Thursday, April 14, 2011

A Couple Of Quick Thoughts

FLG was watching Bill Maher while working out.

Thought #1:
The first guest was that airline pilot who safely landed in the Hudson River. Apparently, he appeared before Congress testifying about the poor level of pilot remuneration and the demands of the job. It used to be better, he argued.

FLG's thought was, look, the fundamental economics of airlines suck. There's high fixed costs and low marginal costs. If a scheduled flight is going to leave with empty seats, then it makes economic to let people fly fro $1 than to let it go empty. This type of economic structure is simply terrible and should lead to consolidation.

Why hasn't it? FLG would argue the glamor of travel. All sorts of rich, hubristic people think owning/running an airline has some sort of cache and that everybody else in the business is dumb. Somewhat oddly, given the high fixed costs, the barriers to entry arent' all that high considering that new entrants can lease jets rather than buy them. (Although, landing slots are precious in a variety of locations. So, that should keep people out.) Likewise, there's lots of people who think being a pilot and flying are glamorous. Thus, you have a relatively large of pilots, especially considering the relatively high training and skill requirements.

Unless you regulate the industry, as it was back before the 70s, then the fundamental economics aren't that good for owners and employees of airlines. So, then we should regulate? Well, not quite. The overall good to society isn't served by ensuring the financial well-being of the owners and employees of airlines. Instead, it comes from the ability to travel. Therefore, the lower prices that come with this competition, FLG would argue, make society better off overall, even if owners and employees are worse off.

Thought #2:
Maher argued that the way to solve the budget problem was to "get rid of our empire and tax the rich" because nobody would feel any pain. He argued our citizens won't notice if our troops aren't overseas anymore. Indeed, they'd probably be happy about it. And the rich won't feel much pain because they already have money. No downside, or so thinks Maher.

FLG thought this, pain minimization, was a thoroughly modern way to think about a problem. But, needless to say, FLG also thought that pain minimization is a short-term thing. To tell you the truth, Maher is one of the best examples of FLG's observation that many liberals can't even fathom beyond the short-term.

Yes, this would probably minimize pain right now. Rich people pay more taxes, which all things considered FLG agrees would minimize pain in the short-term. Even if people who make over $250k a year think they aren't rich, a tax hit doesn't change their lifestyle as much as cuts to social services to poor people, again, all things being equal. Likewise, in the short-term, cutting defense and pulling back troops stationed overseas only has benefits.

But what about the long run? FLG would argue that taxing the rich, especially treating capital gains as ordinary income, will impede investment, again, all things being equal. Likewise, pulling back troops will save money in the short run and their families and loved ones and the American people will all be happy to have them home, but what about the long run? Would this prove to al-Qaeda and sundry bad guys that we don't have the resolve to see our commitments through? Wouldn't it create a power vaccuum that would be filled by China, Iran, or other regional powers? Perhaps that doesn't sound like a big problem now, but it might be, again, in the long run? In fact, Maher even mentioned pulling troops out of South Korea? Entirely, FLG wondered? Is pulling back from the border of the enfant terrible of the non-proliferation world a good idea in a strategic, long-term analysis? FLG sure doesn't think so.

What struck FLG is not so much that Maher was wrong. Maher, FLG, everybody can be wrong. What struck FLG was how sure, how certain that Maher was about his preferred policies. That there's no possibility that a reasonable, rational, and informed person could even see the slightest downside.


jason said...

I don't know--How long have wealthy tax cuts been around? IIRC, since early in the Bush administration (a quick internet search tells me 2001 and 2003). Ten years after the first one and we still don't see all that investment etc, while the rich are still getting richer. Ten years isn't too short term, is it? I'm not for any kind of socialist system, but I also don't think a three to seven percent tax raise for those who benefit the most from our system is socialism. The tax raise won't re-distribute their wealth, but can help pay the deficit. I'm also for limiting spending, but long term that means cutting in the three largest spending areas to be effective: ss, medicare, and the military.

FLG said...



3-7 % rise is fine, but it ain't gonna solve our long-term fiscal problem by itself. Nor will a 3-7% with steep defense cuts alone.

I think that's where I'm shocked by Maher. His plan seems to be gut defense and then fill the hole, however big that happens to be, with taxes on the rich. That's not only politically, but from simple math.

The Ancient said...

The tax raise won't re-distribute their wealth, but can help pay the deficit

Is it a fair guess that you won't be in line for the first showing of Atlas Shrugged Part 1 on Friday?

jason said...

yes. i've seen the preview and know enough about the book to stay away. the same people who preach that they must not be taxed so they can create are perfectly fine with our taxes being raised or the rest of us paying for their break, so forgive me if i don't buy it.

Andrew Stevens said...

Obviously not true, of course. The people who want lower taxes for the rich are the exact same people who want lower taxes for the poor and middle class. I don't even see how anybody can believe what you just said except in a rationalizing "I am going to ascribe whatever belief I like to the people I oppose politically to make them look as bad as possible." Now if you had argued that they're nasty people because they favor destroying social services for the poor, well, I wouldn't buy that either, but I'd at least believe that you really believed it.

jason said...

Andrew-tu quoque to your point. It IS true--the major tax reforms pushed by the right are things like a flat tax of roughly 17%, which would halve the highest bracket and raise most others or an elimination of federal taxes for a federal sales tax. I'm pretty sure both would increase the amount I pay and I'm not at the poverty level. Politically, I'm much closer to Tea Partiers than to Maher (he's a smug asshole). You don't "see how anybody can believe" that the rich are fine with everyone else's taxes being raised because you're playing cheerleader and you must support the team.

Andrew Stevens said...

I'm not sure what team it is I'm supposed to be supporting. I have no issue whatsoever with raising taxes on the wealthy. My issue is with dishonest arguments.

Forbes's 17% consumption flat tax idea would have exempted the first $42,000 on a family of four. The criticism of this idea is that it would lose an absolute fortune in revenue, not that anybody would have paid more under it. All the federal sales taxes have also proposed more generous exemptions than currently exist in the tax code. (It is true that it probably would raise some taxes on people who currently evade taxes through very generous deductions, which would probably include middle class homeowners with more house than they really should have for their income level, but I doubt this is intentional on the part of its proponents.)

Again, the criticism of these people is that they're so in favor of lowering taxes that they've forgotten that the government needs to be funded somehow, not that they're actually advocating raising anybody's taxes.

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