Ramblings of a Megalomaniac

Full disclosure: I support neither mainstream candidate for the current (2012) US Presidential election.  

It amazes me how bad as people we are at recognizing rhetoric.  What’s much more astonishing is how good we think ourselves as individuals are at it.  You’re not good at it.  Neither am I.  Neither is anyone you know, unless someone you know is regularly hired to create rhetoric on a large scale.  

We think we’re good at recognizing rhetoric because we can see things that, to us, are obviously rhetoric and can see lots of people falling for it.  The birther movement comes to mind.  As a whole, more people recognized that the idea of Obama not being born in the US was probably absurd.  I assume we have plenty of checking as to whether an individual is actually legal to be elected as president.  But of course a lot of people took up the movement and ran with it.  If you didn’t believe the birther movement for one second, you probably fancy yourself as being able to recognize rhetoric.

You’re probably very wrong on that.  That rhetoric was targeted for a specific demographic of people, people who already didn’t want Barack Obama as president and weren’t going to look into facts or think critically about it.  They ran with it because it already spoke to them on something they wanted (Obama to not be the president).  But any political campaign at the national level is undoubtedly releasing a barrage of rhetorical attacks.  They’re just targeted differently.  

Think of it as one level of rhetoric for the dumb people who already believe, or at least lean strongly to that cause.  It fires them up, makes sure they go out and vote, and gets them repeating sound bytes over and over.  That last part has the effect of getting undecideds of a similar make-up to hear these things over and over and accept them as truth, hopefully swaying these undecideds to the campaign’s side.  Then, there’ll be another level of rhetoric for the next level up.  These people may be more skeptical of claims so brash, so this rhetoric is a bit less blunt.  Then, there’s another level that doesn’t look like obvious rhetoric, except to those strongly in the camp of the other side, to which everything from the opposing camp looks like rhetoric.  This continues on decreasing levels of obviousness all the way up to whatever the last demographic is that’s still worth the effort.  How many different levels of rhetoric from each side have you identified prior to reading this post?  If you have anything less than 5 for either side, you’re bad at recognizing it.  You probably see a lot for your opponent, but little to none for your side.  You’ve put blinders on yourself.  Don’t worry, though…we’re wired that way.  If we weren’t, this effect wouldn’t be so universally true for everyone.

As you go up the scale, you see more numbers thrown out, giving the impression that there’s a lot of empirical data to support the claims.  Generally, these numbers are gross distortions, biased studies, or blatant lies.  Luckily, you won’t check on them, so they still work.  Qualitative arguments abound throughout.  It’s a way to appeal to a voter’s emotions and bank on them not checking up on things.  Almost always, they’re extreme edge cases that are embellished a bit to look even more extreme.  Campaigns want you to vote with your gut, not with research.  Providing lots of sound research to support an idea is a lot more work.  

Luckily, they don’t need to.  Fear, uncertainty, and doubt are what decide the bulk of the votes, at least the undecided ones.  Paint a picture of your opponent with those three attributes, and another picture of why that’s not true for yourself.  Of course, your opponent will be doing the same to you, so make sure you’re depiction of him is extra scary.  Make him seem out of touch, stupid, greedy, sitting in an ivory tower, someone who doesn’t understand the plight of Joe Sixpack.  

Undoubtedly, the people who strongly support Romney while reading this will see these traits in the Obama campaign, but either ignore or downplay them in the Romney campaign and come up with whatever justification their mind needs.  Likewise, the Pro-Obama supporters will think I just described the Romney plan to the letter, but justify why the Obama campaign isn’t doing it, or at least how that campaign isn’t as strong about it.  They’re both doing it.  It just probably takes someone who’s apathetic to either candidate’s victory to see it in both.

The things your campaign has told you as truths, likely aren’t.  That holds for both sides.  Qualitative arguments supporting something new treat that action in isolation.  It’s never in isolation.  Every change we make will have effects, both positive and negative, ripple throughout the system.  The arguments opposing change always blow out of proportion the magnitude of these effects.  It’s scarier that way.  It gets more votes.  

Most people who read this probably think they can see it in others, but still don’t believe they themselves are affected.  You could be right.  You’re very likely not.  

I’m sure I’m just as bad as anyone else once I hear some rhetoric that speaks to me.  I’m made of the same organic shit as everyone else, wired in the same way, and have the same chemicals released by my brain.  I can see it in this election because I have no interest in anyone.  I’m sure if someone whom I felt represented my views was running, I’d just see it as telling the truth.

Political disclosure: This author does not support either major political party.  Current views are similar to this:  ”At the moment, the GOP seems evil, the Dems seem like complete morons, and the public seems screwed.”  Adjust your mental filter as needed before reading.

In US economic-related politics, the GOP says that taxing businesses slows economic growth.  The Dems are worried about income inequality.  Both don’t like the high unemployment and slow recovery, but differ as to how to fix it.  This posts addresses these points.

The first thing we need to realize is that government taxes generally serve two purposes:

1. Raise revenues for the government
2. Discourage (usually) undesirable behavior

That’s it.  They usually come with a ton of secondary effects that politicians either underestimated or (way more often) didn’t predict.   Let’s ignore the raising revenues component for now as we can change the tax code to do just that after we’ve really identified what we want to encourage/discourage.  

We always want a strong economy, and currently we want lower unemployment.  That’s actually relatively simple to fix.  Abolish corporate income taxes and the payroll tax.  Completely.  0%.  I know I just made a bunch enemies with that statement, but hear me out.  First, the payroll tax.  We want more hiring, not less.  But taxes discourage the behavior that’s taxed.  The payroll tax makes it more expensive to hire any and all workers.  THAT’S DISCOURAGING THE BEHAVIOR THAT EVERYBODY WANTS (hiring more workers).  Why are we continuing this practice?!  And abolishing it for only a year or two doesn’t do much.  Companies know that they’ll be paying the taxes for those additional workers in short order, so it’s either hire the new workers and go through the costs of training them, then probably firing them (and any potential legal costs with that) 12 months later, or just go about business as if the cut didn’t happen.  How many jobs is this tax costing?  Here’s my back-of-the-napkin quick math (I’m sure it’s not this simple)

Currently, I believe the payroll tax is something like 4.2%.  Unemployment is 8.2%, or put another way, employment is at 91.8%.  Top economists from all sides say that we want it somewhere around 95%.  If the entire savings of the payroll tax went into more employees (which should drive up productivity and increase profits), that comes out to this:

91.8 (current employment) * 1.042 (increased by 4.2%) = 95.66% (4.34% unemployment)

That scenario solves the unemployment issue.  My cynical mind thinks that it’s more likely for only 1/2 of the money to be spent on more employment and the other 1/2 pocketed, but that would still bring us to 93.72% (6.27% unemployment).  Still a far sight better than the 8.2% we currently have.  

Now to my much more controversial suggestion: eliminate all corporate income taxes.  Follow me on this one.  Many gigantic corporations aren’t paying much in taxes anyway. They hire top-notch accountants and tax attorneys to come up with legal (or uncatchable) ways of lowering their tax burden.  Really, they’re just creating a bunch of work (and costs) to the IRS (and thus tax payers).  But of the ones that do pay their “fair share,” it’s hurting their business.  If 28% of their income goes straight to the government, that’s 28% that doesn’t go to R&D, more employees, better benefits, or to the business owners (shareholders).  I’m sure many don’t care if the shareholders don’t get a dime, but I do.  If they don’t, people stop investing in US companies.  Or US companies move more and more operations out of the US.  We want these companies spending more money on employees, R&D, and whatever else.  And we want more money coming into the US for investment.  AND we want more companies setting up their headquarters in the US.  Let them set up shop here.  That’s a bunch of new, white-collar jobs for Americans each time a company moves here (or starts here).  Let the US be the tax haven for the world, not the Caymans nor the Seychelles nor Nevis nor anyone else.  If we need to, we only give tax breaks to foreign companies with X% of their global jobs here, or a set nominal number of jobs.    

Bring your jobs and investment to America, and we’ll reward you with no corporate income tax!

Now, this doesn’t address the Dems concern about income inequality.  To that, I say, if we’re concerned about inequality of individual income, then tax that, not the corporations.  Here’s the pitch to the rich: We’re raising your income taxes, but now we’re only taxing it once.  As it is right now, income is taxed at the corporate level, then again at the individual level before business owners (shareholders included) actually get their money.  The nominal values might be 28% and 35%, but taxed at both of those rates twice means an effective tax rate of 53.2%.  Save them money by capping the the top income tax at 50%, and still increase the amount of revenue due to many more jobs.  

Personally, I don’t think soaking the rich is the right way to go about things, but if that’s what we want to do, then let’s actually do *that* instead of hindering economic growth by taxing corporations so highly.

The situation with US prison system is…inefficient to say the least.  We have the highest incarceration rates in the Western world, the death penalty is ultimately more expensive than life imprisonment, and recidivism rates are far too high for anyone to think that our current path is working.  

High incarceration rates are not a function of the prison system, but that of the legal system and law enforcement.  This will not be discussed in this post.

The high cost of the death penalty is a function of the appeals system, and I’m not convinced that we really want to “streamline” that portion, and I don’t want to get into a discussion about whether we should or should not have a death penalty.  Personally, I’m against the death penalty as it’s difficult to completely avoid false convictions, but moreso because (heartless as it may sound) it’s substantially less expensive to keep someone alive in a general prison than on death row through decades of appeals.  Suffice it to say the combination of these two factors is more than enough to put me heavily in the “no death penalty” camp.  

That leaves reducing recidivism as the topic of this blog post.  Interestingly enough, finding good data on if recidivism is something we can reduce is tough.  Some studies will correlate a prisoner’s job detail in prison with recidivism rates, showing that the more desirable jobs in prison correlate to reduced recidivism.  But it’s also that the longer an inmate has exhibited good behavior in prison, the higher the likelihood he’ll get the desirable jobs.  They’re used as incentives.  It’s pretty easy to make the case that the individuals who are predisposed against recidivism are those who are awarded the desirable jobs.  Without randomly assigning prisoner’s all jobs, the case for correlation, not causation, is pretty strong here.

Other studies try to correlate the crime of the initial conviction with recidivism rates.  There seems to be a bit more merit to these studies, but they are by no means definitive.  The type of crime committed, and indeed whether one returns to their crime, are often based on economic factors.  If the individual comes from a background of poverty with little in the way of legal income alternatives, crime is often turned to.  After being released from prison, one usually has substantially less viable employment options (many business owners are quite wary of hiring former convicts).  

So, I take the stance that at least a significant portion of recidivism (and indeed the initial crimes) are income related.  I believe that most former convicts would choose a legal income over an illegal income, especially after their release, where they can further understand the consequences of being convicted.  

But with very few employers willing to give ex-cons a second chance, how can we give these individuals legal income alternatives?  Entrepreneurship may be the answer.  Currently, prisoners have very little choice in the jobs they work in prison, and they often receive very little compensation for their work.  I don’t really have a problem with the low wages (they help offset the costs of running a prison), but it does very little to incentivize prisoners.  Often, a prison will have one or two industries they use prison labor for to make money for the prison, such as running a wood shop and selling, for instance, hand-crafted chairs.  Profits are pumped back into the prison, and these jobs often offer the most “freedom” for a prisoner and are the most desirable jobs.

But if we know anything in comparing capitalism to other economic systems, we know that centrally planning which industries to be in and which products to produce is inefficient.  What if the prisoners got to be entrepreneurs?  A prisoner could come up with a proposal for new jobs/industries in the prison and recruit other prisoners to potentially work the new industry.  After the proposal is vetted for many factors (safety, escape potential, profitability, etc.), the prison could run on the “shop” on a trial basis.  Say, 80% of net profits go directly into the prison system, and the remaining 20% is split among the prisoners working the shop.

This does a lot of things more efficiently.  First, more profitable ventures will eventually be discovered and the prison will have increased revenues over time.  Second, prisoners’ specific skills could be better utilized.  If you have a set of well-behaved prisoners who are adept at precision woodworking for example, employing them in the laundry room is inefficient.  Let them form a proposal for creating intricate wood crafts (jewelry boxes, for example), run the business with lots of prison oversight, and utilize their inherent abilities much better.  This would also get more money for the prison itself.

Second, prisoners are given the opportunity to take part in the pride of ownership of a business.  If your business is successful, that’s something to be proud of.  Further, the more successful your business is, the more money you get to buy cheetos or radios or whatever they let prisoners buy in prison.  

Third, and the point of this post, is that it increases prisoners’ chances of finding legal sources of income once they leave the prison system.  Many will have learned how to start and run a business.  Others on how to manage or even just learned a particular skill.  But if I’m an employer on the fence about hiring a prisoner, learning that this prisoner was part of a successful startup within the prison system puts more confidence in the individual.  He’s learned about business, costs, skills, competition, management, motivation, etc.  Plus, his checkered past means I should be able to pick up a qualified individual at a substantial discount.  Hard-working, experienced, AND cheap?  In any cut-throat industry where margins are slim, that’s an awfully attractive combination.  

It’s possible that letting prisoners create and run “shops” in the prison would allow for certain groups to control more power in the prison population, given they may be the gatekeepers to the best (and most profitable) jobs.  But I’d argue this would really just be a shift in power.  Perhaps less power away from gangs based on race (or whatever gangs are actually based on in prison), and more power to the local titans of industry.  But if I’m one of said titans, I have substantially more to lose by abusing any internal power in this scenario.  If bad behavior means I no longer can participate in the good jobs and make the decent wages, I’ve got a lot to lose.  If I’m leader of a prison gang who makes income from running drugs in prison, even if I get caught and go to solitary, my gang is still making money.  

I’m sure there are plenty of holes in this system, but there are plenty of holes in the current one as well.  Thoughts?

In early January of 2009, I went on a first date with a girl.  Things were going well, until she decided to bring up different economics topics.  Being a rather avid student of economics for several years, I knew this would prove to be a bad idea.  

We’re all armchair economists to varying degrees, and I never fault anyone for being less knowledgable in a field than myself.  I do, however, fault people who are substantially less knowledgable, ignore empirical evidence, cannot actually understand the true effects of supply and demand, use *incredibly* poor qualitative reasoning to determine the proper policy, and strongly believe they’re more knowledgable than anyone without even the slightest hint at humility or the fact that they could be (and most likely are) incredibly wrong.  Back to the date.

It started with differing opinions of what policies are best for economic growth, the middle class, etc.  But then she dropped this bombshell on me:

The US should switch to the Euro.

Not “Maybe…” or “I’d like to see a study on if…” or even just “I think…”  Nope.  Said with authority.  When I probed why, I got the following response. 

The Euro has been going up while the dollar has been going down.

Ugh.  I masochistically asked for more explanation.  I tried to explain that it’s important for a modern economy to control its own currency, but even that if we didn’t want to control it, we shouldn’t relinquish the power of it to competing nations who will use our currency to benefit their nations, not ours.  I explained if she wanted a stronger dollar, there are ways to do that, but like all interventionist policies, they come with a price and that the costs nearly always outweigh the benefits.  I explained that even if we wanted to join the Euro, we likely wouldn’t be allowed in.  All my words fell on deaf ears.  

Long story short, as soon as she uttered that we should switch to the Euro, I knew I didn’t want a second date.  It was more the way that it was presented as an irrefutable fact, rather than postulating a hypothesis.  Here we are, just over 3 years later, and the Euro zone has been having major issues for over two of them.  Our economic situation would likely be far worse if we couldn’t control our own currency and our recovery was weighed down with the problems Ireland, Italy, Portugal, Spain, and, of course, Greece have shown over that time frame.  

I think the time since she stated her “facts” has shown that she wasn’t right.  Sometimes we need a good “I told you so.”