Sunday, May 29, 2011

Green Tea Economics

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. Adam Smith (1723—1790)
A perfectly obvious observation that served as a point of departure in a previous post was that the desideratum of a balanced budget can be achieved only when expenditures do not exceed income. No serious economist believes the government's budget can be balanced by attending only to cutting expenditures or attending only to increasing income. What is needed is a combination of decreased spending and increased acquisition of public funds.

It is remarkable that hardly any figures in the American political arena have had the combination of wisdom and courage needed to point out that the most costly item in the American budget is not Medicare and Social Security (as Tim Pawlenty, John Boehner, Michelle Bachmann and hordes of Black Tea Party enthusiasts incessantly but inaccurately aver), but rather the military. The wastefulness of military spending has already been discussed on this blog site (and will be discussed again in the future). In this squib, the focus will be on how to increase governmental income.

So far, the public discussion of how to increase revenues has been focussed on raising tax rates for the wealthiest 2% of taxpayers, putting into place a national tax on purchases of goods and services, increasing the rates of taxation on inherited assets, and closing loopholes that enable corporations to write off business expenses so that they do not pay taxes on substantial portions of their profits. The Green Tea Party favors all those measures but notes that even if all of them were put into place, the increase in revenues would still be modest. What will be discussed here are other measures needed to increase revenues.

An axiom of economics so basic that even I have heard of it is that the wealth of any nation depends on three factors: population, productivity and ingenuity. The greater the number of people actively participating in a nation's economy, the higher their level of efficiency, and the more skilled a society is in delivering goods and services to their intended markets, the more overall income there is in that nation; the more income there is, the broader the base that can be taxed.

A major weakness in the United States economy is that the country wastes human resources. The country fails to increase its population of workers, and it fails to make good use of the population it has. To rectify these two types of waste, the Green Tea Party proposes two policies: increasing legal immigration and decreasing the prison population.

Increasing legal immigration

There are millions of people around the world, many of them in the Americas, who are ready and able to come to the United States to work and to start up small business enterprises. What prevents them from entering the US workforce are unrealistically strict quotas on immigration. Perhaps the ideal solution would be to establish a pan-American economic union similar to the European union that would have a single currency like the Euro (called, perhaps, the Americano) and porous borders that would allow any citizen of any country in South, Central or North America to take up residency and work legally in any other country on the American continents. The ideal would be an economic zone in which anyone from Ellesmere Island to Tierra del Fuego could move freely. Under present free-trade agreements, only goods can move freely across borders. This policy serves corporations seeking markets, but it hamstrings laborers seeking employment.

While an American economic union would be by far the rational most solution, it is, precisely because it is rational, unlikely to succeed immediately. It may take time to implement, since some people will no doubt perceive that economic justice would erode their unfair advantages, and maintaining the unjust status quo will become a major preoccupation to them. So while North, Central and South America work slowly toward an economic union with a single currency, the United States can unilaterally increase its own labor force by making dramatic increases to immigration quotas. It makes no sense at all to build walls and fences and electronic surveillance systems across the border between the United States and Mexico to keep people out of the country who are eager to find honest employment and to provide labor that the United States desperately needs. The American economy would take a nosedive overnight if it were not for the millions of migrants who have come to this country to work illegally. It is time to recognize the American economy's indebtedness to those people and to make their presence in the country perfectly legal. There is absolutely nothing that eliminates crime more effectively than abolishing laws that make some behavior criminal. It is time to stop making seeking honest work, and doing honest work when it has been found, a crime.

Decreasing the prison population

The United States has the highest incarceration rate in the world. 743 out of every 100,000 American people are in prison. In second place is Russia, with 577. In the United Kingdom 141, and in the Netherlands only 94, out of every 100,000 are in prison. According to an article published in 2008 in the New York Times, 25% of all the prisoners in the world are in the United States.

There are many factors leading to the fact that the percentage of prisons in the USA is eight times the percentage in the Netherlands. Two that deserve special attention are the lengths of sentences given for crimes, and the kinds of behavior deemed criminal. Both of those factors are linked to the fact that in many states, the running of prisons is done by for-profit private companies whose profits depend on a steady flow of customers for their beds. Accordingly the Green Tea Party recommends taking criminal law out of the jurisdiction of states and replacing it with a federal criminal code (similar to the one in Canada) with much shorter sentences for most crimes. It further recommends that all prisons be managed by the federal government and that no correctional facilities anywhere in the country be within the domain of private enterprise. Justice (like health care) is far too important to be entrusted to the hands of profit-seekers.

Reducing the lengths of sentences would only partly reduce the number of people in prisons. A larger factor would be to make significant reductions in the kinds of behavior that is considered criminal. It was mentioned above that seeking and doing honest work should never be made into a crime. (For that matter, it should never be a crime to cross a border and to take up residence in a country.) In 2009, the number of people arrested for drug-related crimes was 13,687,241. Nearly 20% of all inmates in American prisons are serving terms for felonious drug possession or trafficking, and the average length of sentences for drug felonies are only slightly shorter than the average length of sentences for violent crimes. Moreover, 17% of all those convicted for property crimes report that their crimes were committed as a direct result of seeking to find money to pay for drugs. Making drugs illegal makes them expensive, and making them expensive gives drug-users an incentive to commit crimes. People with drug addictions need treatment, not punishment.

Another source of human waste in the American prison system, aside from the unreasonably high number of people imprisoned for behavior that should never have been deemed criminal in the first place, is the scarcity of educational programs made available to prisoners. As a result of serving unreasonably long sentences for minor crimes, people coming out of prisons usually lack marketable work experience. Scarcity of financial resources has led in almost every state to a decrease in programs designed to educate inmates and give them marketable skills. As a result, the recidivism rate all over the United States is remarkably high. The Green Tea Party recommends that money (most of it saved by reducing the overcrowding of prisons by reducing the number of behaviors deemed criminal and by reducing sentences) be put into improving education and job training both inside and outside of prisons.

Decriminalizing international migration, decriminalizing drug use and trafficking, and shortening sentences are three measures that would result in a significantly larger workforce, which would in turn increase the tax base. The government's income could thus be increased significantly without any taxpayers (except for the wealthiest 2% of the population) paying higher rates than they pay now.

Generally improving the quality and availability of education would result in an increase in the productivity of the workforce. Educational reform will therefore be a topic for a future plank in the platform of the Green Tea Party.


Maxim K. Rice said...

An article with so much rationality will take a while to get the recognition it deserves in this country, but thank you for posting it. All so true. During the time I was in prison we had guys sleeping in the concrete floor with one inch thick mats because of overcrowding. Once a week a small cart was available with paperback books of the most violent and insipid kind, but you lined up to get one have some distraction available to yourself. I have to admit meditation was a real struggle with the 24 hour talking and TV happening all around. One of the first young men I met there was serving an 18 month sentence because he had been hitchhiking and was riding with a guy who was stopped and a joint was found in his glovebox. So stupid.
Thank you Richard. I'm a Green Tea Partyer!!