Wednesday, February 02, 2011

Scott Adams On Taxing The Rich

Scott Adams, a one-time Pacific Bell engineer, now famous semi-autobiographical cartoonist (Dilbert), wrote a hilarious piece in last weekend's edition of the Wall Street Journal. He's evidently entered into some sort of contributor relationship, because this is the second piece he's done in the last few months.

Adams begins by suggesting that by writing a 'bad version,' in Hollywood parlance, of how to tax the rich, millions of Americans can read it and invent better ideas for solving our fiscal mess. He then offers some ideas. Humorous, yes. But in the kernel of some of his wacky ones seem to me to be real opportunities.

For example, he wrote,

"Incentives. Another approach, also a bad idea, might be to treat the rich more like venture capitalists than sources of free money. Suppose the tax code is redesigned so that the rich only pay taxes to fund social services, such as health care and social security. This gives the rich an incentive to find ways to reduce the need for those services, which would in turn keep their taxes under control. Perhaps you'd see an explosion of private investment in technologies that make it less expensive to provide health care. You might see rapid advances in bringing down the cost of housing for seniors.

Meanwhile, the middle class would be in charge of funding the military. That feels right. The country generally doesn't go to war unless the middle-class majority is on board."

It strikes me that there's some rationale for dedicated spending of exorbitant tax rates. Such money has to go to a specific use, and no other. Adams' idea for the rich figuring out how to minimize the costs of what their (higher) taxes are spent on, so to reduce those taxes. But, generally, what if we simply designated some social services as being paid for by certain income classes or other source. When that source is exhausted, so is the spending.

It could be a backwards way of forcing Congress to cut spending by allocations. If they won't stop promising benefits, we'll just have them allocate tax sources, which are limited, so that the spending can't be unlimited anymore.

I also thought Adams was not too far off base in considering giving the rich, higher-taxed benefits such as preferred government service, a la concierge-level attention, use of HOV lanes, handicapped parking, or an extra political vote. There are, after all, some benefits that are better than the money that buys them.

Then there's his solution for cost cutting,

"Pull a random yet round number out of your ear, let's say a 10% cut, just for argument's sake, and apply it across the board. No exceptions. Everything from the military to welfare to federal pensions to government salaries would take the same hit. Managers in the private sector have been handling budget cuts this way for years. They know that their subordinates are all professional liars, so there is no reliable information for making cuts in a more reasoned way. They also know that any project can get by with 10% less money if there is no alternative."

Having just struggled through ex-IBM and RJRNabisco CEO Lou Gerstner's detailed steps for re-engineering government, I have to say, I'm actually more inclined toward Adams' jocular version.

Why? Because, although Gerstner wrote in the vein of classic, thorough process re-engineering, it's actually unlikely that such a process will occur as written. At least in the federal government.

Truth is, Adams is right. Anything can generally sustain a 10% cut in expenses. And doing so will, according to Gerstner, avoid allowing special dispensations.

Adams closes his piece with these astute observations,

"The way our political system is designed, politicians are not free to float bad ideas. Doing so is a sure way to lose an election. Politicians aren't even free to support good ideas if they are too far from the norm. But as citizens, we're free to speculate all we want. And if some new and better idea gains popularity at the grassroots level, our elected leaders would then be able to embrace it. In other words, it's literally your job to fix the budget problem because your government isn't equipped to handle it. The ideas I've mentioned here are bad by design. But if a few million people start brainstorming their own ideas for solving the debt problem, someone might come up with a winner. And if that idea gains popular support on the Internet, it frees politicians to consider it. I have no problem imagining that something along those lines can happen, and the thought feels delightful."

Sadly, I think he's right. Politicians are rarely able to speak the unspeakable. Consider Paul Ryan's Roadmap. He's taken incredible flack for that.

It probably is the case, for now, that our spineless politicians can't really fix our spending mess, or tax more intelligently, without being led from the rear, by ordinary citizens.

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