My friend Bill is a raving libertarian who has a visceral dislike of Obama, and now Clinton too. We have had some interesting discussions. Obviously his politics are not mine, which I consider to be pragmatic and center left. I'm not unfamiliar with the basics of libertarian ideology, which can encompass wide range of thoughts. It can be a useful check on the coercive power of government. Bill’s version of it is extreme, and translating it into public policy would, I am convinced, quickly sink the nation into impoverished second world status possibly leading to the breakup of the union. He thinks it would enhance personal freedom and economic opportunity. For whom? Well, it’s left unsaid but the clear implication is for those willing to live as traditional white middle class men.
That aside, our latest exchange was over the size of the national debt, which is obviously the fault of Democrats, especially Obama, the worst president in history. Bill really, really does not like the size of the national debt, a huge number he likes to use as a scary bludgeon. He would like to cut the federal government down to a provider of defense, a builder of limited infrastructure, and a regulator of those things absolutely necessary to the safety of the ebb and flow of otherwise unregulated commerce. He would eliminate the departments of Education, HUD, Commerce, HHS, most of Interior, and a handful of other agencies. His favored weapon? A balanced budget amendment.
The debt is a big number, a little over $18 trillion (it looks even scarier when it’s written out with all it’s zeros), but big by itself means little. It would be a lot less big if it wasn't for the two idiotic unfunded wars launched under the previous administration, or if we hadn't been thrown into the "great recession," but what's done is done, so let's move on. As you know, national debt has to be understood in the context of national income. In our case, national debt is about 1 times national income. It's at the top end of sustainability, too close to the tipping point for comfort, but we've endured worse in times past. Many industrialized nations have higher ratios than that, some by quite a bit, and that is a worry for the future of the global economy. However, this is about our own debt. Bringing down the deficit is part of the solution, and it has been coming down for some time now. If economic growth outpaces what the deficit contributes to debt, the national debt will decline as a percentage of national income, and that's what we want. A balanced budget or budget surplus would be a nice addition, and maybe we can get to it, at least once in a while. Just the same, it's not essential.
The consensus among economists is that national growth of around 2% is what we can expect for the foreseeable future. Anyone who says it can get to 4% or better, and stay there, does not know what he or she is talking about. The key is for national income to increase faster than national debt. What would help make that happen? Within that 2%, whatever we can do to increase the income of the average person will help in three ways. It will reduce dependency on public services, increase revenue flows to the government, and increase demand for goods and services. Whatever we can do to increase the efficiency of the nation’s transportation infrastructure will reduce the cost of doing business while improving on issues of safety and reliability. Bill, of course, doesn’t want increased revenue flows to the government. He wants to starve it into submission. We’re at an impasse there.
He and I would like to see corporate American invest more in job creating ways. I understand that corporations are sitting on trillions of reserve, and claim to be waiting to invest when demand increases. That won't happen until average wages increase. Reagan style economic policies that have been the darlings of the right tend to reward capital more than wages, which certainly benefits people who live off their investments (as I do), but does little for the economy as a whole, and it always leads to greater income disparity, which is one of the reasons for the pickle we're in now. Bill favors old policies that reward the rich, which he isn’t. Maybe he plans on winning Power Ball some day and joining their ranks. In the meantime, giving Reaganomics the heave-ho, what should we do?
We live in a democratic republic, which is a messy, inefficient form of government. Plato thought a benevolent dictator would be better. Aristotle didn’t think much of democracy either. So, being the benevolent person that I am, if I was dictator what would I do? I'd adjust the personal income tax code to create steeply increased rates at the very high end, maybe as much as 70-80% at the top. That would not raise much revenue from top end, but it would be a disincentive to super salaries and an incentive to wage and salary increases farther down the ladder. I would eliminate several of the pass through type exclusions that allow some of the very wealthy to manipulate their way into paying very low or no taxes. I would cut the corporate income tax rate to a level more competitive in the world market, but simplify the code to eliminate the thicket of special privileges granted to industries and individual corporations. I would invest heavily, very heavily in infrastructure and education. Capital gains and estate taxes I would leave pretty much where they are.
All of that would work toward reducing the debt ratio while encouraging wage growth for the educated and skilled middle class. What about the so called lower classes? We are not bringing back union wage factory jobs. Get over it. We deliberately emasculated the unions, and automation has taken over many tasks formerly done by hand. But we can recognize that many of the jobs we now call unskilled actually provide significant value added, and compensate them accordingly. I favor starting with a $15 minimum wage and indexing it. I'd eliminate anti-union state laws balanced with new laws to prevent unions from being as abusively goofy as they were in the mid 20th century, or as they are now in places like France.
Health care? I prefer a system like Canada's. Failing that, I would treat the insurance companies as public utilities, requiring them to insure everyone at fair rates negotiated by the government. Big Pharma? I have no idea.
I'm not sure what I'd do about defense. It might help to start with questions such as: What is the purpose of armed forces, and how does that relate to the world as it is? As dictator it would be a little easier, but in our country it's very hard to crack the "military-industrial complex" that is massively inefficient but even more massively protected by legislators in whose districts plants and bases exist. My preference would be to eliminate unneeded/unwanted weapon systems, reduce civilian and contractor employment, increase employee benefits for the ranks, and fully fund the promises we have made to veterans.
There is one other way to bring down the debt ratio, and that's through controlled inflation. When it works, it works well, but controlling inflation is almost impossible. It's a dangerous tactic.
What will actually happen in the next four to eight years? I don’t know, but am hopeful that the influence Bill and others like him have exercised these last few years will be relegated to the dark corner from which it emerged. I’d like to see congress led by pragmatic members, both left and right, who know they can work out agreeable compromises. Will that happen? We shall see. It might help to rein in high cost lobbying by preventing government employees from becoming lobbyists for five years or more after they leave government service, overturning Citizens United, preventing former members of congress from having floor access, and things like that.