Monday, November 24, 2008

A Thanksgiving Reflection

In his last sermon before his death Father Alexander Schmemman made a very bold claim, ``Everyone capable of thanksgiving is capable of salvation and eternal joy.'' Bold as this claim may be soteriologically, it is far bolder as an insight into human nature. For we all, by virtue of being created in the image and likeness of God, are created with the capacity to be thankful. We all have the ability to receive the blessings we are given with gratitude, to look those who provide us with the things we want and need in the eye and be thankful. Sometimes we give voice to our thanks. Sometimes we do not. Either way, receiving what we have been given thankfully is something that happens in our hearts and souls, not in our words or deeds. When the words and deeds do come it is because of what first happens in our hearts. If they do not come, it doesn't necessarily mean that our hearts are hard. (Although, it may mean just that.) It may just mean that we are unable or unwilling to express the interior gratitude that we feel.

But one of the amazing things about the human condition is that we can change who we are. While we are all created in the image of God, we are also creatures with souls and bodies whose thoughts, words, and deeds affect who we are in our hearts. Our choices shape us no less certainly than the breath of God that first animated each of us in our mother's womb. When we center our minds on the virtues, our words are virtuous and predispose us to act virtuously. When we center our minds on vice, our words are harsh, spiteful, envious, lustful and predispose us to act shamefully in a manner unbecoming creatures who were created in the image of God.

Over time these choices that we make shape us and mold us for good or for ill. The third century Christian mystic Origen of Alexandria observed that ``The sun, by one and the same power of its heat, melts wax indeed, but dries up and hardens mud: not that its power operates one way upon mud, and in another way upon wax; but that the qualities of mud and wax are different, although according to nature they are one thing, both being from the earth.'' This wondrous capacity for choice can bake our hearts like hardened mud in the heat of the sun or soften our hearts like molten wax in those same rays of warmth. How we all choose to use our capacity as the children of God determines whether we have a heart of mud or a heart of wax. How we direct our thoughts, what words we say, what actions we take all shape us and determine just what our interior disposition is.

This interior disposition is entirely the difference between heaven and hell. For the rays of invisible light that are the energies of God are inescapable. God is present everywhere and in all things. God does not punish the sinful by hiding Himself nor reward the blessed by gracing them with His presence. Rather, as Doctor Alexander Kalomiros states in his essay River of Fire, the ``attitude of the logical creatures toward this unceasing grace and love is the difference between paradise and hell.'' For those creatures ``who love God are happy with Him, those who hate Him are extremely miserable by being obliged to live in His presence, and there is no place where one can escape the loving omnipresence of God.'' In this life in a world that has been corrupted by generations of bad choices, we can never perfectly experience the love of God. But we can taste it. We can catch glimpses of it here and there. To those who make their hearts into wax, this is joy. To those who make their hearts into mud, this is horror. Come judgment day, this foretaste will be amplified by the removal of all corruption. Doctor Kalimiros continues:
The Light of Truth, God's Energy, God's grace which will fall on men unhindered by corrupt conditions in the Day of Judgment, will be the same to all men. There will be no distinction whatever. All the difference lies in those who receive, not in Him Who gives. The sun shines on healthy and diseased eyes alike, without any distinction. Healthy eyes enjoy light and because of it see clearly the beauty which surrounds them. Diseased eyes feel pain, they hurt, suffer, and want to hide from this same light which brings such great happiness to those who have healthy eyes.
So to repeat the words of Father Schmemman, ``Everyone capable of thanksgiving is capable of salvation and eternal joy.'' Being thankful tells us that our hearts are not completely hard. Being thankful tells us that we are still capable of receiving love. Allowing this inner gratitude to bubble up out of our hearts and into words and deeds shapes us into new creatures more likely to accept love from not only God but also from our brothers and sisters. Embracing this thankfulness is not only our very salvation but gives us a taste of heaven in this life. To be thankful is to become more fully the likeness of Deity itself, to be join into the ecstatic union with the Godhead in this life.

Monday, November 17, 2008

The Inherent Unfairness of a Flat Tax

In the 2008 US election cycle, one of the largest policy distinctions was between the John McCain's proposal to keep the top marginal income tax rate either at current levels or to cut it further and Barrack Obama's plan to increase the top tax bracket. Obama's plan raised hackles in some quarters and met with the criticism that his tax proposal was essentially socialist, being an income redistribution engine designed to spread the wealth of those who worked hard to get where they are to those who haven't worked so hard. Many commentators have claimed that this state of affairs is claimed to be unjust. But a system of marginal tax brackets, the bedrock of income tax system in the US for almost as long as the US has had a federal income tax, was not pulled out of thin air or implemented to punish those who are successful. Rather, the marginal tax in the US stems from a basic principle of economics, the concept of diminishing marginal utility that is shared by every school of economics from Austrian to Neo-Classical save for the minority of schools that stick to a labor based theory of price setting such as the Marxist and Neo-Ricardian schools. As such, to claim that a marginal system of taxation is inherently unjust is to both undermine the basis of modern economic theory and, if that theory is correct, argue against the premise that the the income tax system should model the way the world actually works.

The background of the criticism of Obama's plan is that the US tax code is overly complicated, obtuse, perplexing and in need of reform. No one seriously disputes this. But time and again, the idea also surfaces that that in order for an income tax to be fair, it must be a flat tax, that the same tax rate (and not merely the same tax system) must be equally applied to everyone subject to it. If someone paying tax on x dollars pays a lower effective rate than someone paying taxes on x + n  dollars, the argument goes, this is unfair. Worse yet, the opponents of a system of marginal tax brackets argue, the tax is not only unfair, but it stifles the economy of the country as a whole because the tax code ends up punishing success. If working harder to make more money results paying a higher tax rate, those who would work harder may be demotivated to do with the net effect that most workers work less hard and productivity suffers. 

But the assessment of a marginal tax system as being inherently unfair ignores its basis in modern economic theory. The US tax system is built on system of marginal tax brackets because of the principle of marginal utility. This principle underlies supply/demand price theory upon which free markets are predicated. The principle is not a complicated one. The idea is that the first unit of a given good does not have the same value to the consumer as subsequent units of a good. While in most cases the value of additional units decrease, there are some situations where the additional value increases. (The decreases are usually in situations where the consumer approaches a tipping point. For example a person with one dollar who needs ten dollars to buy a particular good may not value an single additional dollar very highly until that person gets to nine dollars.)

The traditional textbook explanation, created by economist Eugen von Böhm-Bawerk, deals with bags of grain. Imagine a pioneer with five bags of grain. The first is used by him as sustenance. Without the calories present in one bag of grain, he would starve to death. The second bag  is also consumed by him so that he might not just live but also have the strength to work. While it is important for the pioneer to work, it is secondary to survival. The third bag is used as feed for other livestock so that the pioneer might have variation in diet. While important, it is less important than either having the strength to work or to survival itself. With the fourth bag, the pioneer makes whiskey which has certain uses but is less important than the product of the bags that were already consumed. With the fifth bag, the pioneer feeds some pet parakeets. Now if the pioneer had to give up a bag of grain, he would not curtail all the purposes to which he put the grain. He won't eat less, stop feeding the chickens or stop making whiskey. Rather he would choose to give up the use which was least valuable to him, feeding the parakeets. This is the principle of decreasing marginal utility, that for most things, every additional unit is less valuable to the owner than the subsequent unit.

But what happens if the grain of the pioneer is being taxed per bag? It is clear that any tax on that first bag will be far more injurious to the pioneer than the tax on subsequent bags of grain because if the farmer had only one bag, the tax would affect his very ability to stay alive. A tax on the second bag, while still very injurious in that it affects the pioneer's very ability to work, is not as harmful as a tax on the first bag. A tax on the third bag is less injurious still and by the time we get to the fifth bag, any tax on the grain becomes a very small amount of injury to the one paying the taxes. Now, even if the tax on the fifth bag of grain were exorbitantly high, it would be less injurious to the pioneer than any amount of tax on the first bag of grain. 

The US tax system is structured to reflect this truth of the value of income to the earner. Most US taxpayers pay close to no tax on their first ten thousand dollars of income. For the 2008 tax year, even a single person with no dependents and no deductions pays only 10% on the first eight thousand dollars of Adjusted Gross Income (AGI) which doesn't include the standard deduction or any non-taxable income such as pre-tax FICA, retirement and health care contributions. This is because this is the income that is needed for mere survival. A person making slightly more money will then pay 10% tax on that first eight thousand dollars of AGI and 15% tax on AGI between eight and thirty-two thousand dollars. So the money needed not to just survive but needed to buy necessary to work and the like is taxed at a slightly higher rate. AGI above thirty-two thousand dollars but below seventy-eight thousand dollars, the money needed not just to live or to work but to have a pleasant life, is taxed a bit higher at 25%. And so we go through all the tax brackets until we get to the highest at AGI earned above three hundred and fifty-seven thousand dollars, money which is certainly not required for the necessities of life but which goes to making life more pleasurable, which gets taxed at the highest rate of 35%. To claim that there is some inequality in this money being taxed at the same level as the lowest tax bracket is to claim that it harms the tax payer to lose 35% of every dollar earned well above three hundred and fifty some thousand dollars as it does to lose 10% of the first eight thousand dollars earned. Such is a ludicrous allegation, especially since someone making enough money to be in this tax bracket still only pays 10% on that first eight thousand dollars of AGI. After all, no matter what one's AGI is, one pays the same amount of tax on every dollar within a given tax bracket.

But some might still disagree over this assessment of fairness. But consider that the principle of marginal utility is what underlies the demand curve in the Austrian school of economics and what underlies the indifference curve which in turn underlies the demand curve in Neoclassical schools of economics. Given that the demand curve is half of what determines equilibrium prices in a free market, the allegation that the principle of marginal returns leads to injustice is akin to the claim that free market economics is either fundamentally unjust or somehow does not model reality. But clearly most proponents of a flat tax reject the ideas that the free market does not work or is inherently unjust. Rather they assume that the free market model is predicated on the way that human beings actually behave. If so, the principle of marginal utility is fundamental to human nature and the claim that a tax system based upon this principle is unfair is to claim that human nature ought to be different than what it is. It is perhaps illustrative that most of the countries in the present day that use a flat tax are former Soviet Bloc nations such as Albania, Bulgaria, Lithuania, Romania, Russia and the Ukraine. Most of these countries retain large vestiges of their socialist past and have not yet made full market reforms in many areas. 

One thing that the above mentioned countries with flat taxes do have in common is a phenomenal economic growth rate which may seem to support the assertion by flat tax proponents that a flat tax leads to higher economic growth. The problem, however, is that these countries are not moving from a marginal tax system to a flat-tax system but, rather, are moving to market systems with a flat tax on income from a state owned system of production where the state confiscated virtually all wealth and ran virtually all industry. An increase in productivity, then, is hard to tie specifically to a flat-tax rather than market reforms in general and the new possibility of large numbers of people earning money. Further, if a flat-tax lead to an increase in economic productivity, one would expect that those times in recent US history where the tax code was the flattest would have seen the largest percentage increases in productivity in the US. But the history of the eighties and nineties belies this. In real GDP per capita, the Clinton and Reagan administrations saw similar increases and the increases in both were dwarfed by those under the Kennedy and Johnson administrations. Given that the tax code was the flattest, and taxes in general far lower, during the Reagan administration, one would expect the Reagan administration to have presided over the largest increase in productivity. But it did not, the Kennedy and Johnson administrations did. The historical numbers seem to indicate that the flatness of income tax has little to no effect on the over all economy. What it does greatly affect is the ability of the government to finance itself. Both the budget deficit and the national debt soared under the Reagan tax cuts.

The way that there is no apparent relationship between the flatness of income tax productivity in the US can be easily be explained by the principle of marginal utility. It may be true that paying higher taxes on incomes in higher brackets might lead workers to view each additional dollar of income as less valuable. But the principle of marginal utility suggests that rational economic agents will already view each additional dollar in income as less valuable than the previous dollar of income. It is not clear that the decrease in utility of additional dollars of income in a marginal income tax system is any more demotivating than reality itself. The fact of the matter is that most workers have always felt that additionally earned dollars, even though less valued than previously earned dollars, have been worth pursuing. A proper marginal tax system will never reach the 100% tax rate and, consequently, always allow a earner to be better off by earning one additional dollar, even if they move to the next tax bracket. 

So in conclusion we see that a tax system built upon marginal tax brackets as presently used in the US is the most just in that it harms each individual taxpayer the least. It taxes the income needed the least the most and it taxes the income needed the most the least. To claim that this state of affairs is unfair is to allege that one of the fundamental suppositions behind setting prices in a free market is likewise unfair. Further, the claim that a marginal tax system hampers US productivity simply is not justified by the history of increases in real GDP in recent US history relative to the increases and decreases in the flatness of the US tax system. Why this is so is explained by the principle of marginal utility, workers are already expecting less value in each additional dollar earned. The two largest arguments for a flat tax, then, fail to be persuasive on either the basis of economic theory or the empirical data from the economic history of the US. Rather, the US should maintain its present tax system based on marginal brackets with tax reform being applied to those areas that really do need to be reformed: confusing, byzantine regulations; perverse incentives; tax brackets that disproportionately affect the upper-middle class. Ronald Reagan's goal of a tax return that can be filled out on a single post-card sized form is possible with a marginal tax system. The only thing that makes a marginal system different from a flat system in that regard is the use of a look up table rather (if I make x dollars, I pay y taxes) rather than multiplying x dollars by y percent.

Monday, November 10, 2008

Why Does the One of the Most Religious Countries in the World Have One of the Most Liberal Abortion Policies in the World?

Recently I was on the campus of the Catholic University of America and walked past a display of 4,000 small flags each set about a foot apart on some green space. A sign near by stated that each flag represented one of the four thousand children aborted by their mothers in the US every day. That number is a hard number to comprehend without such an image right before one's eyes. But it also brings up an interesting paradox. The United States is clearly one of the most religious nations in the western world by almost any measure, yet our abortion policies are more liberal than almost anywhere else in the developed world. But this paradox is not a contradiction. The status quo of such liberal abortion laws benefits both of the two major political parties in the US by helping to energize their respective bases which disincentivizes both parties from taking any practical action by either reforming abortion laws or taking pragmatic steps to reduce the perceived need for abortions despite what their respective party platforms might say.

The Republican Party's behavior on abortion exemplifies the behavior of the king's first son in one of Jesus' parables of the two sons in the vineyard. When asked to go work in the vineyard, the second son ``answered and said, I go, sir: and went not.'' Outlawing abortion has a been a plank of the Republican party platform since the Supreme Court first overturned a blanket ban of abortions in Roe v. Wade. Since then, the Republican Party has controlled the presidency for twenty years, both houses of Congress for ten years, the majority of Supreme Court justices for sixteen years, and the trifecta of Congress, the White House and the Supreme Court for four years. Yet not only has Roe v. Wade not been overturned but no federal law has been passed to put any limits on abortions within the guidelines available for doing such under Roe v. Wade. Outside of policy set within the executive branch, for example whether or not abortions can be performed by US Military hospitals, there has been virtually no change with regards to US policy with regards to abortion since Roe v. Wade was decided regardless of how many branches of government that the GOP has controlled.

However much the Republican Party might fit the parable of the two sons, the Democratic Party is certainly not its counterpart. Unlike the `good son' of the parable who ``said, I will not: but afterward he repented and went,'' the Democratic has consistently said that it is categorically behind a woman's right to choose to have an abortion. Despite the refrain from many Democratic politicians that they want to make abortion safe, legal and rare, almost all of the Democratic effort on the abortion issue has focused on the legal aspect. Factions within the Democratic Party, such as Democrats For Life of American (DFLA), have consistently tried to get legislation to the table to put into place policies that would reduce the number of abortions without making it illegal but have not been able to get any traction within their own party. For that matter, they've not even been able to get any traction within the Republican Party. One would expect an internal faction that disagrees with an important plank of its own party to be marginalized but it is not so clear as to why the policies that DFLA would like to see enacted as law don't get any consideration from across the aisle.

The political advantage gained by the Democratic Party in unequivocally supporting a woman's right to choose is obvious. In the last two election cycles, South Dakota, one of the most conservative states in the union, emphatically voted down two different attempts at instituting an almost complete statewide ban on abortion. There is a very large segment of the population that supports the legality of abortion and the Democratic Party has been trying to tap into that population ever since Roe v. Wade was decided. One can speculate that the party leadership thinks this segment of support is so important that it is unwilling to entertain policies such as the 95-10 initiative put forth by DFLA as any positive action in attempting to reduce the number of abortions might be construed on the part of some pro-abortion groups as the Democratic Party getting soft on the issue.

But what is harder to explicate is why the Republican Party has not used the power that it had to attempt to limit abortions so far as it can. As an acquaintance of mine acutely observed in a casual discussion, the GOP has taken an all or nothing approach to the subject and are entirely unwilling to compromise. One would have thought that, at minimum, that the GOP would have sought out European style policies that restrict late term abortions save in exceptional circumstances such as the life of the mother so that the US was no longer the only nation in the western world that has virtually no restrictions on abortions. While exact numbers are hard to come by, the best estimates put the rate of third trimester abortions at 1.4% of all abortions meaning that a ban on late term abortions save for when the health of the mother was in question might prevent thousands of abortions every year. Or failing that, one would have expected them to at least reach out to DFLA to implement policies designed to reduce abortions even if they are not banned. But the fact of the matter is that, save for a few administrative policies dictated by the executive branch, there has been no positive action by the Republican Party. The consequence is that although the national abortion rate has fallen every year since its peak in 1992, there has been no significant difference in the reduction of abortions with regards to which party has controlled the White House, Congress or the Supreme Court.

The conclusion that I am tempted to draw from the present state of affairs is that the leadership of the GOP believes that it benefits from the status quo and, therefore, places no importance on the anti-abortion plank of the party platform. If the GOP were able to get a constitutional amendment passed that outlawed abortion or if the GOP were able to bring US abortion policies in line with those of the western world, the GOP would lose the time, energy and support of a large number of single issue voters. So long as the preachers and pastors of the religious right continue to conflate with supporting Democratic candidates with death itself, the GOP reaps very large gain from very little investment. This brings to mind the way operatives like Jack Abramoff would refer to his lobbying clients as troglodytes while taking vast sums of money from them and doing little in return. But at least with Abramoff, he was only cashing in on the hopes of his clients to make money. Today's GOP is exploiting the desire of the religious right to save the lives of innocents.

One can argue that the Republican Party has been active at the state level in the battle to prohibit abortion because US law is not only legislated at the federal level. Over three-fifths of US states have some sort of limitation on late term abortions in line with European legislation (although some of these bans are unenforceable because they are contrary to the Roe v. Wade). One of the most misunderstood facts about Roe v. Wade is that the decision does not make the practice of banning abortion unconstitutional; it makes the unconditional banning of abortion prior to the point of viability of the fetus unconstitutional. Nevertheless even where abortion is limited by law, those laws are seldom enforced and even if they were strictly enforced, relative freedom of travel in the US merely makes abortions in states where there is a ban slightly more difficult to obtain as travel to another state is required. So long as abortion without limitation is legal within the US in some state, banning abortions at the state level is effectively meaningless from the perspective of attempting to stop abortions as a whole.

The silver lining in the dark cloud of the two major parties in the US exploiting the status quo for their own benefit is that the number of abortions performed every year in the US has been in constant decline since its peak as mentioned above. While the Democratic and Republican Parties are jockeying for position, the rest of the US is slowly coming to understand that abortion is not the only option. The mood of the country seems to be changing. Whereas in the eighties, hit movies like Fast Times at Ridgemont High and Dirty Dancing presented abortion to be the best (or even only) choice to young, unwed women, today's films aimed at youth like Knocked Up and Juno celebrate the choice of young women who find themselves pregnant and decide to carry the pregnancy to full term. So perhaps there is hope that as the new generation comes of age and enters political life that those who really believe in life will work to transform both parties. Somewhere between the extremes of abortion being legal for any reason at any time and abortion never being legal at any place for any reason, there is room for both sides to come together to work out something better than what we have now. Few, after all, would argue that abortion is a good thing. Even those who argue that abortion should be completely unrestricted concede that a world where there was no need to have an abortion would be a better place.