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Monday, January 5, 2009




Charles Krauthammer and demise of American conservatives

Yes, a high gas tax constitutes a very serious government intervention. But it has the virtue of simplicity. It is clean, adaptable, and easy to administer. Admittedly, it takes a massive external force to alter behavior and tastes. But given the national security and the economic need for more fuel efficiency, and given the leverage that environmental considerations will have on the incoming Democratic administration and Democratic Congress, that change in behavior and taste will occur one way or the other. Better a gas tax that activates free market mechanisms rather than regulation that causes cascading market distortions.

Source: The Net-Zero Gas Tax

One thing that stands out about the US free market conservatives is this. In the American political culture tax cuts are equivalent to European welfare states, minimum wages and social spending. America seems to be generally very low on social capital which is usually high in smaller and more homogeneous societies such as Sweden was until a decade or something ago. In fact, America is probably just too big and its sheer size requires quite an effort from that part of the human brain that's responsible for forming national identities. That's why beyond the passionate flag waving, the sense of social solidarity is actually not very high and people are generally reluctant to pay taxes. Given that low taxes and minimal state intervention constitute an important part of the free market doctrine, there has been produced a strange phenomenon of tax cuts not as part of austerity measures or structural reforms but as regular political commodities traded by deeply populist and economically ignorant politicians to a no less economically ignorant and extremely receptive to populist rhetoric electorate, all this, nevertheless, accompanied by a no less populist and void of substance pseudo free market blah blah blah.

This trait of the American political culture has two major effects. First, the US has become culturally and ideologically predisposed to getting up to its neck in out of control deficits and debts since many of these tax cuts are severely deficient not only in the economic but just plain human common sense. It should be also mentioned that the conservative idea of free market is not very economical from the beginning and it just can't be other way given the total lack of any economic thinking in the overwhelming majority of the conservatives. The conservative view of free market is just a part of a much bigger ideal of a self governing society where the government is nowhere around and the society is sustained by the self interest or voluntarism of its citizenry. This utopia in some respects resembles the ideal society dreamed in Russian and other Communisms, even though in the Communist case the exact opposite had been achieved. As they say, extremes meet.

As a matter of fact, extremes have met in the case of America just as well and this is the second consequence of this "free market" approach to taxes. Since without taxes, by far the most market friendly tools for carrying out economic policies, the regulators were left with the most socialist methods for achieving their goals of energy independence and universal home ownership. For example, the measures undertaken or considered for the sake of energy independence include everything from ethanol subsidies and mandatory blends to this crown jewel of the American free market approach to energy policy which is hardening of energy efficiency standards. Some of these, even taken in isolation, can put to shame Scandinavian socialist paradises. All of them, however, can be easily replaced by a single gas tax.

Of course, the ethanol subsidies, tax breaks for national oil companies and their friends have all their price. But a combination of economic ignorance and unshakable belief that the world is teeming with opportunities for getting free lunches led the American public to believe that it's paying nothing for having these. Very illustrative in this sense are the tax cuts carried out by the Bush administration which were basically defunding the state at a time when people and businesses were all busy leveraging themselves up. It's important to see this in a wider context of what was happening in the American society as a whole. In times of crises Wall Street usually takes the brunt of fingering, but it's important to see that the whole of America was one big Wall Street, the society stopped saving and went on a consuming binge fueled by a runaway abuse of mortgages and credit cards. The US government with its mounting deficits and debts was a reflection of a nationwide trend that has very little to do with free markets as such. Any person, even with the most minimal pro market orientation, would be wasting his time searching here for any signs of the budget discipline that we came to associate with free market economic policies, since there are none.

By the end of the Bush presidency a significant portion of the conservative camp has degenerated into a bunch of political kamikazes in the sense of them refusing to have any policy whatsoever. Anybody who has happened to visit conservative blogs could not fail to get amazed by the sheer amount of articles disproving the global warming recycled there. The same can be easily observed now on the same blogs with regards to Krauthammer's call for a fuel tax. Some conservatives have joined forces with the greens to oust the ethanol program, others for the sake of consistency are also calling for repelling the tax breaks for oil companies (American oil is not cheap. Without an import duty on foreign oil, withdrawing these tax breaks is bound to lead to closure of fields and increased imports of foreign oil).

The conservatives were simply refusing to deal with any of the three major challenges facing their country: energy crisis, radical Islam and global warming. In this sense it can be said that by the time Obama has won the elections, the conservatives had pretty much nothing to offer to their bankrupt nation beyond more tax cuts and invading a couple of more countries in the Middle East. It is not that Obama has something sensible to offer instead, but at least he is trying.

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Proclaimed un monstruooo muy monstruoso at 4:32 PM