Saturday, July 25, 2020

Against Decimation

There's been a lot of talk recently about "cancel culture". To pick a prominent recent example, the firing of David Shor seems to have bothered almost everyone - even skeptics of the idea of "cancel culture" seem to mostly think that firing a data analyst for sharing a respectable academic study about how the public reacts to protests was awful. And this isn't the only one - there are lists of many dozens of well-publicized examples out there(here's the best such list I've come across).

This debate really stepped into high gear online with the release of an open letter in Harper's magazine, signed by over a hundred prominent people.  Since then, there's also been a poll of Americans which shows that there's real public concern, on all sides, over this issue. And there's cause for real concern too. A majority of people worry about expressing their views, a majority want to get other people fired for expressing opposing views, and there's a non-trivial amount of overlap between the two groups. And while the left seems somewhat worse, the right is still pretty bad.

Unfortunately, "cancel culture" is a pretty ill-defined term in many ways. Let's look at the Shor case. Is the key part the firing? The fact that it was a left-wing group that got him fired? Was the criticism he got before-hand "cancellation"? How about the part where he got kicked off an email list? That doesn't affect his livelihood, after all.

This is also made more complex because it doesn't take a lot of pressure to really clamp down on people's behaviour. Note that systems like China's "social credit" are largely about going after comparatively small parts of people's lives (buying train tickets, etc.) in order to keep minor dissent down. If you threaten jobs, you'll naturally get even stronger reactions.

If a view has 20% support, and you think people need to be fired for expressing it, you're advocating for 20% unemployment if people aren't cowed. This is awful, but it's also worth noting that it won't even work. You'll merely divide society between those who employ the left and those who employ the right. (This is a big part of why we have Fox News.) So you're basically just exacerbating tensions for no real long-term gain.


There's some real tension here, between encouraging speech but not encouraging toxic speech, advocating social consequences but not overly severe ones, and a host of other issues. And like all balancing acts, it's tough to get it exactly right. But I think I have a fairly good set of rules that would prevent the worst of it on all sides.

1. People are always allowed to disagree with anything you say, and you should expect them to do so. Simple verbal disagreement(even by large numbers of people) is not "cancellation", and should not be treated as a threat by itself. You need to be able to deal with it.

2. Violence in response to speech is always wrong. This includes inciting others to be violent on your behalf, or credible threats of violence.

3.  Getting people fired in response to speech that's not directly related to their job is usually wrong. In order to be an exception, I think you need to meet the following criteria:

a) The speech must be significantly unpopular. If you start firing people en masse for supporting Biden or Trump, you're basically trying to declare half of society anathema. I would suggest a rule of thumb of 10% support. This is well above the margin of silly responses on polls, so a view that hits 10% actually has real-world support, and it's above the level where the truly loathsome views get to (e.g., open neo-Nazis). But it's well below the level where you'd be opening mainstream views up for cancellation. It's also a convenient round number.

b) More specifically, it must be that unpopular at the time. Dredging up old people's letters to the editor from 1957 about how they were worried about interracial marriage does no good, because they've probably changed their opinions since then, and because you're punishing people for something that wasn't seen as wrong when they did it. There's a reason every decent constitution bans ex post facto punishment.

c) The speech must be truly offensive. Thinking that the world is flat makes you a crank, but it doesn't affect your ability to flip burgers or balance a ledger.

d) And, most importantly, the speech must be theirs. Don't go after people over something their kids or parents wrote - guilt by association is a terrible system.

4. Boycotting and ostracism over speech is often wrong. I won't tell you how to spend your money or who to be friends with, and I won't impose rules as strict as the above on who you ought to support. But stop and consciously consider whether the offense is large enough to justify the response. For boycotts in particular, remember that a firm keeping someone employed is not generally an endorsement of their views, unless they're the firm's spokesperson or CEO.

5. If you have to think about whether you're being a dick, you probably are. Stop and reconsider.

6. Be (sanely) courageous. If someone's speech is threatened, stand up for them if you think you can. This may come at some cost to you, but if nobody will pay that cost, we all lose.

It's important to note that these are not rules any societal agency can enforce. Government will pass no law on this topic, and despite point 6, employers will likely not save people's jobs based on this reasoning. These are rules of how you should act. And, more to the point, these are rules of how I will respond to your cancellation efforts, and how I will try to conduct myself.

That said, I think they're good rules. I haven't seen any better ones out there. And I'll encourage everyone to follow these rules. Stop trying to destroy the 10%.

Saturday, January 18, 2020

Balancing the US budget

As a conservative political geek, you hear a lot about the importance of governments balancing their budgets. This is good and proper - fiscal responsibility is a core conservative value - but I think we sometimes make the error of glossing over what's involved in making that happen. Balancing the books isn't supposed to be something we yell at the other side about, it's supposed to be something that we actually try to do. But like a lot of things in politics, it's a lot easier to yell about how the other guy should do it than it is to do it yourself. Since I don't like it when either side acts superior or demands things from others that they can't do themselves, I want us to actually understand what we're asking for, and know how we'd do it.

On this basis, I posted a challenge to balance the US federal budget in a Facebook group a few days ago. (I picked the US budget because the group is mostly American, and because the available data is far better than the Canadian budget). And naturally, as with most of the times I post this sort of thing, I did it and nobody else even tried. It seems like it'd make an interesting long-form blog post, so I figured I'd adapt it to here.

A few notes before we get started.

1) This is really damn hard. The Americans are running a deficit of over a trillion dollars a year, or about 23% of all the money they spend. A lot of the comments I got there were astonishment at how harsh the changes I was proposing were, but frankly I thought I was gentler than was likely to actually happen in practice if someone did demand the deficit get fixed tomorrow.

2) This is going to be ham-fisted. I do not have the full US budget breakdown, and even if I did, I don't have the time or interest to dig into it in the necessary level of detail. I tried to make it realistic-ish, but this cannot be taken as an actual plan that should be implemented by anyone in Congress. And while I tried to make it reasonable, there's probably some stuff here I'd change on a closer analysis even if I didn't have access to any new data sources - this took me a while, and I probably dropped a few balls while I was juggling my priorities.

3) I'm not actually advocating this. Because it's so ham-fisted, and because the impact would be so jarring, I can't say that making the changes I outline below would be a good plan. (The first group might be, but anything beyond that is more scary than pleasant to think about.) This is a thought exercise, not a policy proposal. I want to know what serious cutting looks like, and I want to get a sense of how bad things are, so I know when it might be best to stop pushing for a while.

4) For the same reason as #2, this is going to assume a static analysis of the 2020 budget numbers. I am not the CBO, and I do not have access to models detailed enough to estimate second-order effects of all these changes. In practice, you could safely assume that they'll do a few hundred billion of damage to the bottom line, and leave the county with a deficit like the Bush years. Modest by comparison, though still a bit scary overall. In reality, this would require a substantial phase-in period, but for the sake of this analysis we're assuming that the phase-in has already happened.

5) I'm not making major changes to anything outside of the budget here. We might want to say that(e.g.) they could cut prison spending by legalizing weed, or improve social security's balance by investing their trust fund in the market, but those aren't budget changes, so I didn't consider them.

6) For brevity, all dollar values are in billions, and I've merged some categories. I've rounded things off (the official stats are in millions), but at the level we're working at, the differences are immaterial.

All values are taken from the official GPO budget tables, except where other sources are linked. Section 2 is tax revenues, section 3 is spending.

The Status Quo
DEFICIT: $1,101

Revenue breakdown:
Personal income taxes: $1,824

Corporate income taxes: $255

Social Security/Medicare taxes: $1,295

Excise taxes: $109
Alcohol/Tobacco: $23
Obamacare insurer/device taxes: $17
Gas taxes: $43
Airports: $17
Other: $9

Other: $161
Estate/Gift taxes: $19
Customs fees: $48
Fed deposits: $49
Other: $45

Expense Breakdown:
Defence: $738
Personnel: $163
Ops & Maintenance: $290
Procurement: $139
R&D: $100
Atomic energy defense activities: $25
Other: $21

International Affairs: $53
Humanitarian aid: $25
Security aid: $14
Conduct of Foreign Affairs: $13

Science, Space, and Technology: $35
Science: $13
Space flight: $21

Energy: $4

Natural Resources/Environment: $44
Water: $11
Conservation and land management: $13
Recreation: $5
Pollution control: $7
Other: $8

Agriculture: $19
Farm subsidies: $14
Research: $6

Commerce: $-5 (yes, that's negative)

Transport: $101
Ground: $66
Air: $22
Water: $12
Other: $1

Community and Regional Development: $36
Disaster relief: $21
Other: $15

Education and social services: $112
K-12: $43
University: $39
Social services: $19
Training: $7
Other: $4

Health: $1,301
Medicare: $685
Health care services(Medicaid, mostly): $572
Training: $39
Health&Safety: $5

Income Security: $514
Federal employee retirement: $152
Unemployment: $31
Housing assistance: $50
Food assistance: $79
Other income security: $196
Other: $6

Social Security: $1,107

Veterans: $218
Income security for veterans: $110
Healthcare for veterans: $86
Other: $22

Justice: $69
Law enforcement: $37
Litigation and justice activities: $17
Jail: $7
Criminal justice assistance: $9

General government: $32

Debt Interest: $479

Offsetting receipts not included above: $-110 (again, negative)

First Pass - The "Easy" Stuff
For my first pass through the numbers, I made a bunch of changes that I think are actually justified on policy grounds, or at least generally reasonable ways to save money without wrecking things too badly.

- Kill farm subsidies: $14.

- Push education down to the state level: $112.

- Raise gas and airport taxes to equal the related transportation spending: $28.

- Reduce military spending on most things down to 2017 levels (but not R&D or procurement - tech advantages matter): $73.

- Raise Social Security taxes to be high enough to pay for the program's costs long-term(by hiking rates, not the cap on earnings to be taxed): Per the trustee's report, this is a long-term shortfall of 1% of GDP, or about $193, so we'll say that.

- Raise taxes on the rich enough that normal people don't rebel at that last provision. About 17% of national income is earned over the cap(note: 2014 numbers, so it might be a bit higher today), and we'll tax it at a bit higher a rate than the SS tax hike, so say $50.

- Find 5% of the budget to cut in everything except Social Security and debt interest(and the above-cut programs): $148.


A separate analysis of tax credits, based on this excellent list of existing tax credits, shows me that there's not a lot of money to be had in tightening up loopholes, but it did find me two provisions I'd be happy to change.

- I'd eliminate estate and gift taxes, but also eliminate the step-up basis on capital gains at death and the carryover basis on gifts. Instead, I'd move to the Canadian system, where death is a deemed disposition. I'm going to make the (likely oversimplified) assumption that these provisions are the only ones affected, so the $19 estate tax revenue is lost in exchange for a $52 capital gains tax at death and $3 on gifts, for a net positive impact of $36.

- Deductions for muni bonds and state and local taxes are silly. $32 in new taxes.

SUB-TOTAL: $686, leaving a deficit of $415

This deals with over half the deficit, but we've used up all of the big headline changes that can be made easily.

Second Pass - Cutting Spending, The Nitty-Gritty
In the first pass, I've done a lot of the fixing with a heck of a lot of tax hikes - $339 of tax hikes, compared to $347 of spending cuts - so I want to focus more on spending cuts for a while.

- Federal employees are pretty numerous - about 2.2 million civilians(see section 16 of the budget tables). Cutting their compensation packages somewhat ought to be doable in the context of a change this large. Let's say we can cut their average all-in compensation (including benefits) by a few grand each. That saves us maybe $7. (Side note: This is a far lower percentage of government expenses than I'd have ever thought. If they all make $100k in total compensation, it's still less than 5% of federal outlays)

- I suspect international aid is probably somewhat too rich for the blood of a nation cutting spending like this. Let's trim it by a quarter, and save $10.

- Environmental policy is important, but there's no way current regulations and spending is done well at all. Cut everything by a quarter, save $11.

- I know healthcare is even more of a third rail for the federal budget than social security, so I'll tread lightly. (I kind of want to raise the Medicare age, but I'd get immolated just for musing about it, so no). The 5% cut imposed above is probably about as much as I could really squeeze it. But I'll drop the training budget by a quarter, and save $10.

- I love science and space flight, but the federal government can't reasonably spend as much as they are. Again, knock off 25%, save $9.

- I excluded military R&D and procurement from the "back to 2017" hammer above, but I don't think I can maintain that. Knock them back down, and after the 5% cut above save $63.

- I'll 2017-ize a lot of other categories as well - stuff that's grown in recent years without any cause I know of, and which can reasonably be pared back by the last few years of growth. (I know this process excludes the impact of inflation and population growth, but that's why they call it "cutting").
> agricultural research
> the USPS
> "other advancement of commerce"
> community development and area development (whatever makes those two separate line items)
> "other income security"(which has grown when all other welfare has stayed flat or dropped)
> income security for veterans (ditto)
> justice, and
> general government.

That's another $82 after the 5% flat cut above.

SUB-TOTAL: $192, leaving a deficit of $223

Third Pass - Grasping Nettles

There's a few categories I've been consciously trying to exempt from my cutting thus far. In particular, welfare and seniors welfare(Social Security/Medicare). While businesses and workers should hopefully be able to adjust to changes, the very poor and retirees are less able to do so. They have minimal income, and thus can't easily cushion themselves. I think I can eliminate the deficit without hitting welfare spending any more than I have above, but seniors can't keep getting a pass. SS and Medicare are 42% of the budget, and so far they've only been 6% of my spending cuts (there was the flat 5% hit to Medicare, for $34). That will have to change.

- Surprisingly, raising the eligibility age isn't the fix here. It's age 67 for SS(nominally), but making Medicare also age 67 will help less than I expected. The CBO has an analysis, and while it doesn't give annual details out to age 67, the age-66 effect would be $5 in improvement to the deficit (because most of the savings would be lost to Obamacare subsidies, or net tax impacts). So let's say we get the same from the extra year, and pushing it to age 67 will save us $10.

- That means we're means-testing. If we implement a clawback designed so that the top 5% of earners lose their benefits entirely and the next 10% lose an average of half, that saves us 10% on the budget for each. That's $175.

SUB-TOTAL: $185, leaving a deficit of $38

With that, cuts to SS/Medicare are now $219 billion, or 30% of total spending cuts. This is still on the low side compared to their share of the budget, but I think that's proper policy - they shouldn't be expected to carry as much of the burden as working-age people.

While I'm grasping nettles, let's do this right. Employer health insurance being tax deductible is a $215 tax hit. I don't want to unwind that totally, but I think 10% inclusion is reasonable - if your employer spends $10k on your group benefits, you're taxed as if you earned $1k. If nothing else, this should help make people see what the cost of the benefits is. This is $22 in new revenue.

One I was eyeing earlier is a tax credit for increasing research expenses. I think that might be a good target - it's probably a lot of admin overhead for companies, and this sort of thing is usually just a way for politicians to talk about how they're supporting the economy. Besides, the left will go crazy if we don't hit corps at least a little bit. That's $16 if we axe it.

SUB-TOTAL: $38, leaving no deficit!

The Results

Total spending cuts are $724 billion(15.2% of the budget), and total tax hikes are $377 billion(10.3% of federal taxes). The new federal budget is $4.022 trillion per year. And I'm being strung up by an angry coalition of government employee unions, socialists, anti-tax crusaders, seniors, soldiers, and modern monetary theorists. Isn't life grand?

TOTAL REVENUES: $3,645 > 4,022
TOTAL SPENDING: $4,746 > 4,022
DEFICIT: $1,101 > 0

Personal income taxes: $1,824 > 1,929 (high earners tax, muni/SALT elimination, employer health insurance deduction down to 90%)

Corporate income taxes: $255 > 271 (ending research expansion tax credit)

Social Security/Medicare taxes: $1,295 > 1,488 (SS breakeven tax hike)

Excise taxes: $109 > 137
-Alcohol/Tobacco: $23 > 23
-Obamacare insurer/device taxes: $17 > 17
-Gas taxes: $43 > 66 (pay for ground transport)
-Airports: $17 > 22 (pay for air transport)
-Other: $9 > 9

Other: $161 > 197
-Estate/Gift taxes: $19 > 55 (in cap gains taxes)
-Customs fees: $48 > 48
-Fed deposits: $49 > 49
-Other: $45 > 45

EXPENSE BREAKDOWN: (All cut by 5% unless otherwise stated)
Defence: $738 > 568 (all 2017'd)
-Personnel: $163 > 137
-Ops & Maintenance: $290 > 233
-Procurement: $139 > 99
-R&D: $100 > 65
-Atomic energy defense activities: $25 > 19
-Other: $21 > 15

International Affairs: $53 > 39
-Humanitarian aid: $25 > 17 (extra 25% cut)
-Security aid: $14 > 10 (extra 25% cut)
-Conduct of Foreign Affairs: $13 > 12

Science, Space, and Technology: $35 > 24 (extra 25% cut)
-Science: $13 > 9
-Space flight: $21 > 15

Energy: $4 > 4

Natural Resources/Environment: $44 > 31 (extra 25% cut)
-Water: $11 > 8
-Conservation and land management: $13 > 9
-Recreation: $5 > 3
-Pollution control: $7 > 5
-Other: $8 > 6

Agriculture: $19 > 4
-Farm subsidies: $14 > 0 (killed)
-Research: $6 > 4 (2017'd)

Commerce: $-5 > -19 (USPS and other advancement of commerce 2017'd)

Transport: $101 > 96
-Ground: $66 > 63
-Air: $22 > 21
-Water: $12 > 11
-Other: $1 > 1

Community and Regional Development: $36 > 29
-Disaster relief: $21 > 20
-Other: $15 > 9 (2017'd)

Education and social services: $112 > 0 (all moved to states)

Health: $1,301 > 1,147
-Medicare: $685 > 572 (means testing, eligibility at age 67)
-Health care services(Medicaid, mostly): $572 > 543
-Training: $39 > 27 (extra 25% cut)
-Health&Safety: $5 > 5

Income Security: $514 > 467
-Federal employee retirement: $152 > 144
-Unemployment: $31 > 29
-Housing assistance: $50 > 48
-Food assistance: $79 > 75
-Other income security: $196 > 165 (2017'd)
-Other: $6 > 6

Social Security: $1,107 > 996 (means testing, but no 5% cut)

Veterans: $218 > 185
-Income security for veterans: $110 > 82 (2017'd)
-Healthcare for veterans: $86 > 82
-Other: $22 > 21

Justice: $69 > 55 (all 2017'd)
-Law enforcement: $37 > 28
-Litigation and justice activities: $17 > 14
-Jail: $7 > 7
-Criminal justice assistance: $9 > 6

General government: $32 > 23 (2017'd)

Debt Interest: $479 > 479 (no 5% cut)

Offsetting receipts not included above: $-110 > -117 (cut to federal employee compensation included here)


And, as one final note, I'd like to point out that the Transportation budget has four categories - Ground, Air, Water, and Other.

What the hell goes under Other?

The other three match three of the four classical elements, so is this the federal investment in Floo powder?