Some of the shibboleths and slogans readers trotted out responding to the economists’ (and my) views published yesterday need rebutting.
A Texan doctor decries my zeal for resuming estate taxes (after the heirs of Dan Duncan of his home state inherited $7 bn without any such tax). He claims that taxing estates is “double taxation.” Yeah, sure. So is taking benefits away from a welfare recipient who has found a job and is paying taxes. So is not giving the same size college scholarships to children whose parents saved for their education rather than spending profligately. Double taxation is part of life. And life is unfair, as John Kennedy famously said.
With government budgets constrained worldwide and locally, something has to give. And billionaires’ heirs look like a popular candidate to pay up.
Another reader theory is that any increase in taxes or regulation is somehow nefarious, socialistic, statist. Financial innovation is always good, they argue.
We tried that. Deregulation and leaving it to the markets are how we got into the present fix. Crafting the right regs is not easy and politics is icky. But doing nothing is not an option.
Perverse incentives and moral hazard do not only result from laws and regulations. They also result from human nature.
Globalization is not only part of the problem. It is part of the solution. To stop regulation shopping and the search for havens for high-risk or illicit operations, major countries need to agree on controls and taxes. I don’t think short selling or hedge funds are bad, as some European countries say.
I do think money has to be put aside to save banks which are too big to fail from bringing down the system as they nearly did two years ago. I want there to be greater protection not just of home buyers and credit card users, but also of supposed sophisticated purchasers of complex derivatives from investment banks sold worldwide.
A tax to cut the profits of rapid-fire electronic trading of stocks and other financial entities would be in the interests of the markets, but it has to be coordinated across borders.
Criticizing BP is not anti-capitalist or anti-market. BP screwed up partly because of silly cost-cutting creating a mess there is no technology to clean up. It is far sillier to blame Washington for what happened. Lex regulations were at fault, but Uncle Sam cannot turn off the gushing oil flow.
Blaming the guys you defeated in an election for current messes is standard political procedure. The danger is that you overstate the crisis, as in Greece, Hungary, and even Britain. The Obama Administration should be credited with trying to restore the ecnomy and maintain continuity of policy and personnel post-Bush. Critics from both left and right (my readers come from both sides) underestimate how hard the president worked to keep the debate over financial reform civilized and positive.
Two popular slogans terrify me: We need cheap oil; We need cheap Chinese exports. Actually we need more expensive oil to develop alternatives to the stuff flowing into the Gulf of Mexico and blowing up in PA. And like it or not we face more expensive Chinese labor after factory strikes and protests at the wages and working conditions around eastern China. Both cheap oil and cheap Chinese goods are addictions we would be better off without.
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