Business As Usual, Sort Of
There are important policy debates to be had, if only there were two sides composed to argue them.
Continuing GOP Immolation
The GOP Members of the House of Representatives met this week to discuss their slow-motion train wreck of a caucus. Reports from the meeting indicate that Representative Marjorie Taylor Greene (Q-CRAZYTOWN) received a standing ovation for disassociating herself with all manner of disqualifying statements and positions that are to be put behind her now because she hasn’t said them since her election. That this woman is a lunatic seems incontrovertible. That her views represent a certain (apparently) incompressible number of voters is not a historical anomaly. The U.S. has always had a lunatic fringe. That they are so easily networked is a feature of the modern age, as is the glee with which the leading lights of this dimness are covered by the press.
What is also different about THIS age and THIS GOP is that it is no longer a fringe. It is the “base”. Parties have made hay for the history of this republic by tarring the entirety of the other party with the excesses of the fringe. It has become too easy with today’s GOP, as what could in the past be easily dismissed as agitprop is now a reasonable and rational position to take vs. the Republican Party. The fringe, to the extent that it continues to exist, is made up of those who publicly adhere to constitutional norms, historical conservative ideology, and quaint notions of civility, propriety, and poise. The extent of this sane wing of the party is unclear, as many simply left the party during the age of Trump. The base is made up of the grievance class, the protectionists, the nationalists, and the populists. Sadly, this is the Republican Party. Fan service to this group animated the lamentable stand of the GOP House in supporting objections to certified state election results and the execrable failure of all but 10 of them to confirm the unconstitutional conduct captured in the impeachment article.
The good news coming out of this meeting was the vote of confidence—overwhelming vote of confidence—in Rep. Liz Cheney (R-WY), who was among the 10 who saw January 6th for the traitorous event it was, and who saw the direct hand of the President in it. A woman of from a good Republican family, Cheney insisted on the vote and was validated by it. The GOP needs more principled leaders like Liz Cheney.
Breaking late, Congresswoman Greene was stripped of her committee assignments in the House, after House GOP leadership failed to impose any discipline on her of their own.
Wealth Tax and Minimum Wage
Because the White House no longer bleeds incompetence and corruption like it did for the past four years, actual important policy debates are beginning to arise, the kinds of debates that spring from having thought and cared about matters of policy. Two ideas that are once again in vogue as the nation begins to wrestle with a possible move to the left are the wealth tax and a raised national minimum wage.
Let’s start with the wealth tax, an idea championed in the Democratic primaries by two of the most left-leaning candidates in the field, Bernie Sanders and Elizabeth Warren. Essentially, a wealth tax would impose a tax on wealthy Americans at a certain level of wealth. That wealth is essentially, net worth. Your house/es, cars, boats, airplanes, etc. Here’s Senator Warren to tell you all about her idea.
There are several problems with the Senator’s approach to redistribution of wealth. The first is that the tax is almost certainly unconstitutional, as this piece by two admittedly liberal tax law professors avers:
The constitutional objection to wealth taxation is based on two clauses that require any “direct tax” to be apportioned among the states based on population. So, since 12 percent of the population lives in California, Californians must pay 12 percent of any direct tax.
For the Warren and Sanders wealth taxes, that would be a deal breaker. To match revenue fractions to population percentages, as the Constitution’s direct tax clauses demand, we estimate that the wealth tax rate in West Virginia — the poorest state per capita — would need to be roughly 10 times the rate in more affluent California and more than 20 times the rate in prosperous Connecticut.
The Warren and Sanders wealth taxes would very likely be classified by courts as “direct taxes.” Alexander Hamilton explained in Federalist No. 36 that taxes on “houses and lands” were direct taxes. Supreme Court majorities have said on at least seven occasions that federal taxes on real property (land and buildings) are “direct taxes.” Congress enacted at least five federal property taxes in the 18th and 19th centuries and apportioned them based on state population each time.
Putting aside the messy constitutional issues, there are straightforward questions of whether a wealth tax is an effective vehicle for raising revenue. This piece from the Manhattan Institute makes this argument nicely. Now, as class warfare, wealth taxes are wonderful tools, allowing the politician calling for it to appear as a man/woman of the people working against all those special interests. The question arises, how soon until Josh Hawley, Ted Cruz, and Marco Rubio begin to agitate for one. Here are some nice bits from the Manhattan Institute:
A dozen European countries had a wealth tax in 1990, but most abandoned them because they were ineffective and expensive to administer. In part, the taxes failed to raise much revenue because wealthy individuals easily moved their assets across borders to avoid taxation. Today, only Switzerland, Norway, Belgium, and Spain still have wealth taxes, but the rates—0.3%–1%, 0.85%, 0.15%, and 0.2%–2.5%, respectively—are much lower than the 2%–6% proposed by advocates such as Senator Elizabeth Warren for the United States. With a small enough rate, there is much less incentive to evade the tax, but far less revenue is raised. Switzerland collects the most from its wealth tax; and it only brings in about 3% of its tax revenue.
AND
A 2% wealth tax may sound small. Senator Warren points out that it is only 2 cents on every dollar of wealth. But it will be levied each year, so it is more instructive to think of it as a tax on capital income. And when you put the tax in income terms, 2% can be enormous. For example, if your assets return 4%, a 2% wealth tax is equivalent to a 50% tax on capital income! Thus, it is not surprising that wealth taxes increase the incentive to move assets abroad, as European nations have experienced. Unlike income, wealth is relatively easy to move and its value is relatively easy to manipulate.
Moving on to the concept of raising the national minimum wage to $15 an hour (a provision in the COVID relief package currently being conjured by the administration), it has been an article of faith among conservatives that the mere existence of a minimum wage makes no sense (where supply and demand should determine the price of labor), but that spreading a common rate across an entire continent of 330 millions of people—is an exceptionally bad idea. Cato Scholar Scott Lincicome had a nice piece at The Dispatch recently that sums up a good bit of modern libertarian and conservative thinking on the subject:
Despite common claims that minimum wage hikes are “essentially costless,” the bulk of academic research still shows that tradeoffs exist and go something like this: Higher federal minimum wages, particularly at $15 an hour, would benefit many low-wage workers but impose significant costs on other workers (particularly those out of the labor force or with the lowest skills), companies, and/or consumers—even if they don’t actually destroy low-wage jobs. (Indeed, that the $15 wage is phased in over several years is a tacit admission from Democratic sponsors that there will be some costs.) The specific channels through which those costs are imposed will vary, but it’s safe to assume that—especially given the current recession—they’ll be most acute for the people and companies already hardest hit by the pandemic, i.e., low-skilled workers and smaller businesses in the leisure/hospitality and accommodation/food industries, and those located in lower-cost states and localities.
There is fertile ground for real policy debates on important questions, and a coherent conservative party in opposition would be organizing to raise these objections and shape legislation that is less harmful to the public good. But that opposition does not yet exist. That it might return is to be hoped for.
Finally….
Senator Ben Sasse with five minutes of sanity.