Category Archives: Politics – international

The Bizarre Logic of a Conservative Mind

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Thanks to commenter Sancho for alerting me to the following post, by Sarah Kliff, at the Washington Post’s Wonkblog (via Reading is for Snobs). It had me chuckling all the way to the bottle-o and back on this dreary, rainy Melbourne morning:

Readers ask, we answer! What happens if you don’t pay Obamacare’s tax penalty?

Gene is a self-employed New Yorker who currently purchases his own health insurance. He also is a strong opponent of Obamacare. And starting next year, Gene plans to drop his health coverage in express protest of the health law’s mandate.

“I will cancel my insurance the instant I can no longer be denied insurance for preexisting conditions,” Gene wrote in an e-mail Sunday night. “I will not fill out the special IRS form.”

Gene asked that I not use his last name as he’s talking specifically about disobeying a federal mandate…

“I am especially interested to know what happens, if anything, when my 2013 federal tax return does not include the Obamacare form and when I refuse to comply with any request to produce one?” Gene asked in his e-mail. “Am I correct that if I do not provide the form, there is nothing the IRS can do to me? And if they can do something to me, what is it that they can do?”

To answer these questions, I called up Catherine Livingston. Up until January, she was the health-care counsel in the Internal Revenue Services’s Office of Chief Counsel. She now works as a partner at the law firm Jones Day.

The first thing I asked her was what happens if you don’t send in a form that specifies whether you do or don’t have insurance coverage. That, she told me, isn’t actually clear yet.

I’ll skip over the intricacies of US tax accounting and tax law that follow. What’s interesting to me in this post is Gene’s cunning little plan to avoid paying the $95 tax penalty he might incur by dropping his health coverage:

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The Persistence of de Facto Power: Elites and Economic Development in the US South, 1840-1960

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By: Philipp Ager (Universitat Pompeu Fabra)

URL: http://d.repec.org/n?u=RePEc:hes:wpaper:0038&r=his

Wealthy elites may end up retarding economic development for their own interests. This paper examines how the historical planter elite of the Southern US affected economic development at the county level between 1840 and 1960. To capture the planter elite’s potential to exercise de facto power, I construct a new dataset on the personal wealth of the richest Southern planters before the American Civil War. I find that counties with a relatively wealthier planter elite before the Civil War performed significantly worse in the post-war decades and even after World War II. I argue that this is the likely consequence of the planter elite’s lack of support for mass schooling. My results suggest that when during Reconstruction the US government abolished slavery and enfranchised the freedmen, the planter elite used their de facto power to maintain their influence over the political system and preserve a plantation economy based on low-skilled labor. In fact, I find that the planter elite was better able to sustain land prices and the production of plantation crops during Reconstruction in counties where they had more de facto power.

Putting the ism in Thatcherism

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During the mid 1970s Thatcher was listening to a member of the Conservative Research Department staff explain why the party should take a pragmatic ‘middle way ‘ between left and right. But before he could finish Thatcher reached into her briefcase and pulled out a copy of Friedrich Hayek’s The Constitution of Liberty. "This is what we believe", she said. And slammed the book down on the table.

Some people say this story — told by John Ranelagh in his book Thatcher’s People — is a little too good to be true. But everyone agrees Hayek had a major influence on Thatcher and Thatcherism.

Hayek had a theory about how intellectuals influence politics. And it wasn’t as simple as getting politicians to read their books. Hayek advocated an indirect approach. When businessman Antony Fisher came to him asking how he could join the fight against socialism and promote the ideas of classical liberalism, Hayek told him going into politics would be a waste of time.

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Does radical welfare reform require cultural change?

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"Hostility towards benefit claimants is founded upon a moral instinct", says Chris Dillow. The instinct is the norm of reciprocity. According to this norm, people are entitled to the community’s help when they need it, but must also contribute in return. According to Dillow, many people worry that "that claimants are getting something for nothing" and "that ‘hard-working tax-payers’ are being ripped off".

Dillow is not alone. Peter Saunders of the Centre for Independent Studies suggests that the norm of reciprocity is a cultural universal. As a result: "In all human societies, long-term dependency on others without some form of reciprocity is associated with low social status, weak self-esteem and powerlessness."

Psychologist Jonathan Haidt offers a theory of how the norm of reciprocity developed. Individuals are better off when they are members of groups that work together. By working together hunters can catch more game and by sharing what they catch and gather, individuals members of a tribe are more likely to survive periods of illness or unreliable food supplies.

In his book The Righteous Mind Haidt argues that human beings gradually developed practices of reciprocal altruism that are underpinned by gut feelings about fairness and unfairness::

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Mark Latham and the return of the underclass

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Not Dead Yet QE49

As opposition leader Mark Latham vowed to wage war on poverty. It’s an idea he revives for his latest Quarterly Essay, Not Dead Yet: Labor’s Post-Left Future.

According to Latham, poverty isn’t about a lack of money. The dole is generous enough to cover people’s basic needs, he says. It isn’t about a lack of opportunity either. He says our thriving post-Keating economy has plenty of jobs for those with the ambition to pursue them.

According to Latham, the real problem is an underclass mired in a culture of poverty. It’s a group of people trapped by shared sense of hopelessness and a pervasive lack of aspiration. Instead of taking responsibility, these people have gone feral "leading lives of welfare dependency, substance abuse and street crime."

The underclass is sustained by large public housing estates that concentrate disadvantage, says Latham. When disadvantaged people are clustered together, young people lack positive role models and dysfunctional behaviour becomes normal.

To destroy the culture of poverty and persuade the underclass to help themselves, he argues that governments should break up these dysfunctional communities. "The starting point for reform must be a policy of dispersal, " he says.

It’s easy to see the political advantages of Latham’s plan. If poor people cause poverty there’s no need to risk a popular backlash by challenging stereotypes about welfare recipients. And if welfare payments and services are already adequate there’s no need to run deficits, raise taxes or look for unpopular budget cuts. The system is basically ok.

The only serious problem with Latham’s plan to end poverty is that it won’t do much to end poverty. As US researchers Jens Ludwig and Susan Mayer explain:

Many public discussions assume that reducing poverty among future generations and reducing the intergenerational transmission
of poverty are equivalent goals. They are not. The poverty rate in the children’s generation depends not only on how many poor children grow up to be poor adults, but also on how many nonpoor children grow up to be poor adults. Reducing the chances that poor children become poor adults will dramatically lower future poverty rates only if most poor adults begin life as poor children.

In the US, most poor adults do not begin life as poor children. While the percentage of children from well functioning non-poor families who become poor is low, the group is very large. As a result, most of tomorrow’s poverty will from today’s non-poor families. The same is likely to be true in Australia. Most poverty will emerge from non-underclass suburbs.

This isn’t to say that a place-based approach to poverty is a bad idea. Preventing the next generation from inheriting their parents’ poverty would be an important achievement. But there’s little evidence that Latham’s plan to move people out of disadvantaged neighbourhoods would work.

It’s not that the idea hasn’t been tried. In the US, the Moving to Opportunity (MTO) demonstration tested the idea that moving households with children from government-subsidized, project-based housing in selected high-poverty areas to areas with lower poverty rates. The results the experiment were disappointing. As Ludwig and Mayer write:

Although evaluations of MTO after four to seven years find that moving to less disadvantaged communities reduces risky and criminal behavior in girls, they find that such moves on balance increase these behaviors in boys and have no detectable effects on children’s academic performance, such as achievement test results or the chance of dropping out of high school. It is possible that the benefits of moving away from very disadvantaged neighborhoods may become greater over time, or that the benefits may be more pronounced among children who were very young when they moved. But there is as yet no strong evidence that moving poor families to less disadvantaged areas will substantially change children’s life chances.

While preventing poverty is better than dealing with it after it happens, it’s a lot harder than it looks. So as Ludwig and Mayer write: "To reduce poverty among future generations, there may be no substitute for a system of social insurance and income transfers for those children who end up poor as adults."

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