companies). 
  • ·         Let’s add taxes on sales and imports of 10% (produce and non-processed groceries exempted).  This could be paired with foreign policy to reduce or waive these duties when appropriate on a most-favored nation status basis.
  • ·         Let’s also add taxes of 10% on exotic financial transactions (credit default swaps, collateralized debt obligations, derivatives, etc.) and tax short-term investments at 26% (decreasing steadily with each year of investment to 10% after 5 years of holding). 
  • ·         End federal incentives to take on debt (e.g., home mortgages, student loans). For the truly needy or meritorious, provide increased grants in the spirit of a hand-up, not hand-out, e.g., scholarships for programs of study that increase long-term economic potential (e.g., science, technology, engineering, business, math, law, health care, English)
  • ·         Let’s raise taxes on alcohol, tobacco, processed foods, high-fructose corn syrup, trans-fats, and marijuana (where it’s been legalized) and start increasing federal gas taxes by a penny a month, indefinitely.
  • ·         Let’s add a 10% tax on lobbying and campaign political ads for corporations, organizations, or entities that don’t pay any taxes.  This is not a speech issue, but rather organizations/entities that don’t pay income taxes (and hence don’t vote) should not seek to influence tax policy, or at least should pay a toll to do so.  Just as there should be taxation without representation, I do not feel there should be representation without taxation.
  • ·         On the entitlement side, Social Security and Medicare were initiated were longevity was far less than today.  We should increase retirement age slowly but steadily, perhaps 1 year every 5 years.  Benefits should be means-tested for both these programs as well, while increased opportunities for private retirement and private health accounts (with some matching government contributions) should be developed for younger Americans. 

As a package, these measures will remove the distortions in our market and rebalance our economy towards work and productive long-term investment and away from consumption, destructive behaviors, stock market gambling, and rent-seeking behavior through the tax code.  Further, the measures in points 1 and 2 would repatriate and attract capital and jobs from overseas.  Very importantly, all of the above should be accompanied by transparency in budgeting – each American should receive an easy-to-understand budget and balance sheet each year reflecting what tax dollars are being used for and what the future liabilities are for our nation. Further, both houses of Congress (on penalty of sequestered pay) should be required to pass a budget each year.
3.       Energy: Our goals here should be maximizing energy independence, reducing environmental harm, and increasing our economy’s efficiency in using energy.  Crafting a policy geared to these objectives will take time and thoughtfulness but is doable.  While we should remove obstacles to oil and gas exploration, fossil fuel exploration and use has externalities (adverse impacts) that should be accounted for – e.g., the need for overseas military expeditions to keep the Persian Gulf secure, pollution in the air and sea, etc. The best way to account for such externalities is a carbon tax, and I have proposed a gas tax that increases a penny each month to promote a gradual efficiency over time and reduced dependence on fossil fuels.  With respect to renewable sources, the government should engage in subsidies to specific companies but rather offer prizes for specific objectives (efficiency in energy conversion, storage, or transportability) and increase research funding for such objectives.
4.       Health: I have described my ideas for health care reform previously (get rid of the employer health coverage tax benefit to make it an even playing field for individuals, promote transparency in costing, enable cross-state competition, and tort reform). Some of the key problems facing us in health care include lack of incentives for doctors and patients to prevent and save for chronic disease, and lack of discussion regarding costs of end-of-life care. To address these, let’s:
  • ·         Change incentives for primary care practice to encourage more physicians to enter it and focus reimbursement of primary care on keeping patients healthy as opposed to fee-for-service. Physicians could help here by starting a “guild fund” donating 1% of income to ensure medical students would graduate with minimal or no debt, in exchange for new graduates committing to a minimum 2-4 year program of primary care service in underserved areas. 
  • ·         Start a health information card for each person as a portable electronic record and get rid of the onerous EMR requirements but have prizes for interoperability and reductions in errors
  • ·         Health savings accounts where federal dollars would match individual savings (to be used for medical expenses over time and every decade, a distribution could be taken as a reward for savings). Over time, this would get insurance companies, government bureaucrats, and lawyers out of the doctor-patient relationship, and let doctors work directly for patients rather than for third-party regulations, documentation, or mindless box-checkers.
  • ·         Allow basic health insurance plans that cover just catastrophic events
  • ·         Increase costs to egregious adverse behaviors (e.g., driving drunk, not vaccinating one’s children, etc.) while incentivizing good behaviors (e.g., by reducing premiums for keeping a healthy weight, quitting smoking, etc.)
  • ·         Give pharmacists the ability substitute in-class (not just same chemical) generic drugs for specific indications unless the doctor specifically wants a brand, and the chance for individuals to buy into Medicare, Medicaid, or private insurance if they so please.  
  • ·         Make the patent protection clock for drugs/devices start from FDA approval as that is when they can be marketed. This would allow drug companies a longer period of time to recoup their R&D costs and reduce the immediate price pressures that occur after approval.
  • ·         Let patients know that the longer they wait to buy into health insurance, the higher their premiums would be (much like Australia’s health coverage system or America’s life insurance policies).  Also, for specialists, let there be a free market in services.
  • ·         Increase research funding for optimizing patient care and translational/innovative programs geared for bringing new treatments forward.


5.       Education: Curricular and teacher standards need to be improved.  Set national standards for English, history, math, and science based on the achievement tests sponsored by the College Board and Advanced Placement exams sponsored by ETS. This will redirect education towards teaching of content and actual knowledge.  Increase teacher salaries by offering starting salaries of $80,000 or $100,000 or more for teachers with a bachelor’s in the subject they are teaching (education should no longer be a major but a module of pedagogy); perhaps there should be certification-level exams based on GRE or Achievement Tests for subjects teachers desire to teach. Tie raises to performance (as measured by student improvement over the course of each year).  Let parents have choice, and let education dollars follow the student. Further, disconnect education funding from local property taxes – let each student get the same number of dollars from state/federal level income/sales/property taxes.  Promote physical  and vocational education again in schools.  Increase funding for gifted and talented education.  Increase funding for research and development at the university level and for business-academic partnerships in innovation. Last but not least, move towards a stakeholder society by giving every citizen on their 20th birthday either $20,000 for college, professional, or trade school (contingent on good grades in a viable program of study at an accredited school), $20,000 for starting a business (contingent on a credible business plan), or $10,000 for a long-term savings/investment account (not withdrawable before age 40)
6.       Environment: Some of this I discussed above in energy but the key concept has to be accounting for externalities. Taxes on air, water, and land pollution should account for damage done by energy, mining, corporate, and individual use.  Companies which take on catastrophic risk should have appropriately sized insurance (e.g., deepwater drilling, nuclear plants).   A key element of environmental policy should be to focus on preservation of the global commons – reefs, rainforests, wildlife preserves and ecologic diversity. This is ultimately best done not only through multilateral agreements and pollution taxes but on spreading property rights through the Third World (see Hernando de Soto’s seminal work), and on pricing water, electricity, and gas use appropriately. 
7.       Foreign Policy: What would an alternative foreign policy look like?  To start with, our priorities should be to promote freedom,  economic growth, broad-based human and societal empowerment, liberal democracy, human rights, and free trade around the world while helping our friends and weakening our enemies.  The Millenium Challenge started by George Bush should be expanded – this program directed foreign aid to countries striving for good governance; we should also expedite free trade agreements to reward good governance and ensuring freedom and empowerment for peoples around the world. We should not be enslaved by pessimism and withdraw from tough places around the world. Rather we should ally with fortify, and make robust and muscular alliances with true democracies whenever possible. This requires a strong military with sensible long-term defense spending. And some tough questions need to be posed. Did we hand or are we in the process of handing Egypt, Libya, or Iraq to forces that are inimical to the US? Are we about to do the same in Syria or Afghanistan?  Why did we abandon the green revolution groups in Iran? How will we maintain military supremacy in the air, oceans, sea lanes, and pivotal regions?  Do we have the capacity to maintain our treaty commitments to our friends around the world? How will we minimize and shield against nuclear and missile proliferation? These are difficult questions but they need to be asked and cogent strategies formulated.

While this is not a comprehensive plan, hopefully they form the cornerstones for a new Republican policy strategy.  I should take a moment to comment on social issues.  While I do not view this as important as priorities in a national election context as the above, for a lot of people they are.  And unfortunately both sides define themselves and demonize the other on the basis of what they are against: Democrats are against guns, tobacco, oil, religious influence, restrictions on abortion or marijuana, while Republicans are against abortion, gay marriage, gun control, etc. Anathema and caricature have dumbed down our political discourse.
On the hot button issues of abortion, gay marriage, gun control, immigration, etc., I think Republicans can do a lot more to  be inclusive while yet upholding their principles.  For abortion, almost everyone has charged emotions about this.  In my case, I was strongly pro-choice for many years because a classmate confided her horrible circumstances when we were in high school. Over the years, things became grayer, as I came to realize that the right to a chance at life probably should outweigh the right to convenience in many cases. But in any case, Republicans should convey an understanding of how traumatic and challenging such a situation could be for any particular woman, and guarantee access to it in situations of rape, incest, and threat to a mother’s life, and increase support for prenatal, postnatal, and adoption services. While firmly making the argument that an unborn child has more than zero moral value, stay away from idiocies like mandated transvaginal ultrasounds, call out extremist Democrats when they would ban support for viable infants born after abortion, and leave any other debates on restrictions to the democratic process in states.
On gay marriage, again, many of us, myself included, have personal friends who are gay and we want them to be happy. Is gay marriage a civil right issue, and should it be called “marriage equality’?   The Supreme Court will rule on that in the coming months, but unlike interracial marriage in the 1960s or before, there is not an issue of criminalization – the landmark Loving vs. Virginia case arose from an arrest and prison sentence for the “felony” of interracial marriage.  Freedom from criminalization is not what gay marriage advocates are seeking; rather, what is being sought is a societal seal of approval in the form of a marriage license, and by definition, a license is a privilege, not a right.  Many, perhaps most states, will legalize gay marriage – that is the province of the voters’ wisdom.  No matter what, Republicans should and need to impart a concern for the happiness of couples who don’t happen to be straight by guaranteeing rights on inheritance, hospital access, health proxy, etc. and leave decisions on tax benefits, nature of marriage, civil unions, or domestic partnerships, etc. to states. At the same time, firm lines against polygamy or adult incest should be drawn.  
On gun control, honor and respect the second amendment while closing the gun-show loophole, requiring all gun owners to take background checks, safety, and usage classes comparable to what is required of concealed weapons permit holders in most states.  Acknowledge the risks of guns, but also discuss how many unreported times concealed weapons holders stop crime, yet are often occurrences.
 On immigration, acknowledge the tremendous contribution of immigrants to America and that almost all of us have an immigrant heritage.  At the same time, craft an immigration policy that values skills and education and limits family reunification to immediate family members and minimizes taxpayer benefits to immigrants until 5 or 10 years after becoming citizens. Enforce current laws and seal off areas of illegal entry, and then explore earned amnesty 5 years after a secure border is ensured. Regulate the process of entry to make it fair to all countries without discriminating on the basis of geography, while bringing employers and universities into a system where they bid for the right to hire immigrants.
 On the critical area of reconciling science and faith , understand and appreciate that science and faith do not have to contradict each other and be reasonable about what is taught in what context.   Why not have a conversation premised on the beautiful concept that God could have created evolution? Why not come to a common sense position that faith and reason are like a pair of shoes – you can get farther with both than just one?

Essentially, I hope the Republican Party re-energizes to helping America achieve equality of opportunity, whereas the Democrats have chosen to focus on equality of outcome. To do that, we need a sound platform that restores our country’s financial health, sparks economic growth, creates jobs (while maintaining a safety net that gives a hand-up not a hand-out), and invests in the future (education, health, energy, environment), while maintaining our standing in the world.  I hope the above may serve as a road-map for forward-thinking Republicans and Democrats to right the ship of state, focus on and meet the major challenges facing America, and minimize the tribalization and polarization of our people.  

3 Comments:

At 9:38 PM, Anonymous Zack said...

Many good thoughts! The Pigovian stuff was fun, and I loved the de Soto stuff. De Soto's work on property rights is fundamental and so contrary to the ideology in Washington where the legal system that would help responsible planning and forethought are more of a postscript.

A libertarian like myself would take specific issue with several points; usually they follow the idea, described first by Hayek, known as the "fatal conceit." This states that many well-intentioned programs and policies rely on information that is incomplete, information that is unknowable to central planners.

Following Hayek's logic the classical liberal positions you propose, therefore, require us to know things that are unknowable. For example, why is $20,000 a good number of dollars to give to students? and how do we really know that removing those dollars from diverse and unknown people is better, in a trade-off, compared to leaving it with them? it could hypothetically be possible that more people will be educated more often and with more specific application to their needs should that money be left to more productive endeavors. The issue is that we cannot describe those endeavors and the sacrifices to productivity are in the future and unpredictable. The old idea, from Descartes, that such things should be determined by identifiable reason and knowability alone contradicts other theories related to unknown potential (see p. 384 http://goo.gl/5XOZ2). In other words, the information that we have before us to determine where the money should go is incomplete and will never fully describe the information that is being considered by millions in a free society.

The inclusive stuff on moral issues like abortion and LGBT is a much welcome change that I see Republicanism embracing out of necessity. They're kind of late to the tolerance party, though progressive readers shouldn't be reading this with the idea that their people have been on the correct side of history.

President Obama puts the intolerances of Bush 43 to shame, especially for foreign and immigration policy. In fact today I found a twitter user who has documented every drone strike since 2002 (https://twitter.com/dronestream). It's utterly amazing how influential a phenomenon media fatigue can be. In 2008 we heard this issue described in existential terms, how removing the Republicans from office was a matter of American values, how the former president should be arraigned and brought before the Hague. Now when another person with a (D) behind his name commits the same (and I would say more illegal) atrocities, the same peace-making denizens are back at home sitting on their MacBooks, ignoring the monster they voted into office (http://goo.gl/kgJPj).

Still though, compared to what all other classical liberals are proposing, these are some of the best ideas. They intermediate from where we are now (crappy pop socialism) to an ideal situation better than most propositions available in mass media. I think most people can get behind this middle-to-right approach to business and other policies as a natural progression of the liberation movement that justifies drug and other cultural policies. Well done. As one of my mentors, this side of you makes me happy :)

 
At 12:44 PM, Anonymous IronmanAndrew said...

Great stuff here in a summation of the year. I look forward to hearing more this year. I have this page bookmarked. Ill be looking forward to the next post. Best Wishes.

 
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