Monday, July 25, 2011

Negative Flat Income Tax Concept Deserves To Be Reconsidered

As a society, America upholds both the ideal of maximizing individual liberty and the ideal of protecting our most vulnerable citizens. We believe that every citizen should have the right to do whatever he or she wants, provided that he or she does not infringe on the rights of others. We also believe that no citizen should be abandoned to the squalor of abject poverty, hunger, and homelessness.

Unfortunately, these two ideals do not always coexist peacefully, especially when it comes to taxation policy and social welfare programs. Higher income earners in the United States, quite understandably, do not like having to pay higher taxes than lower income earners, especially as the large chunk of their tax dollars go to social welfare programs that benefit only the lower income earners. Lower income earners, by contrast, object to clear benefits the higher income earners receive when it comes to taxes, including having capital gains taxed at a lower rate than regular income and easier access to the multitude of loopholes within the Swiss cheese that is our tax code.

Over the past century, the federal government has created a multitude of programs to help the economically disadvantaged in America. Social Security came during Franklin Roosevelt's New Deal. Medicare, Medicaid, and the Food Stamp program emerged from Lyndon Johnson's Great Society. The Children's Health Insurance Program was created during the Clinton administration. Taken all together, few can deny that these and other such programs have benefited low income Americans tremendously by keeping the specter of abject poverty at bay.

But the price paid has been high. Most obvious is the fact that these programs are horribly expensive. Indeed, paying for them now accounts for more than half of the annual federal budget, and the expected growth of the programs is the most disturbing facet of the fiscal crisis now facing our nation. The blunt truth is that unless we begin reducing the cost of these programs, or adopt an entirely new model of social welfare altogether, the fiscal structure of the United States is doomed to collapse.

Beyond the basic cost, there is another, more disquieting objection raised by innumerable conservatives and libertarians over the years: that massive federal social welfare programs create a culture of dependence among lower income Americans which makes it difficult or impossible for them to break out of the "welfare trap". Perversely, it may be that those very social welfare programs which were created in a well-meaning effort to improve the lives of low income Americans have instead enmeshed them in a cycle of dependence on the federal government by robbing them of any incentive towards material self-improvement. After all, if getting a job with a higher salary, or getting a job at all if one is unemployed, results in losing government benefits of a greater value than the salary increase, what rational person would choose the higher salary or new job? In terms of self-interest and cost-benefit analysis, it would simply make no sense.

Is there a way to create a fair system of taxation and social welfare that ensures a sufficient level of funding for the government and avoids pushing lower income citizens into the welfare trap? One intriguing possibility is usually called the negative flat income tax. In the form suggested by the late Milton Friedman, one of the most influential economists of the 20th Century, the negative income tax would take the form of a completely flat income tax combined with a basic cash subsidy distributed equally to every citizen. In other words, every single citizen would pay the same percentage of his income in taxes, while receiving a subsidy of an equal dollar amount as everyone else, whether he were a wealthy corporate CEO or a guy on the street with a cardboard sign.

As an example, consider a negative income tax with a tax rate of 20% on all income and a subsidy of $6,000. A citizen with absolutely no income would obviously pay no taxes and would receive the $6,000 subsidy. A citizen making a mere $10,000 would end up taking in $14,000 annually ($10,000 minus $2,000 in taxes plus the $6,000 subsidy). A citizen making $100,000 would end up taking in $86,000 annually ($100,000 minus $20,000 in taxes plus the $6,000 subsidy). A citizen making $1,000,000 would end up bringing in $806,000 ($1,000,000 minus $200,000 in taxes plus the $6,000 subsidy). And so on.

Friedman only thought that his plan would work only if it were combined with an even more radical proposal: the cash subsidy received by each citizen should completely replace every other form of social welfare for the economically disadvantaged. If the negative income tax were adopted, Social Security would have to be abolished, as would Medicare, Medicaid, food stamps, and all other programs of social welfare. Minimum wage laws would also have to be repealed.

Under this proposal , the government would essentially wash its hands of taking care of economically disadvantaged citizens, who would then have to provide for themselves using their basic subsidy and whatever their own labor could earn. If a low income person chooses to spend his $6,000 on basic household necessities while working to improve his own economic situation, all well and good. But if they wanted to spend their $6,000 subsidy on alcohol, they'd better hope that their families, churches, and charitable organizations will step in to help them, because the government will not.

It should be pointed out that government assistance to such people as wounded veterans, physically and mentally handicapped people, and people in certain other categories would not need to be affected by the proposal. The social welfare programs which would be replaced by the basic subsidy would only be those directly involved in assisting the economically disadvantaged. It also would not affect such governmental actions as environmental regulation, workplace safety standards, and other such matters.

To Friedman's desire that the negative income tax replace all other forms of government social welfare, I would add a stipulation that the flat nature of the income tax be absolutely binding. The proposal would only work if there were no longer any write-offs, loopholes, or deductions of any kind. Every citizen would have to pay the agreed upon percentage of their total income. One's tax form would be a single page, on which one reported how much money they made over the course of the year, how much money they consequently owe the government (which could be calculated with a few pencil scratches on the back of an envelope), and their check.

Adopting a negative income tax would allow for a massive reduction in the administrative overhead of the federal government. The bloated bureaucracies within the Internal Revenue Service and the vast social welfare agencies would either be massively downsized or abolished altogether. Needless to say, this tremendous reduction in the size of the federal government would greatly ease the budget pressures our country is currently enduring, and remove the burden of an unnecessarily big government from the backs of the American people.

Although the negative flat income tax has been widely discussed since the 1960s, its implementation has always proven politically impossible. Conservatives dislike the notion of giving a cash subsidy to all citizens, while liberals believe that individual citizens cannot be trusted to provide for themselves with the subsidy alone. Politicians of all stripes recoil from the radical nature of the proposal, being instinctively fearful of change and recognizing that the resultant massive downsizing of the government would greatly weaken their own power and influence.

But radical though it might be, the negative flat income tax proposal is no more radical than many of the proposals of the Progressive Era, the New Deal, and the Great Society were in their days. It is an idea on which rational and pragmatic conservatives and liberals can agree. It has the potential to completely revolutionize the relationship between the federal government and the American people, remaking it into a much healthier and more beneficial relationship that is has been over the course of the past century.

It's high time that the negative flat income tax be dusted off and placed before the American people as a serious alternative to the current system of taxation and social welfare.

Thursday, July 21, 2011

Wither The American Space Program?

When the Space Shuttle Atlantis rolled to a stop on the runway at Kennedy Space Center early this morning, a disappointing and disturbing reality came to pass: as of that moment, for the first time in decades, the United States no longer had a manned spaceflight program. With the end of the Space Shuttle program, we have become dependent upon Russia to ferry our people to and from the International Space Station. This is not the result of any technical problem. Our great republic, which was the first nation to land human beings on another world, has made a deliberate decision to step away from the exploration of space.

This is not to say that the Space Shuttle program itself should have been continued. The Space Shuttle achieved a great deal in its three decades of operation, including the deployment and maintenance of the magnificent Hubble Space Telescope and the launching of several successful interplanetary robotic probes. But it was a flawed machine whose cost was enormous and whose unsafe design cost the lives of fourteen brave explorers. It is right and proper that the Space Shuttles be sent into honorable retirement.

The mistake we have made is that we have not properly planned for the future of the American space program. For manned spaceflight, there does not seem to be any clear or specific post-Shuttle plans on drawing board. True, the Obama administration has expressed a welcome desire to shift routine launches into orbit to private companies and has described its desire for NASA to invest in new technologies that will make manned spaceflight easier in the future, while Congress has been prodding NASA to develop a new heavy lift vehicle at some point in the future. But in the absence of any clearly-defined plan, all this is nothing but talk.

The only silver lining to all this is that the final end of the Space Shuttle program provides us a unique opportunity to reflect upon the dismal state of the American space program. It is past time that we cut through the ambiguity and indecision that has plagued American space policy in recent years and come to a consensus on a solid, sustainable, and worthwhile plan of space exploration that can be embraced by Americans of all political affiliations.

Any worthwhile American space policy must include a continued investment in our spectacularly successful exploration of the Solar System using unmanned spacecraft. NASA, to its credit, has big plans in this field for the coming years. Juno, a probe which will explore the Jupiter system, is scheduled to be launched this summer. The rover Curiosity, far larger and more advanced than earlier rovers, will be launched to Mars sometime in the fall. New Horizons, launched several years ago, will become the first spacecraft to fly by Pluto in a few years. Ambitious plans for a joint American-European set of unmanned spacecraft to Jupiter, possibly including participation by Russia and Japan, are now on the drawing board.

These missions will build on ongoing efforts that have already helped revolutionize our scientic understanding of the Solar System. Already, there is a veritable armada of robots orbiting or roving on the surface of Mars. The Cassini continues its remarkable exploration of Saturn and its moons, the Messenger probe has recently arrived in orbit around Mercury, the Lunar Reconnaissance Orbiter continues its intense study of the Moon, and the Dawn spacecraft has just gone into orbit around its first exploratory target in the heart of the Asteroid Belt. The unmanned robotic exploration of the Solar System has been an amazingly successfully undertaking and is something in which every American should take great pride.

But what of the future of American manned spaceflight?

In 2004, President George W. Bush proposed creating a replacement launch system comprising the Orion spacecraft and the Ares rockets, which would first set up an outpost on the Moon and eventually dispatch a human expedition to Mars. It was a sound plan which, had it succeeded, could have completely reshaped human space exploration. But it fell victim to administrative mismanagement and inevitable cost overruns and was essentially cancelled by President Obama in 2010.

In retrospect, Obama's decision to simply cancel the project rather than revitalize and renew it may turn out to be one of the great mistakes of his administration. Former astronaut Gene Cernan, the last man to step foot on the Moon, has called Obama's manned spaceflight policy a "mission to nowhere."

Some advocates of space exploration believe that the President should issue a dramatic statement that gives a specific goal and deadline for the American space program. This is exactly what President Kennedy did in 1961, which he challenged America to land a man on the Moon and return him safely to the Earth before the decade was out. But we don't live in 1961. The challenge met by the Apollo Program was made against the political backdrop of the Cold War, when the American people considered it critical that we "beat" the Russians to the Moon. If President Obama were to go on TV today and challenge America to land men on Mars by 2030, most Americans would simply yawn and change the channel.

So how can we inject our faltering space program with the necessary energy and excitement to give it a chance of success? Simple: tell the truth. Rather than portraying the space program as nothing but a big science project or, at best, a patriotic operation whose only goal is to plant a flag where it has never been planted before, the advocates of space exploration should be emphasizing the potential benefits that a successful space program could bring to the American people and, indeed, to the world as a whole.

I'm not talking about the much ballyhooed "spin-offs" from the space program, which entirely miss the point of the space program. I'm talking about real direct benefits: space-based solar power, obtaining helium-3 from the Moon to power fusion reactors, mining asteroids for their effectively infinite sources of minerals and metals. In other words, I'm talking about bringing the resources of the Solar System into the economic sphere of the human race. In the long run, decades or perhaps a century from now, the fruits of a vigorous and effective space program could be so immense as to fundamentally transform the lives of every human being on the planet for the better.

Advocates of a strong space program may think of these things often, but they are reluctant to talk about it in the public sphere. To most citizens, these ideas sound more like science-fiction than proper public policy. But history is full of ideas which once sounded crazy and are now established fact: cutting a canal through the Isthmus of Panama, creating energy by splitting the nuclei of atoms, building a railway tunnel under the English Channel, or, for that matter, landing a man on the Moon and returning him safely to the Earth.

We need a space program worthy of our great republic. We should be developing a replacement for the Space Shuttle that will allow us to send astronauts into space in a safe and affordable manner. We should be laying plans for returning to the Moon and landing on Mars. We need to reclaim the limitless ambition and energy which has made our country great in the past, and which could make it great once again.

It is often argued that a drawback to representative democracy and free market capitalism is their inability to foster long-term planning, as they obviously focus on short-term objectives. When it comes to the future of the American space program, we have to begin thinking of bigger things than simply creating jobs in eastern Florida, northern Alabama or southeastern Texas. A great nation like the United States needs to have a great space program that will eventually bring forth unheard of progress and prosperity. That is a goal worthy of a grand alliance between Republicans and Democrats. And despite all the problems our country is currently facing, the time to start is now.

Monday, July 18, 2011

We Need an Army More Suited to Our Nation

The Founding Fathers were men of the Enlightenment, which meant that most of them had an engrained suspicion of large standing armies. Not only did a large standing army create a massive burden on the national budget, but it could potentially entice the national leadership to military adventurism of the kind undertaken by the Bush administration in Iraq. Even worse, a large standing army could potentially be used by the political faction in power to suppress the opposition by force, as Alexander Hamilton threatened to do to the political followers of Thomas Jefferson. Being well-versed in classical history, many of the Founding Fathers worried that a large standing army which was more loyal to its commander than it was to the state could bring down the legitimate government, as the armies of Marius, Sulla, and eventually Julius Caesar had done to the Roman Republic.

Alexander Hamilton aside, if the Founding Fathers could see the American military of the modern age, they would be very confused and not a little frightened. In 2011, the United States is by far the world's dominant military power. Indeed, the military budget of the United States is roughly as large as the rest of the world put together. While it is basic common sense for the nation to take adequate measures to guarantee its security, the massive American military expenditures every year are simply absurd, especially in an age of severe budget pressures and a rapidly increasing national debt.

While the Republicans and Democrats in Washington wrangle over the proper mix of tax inceases and spending cuts necessary to put our fiscal house in order, it is imperative that we put big reductions in military spending on the table, and the best way to achieve this is through a complete restructuring of the United States Army.

The current regular United States Army is made up of ten divisions, a number of independent brigades or regiments, and many independent smaller units. The personnel for these units are full-time regular soldiers, a substantial portion of whom intend the Army to be their lifetime career. Regular full-time strength of the Army is around 550,000 men. The Army Reserve, which is under federal control, contributes another 200,000 men.

Previously, this blog has raised the obvious question of why we have such an extensive network of permanent American military deployments overseas, including tens of thousands of soldiers in places like Germany, South Korea, and Japan. But why do we have such a large army in the first place? After all, there is no conventional military threat to the United States. Our borders are protected by two enormous oceans and two friendly and militarily weak neighbors. Even if our army was no bigger than Belgium’s, a successful foreign military invasion of the United States is about as likely as Bolivia invading Turkmenistan.

For a sound military policy, the United States would do well to go back to the ideal of a small army backed by a large militia system, which is precisely what existed in the early days of the Republic. The concept was quite simple: militias organized by the individual states would be used by the state governors to deal with immediate emergencies, such as Indian attacks or domestic disturbances, while only a small federal army would exist. In the unfortunate event of a major war with a foreign power, the militia units would be brought into federal service, with the regular army serving as the core of the wartime force large enough to win the war. When the war was over, the militia units would leave federal service and return to the states.

The idea of a national defense secured by a small regular army supplemented by militia units, which can be quickly expanded if necessary, has achieved great success in many countries. Indeed, it is the concept behind the structure of the Israeli Defense Forces, which has proven to be an astoundingly successful military force over the last six decades. And the United States has a ready-made organization to transform our current, bloated military into a much more suitable and affordable fighting force: the National Guard.

The Army National Guard has eight divisions and a large number of independent service brigades, with a total strength of about 450,000. Unlike the personnel of the regular Army, the men and women of the National Guard are not full-time professionals, but reservists. They serve, as their motto states, "one weekend a month and two weeks a year." When not training or on actual duty, the men and women of the National Guard are ordinary citizens, working ordinary jobs and living ordinary lives. During peacetime, they may be called into service by their state's governor in the event of an emergency, such as civil unrest or a natural disaster, but they can also be called into federal service in the event of war.

Recently, National Guard units have served with a high degree of effectiveness in both Afghanistan and Iraq. At any given time, between a quarter and a half of all American personnel in the conflict zones have been members of the National Guard, and by all accounts the performance of the National Guardsmen has been outstanding. The successful and effective service rendered to the country by the National Guardsmen in these conflicts should forever put to rest the assertions by some that volunteer reservists cannot make effective soldiers.

The age in which we live calls for a complete revamping of America's military policy, and the National Guard should play a major role in this. An ideal policy would include a substantial reduction of the active-duty military by converting perhaps half of the regular divisions and brigades of the United States Army into National Guard formations. Our grand strategy should thereafter rely less on the regular standing army and more on the National Guard. As part of this shift, we should obviously terminate most, if not all, of our overseas military deployments. In the unlikely event of a war with a major foreign power, the National Guard could serve as the core of a great national army, and would be returned to its ordinary state once the war was concluded.

Such a policy would allow the United States to maintain a more-than-sufficient ability to defend itself, especially as our security is mostly dependent upon strong naval power in any event. It would also allow us to significantly reduce military expenditures, vastly relieving pressure on the federal budget, which is a much greater threat to the American republic than any foreign enemy. It would remove the temptation for military adventurism that brought such disastrous results to the country during the Bush administration. Finally, American society would also be enriched by the contributions of hundreds of thousands of citizens whose energies would otherwise be sadly devoted to destructive ends.

Saturday, July 16, 2011

Republicans Need To Compromise In Debt Ceiling Showdown

Take a look at today's weekly address by President Obama:

The President is quite correct when he says that solving the budget crisis will require both spending cuts and tax increases. He is also quite correct when he points out the necessity of Republicans and Democrats to compromise with one another in order to put our nation's fiscal house in order and that neither side is going to get everything they want. That's how public policy is supposed to get done in a country like ours.

In the negotiations that have been undertaken between the two sides, President Obama has been willing to put a lot on the table, including big reductions in Medicare and Social Security that have some members of his own party screaming for his head. In exchange, he has asked for the Republicans to agree to closing certain tax loopholes that benefit wealthy Americans. Rather than agree to what any rational and logical person would quickly recognize as a great deal, the Republican leadership has remain fixated on their ideological obsessions and refused the President's offer.

Because of this Republican obstinacy, the specter of a default by the federal government is hanging over our heads. Such an event could very well plunge the global economy into a more severe credit crisis than the one we experienced in 2007-09. If the Republicans insist upon remaining on their current path, they could well be responsible for a complete economic catastrophe not only for America, but for the entire world. The American voter will certainly remember that when November of 2012 rolls around.

In the long run, the Republicans are correct in wishing for a smaller government and lower taxes, secured by a Balanced Budget Amendment to the Constitution. But to meet the immediate crisis, a deal must be hammered out between the two sides. President Obama is offering the Republicans a good deal; their failure to accept it remains not only utterly inexplicable, but frightening in the extreme.

Monday, July 11, 2011

Market Access Program Should Be Defunded

As both Republicans and Democrats ineffectually squabble in Washington over where and how to cut the federal budget, innumerable programs that should logically be on the chopping block are being completely overlooked. One of these is the Market Access Program (MAP), which is run by the Department of Agriculture. Since it's creation in 1978, MAP has cost the American taxpayer about $3.4 billion, and currently expends about $200 million every year.

According to the Department of Agriculture, MAP "encourages the development, maintenance, and expansion of of commercial export markets for agricultural commodities" through the use of "promotional activities for U.S. agricultural products." The Department goes on to say that the activities financed by MAP subsidies "include consumer promotions, market research, technical assistance, and trade servicing."

To put it in simple terms, the federal government is subsidizing corporate advertising campaigns in foreign countries. It amounts to a financial giveaway by the government to wealthy corporate interests to the tune of $200 million a year. Though they may publicly claim to adhere to capitalism in the tradition of Adam Smith and decry any governmental interference in the economy, the big corporations are always more than happy to fill their coffers at the taxpayer's expense whenever they get the chance.

It is certainly not as though the corporations receiving these subsidies need the money. According to the group Taxpayers for Common Sense, the companies which receive these subsidies include McDonald's, Nabisco, Fruit of the Loom, and Mars. These companies generally have more money than they know what to do with, and they certainly do not need the help of the federal government in marketing their products to overseas markets. If they want to advertise overseas, more power to them. Let them pay for it themselves.

MAP should be immediately defunded. Not only is the program a classic example of the corporate welfare we need to eradicate from government, but it will save taxpayers $200 million every year. This may not sound like much when we have a national debt of $14.2 trillion, but every little bit helps. As the old Chinese proverb goes, the man who removes a mountain begins by carrying away small stones.