WASHINGTON, Feb. 18 (UPI) -- The UPI think tank wrap-up is a daily digest covering opinion pieces, reactions to recent news events, and position statements released by various think tanks. This is the third of three wrap-ups for February 18.
The National Center for Policy Analysis
(NCPA is a nonprofit, nonpartisan public policy research organization whose goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector.)
Bush moves toward consumption taxation
By Bruce Bartlett
DALLAS -- The Bush administration supports a fundamental tax reform that would move the federal tax system away from taxing income toward taxing consumption. This is a highly desirable goal, because it will raise growth and living standards for most Americans.
Nevertheless, liberals are opposing it because it would benefit the rich too much.
Traditionally, consumption taxation has meant taxing goods directly, with services generally exempted. Such taxes are common at the state and local level, where we are accustomed to paying as much as 10 percent at the checkout. According to the Federation of Tax Administrators, 45 states currently have general sales taxes, varying between 2.9 percent in Colorado and 7 percent in Mississippi and Rhode Island. Local sales taxes can raise the total tax as high as 9.75 percent (in Oklahoma), with excise taxes on some specific goods on top. The federal government also has many excise taxes as well, especially on gasoline, alcohol and tobacco.
Consumption taxes are less burdensome than income taxes because of the way they treat saving. Under an income tax, all returns to saving and investment -- interest, dividends, rent and capital gains -- are fully taxed. Under a consumption tax, they would be exempt.
Consequently, saving and investment are much higher with a consumption tax than an income tax. That is why European countries, which all have tax burdens much higher than ours but also raise more of their revenue by taxing consumption, are still able to grow.
If it were just a matter of economics, there would be no contest between taxing income and consumption. Unfortunately, ideology and politics have prevented reductions in taxes on saving and investment that would move the United States toward a consumption-based tax system.
Keep in mind that it is not necessary to tax consumption directly, through sales or excise taxes, to have a consumption tax system. Since there are only two things that can be done with income -- either save it or spend it -- eliminating taxes on saving necessarily shifts the tax burden onto consumption. If there were no taxes at all on saving, we would have a consumption tax system, even if there were no direct taxes on sales.
Unfortunately, it is the case that most saving and investment are done by the wealthy. How could it be otherwise? Therefore, reducing taxes on saving necessarily involves a reduction in taxes on the well to do. Consequently, liberals strenuously fight efforts to lower taxes on saving even though the ultimate beneficiaries would be the working class. Higher saving and capital formation will lead to more investment, which will raise productivity and, ultimately, wages and living standards.
Liberals also make the mistake of assuming that a consumption-based tax system is regressive -- taking more out of the pockets of the poor than the rich. In fact, over one's lifetime, consumption is roughly proportional to income, because over a lifetime we eventually consume all our income. Thus, a tax on consumption will also be roughly proportional -- taking the same percentage from all taxpayers.
Furthermore, liberals make the mistake of assuming that those who are poor today will always be poor, and those who are rich will always be rich. This is really their principal justification for income and wealth redistribution policies. However, new data reported in the latest Economic Report of the president show that there is substantial mobility up and down the income ladder.
The Council of Economic Advisers looked at what rate taxpayers faced in 1987 and again in 1996. Two-thirds of those in the lowest tax bracket the first year were in a higher bracket 10 years later, and more than half of those in the top tax bracket were in a lower bracket.
In other words, the bulk of those who would be considered poor in the first instance were much better off a decade later -- a few even became rich, going all the way from the bottom tax bracket to the top bracket. Simultaneously, most of those who would be considered rich weren't after a few years -- 5 percent fell all the way from the top tax bracket to the bottom bracket.
The high degree of income mobility in American society is a key reason why many of the poor and middle class oppose high taxes on the rich -- 70 percent of Americans favor abolishing the estate tax, for example, even though it affects just 2 percent of the population. Implicitly, they know that they or their children might one day be rich and have to pay this tax. They also know that poor people don't create jobs; rich people do.
Adopting a consumption-based tax system will help more Americans become rich. That is another reason why liberals oppose it.
(Bruce Bartlett is a senior fellow with the National Center for Policy Analysis.)
The Hoover Institution
Kicking the Vietnam syndrome
By H. R. McMaster
STANFORD, Calif. -- For a brief period, it seemed that the 1991 Gulf War had put an end to the Vietnam syndrome -- a belief that the United States should avoid military intervention abroad. The painful memory of America's long, costly, and divisive war in Vietnam, however, retained its influence on the American psyche.
Recent protests over impending military action against the Iraqi regime again invoke the tragedy and the analogies of Vietnam. Those simplistic analogies suited the purposes of their purveyors because America's collective memory of the war has become more symbolic than historical. To judge better the value of the inevitable Vietnam analogy, we might ask what, if anything, we can learn from our painful experience in Southeast Asia.
Most historians, sensitive to the complex causality of historical events, would answer cautiously. What good is history, however, if we cannot learn from experience? If we neglect previous mistakes are we not, as philosopher George Santayana suggested, doomed to repeat them? Indeed, the desire to learn from Vietnam remains one of the war's enduring legacies.
The first step in learning the right lessons is to become familiar with the historical record. It may be the uniqueness of how America went to war in Vietnam that is most instructive. There was no clear decision for war. Instead of exercising leadership, President Lyndon B. Johnson sought to avoid a decision and preserve a fragile consensus built on lies and deceptions.
The administration's dishonesty allowed the president to circumvent the Constitution and deny the American people a say in the most important question a nation must face. As a result, Americans were at war before they even recognized that fact. LBJ's behavior was not only undemocratic but also removed correctives to what was an unwise policy. Not surprisingly, the way in which the United States went to war had a profound impact on the conduct of the war, its outcome, and its legacy.
President George W. Bush's approach to the current Iraqi problem stands in stark contrast to LBJ's approach to Vietnam. The Bush administration made its case for military action, and, after considerable debate, the American people, through their representatives in Congress, gave approval. The administration also made its case to the United Nations, highlighting the damage that inaction would inflict on prospects for peace in the long term.
Although the dangers of careless military activism are easy to imagine, the cost of passivity is more difficult to discern. In the 1990s, the Vietnam syndrome helped delay and limit U.S. military intervention in the Balkans. Those delays and limits extended murderous Serbian repression and actually accelerated ethnic cleansing in Kosovo. Failure to intervene militarily often permits humanitarian crises to continue and leads to more dangerous conflicts.
Rather than helping us avoid folly, the symbolic memory of Vietnam poses a danger. Recognizing most Vietnam analogies for what they are -- attempts to evoke emotion rather than invoke historical reasoning -- can help minimize that danger. It seems as if the Bush administration has kicked the Vietnam syndrome. Maybe it is time for the rest of us to do the same.
(H. R. McMaster is a national security affairs fellow at the Hoover Institution and author of "Dereliction of Duty: Lyndon Johnson, Robert McNamara, the Joint Chiefs of Staff and the Lies That Led to Vietnam.")
The Reason Foundation
Beat on the brat: A post-relevant poet shores fragments against our ruin
By Tim Cavanaugh
LOS ANGELES -- It was probably inevitable, once the cavalcade of anti-war stars had reached the ranks of forgettables like Tyne Daly and Malachy McCourt, that another of history's great B-listers would lend his reputation to the movement. No less a figure than Lawrence Ferlinghetti, founding member and premier entrepreneur of the Beats, has been moved to break his literary semi-retirement, take up his quill, and howl against "the war with the Third World."
Although the once-subversive poet and founder of the legendary City Lights bookstore continues to plug away, he has not been much in view lately. Ferlinghetti's 1997 book "A Far Rockaway of the Heart" strove in vain to recapture the magic of his classic "A Coney Island of the Mind" and stirred fears that "A Howard Beach of the Spirit" might be awaiting publication somewhere.
The last time he really made a splash was by circulating an open letter wherein he griped about the declining quality of U.S. restaurants in San Francisco's North Beach. Thus, the publication of his new piece of anti-war verse, entitled "Speak Out," has been enough to make the local papers snap to attention.
Whether "Speak Out" is a substantial poetic achievement is a question we must leave to future literary critics, but its merits as an anti-war tirade are easily scanned.
"And the terrorists in Washington/Are drafting all the young men," the poet writes. Ferlinghetti, who served his country in the Navy during World War II, presumably knows what it actually means when the government drafts young men, and thus should understand that this is not even close to happening at the present time.
In fact, the current sponsors of a congressional bill to reinstate mass conscription, Reps. Charles Rangel, D-N.Y., and John Conyers, D-Mich., are opponents of the Bush administration whose bill is intended as a form of protest. (Before leaving this point, let me note that Ferlinghetti continues the boys-only ethos of the famously misogynistic Beats by referring repeatedly to "young men" throughout the work, even the most socially backward supporters of a war in Iraq now know enough to use the phrase "our men and women in uniform.")
On more solid ground, Ferlinghetti indicts the crackdown on Muslims and Middle Easterners:
And they are rousting out
All the ones with turbans
And they are flushing out
All the strange immigrants
Lest we go too far in our concern about the very real and very troubling approach authorities have taken toward ethnic and religious outsiders, however, Ferlinghetti quickly reminds us who the real victim/heroes of today are:
And when they come to round up
All the great writers and poets and painters
The National Endowment of the Arts of Complacency
Will not speak
While the actual literary creations of the Beats have mostly faded from memory, the movement's real achievements -- deft self-promotion and the almost single-handed creation of aspirational marketing -- live on as testaments to free-market capitalism, so it's refreshing to see Ferlinghetti's honest dislike of a federal boondoggle like the NEA. Still, are we supposed to be stirred by a line about "all the young men ... killing all the young men," when the horribly distinctive thing about our new reality -- from the unprecedented slaughter of Sept. 11, 2001, and Bali to the (accidental but still horrific) bombing of an Afghan wedding party, to what will most likely be a high civilian toll on the Iraqi population -- is the killing of civilians?
And while I'm willing to believe that domestic support for an attack on Iraq is far less enthusiastic than instant polling has suggested, it flies in the face of some powerful statistical evidence for the poet to announce, "Now is the time for you to speak/O silent majority."
It's easy, and meaningless, to mock a way-past-his-prime literary runner-up, but "Speak Out" is indicative of just what makes the anti-war movement in its current form so inept. Deeply satisfying as it may be to let your freak flags fly at The Man and all his hang-ups, opposition to a war on Iraq is important enough to attract Americans across a wide social and political spectrum.
This opposition doesn't (or shouldn't) have anything to do with scattershot accusations about a terrorist government, or concerns about a non-existent military draft, or half-baked claims about American imperialism. (In fact, I think America's relative lack of imperial ambitions is one of the main reasons not to start on a decades-long nation-building process now.)
The breadth and range of attendance at this weekend's anti-war demonstrations suggests opposition to a war in Iraq has moved beyond moribund leftist clichés. If so, that's a hopeful sign. The case that we have no alternative to invading Iraq is one of the flimsiest arguments for war ever presented to the American people, and there may well be a "silent majority" that would reject that case for practical and essentially patriotic reasons.
Which is all the more reason we don't need faded beat-era platitudes that made little sense even when they were first circulated more than 40 years ago. Especially when they don't even rhyme.
(Tim Cavanaugh is the Web editor for Reason magazine.)