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Landsburg's 2 Percent Solution
Like his previous columns,
"Tax the
Knickers Off Your Grandchildren," by Steven E. Landsburg, took a simplistic
mathematical model with little connection to reality, extended it to absurd
lengths, and stated that the conclusions are the only reasonable social policy.
He truly embodies the worst stereotypes of both economists and radical
conservatives.
"If U.S. per capita income
manages to grow in real terms at a plausible 2 percent per year, then in just
400 years, the average American family of four will enjoy a daily income of $2
million," he writes. Using this logic, in 1597, the residents of my hometown of
Pittsburgh should have let their economic policies be dictated by their
estimations of what would happen here now. In addition, what Landsburg didn't
say is that no society in human history has ever sustained very rapid economic
growth for 100 years.
Landsburg goes on to berate
and insult those who disagree, using phrases like "their pathological concern
for future generations" and "an epidemic of hysteria," ending the piece with
the diagnosis of "a mild air of intellectual schizophrenia" for those of us who
don't subscribe to his beliefs.
In addition to his
simplistic model and the sheer arrogance of his prose, Landsburg spews
anti-conservationist nonsense that demonstrates a total ignorance of history.
There are at least a dozen examples of man-made ecological disasters that led
to famine and widespread devastation, and at least a couple of major
civilizations that collapsed under the weight of ecological mismanagement. I'd
bet that each famine-wracked region in history had at least one person like
Landsburg who had been predicting 2 percent economic growth for centuries and
ridiculing anyone who tried to consider the consequences of their actions.
One-third
of our government budget now goes to pay the interest on the debt that
Landsburg's friends ran up just 10 years ago. Most of that money went into
short-lived schemes that no longer have measurable benefits (if they ever did
to most taxpayers), yet the interest on that debt will dominate government
spending for the foreseeable future. What Landsburg would have us do is pay
this interest by borrowing more each year, and continue to do so indefinitely,
or until the inevitable collapse, which he presumes would take over 400 years
to happen. His silly little savings-account example does nothing to hide the
staggering stupidity of that policy.
--Dr. Daniel
Schwarcz
Tax the
Trees
"Tax the Knickers Off
Your Grandchildren," by Steven E. Landsburg, seems less like a
well-reasoned editorial on economics than a weak rationalization for
shortsightedness. He begins by suggesting that if the United States could
achieve growth rates reported by South Korea in the past couple of decades, our
grandchildren would eventually be earning $2 million a day. But it seems
misleading, verging on irresponsible, to compare the economies of the most
powerful nation on earth to a Third World country recently infused with the
newfound growth of capitalism. It's akin to saying that if the Chicago Bulls
showed the same growth as the Raptors, they'd eventually be winning more games
than they're playing.
Based on this faulty
assumption, Landsburg then goes on to make the assertion that since our
grandchildren are going to be so rich, they won't mind being reduced to seeing
things like trees only in photographs, and they "might prefer inheriting the
proceeds of economic development to inheriting the redwoods," anyway. But this
seems to be bred from the same kind of "intellectual schizophrenia" he
attributes to those who would disagree with him: If economic growth is
dependent on cutting down trees, what happens when the trees are gone, as he
himself concedes will eventually happen? And if we can continue at this superb
rate of growth after there are no more trees to cut, couldn't we continue with
this rate of growth by stopping the cutting now?
He sees this "pathological
concern for future generations" carrying over to the deficit as well, and has a
similar defense of our spend-happy ways and insatiable need to consume: Our
grandchildren are going to be a bunch of spoiled, rich little brats,
undeserving of all the concern we've been giving them.
What if
our economy doesn't grow at the rate of South Korea's, or even 2 percent a
year, but stagnates, or, God forbid, goes down despite all the cutting of taxes
and trees, and racking up of deficits? Then, I suppose those of us who support
income redistribution wouldn't look so hypocritical and our grandchildren would
have big debts, higher taxes, no trees--and be poor.
--Dylan Otto
Krider
Steven E.
Landsburg Replies:
Schwarcz thinks that the
residents of Pittsburgh did the right thing in 1597 when they chose not to
worry too much about how their consumption would affect their descendants in
1997. He's right; it would be absurd for people living in 16 th
century conditions to eat less well so that people living in 20 th
century conditions could afford an even more extravagant lifestyle.
Replace the 16 th
and 20 th centuries with the 20 th and 24 th , and
you'll see that he's making the same point I am.
Schwarcz's statement about
rapid economic growth never lasting more than a century is incorrect. The world
has enjoyed rapid economic growth for the past 200 years; worldwide per capita
income is now 10 times what it was in 1800. That growth is fueled by
technological progress, and technological progress is, if anything,
accelerating.
On a completely separate
issue, Schwarcz confuses the effects of government spending with the effects of
government debt. Government spending consumes resources. It consumes an equal
amount of resources regardless of whether it is paid for by debt or by
taxation.
He has in fact made the
standard freshman-economics error of viewing the interest on the debt as a
cost, without accounting for the offsetting benefit: By keeping current taxes
lower than they would otherwise be, the debt allows people to have higher
savings and therefore to earn additional interest. That benefit offsets
the cost. This is not a matter of sophisticated economic theory; it is a matter
of simple arithmetic. Not even the federal government has the power to override
the laws of arithmetic.
Krider is absolutely correct
that achieving and maintaining South Korean growth rates for the next 400 years
is unlikely. But that's an observation about an essentially parenthetical
remark. The thrust of my argument--and the numbers that I used in the
mathematical hyperlink--assumed a plausible growth rate of 2 percent.
Finally,
Krider worries that the economy might not grow at 2 percent, in which
case policies based on that forecast will have been mistaken. Sure. It's also
true that the earth might get destroyed by an asteroid in 10 years, in
which case all our sacrificing for future generations will look like a big
mistake. It would be silly to say that we should consume everything we've got
just because an asteroid might destroy us, and equally silly to say that
we should engage in an orgy of conservation just because economic growth
might slow to zero. We make the best estimates we can and plan
accordingly.
Public
Donations
Franklin Foer's "The White House and the Hatch
Act" adopted the conventional response toward this affair: to find a way to
sweep this unseemly activity under a rug.
The current cycle of shock
and horror about White House sleepovers in the Lincoln Bedroom in return for
large contributions to the Democratic National Committee is amusing. I remember
this same response when the Republican Conference chairman, Rep. John Boehner,
was caught passing out checks from tobacco lobbyists on the House floor. Howls
of iconoclasm and protests against tainting the official chamber with Tammany
Hall vote-buying rang then and ring now.
The corrective response
offered by most media to both of these events is the exact opposite of what it
should be. Rather than prohibit the solicitation of campaign contributions at
federal buildings, the Hatch Act should be amended to designate these "hallowed
places" as the only sites at which a candidate may solicit or accept a campaign
contribution. It ought to require that the White House rotunda be the only
place at which the DNC or the president may accept large contributions, and
that the floors of the House and Senate chambers be the only places an
individual or PAC may give a large contribution to a member of Congress.
The law ought to also
stipulate the check(s) must be presented in a small, white canvas sack with a
large "$" sign on it. The burgeoning surveillance possibilities of microchip
technology ought to be applied toward a public good. The sergeant-at-arms or
Marine guard at each site should attach a tag with a microchip to each sack
that emits information about the contributor, the recipient, and the amount of
the contribution. Then C-SPAN could run a stock ticker ribbon at the bottom of
the screen conveying information on the current "trades."
Attempts
at prohibition or limiting this activity have shown the proclivity of its
members to simply move it underground to Washington hotels and Florida resorts
in order to skirt responsibility for its appearance. By forcing candidates to
conduct their fund raising at the places of the peoples' business, politicians
will have to accept responsibility for the appearance and fact of the tie
between influence and money instead of maintaining the fiction of a
separation.
--Kris Lipman
The Check
Stops Here
In reading the revealing
article "The White
House and the Hatch Act," by Franklin Foer, one major issue seems to jump
out at me. We have heard Vice President Al Gore say that he has violated no
law, and that may be true, within the narrow letter of these laws. The issue
that bothers me is that, as the supposed paragon of virtue of the Democratic
Party, why does Gore apparently go to the very limit of the definition to
condone his actions?
If it is unlawful for any
government employee, save the president, vice president, and confirmed
appointed officials, to engage in fund raising from a government building, why
do our leaders choose to walk the very thin edge of legality in their political
activities?
What
happened to the concept of a leader being a shining example to the people
expected to follow? Are all now to presume that any activity we choose to
engage in is fine as long as we can find a narrow definition that appears to
exclude us from the responsibility of our actions?
--Lawrence R.
Westin
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