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- Published on Amazon.com
Many of our most important decisions have strong economic components, not all of them obvious. This is especially true in the political world. Frank's "The Economic Naturalist's Field Guide" explores the often hidden reality behind a number of them in a collection of short essays previously published in the New York Times. (Pause for conservatives to scream about the NYT.)
Frank begins with income inequality, asserting that most countries tend to push against increasing income inequality, but in the U.S. we enact tax cuts for the wealthy and cut public services for the needy. However, even the wealthy have been made worse off, on balance, by recent tax cuts - per Frank. On the benefit side, tax cuts have led the wealthy to buy larger houses; however, since economic satisfaction if primarily established on a comparative basis, the primary effect is merely to redefine what qualifies as an acceptable dwelling. Meanwhile, deficits have led to cuts in financing for basic scientific research, public health, highway maintenance, "loose-nuke" security of former U.S.S.R. weapons - threatening the long-term economic prosperity of all, including the wealthy. (A bit of a stretch, but interesting.)
Frank then acknowledges that government does waste money from time to time (my experience in education, the military, and health care tell me he doesn't BEGIN to understand how much), but waste is not limited to the public sector. Watches, for example, cost up to $700,000. (I'd be embarrassed to wear one - mine was $29.95 at Wal-Mart, with Atomic accuracy.) More importantly, the middle-class and poor are more likely to spend any tax savings than the rich.
A corollary of the "it's-your-money" argument is that the government should never redistribute income from the rich to the poor. Frank says that no government follows this admonition, and it would sometimes harm the rich. For example, fewer than 10% of L.A. vehicles are over 15 years old, and they produce over half the smog. Further tightening new car standards is several times as costly as meeting standards by eliminating exemptions for older vehicles. Alternatively, raising taxes on high-income motorists could finance vouchers enabling low-income motorists to scrap their older vehicles. The required taxes would be much smaller than resulting savings from not having to adopt more costly standards for new vehicles.
Similarly, private health insurance in the U.S. delivers worse outcomes (47 million uninsured) and substantially higher costs (31% administrative costs) than single-payer systems (17% administrative costs in Canada) in most every other industrial country.
Frank also points out that the Earned Income Credit (EIC) does not discourage hiring, as do increases in the minimum wage.
Bush II tax cuts were rationalized on the basis that they would stimulate robust economic growth. However, the basic hiring criteria - taught even in Bush advisor textbooks, is that workers will be added whenever their output can be sold at prices exceeding added costs. (Me thinks Franks slipped a gear here. Tax cuts would increase the amount left after sales, and therefore also should increase hiring.)
Bush II proposed repeal of the estate tax. Doing so would reduce federal revenues by about $1 trillion from 2012 - 2021. To help reduce costs, Bush also proposed cutting veterans' health care, educational and vocational training, etc. When these cuts are associated with repealing the "death tax," voters are 4:1 against; when these cuts are not mentioned, voters are 3:1 in favor. Regardless, as it now stands, less than 1% will ever pay any estate tax.
Japanese CEOs earn less than 1/5 that of the American counterparts and face higher marginal tax rates on even that - similar to the U.S. situation in the 1950s. Ergo, says Frank, American CEOs don't need all that money and tax relief to be motivated.
Etc., etc., etc. - worth reading!