Liberal Debate Strategy: Redefining Baselines

I'm becoming very tired of liberals redefining baselines. The most recent example comes from the IMF. According to them, we can reduce carbon emissions by decreasing subsidies to fossil fuels. So far, so sensible. However, when you learn what they're classifying as subsidies, you see that they're warping traditional definitions, as liberals like to do.

Burning fossil fuels clearly has a negative externality--it harms people who don't directly use it because of pollution. One way to offset the cost to the public is to tax the burning of fossil fuels. This way, those harmed can be compensated and those who use the fuels have a disincentive to do so.

What the IMF does is says, any tax on fossil fuels below this level of optimal taxation, we're going to call a subsidy. This is another strategy from liberals--to skew traditional definitions in new directions. Usually we think of a tax as any price increase caused by the government and a subsidy is a reduction in cost or a payment to users from the government. The baseline has always been government non-intervention.

Now, the IMF wants to argue that the baseline should be the optimal tax on it. I wonder if that works the other way around. Can we say that something with a positive externality should be subsidized, so any failure to subsidize should be considered a tax? Should we go around from now own decrying the fact that the government taxes landscaping?

The level of optimal taxation/subsidy is impossible to determine; we should stick with the baseline of zero government intervention.

Spend More on Infrastructure - Now Now Now

Liberals have continued to beat the drum about infrastructure spending. Basically the argument is that our roads and bridges are in extreme cases of disrepair and interest rates are bargain-basement level, so we should do it now.

There's a great edition of EconTalk with a debate between libertarian Russ Roberts and Keynesian Robert Frank. There's one major point that Russ kind of hinted at, but didn't develop enough. The point is that the government (all levels) spends $350 Billion/yr on infrastructure and to make the case that Orszag and Frank want to make, they have to argue that what we currently spend isn't enough. Instead, they just say that infrastructure needs funding.

A reasoned argument would be we need to spend $X on infrastructure, and we're currently spending $Y so we need to increase spending by $(X-Y). Their argument is "We need to spend $X on infrastructure and it doesn't cost very much to borrow $X right now, so let's do it."

On top of that, as Russ alludes to, at all levels of government we spend $5-6T, the pro-infrastructure argument has to include the point that we can't afford to reduce spending on anything else--infrastructure spending is the least important item we spend money on. Otherwise, we should reduce spending elsewhere and reassign it to infrastructure.

This is another trick Democrats use when talking about spending. They never, ever compare spending on different programs; everything's urgent and critical--healthcare, social security, infrastructure, research, education--and all equally so. Libertarians have to change the terms of these debates to include prioritizing budget items.

Liberal Debate Strategy: Appeal to Humanity

I challenge anyone to read this and not feel awful. Basically it's the story of how someone became sick, and his insurance wouldn't cover treatment without his challenging the CEO publicly.

I think anyone's first reaction is to feel miserable that anyone has to go through this. This is the emotional response.

Liberals are always, however, saying that they only look at facts/data. This clearly is not true. Sometimes they use examples like these to evoke a sympathetic response for their point of view. We must be cognizant of this strategy.

As far as data, one question I would have is whether this student had the option of another health insurance plan, and did he choose the cheaper plan. This is critical. If he chose the cheaper plan knowing of the limits and risks, then as tragic as this is, he made a choice.

I believe many liberals want to argue that this is not a choice people should be able to make (and they actually can't make it anymore under the ACA), but they must acknowledge that by restricting that choice, they're raising the costs of healthcare for everyone. If they announce that, and most people still desire this policy, great. But instead, they present this regulation as something that benefits everyone and has no costs.

Market-oriented people, if they want to argue for the ability to choose options that could possibly have tragic consequences, have to be ready to defend their stance against these emotional appeals, which is very challenging.

Privatizing Social Security

It's no secret that liberals recoil at the idea of privatizing Social Security.  Their primary argument is that it's too desert your retirement funds to the whims of the stock market. In this opinion piece, Clive Crook makes the argument that liberals should embrace privatization as a means to address the growing inequality in the economy.

Although I'm confident that this will have no truck with liberals, he raises an interesting point.  The rich are getting richer largely because of their exposure to capital while the rest of the population relies largely on Social Security for their retirement and has much less capital in their portfolio. One remedy for this would be to re-orient Social Security towards market-based assets instead of government debt.

Again, I doubt any liberal will be moved by this argument. They have an inexplicable attachment to Social Security. Yes, they say it's because of the risk, but their reactions to modifying Social Security are disproportionate to their criticisms of any modifications.

For example, if Republicans gave people the option of putting part of their Social Security taxes into private accounts, it would be a non-starter. They wouldn't calmly discuss why that's a bad idea, but would quickly dismiss it (see the Ryan-Biden VP debate). Why? Exposure to risk is limited, and on top of that, people have a choice to participate or not.  No one has to lose. If anyone has an idea as to what accounts for this mismatch, I'd love to hear it.

My tentative proposal which I'm confident will have no impact on the debate would be to re-engineer Social Security as more of an insurance program.  Instead of paying into an account, your payments to Social Security would be based on how much you save. There could be a list of options (Life Stage funds, for example, and US bonds), but the more you save, the less you pay to Social Security.  Then, when retirement comes, Social Security would guarantee a certain level of income (including proceeds from investments). That way, everyone's covered for the risk, but it's likely that it won't cost the government much at all.

Deficit Target

Republicans want a balanced budget; Democrats don't. Democrats argue that as long as the deficit is below GDP growth, it's sustainable. I'm ambivalent about this debate; I'm drawn to the idea that the government spends less than it brings in, but I can also see that we may be better off by running a consistent deficit.

What the Democrats don't account for, though, is the cyclical nature of the economy.  Basically, their target is to overspend by GDP growth in the best years and then spend even more during recessions. If they want to stick with the deficit being less than or equal to GDP growth, that should be the target over long periods of time including ups and downs of the business cycle.

The Democrats' approach would mean our debt stays the same during boom times but explodes during busts (much like the last four years), and the national debt would inexorably march upwards. President Obama has said his goal is to make sure the debt is stabilized over the next ten years, but that's not good enough. It has to go down, because when the next recession hits, which budget projections don't expect, the debt will increase.