Wednesday, July 12, 2006
Death and Taxes
Evidently some on the right are considering Warren Buffett's when he dies donation to be an example of hypocrisy: if he really feels that government does a better job of allocating money than private charity, why doesn't he donate the money to the government?
As many on the left have pointed out, the set of people who are rich enough that the estate tax will attach but who are not rich enough to set up a foundation to avoid having the estate tax paid is pretty much the empty set. Thus, Buffett is not a hypocrite (*) unless he is also claiming that large estates should have to be assessed an estate tax even if the estate is shunted into a foundation -- which he is not.
But the larger claim of the right, that individuals do a better job of allocating resources than the government does, is not necessarily true. Adam Smith may have come up with a nice theory about the "Invisible Hand", but people who have problems accepting the "theory" of evolution should realize that a less tested theory about a mysterious "Hand" no-one can see may not always apply to the real world. While certainly the choices of individuals are often better than those of government and the politicians therein (and that includes Holy Joe and GW Bush and St. Ronnie of GE, conservatives should remember), sometimes they are not -- even assuming an individual as acting in rational self-interest, what is good for an individual may not be good for the economy as a whole.
Suppose, for example, a person gets a huge inheritance. She presumably would not spend it all at once but would rather save and/or invest it. If the stock market is under-capitalized, her investing her estate in the stock market is a good thing. But suppose, as happened during the tech bubble and its bursting, everybody and their mother('s pension fund) was invested in the market and there was so much capital in the market that every single underwear gnomes business was having a successful IPO and getting overly-capitalized. On the other hand, suppose, due to a recession or fear thereof, interest rates are lowered to ensure that people can get loans and spend money. In such a case, who's gonna put money in a savings account? What happens then is the case of the $0.02 bialy (**): that, even if the cost for a small business or individual to obtain an infusion of capital is low, there simply is not the money around for a bank to loan. In such a situation, it is in society's best interest (to jump start the economy by helping out those entrepreneurs and middle class families that politicians so claim to want to help but don't) for the money the rich person has to go to a loan making institution, but in the best interest of said rich person to invest in the stock market (so long as low interest rates can keep it from crashing). In such a case, it is certainly better for society (if not the heiress) to have steep estate tax: the federal government, which can allocate money to federal loan programs or even pork barrel spending which certainly will put money in the hands of contractors some of whom are entrepreneurs, etc. as well as their middle class employees, does a better job, as far as society is concerned, allocating resources than a (selfish, not that there's anything wrong with that according to some) individual.
The claims of Libertarian types are not always wrong, but the idea that these free-market claims are hard facts while liberalism is squishy is certainly wrong -- free-marketism is a faith like any other. And do you want money that could be put to use for the good of society to be sacrificed for worshiping free market idols?
(*) Actually, I was thinking about whether it would have been a good thing for religious liberals if Gillman (do I have the right person?) were appointed Chancellor of JTS over having the movement punt all the hot-button social issues and assert that JTS is an academic institution rather than the arbiter of Halacha (come to think of it, having the Chancellor of JTS play the role he did would kind of be like if the leading voice on what is Constitutional or not were not the SCOTUS but rather the Dean of Harvard Law School). Certainly Gillman would have likely taken, with Halachic authority attached to this move, our movement in a more liberal direction, but would he have been the right person to do it? After all, would people listen to the Halachic authority of a person who doesn't consider Halacha normative? The problem with Gillman, after all, is that he not only practices what he preaches, but he practices more than what he preaches -- he practices Halacha but doesn't preach its normativeness. While it is nice to put such a fence around being hypocritical and to possess such intellectual honesty, sometimes to have moral authority you must skirt the line into being hypocritical and certainly enter into a territory of intellectual dishonesty: if you restrict your pronouncements solely to reflect what is lest you apply any sort of double standard, how do you say anything meaningful about what ought to be? So even if Gillman were appointed Chancellor of JTS, how could his voice, being overly honest, really have any authority? In general, am I correct -- is too much intellectual honesty problematic in the exercize of moral authority?
(**) cf. the joke about the $0.02 bialy: a woman goes to a deli offering bialies for $0.02 only to learn they are out of stock, so she goes to the deli down the street selling them for a dollar. She asks the proprietor why they are selling them for a dollar when the shop down the street is selling them for $0.02. To which the proprietor replies "lady, why didn't you get them at the shop down the street?" "'Cause they are out" "Aha ... when I am out of bialies, I sell them for $0.02 as well". This happens in real life. The Black Pearl Rojo cigar typically sells for about $4 or less a stick -- but nobody actually has any in stock. At places where they do have it in stock, it sells for $6 a stick.
As many on the left have pointed out, the set of people who are rich enough that the estate tax will attach but who are not rich enough to set up a foundation to avoid having the estate tax paid is pretty much the empty set. Thus, Buffett is not a hypocrite (*) unless he is also claiming that large estates should have to be assessed an estate tax even if the estate is shunted into a foundation -- which he is not.
But the larger claim of the right, that individuals do a better job of allocating resources than the government does, is not necessarily true. Adam Smith may have come up with a nice theory about the "Invisible Hand", but people who have problems accepting the "theory" of evolution should realize that a less tested theory about a mysterious "Hand" no-one can see may not always apply to the real world. While certainly the choices of individuals are often better than those of government and the politicians therein (and that includes Holy Joe and GW Bush and St. Ronnie of GE, conservatives should remember), sometimes they are not -- even assuming an individual as acting in rational self-interest, what is good for an individual may not be good for the economy as a whole.
Suppose, for example, a person gets a huge inheritance. She presumably would not spend it all at once but would rather save and/or invest it. If the stock market is under-capitalized, her investing her estate in the stock market is a good thing. But suppose, as happened during the tech bubble and its bursting, everybody and their mother('s pension fund) was invested in the market and there was so much capital in the market that every single underwear gnomes business was having a successful IPO and getting overly-capitalized. On the other hand, suppose, due to a recession or fear thereof, interest rates are lowered to ensure that people can get loans and spend money. In such a case, who's gonna put money in a savings account? What happens then is the case of the $0.02 bialy (**): that, even if the cost for a small business or individual to obtain an infusion of capital is low, there simply is not the money around for a bank to loan. In such a situation, it is in society's best interest (to jump start the economy by helping out those entrepreneurs and middle class families that politicians so claim to want to help but don't) for the money the rich person has to go to a loan making institution, but in the best interest of said rich person to invest in the stock market (so long as low interest rates can keep it from crashing). In such a case, it is certainly better for society (if not the heiress) to have steep estate tax: the federal government, which can allocate money to federal loan programs or even pork barrel spending which certainly will put money in the hands of contractors some of whom are entrepreneurs, etc. as well as their middle class employees, does a better job, as far as society is concerned, allocating resources than a (selfish, not that there's anything wrong with that according to some) individual.
The claims of Libertarian types are not always wrong, but the idea that these free-market claims are hard facts while liberalism is squishy is certainly wrong -- free-marketism is a faith like any other. And do you want money that could be put to use for the good of society to be sacrificed for worshiping free market idols?
(*) Actually, I was thinking about whether it would have been a good thing for religious liberals if Gillman (do I have the right person?) were appointed Chancellor of JTS over having the movement punt all the hot-button social issues and assert that JTS is an academic institution rather than the arbiter of Halacha (come to think of it, having the Chancellor of JTS play the role he did would kind of be like if the leading voice on what is Constitutional or not were not the SCOTUS but rather the Dean of Harvard Law School). Certainly Gillman would have likely taken, with Halachic authority attached to this move, our movement in a more liberal direction, but would he have been the right person to do it? After all, would people listen to the Halachic authority of a person who doesn't consider Halacha normative? The problem with Gillman, after all, is that he not only practices what he preaches, but he practices more than what he preaches -- he practices Halacha but doesn't preach its normativeness. While it is nice to put such a fence around being hypocritical and to possess such intellectual honesty, sometimes to have moral authority you must skirt the line into being hypocritical and certainly enter into a territory of intellectual dishonesty: if you restrict your pronouncements solely to reflect what is lest you apply any sort of double standard, how do you say anything meaningful about what ought to be? So even if Gillman were appointed Chancellor of JTS, how could his voice, being overly honest, really have any authority? In general, am I correct -- is too much intellectual honesty problematic in the exercize of moral authority?
(**) cf. the joke about the $0.02 bialy: a woman goes to a deli offering bialies for $0.02 only to learn they are out of stock, so she goes to the deli down the street selling them for a dollar. She asks the proprietor why they are selling them for a dollar when the shop down the street is selling them for $0.02. To which the proprietor replies "lady, why didn't you get them at the shop down the street?" "'Cause they are out" "Aha ... when I am out of bialies, I sell them for $0.02 as well". This happens in real life. The Black Pearl Rojo cigar typically sells for about $4 or less a stick -- but nobody actually has any in stock. At places where they do have it in stock, it sells for $6 a stick.
# posted by alberich @ 3:34 PM 
