Wednesday, October 31, 2007

Not a four-letter-word any more

In polite society there are four letter words. We all know them, even if we manage not to use them. Politics, however, has simplified this a bit. Whether in Washington or anywhere else in America, we are now down to a three letter word. Tax.

It may be heresy to say this, but both parties have found something to agree on: taxes are bad. The disagreement is one of degree, not of position. The easiest way to describe the Republican position is, “taxes are bad, especially on those who make the most money because they work the hardest, but necessary to maintain a strong national defense.” The Democratic position is slightly more convoluted, “Taxes are bad, especially on the poor who can least afford to pay. But taxes are also a good way to redistribute wealth.”

While I would like to say that neither of these messages is compelling, the Republicans have shined their “taxes are bad” message into a beacon to draw people like moths to a flame, and have sharpened their rhetoric to use “tax hike” as knife to cut down opposition.

So instead of saying that neither the Republican or Democratic position is compelling, I will say that neither is genuine, and has the interests neither of Americans nor America at its root. Like too much political rhetoric in the past twenty years, our language on taxation has been wielded to build a more successful party, not a more successful America.

For all the rhetoric and position-jockeying on taxes, there are a couple simple things I try to keep in mind when thinking about them.

First, taxes are where cheap talk gives way to real commitment. Nothing happens in the government (or anywhere else, as the charge for wireless internet connections at Starbucks illustrates) for free. A politician can talk up an idea all he or she wants, but until there is an action to put money behind it, it’s just a nice speech.

Second, the collection of what the government commits itself to becomes our social compact. Whether you believe government has a large or small role in society, taxes are the government’s commitment to a people that it will move the country in a given direction. A government’s ability to convince people to surrender their earnings to accomplish something is the government’s badge of legitimacy.

Statements that taxes are ‘bad’ or ‘good’ miss these two points entirely. People are willing to pay thousands of dollars for a business-class airplane seat because they feel there is value in what they are purchasing. This is the direction our national conversation on taxes must move: not whether taxes are good or bad, carte blanche, but whether the government is able to provide something of value to Americans for the taxes collected.

Any politician can demonize taxes—whether because they are too high on the wealthy, the poor, or the middle class—but the rhetoric of negation and using ‘tax’ like a three letter word will not create a stronger, safer, smarter, wealthier America. What America really needs, if we are to continue to be a strong, smart power, are politicians who are willing to recommit to a social compact with America.

Wednesday, October 17, 2007

An outsider's inside view of North Korea

Jon Wolfsthal, Senior Fellow at CSIS, just published a short piece that does an excellent job painting the picture of the challenges faced by the American inspection teams about to head to North Korea to verify the dismantling of North Korea's nuclear facilities. And Wolfsthal would know better than most, since he spent a fair length of time in North Korea doing dismantlement verification in the 1990s.

Friday, October 12, 2007

Globalization: Not as easy as it used to be

Globalization is getting more complicated. Now we have labor in the U.S. fighting it, and big business in India and China pushing it. The two sides are presented clearly in this piece from Wednesday’s Times (via Reuters). India is having a huge public debate (usually in the form of protests) over whether to allow ‘big box’ retailers to set up shop. Not Walmarts, Targets, and Best Buys—foreign companies are barred from establishing “multibrand” establishments.

There are actually a number of significant issues emerging: is rapid economic modernization worth the price of massive social upheaval? Can we expect a people (not just a few people) to sacrifice their livelihoods in the name of progress? How does a society balance competing demands when one portion of its population desires a risk-opportunity-reward environment against the wishes of a group that prefers security and stablity?

There are basic economic questions as well: if a big-box retailer can sell the same number of goods (at a lower price) while employing only two million people, and traditional retailers need 40 million to sell the same quantity, which is better for the economy? Tipping towards a big-box makes sense in a labor-scarce country like the U.S., but does the same make sense for a labor-abundant place like India or China? And it gets even more complicated when market-segments are considered. Wages for “knowledge workers” in both India and the U.S. (and all over the world) are going up, as the demand for their services outpaces the rate at which they are produced. Conversely, earnings for low-skill positions are flat or falling, as international competition combined with mechanization are eliminating positions across the globe. Said another way, can a labor-abundant India afford to give up millions of jobs, only to increase profit?

How should policy makers frame their thinking in this kind of environment? How does a society position itself to best weather the shocks, and capitalize on the opportunities of this type of economy?

A few places are getting it absolutely right: Singapore, Hong Kong, Dubai. These small city-states have the advantage of being small and knowing anything they achieve will be precarious: so they are constantly struggling to achieve. It makes them less ideological and more pragmatic than many other—larger—countries. They invested in education, shipping, and low-tech manufacturing 30 years ago. Now they are transitioning to high-tech, investments, banking, and other spin-offs of their small, highly educated populations. Of course, not everyone in Singapore, Hong Kong, or Dubai is highly educated. But the places are small enough—with enough central government control—that they can be highly selective about immigration, and they can fund education very well to encourage their own citizens to be well-educated.

Large countries—like China, U.S., India, or even Germany or Canada, have a more complicated problem because of a large, diverse population, spread across large areas, and (relatively) loose central control. The solutions that work for San Diego, might create disaster in San Antonio. The economy in Minneapolis looks nothing like the economy in Mobile.

My guess is that getting the U.S. (or India or China) to serve both parts of its population—the risk-taking, and the security-seeking—is going to take a bit of a two-step. Both Washington (or Beijing or New Delhi) ceding control to local levels for education and employment policy, but also a greater central-effort on job-training, unemployment benefits, health care and emergency-retirement.

I’m no expert though, and welcome thoughts, if you're willing to share.

Friday, October 05, 2007

What power?

Fred Hiatt at the Washington Post has sparked quite an exchange today in Post Global, with his piece arguing that the U.S. should let China know it has a choice: a friendly regime in Burma, or a successful Olympics next year. This precipitated a detailed response in opposition from James Fallows, The Atlantic’s correspondent in China.

Both men provide compelling arguments, but this discussion raises a broader question about American foreign policy since the end of the Cold War: if we are unwilling to speak with our adversaries, and we are unwilling to coerce our friends, what power does the United States have left?