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.

Friday, May 27, 2011

Green Tea Party

Let every man make known what kind of government would command his respect, and that will be one step toward obtaining it. (Henry David Thoreau)


There is no political party in American politics that represents my interests. In saying that, I realize I am joining a queue that grows longer each day. Some disgruntled Americans have identified themselves with a movement called The Tea Party, so called because its policies are as loose and random as raw tea leaves. There may be some affinity between the twenty-first century Tea Party and the Boston Tea Party of 1773. The eighteenth century protest action that came to be called the Boston Tea Party was a protest against the Tea Act, which lowered the taxes on tea imported from Britain, thereby driving down the price of tea to consumers. Lower British tea prices endangered the business of smugglers who had been making a handsome profit by smuggling Dutch tea into the colonies and selling it at lower prices than British tea fetched. Rowdies paid by the smugglers threw a shipload of British tea into the harbor, and greedy criminals have been rousing the rabble ever since against any governmental policy that threatens their interests by passing laws and regulations that benefit ordinary people. The twentieth century Tea Party movement follows that original model much too closely for my tastes. I have little use for it.

The twenty-first century Tea Party movement, insofar as it has any focus, seems to be interested primarily in wringing its hands over governmental spending that would benefit ordinary people rather than a handful of billionaires. The allegation of some of its followers is that such programs as Medicare and the Patient Protection and Affordable Care Act have the potential to bankrupt America and that they represent a governmental takeover of the healthcare system; apparently what the Tea Party Movers prefer is a continued takeover of the healthcare system by rapacious corporations that make fat profits by keeping the costs of poor-quality medical interventions artificially high. Be that as it may, one can have a certain amount of sympathy with the concern that the American government spends far more than it makes and is therefore running up a debt that could bring considerable inconvenience to future generations. If a concern with unsustainable levels of public debt is what makes one a Tea Party sympathizer, then I propose a new branch of the Tea Party that takes the interests of ordinary people and some of the better policies of the Green Party into account. Let's call this new movement The Green Tea Party.

The Platform

If a new political party hopes to sweep the nation in the next election cycle it needs a platform, which is a list of policies and promises that will be forgotten or ignored once the party gains power and finds itself besieged by highly paid and ruthlessly efficient lobbyists representing the major corporate interests that actually determine how the country will be run. The Green Tea Party's platform is still under construction, or it will be as soon as the planks and nails arrive. So far only one plank has come, but that's a start. As other planks and shims (and, of course, wedges) arrive, they will be announced in future posts to this blog site.

Balancing the budget

There is no hope of balancing any budget unless expenditures are equal to or less than income. A government's income is made up largely of various kinds of taxes and tariffs. Most reasonable people can be persuaded that it is to their advantage to pay taxes if the money raised is spent on programs that support the well-being of the population. For at least a century in the United States, governmental policies have resulted in spending that not only does not foster the well-being of the population but actually undermines it. The greatest single source of counterproductive spending is the military budget. Therefore, the most important bundle of expenditures to examine is the bundle resulting from the policies that result in the United States spending nearly half of all the money spent in the entire world on military enterprises.

The military is a twig on the executive branch of government. Its stated purpose is to defend the country. Arriving at a reasonable military budget requires coming to a clear understanding of what the United States needs to be defended against. Aside from natural events such as floods, hurricanes, tornados and earthquakes, the people of the United States are endangered by very little. No other nations are poised to invade the country and colonize it. (That has already been done by the Europeans, with quite a bit of involuntary help by African slaves.) The only human enemies that threaten to disturb the peace of Americans are those created by the unwelcome presence of the US military itself. The US has military bases in more than 130 countries. It also has a stockpile of expensive weaponry, some of it kept in the United States and some of it stored elsewhere, that could destroy most human life and that still costs a great deal of money to maintain. The Green Tea Party therefore recommends saving money by closing all military bases overseas, bringing all military personnel in foreign countries back to the United States, dismantling the entire arsenal of nuclear, chemical and biological weapons of mass destruction, and reducing the army to a few thousand people trained to help victims of natural disasters. That would result in a reduction of government expenditures by about 35% of its current levels. If Wikipedia is anywhere near correct,

The U.S. Department of Defense budget accounted in fiscal year 2010 for about 19% of the United States federal budgeted expenditures and 28% of estimated tax revenues. Including non-DOD expenditures, defense spending was approximately 28–38% of budgeted expenditures and 42–57% of estimated tax revenues.

In addition to cuts in the military budget, The Green Tea Party recommends cutting all military aid to foreign countries and replacing it with non-military humanitarian aid to promote health and education in developing countries. This change would surely result in good will toward the United States, thereby reducing the resentment and hostility toward the country that has arisen through decades of interference in and exploitation of developing countries around the world.

It is impossible to take seriously any political party in the United States that does not make a dramatic reduction in the influence of the military a top priority. Some members of the other branch of the Tea Party (which, to distinguish it from the Green Tea Party shall henceforth be called the Black Tea Party or perhaps the Red Tea Party) agree that the current level of military expenditures are destroying the United States. In future postings, an attempt will be made to persuade them that the Green Tea Party has policies that make more sense than those of the Koch Brothers and other enthusiastic corporate sponsors of the Black Tea Party that have grown wealthy through entrepreneurship like that of the pirates in the eighteenth century who used to trade in stolen Dutch tea.