The Pentagong Show

The Pentagong Show
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Monday, January 7, 2013

Whack-a-Mole Duns the Dunces.

I gave my Catatonic, and now she's Skittyfrenic.

On today's post on ckmichaelson's blog, aptly named, "Some Assembly Required", which,for some reason, I've taken up the task of assembling into my own little erector-set-like contrivance, he posted, in the section he refers to as 'Porn-O-Graph', a chart published by none other than that stalwart of Capitalismo, Forbes, a graphical representation of healthcare costs in various countries over the span of their citizens' lifetimes. (Not sure if I can post their content, so had to content myself with posting the link). The graph wonderfully illustrates how the private sector gladly pays for healthcare coverage during all those years little is needed, and then sloughs the rest of the job onto the public sector.  This is called an externality.

Much like polluting the environment, resource extraction, education, and environmental restoration, responsibility for healthcare is considered outside the purview of Corporate balance-sheets. They are instead considered externalities, and need not be included when weighing the costs of pursuing a particular profit-making opportunity. And this may be the way it should be. Perhaps the direct involvement of government officials would indeed make the nimbleness of business that much less adroit. But there's a proviso. You can't depend on society to take care of these more and more burdensome costs and then deny that there's any such thing as society, or go apoplectic, as so many in the business community did, when it's suggested, as it was by Obama during the campaign, that, without us, there's no you.

 Obama's "You didn't build that" meant that businessmen are not solely responsible, and therefore owe the rest of us some thanks, for their success. But Romney changed it to mean Chambers didn't build Cisco, like saying I didn't paint that. Which isn't what he meant at all. He meant, I wouldn't, even couldn't, have painted it if it weren't for you, and just as community fosters art, community fosters business, because obviously without it there simply isn't any raison d'etre.

It's only because artistic endeavor and achievement, outside of the movies, is so denigrated by the vast majority of Americans, that this analogy was not drawn. No one notices that the very characteristics condoned and admired in those who start Small Businesses are all nurtured and encouraged in the arts. Risk-taking, business acumen, receptivity to what the public likes, resource utilization, product creation, manufacture, and dissemination, are all attributes the artist shares with the more hard-nosed, but less aesthetically-inclined, business community.

The same phenomena exists in the political sphere in the form of tax deductions. Comparable to what are called externalities in business are deductions in government. They are a way of getting the rest of the, in this case, tax-paying, community to pay for something you, as a politician, and your constituency, wish to pay for but can't on your own. In other words, just as externalities are expenses sloughed off onto the public by private industry to keep prices down, and used to hide the true costs of any particular enterprise from the public, while forcing those who don't even buy the product to share in the burden, the public sector uses tax deductions shuffled through the labyrinthine tax code to hide the true costs of public programs and incentives for private-industry from the taxpayers.

Now, one of the most astute observations I've ever read was made by Arundhati Roy, when she remarked that you can't have a non-democratic institution in a Democracy, or else all the hard decisions will eventually gravitate to that institution (not verbatim quote, but that's the sense of it). For a good domestic example, one need only look at how the FED is currently using monetary policy to make decisions the fiscally feckless Congress, our"Parliament of Whores" (referred to as such by PJ O'Rourke in his, characteristically hilarious while instructive, book of the same title), is avoiding.Yet this is exactly how, not only Capitalism in general, but Tax-policy, in particular, functions.

Out of this arises our frustrating game of whack-a-mole to which the title of this post refers. Because, since the true costs of everything and anything are purposely camouflaged, the very basis on which Capitalism is purportedly built - price-discovery - is suborned.  And what we're discovering now, although it should have been obvious, having been so politely illustrated to us over the last generation by the dutiful Japanese, is that when you introduce that distortion into the pricing of the very commodity that is the lifeblood of the system, Money itself, it's circulation flows into stagnant pools, or to nurture unwanted growths and cancerous polyps, and is choked off from the healthier organic shoots needed to nurture a vibrant organism.

Thus a myriad assortment of problems arise that one by one you take the hammer to, yet every mole you whack just causes another to pop up, because the poisonous bile flowing through the system can never be eliminated, but is merely redirected, and always with negative repercussions.

Mitt Romney, since he just ran for President, and made public some of his finances, is a perfect example. He deducted millions from his tax liability to give those millions instead to the Mormon Church. Then, as an elder of that church, he directed those dollars, which the other taxpayers of America, amongst them the 40 million people of California, were forced to pay instead, to campaign against proposition 8, which concerned gay marriage. Whether or not you agree with the proposition, the fact remains that those very tax dollars Romney did not pay the federal government, those California voters paid, either in actual taxes to make up the resultant deficit, or in interest payment to service the National Debt, both of which each annual deficit increases.

Thus in this convoluted way were the voters of California surreptitiously forced to pay for the forces in play that were intent on undermining their will.

In another instance, the very Central Bank that is actively engaged in propping up home prices, keeping them higher than they would otherwise be, is undermining federal tax receipts, on which the credit rating of the same government relies, and which, in turn, the continued low interest rates, on which home sales depend, rely on as well. How? Property taxes are deductible from federal taxes. The more home prices rise, the more property taxes rise in response, the deduction of which, has the effect of lowering the amount of total federal tax receipts, threatening that same government's Triple-A rating, and the cost of debt-servicing, which mean it'll need more taxes, or have to raise the debt-ceiling: the next mole on the National agenda we'll be whacking.

War, the ultimate tool for politically distorting the economy to achieve specific results, as opposed to a general prosperity,  accelerates and exacerbates this dynamic, as no one can question the wisdom of these distortions lest their Patriotism be questioned in response. Thus does Whack-a-mole become systemic and ineradicable. Like War itself, it's become such a given, it's taken for granted that this is how life is, and how it will always be, forever and ever, Amen.

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