What do economists REALLY want?

captureThose that read my blogs here might have picked up on my dismay that so much of society and politics seems increasingly indifferent to evidence and expertise as a way of determining what is true and what is not…what is workable and what is not. It seems that many people’s political or religious ideologies or simple gut feel is as high a bar as they need or want to make every decision or to define every position.

There are issues, though, that are very important where we really should seek out the experts and the evidence to make sure we are not going down the wrong road. It takes some effort to seek evidence though. It is well documented that we shun evidence contrary to our existing beliefs and seek out information that supports our beliefs. This evidence filtering is known as “confirmation bias” and is why those that watch Fox News and MSNBC stick with their respective cable channel. [Note: I don’t claim that each of those sources are similarly biased] It is unpleasant to confront disconfirming evidence because it doesn’t give a hoot about how good you feel or what you believe. Richard Feynman famously said in a lecture

“It doesn’t matter how beautiful your theory is, it doesn’t matter how smart you are. If it doesn’t agree with experiment, it’s wrong.”

Nobody likes to be wrong.

Now let’s look at U.S. economic policy. This is a matter of great import. Candidates will have you believe that the other person’s plan will lead to either a bread-line socialist state or a plutocracy consisting of aristocrats and peasants. To be sure; there is a lot at stake. Economic policy has a significant impact on the economy, jobs and the financial well-being of you and me. Look what happened post-9/11, post-banking, post-housing and the like. When the economy suffers, the population suffers. Economic policy is too important to leave to ideology or gut feel. We need to seek out experts and heed their advice whether it jives with our beliefs or not.

I do not plan on making this a treatise for or against any one candidate’s policies.  Instead I want to relate an interesting story spearheaded by the folks over at Planet Money back in the 2012 presidential election cycle. They sought out some well-credentialed economists, put them in a room and had them hash out a dream candidate with an economic plan with the best chance of improving the economy. If, as is said continually, the economy is “issue number one”, then wouldn’t we want to take a serious look at that dream candidate…or at least the policies? Well the results might surprise you. The dream candidates economic plan, agreed on by this amply qualified gaggle of econo-warriors [ed. I can’t find the link to the list of economists any longer], has six major points. They are:

One: Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger tax breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?

Two: End the tax deduction companies get for providing healthcare to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the healthcare market fairer.

Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that’s good. Don’t tax companies in an effort to tax rich people.

Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you’re taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.

Five: Tax carbon emissions. Yes, that means higher gasoline prices. It’s a kind of consumption tax, and can be structured to make sure it doesn’t disproportionately harm lower-income Americans. More, it’s taxing something that’s bad, which gives people an incentive to stop polluting.

Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.
So! What are the chances of that dream candidate being elected? Exactly zero…and least in today’s climate. It’s not that the ideas are without merit. In fact, I have warmed to every one of them depending on their implementation. If you start to research these proposals as I did, you may find that the upsides and downsides of each of them does not comport with your ideology or gut feel (they didn’t with me). They are worth pondering. What do you think?

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About Mike Bruno

I live in Geneva, Illinois and enjoy discussing contentious topics (what's the point otherwise?). I am very involved in my community and historic preservation. I write here as a way to explore my own positions. I am a computer engineer that has been in the business since floppy disks had a capacity of 720 KILObytes...and were actually floppy. I am something of a science evangelist. If you like (or really dislike) what you read here, say so...and point your friends here. Thanks! The opinions expressed here are my own and do not necessarily reflect any persons or organizations with which I might be affiliated.
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