Israel 'n' Egypt

I haven’t seen anything as arrogant, tone-deaf, and probably doomed to quick refutation as the Israeli response to the situation in Egypt since … the Bush administration. Seriously, it’s like Bush and Bibi were cut from the same stock.

I’m still not convinced Mubarak is out or that his successor will vindicate the dreams of U.S. liberals, but somehow I don’t think that Bibi’s pro-Mubarak efforts are such a good idea right now, nor are his American henchmen’s attempts to smear El Baradei.

If any country’s leadership seriously believes it is in their best strategic interest to prop up a dictator in a neighboring state that either (a) is so unstable as to cause such protests and/or (b) cannot stop them, then I think that country has gone mad.

Oh, and, also, this entirely internal civil revolt somehow proves that Bush was right to invade Iraq to remove weapons of mass destruction, er, bring democracy to the middle east.

Please Stop.

I really wish the wonkosphere, comprised of many people whom I enjoy reading and respect greatly, would quit trying to invent ways to fuck with the housing market. Yes, in an ideal world (I guess) there wouldn’t be a tax subsidy for homeowners nor would there be a government agency “artificially” lowering mortgage rates.

But this isn’t an ideal world. And maybe you should focus your energies on ways to punish the grifter class instead of the middle class on your wonkish (self-flagellating?) quest to set things in order.

Of course both the mortgage market and the tax deduction are politically impossible to change, but there is also no point. How about a 1 time net worth tax of 50% on everyone who owns more than $5m to pay for debt reduction for the rest of us? I mean, that’s a pinko socialist redistribution, but at least it goes downward. Making a bunch of middle class homeowners poorer so that “the market” isn’t distorted is just an upward redistribution all for some sort of clockwork ideal.

Please. Just stop it.

There are about 1,000 other more important things to fix right now.

Egypt Update

I said:

But wouldn’t it be interesting if instead of backing the dictator, the US got behind the revolutionaries, Islamists or not? It’s the one thing we haven’t tried.

They said:

White House press secretary Robert Gibbs called for an end to violence and the lifting of the Internet ban. Secretary of State Clinton insisted that “leaders need to respond” to their peoples’ calls for democracy; Sen. John Kerry, who chairs the Foreign Relations Committee, went further, explicitly calling for free and fair elections. On top of that, the Obama administration is publicly threatening to reconsider the $1.5 billion in annual military aid we give Egypt, which, as I noted earlier today, was actually the initial result of Egypt’s becoming the first Arab country to make peace with Israel.

I still think the news wants to make a bigger deal of this than it will be. So many of these “revolutions” have come to nothing. Nothing happened in Pakistan after Bhutto was killed. Nothing happened in Iran after the elections were rigged. Whatever happened in Lebanon after the assassination there seems to have reversed itself.

I also wonder if the revolutionary governments will care if the US gets behind them or not. But it might be a good start. Like I said, it’s just about the only thing we haven’t tried.

Not So Fast On Mortgage Interest Deduction

The wonkosphere seems to be mostly united in thinking that the mortgage interest deduction is a bad idea. Not so fast.

Yes, this is a form of middle-class welfare that hinges on the intellectually troubled notion that home ownership is a net benefit to everyone, makes for higher aggregate property values and therefore a benefit to all, when it’s clear by now that there are a lot of social consequences including sprawl, isolation, the very neighborhood blight it was supposed to fix, and so on.

But it’s not that simple. Families don’t think like economists or budget wonks. Conversely, any time you hear the government being urged to think like families, run. Families think mostly in terms of what their monthly mortgage payment will be first. Knowing that you get to deduct a big part of your biggest expense every month means you can usually pay a little bit more for a house than you could for a rental. That means you can buy more house. That means there is more demand and prices stay higher…

…and that means that there is more property tax revenue for states and local governments. Anyone who hasn’t been trapped in ice for the last 5 years knows these are the very entities that are in the most danger from The Great Recession. They also directly provide many of the services that people who vote use on a day to day basis. Schools. Fire. Police. Roads. And I don’t think replacing the revenue this will cost them with block grants is going to make anyone feel better. Block grants can be taken away.

So, either show me that this won’t be a problem or tell me how you’re going to replace the revenue. Or else stop it with this talk—which is, as all of the same wonks recognize, politically futile anyway. But it’s also even lacks the justification of being smart policy if it’s going to gank local government.


Color me skeptical on the protests in Egypt. Are they a release valve that, once enough pressure has been released, will fade into nothing? Even if not, would a regime change be a good thing for the US or would the Muslim Brotherhood gain too much control and perhaps even threaten war with Israel?

I am also skeptical this has any significant connection to what happened in Tunisia. That seems to me to be an overly facile connection.

But wouldn’t it be interesting if instead of backing the dictator, the US got behind the revolutionaries, Islamists or not? It’s the one thing we haven’t tried.


FWIW, former Israeli Defense Minister Ben-Eliezer seems to say what I’m saying. He’s not speaking for the Israeli government, but I’m fairly certain that he’s not speaking against their interests. So, this either confirms what I said or is merely a signal of what Israel wishes to be true rather than what is. The point at the end about Mubarak’s power coming from the army–the world’s 10th largest standing army–is well taken.

Anyway, the general lack of concern in Israel is telling, I think. I’ll believe El Baradei is the leader of Egypt when I see it.

Liberal Power Checkers

A family member of mine is in a situation where they might have to walk away from their house. No one is a more honest hard-working emblem of the middle class than these folks. Their house is about 50% underwater and worth not much more than when they bought it over 20 years ago. They are very reluctant to do this because it feels like cheating.

Of course, the cheaters are the bankers who have put folks like this through the wringer with their Bubble Capitalism over the last 30 years. Yet, it is difficult to get most people to see it that way.

I tell that story because I think it is a good representative of overall how liberals feel about power. Liberals are ashamed to wield it. They think this is The Lord of the Rings and they should destroy the ring, not use it. But this sort of technocratic, pragmatic, policy-focused approach is partly to blame for the backwards progress that is costing my relatives their home equity.

By ignoring power and always looking for “the good result,” liberals are playing checkers while the other side is playing chess. A more familiar metaphor is bringing a knife to a gunfight. The problem with that metaphor is that the Democrats win a lot of battles but keep losing the war. The last 40 years have been their Vietnam.

I’m not saying, like, say, Kevin Drum, that we need to necessarily reempower labor. Maybe that’s a good repository of a countervailing power. Maybe it is in state governments. But it is clear now that simply handing over the keys to the financial class and asking through legislation for a few scraps of middle class welfare is only a good strategy when the middle class is worthy of sharing with. Now that they are class to being ignorable, this whole approach depends on some kind of noblesse oblige that has very little history in America.

But worse than not finding a power repository is the angsty proposal to destroy the one last semi-potent source of occasional lefty power in the Democratic Party. Creating a third party on the left would do this.

Third party Presidential candidates have cost a lot of people the office. Everyone seems to remember Ralph Nader, but does anyone remember Ross Perot?

Perot seemed to be the standard-bearer of Republican discontent in the early 90s. He was sort of like a Tea Party without the guns, if you can imagine. And he cost George Bush I his reelection, and he did not help Bob Dole in 1996 even if he was much less relevant.

So, why on earth isn’t the left agitating to create a center-right party that would draw off the Evan Bayhs and Joe Liebermans and the Olympia Snowes, but tilted to the right enough to create the fault line mostly within the Republican party the way Perot did?

Because they’re constitutionally incapable of thinking in terms of power instead of ideology. And this is why there is no left wing in America, not because there is no labor movement. Don’t mistake cause for effect.

The Tax Tax & The Simple Accelerating Tax

We’ve all heard of the clever branding of the estate tax as “the death tax.” But what about the ridiculous expenses and complications of paying taxes themselves and the perverse incentives they create?

I have spent the last year making sure that I knew where every single last penny I have came from and where it went. I have receipts. I have spreadsheets. And in doing this, I was able to do pretty good with my exemptions. My tax bracket, based on gross income should be 25%. People go around imagining in their head that they actually pay that rate. But of course, they only pay their maximum rate on the increasing chunks of their money. My “adjusted gross income” is still in that same rate. But then I take deductions and I can get down into the 15% rate. Then credits get added onto that. The 15% rate’s top end is within kissing distance of the AMT exemption, so if you pay any tax at all, you probably won’t get hit there either… and AMT has deductions too, after all! California has a more straightforward rate for me of 9.3%.

By the time all is said and done, I pay about 5% of my gross income in state and federal income taxes. A professor in law school I had made fun of us for renting. She told us we were suckers because we didn’t get the mortgage interest tax deduction. True, but we also don’t pay property tax. I pay about as much in property tax as in income tax, and, off the cuff I think it just about washes with the benefit of the mortgage interest deduction. I also know within a pretty good degree of accuracy how much I pay in sales taxes, too. Throw in Medicare. Put it all together and I pay about 11% of my income in taxes.

But a lot of people in my position would say they pay 25%. Then they go–oh shit, state taxes too!!!–another 10%. It’s one third! And Social Security! I hear so-called serious people on TV say that it can approach 50% for some people. By some people, they mean the top 2.5% of income earners who probably are even better at not paying taxes than I am, and I’m pretty good. I just use deductions. I don’t channel my income in weird ways, or even doing anything as relatively simple as get things at a lower capital gains rate.

It’s all a lie. And it’s a useless lie too. No, it’s an evil lie.

I like the idea that everyone should have to figure their effective tax rate on their returns. I like the idea that everyone should get a receipt from their taxes to see what it goes towards as some have suggested. But I would like even better if the government could figure out a way not to charge a flat tax, but what I’m calling a “Simple Accelerating Tax.” A flat tax means someone making $1,000,000 a year pays the same as someone making $50,000 (assuming there are no deductions). Let’s say that’s 20%. That leaves the first dude with $800,000. Still very nice. But it leaves the second guy with $40,000. That’s a huge difference. What I’m calling a “simple” tax is one without deductions and credits or pre-tax dollars or any of that shit. The trouble with “simple” taxes is that we use a marginal system to tax different amounts at different rates. But the barriers are more or less artificial. Say the thresholds are at $10,000, $100,000 and $500,000 at 10%, 20%, 30%, and 40%. If I’m the first guy, I keep $41,000 this time. That’s an extra trip to the grocery store and a tank of gas every month. The second guy will only keep $653,000 this time. Still awesome. But, why is someone making $101,000 so different from someone making $99,000? They aren’t.

Using a little calculus, we could still have progressive taxation, but without clunky steps. It would accelerate. The higher it gets, the higher it gets. The resolution could go down to the dollar or the penny. We could fit a curve to start at 0% at $0 and rise to 33% at $1,000,000 and above, but not on a straight-line. After 100k (or whatever, adjusted for inflation, of course), it would start to get closer. Imagine a parabola on its side.

Under this scenario, the first dude might pay 9.9212% and keep about $45,000. Now, that’s a huge difference for him. The second guy would keep $666,666 of his money. Almost the same as the second example.

This would be amazingly simple to do. No one would have to know calculus. In fact, no one would have to know math at all. Just match your income to what’s on the table. It would be so easy, it would be very unlikely your withholdings would be off by much. Your tax return would be the size of a postcard.

The entire revenue side of the federal budget would be drastically simplified. Just pick the right number to balance the budget or stimulate the economy as needed. Collection would be simple. The whole transaction cost based economy of tax preparers would wither and people in the financial industry could learn how great retraining and labor mobility is for once. Congress could even still pay people to do things they like by sending them checks if they fill out a claim form. Example: instead of, say, a child tax credit, they just send you a check if you have a kid. Or, whatever. (In other words, lobbyists could still achieve their results.)

But the way it is now, we pay a huge “tax on tax.” Sometimes it’s easy to quantify, like the amount we pay a tax preparer or the stamp we put on what we file, or the tax software we use. But most of the time, the keeping of receipts, dealing with all of the forms we get, and doing all of the preparation (not to mention how much waste, fraud, and abuse–do I get points for the GOP buzzwords there?–is lurking in all of that) involves a lot of wasted time, which has value too.

The flat tax is a backdoor boondoggle for the wealthy. Simplified taxes have rough steps. What I’m proposing has neither weakness.