Thinking About Things: A [New England] Republican’s View of Policies for a Unified Way Forward

By John DeQ. Briggs

July 4, 2020

So, here we are at last: on the verge of class warfare, racial warfare, gender and other identity warfare, political warfare, a war on police (crime having won the war on crime), the erasure of Western and American history, and the predominance of mob- and group-think. And that just describes the last week or two.   There does not seem to be any consensus about anything.  It is hard to imagine the speed with which all of this has gelled, although the elements have been building for years.  Covid-19 seems to be making a resurgence and the economy seems ready to respond with further decline.  Independence Day is upon us and July 4 no longer feels patriotic. 

One even wonders if the great American Experiment has actually failed.  If so, where did it go wrong? Well, I don’t know.  But I do feel that everything I read now is mired in analysis paralysis.  Everybody has reasons to think other people are wrong.  I have read virtually nothing recently about a possible path forward.  Accordingly, this column is devoted to thinking about policies from a New England Republican’s conservative point of view, which might serve as a foundation for the future – policy approaches that could be embraced, and I think should be embraced, by a wide swath of the population no matter their politics. Hope springs eternal.  The policies I propose have not in all cases been deeply researched; nor am I prepared to defend each down to the last implementing detail.  They are relatively high or mid-level and notional.  Some will be controversial, others less so; others not at all.

Health Care.  The ability of American citizens to obtain affordable health care did not have to become a political football.  In the end, we are either going to have a single payor health care system paid for by taxpayers or we are going to have a market-based system supplemented by the existing single payor system (e.g., Medicare and Medicaid).  A market-based system would be far more efficient, and it would be supported by hospitals, physicians, and nurses, all of whom are going to get the short end of the stick under a single payor system, as they now do under Medicare and Medicaid.  Patients also, of course, will get the short end of the stick under a single payor system, with healthcare being to a meaningful degree rationed. 

There is an enormous irony in all of this.  The core idea of so-called “Romneycare,” which evolved (or transmogrified you might say) into “Obamacare,” was that everybody should be required to purchase health insurance in much the same way that everybody is required to purchase liability insurance for their automobiles.  This was not some radical left-wing socialist idea.  It was an idea that came from the conservative Heritage Foundation at the outset of the Reagan administration.  It was a market-based conservative idea.  It still is.  Properly implemented, it would also take health care off the backs of employers thus reducing the cost of products and services and making them more competitive with products and services produced outside this country. The supreme irony of recent years is that supposedly conservative groups opposed the law in the Supreme Court on the grounds that it was unconstitutional to force people to buy health insurance (“eat their spinach” was the catchy metaphor that gained traction).  The Republican administration turned against market-based principles in its legal argumentation, and legislatively it crippled those features of Romneycare (er, Obamacare) that might have made it more successful. The administration talked of “repeal and replace,” but the “replace” piece of it was always, and is today, a ghostly mirage.

Anyway, one way or another, we are going to have health care in this country that does not exclude people with pre-existing conditions and that is available to at least all citizens and maybe even some non-citizens.  But for the moment, and to avoid controversy over non-citizens in America, of whom there are many millions, I am focusing just on citizens.  Whether one is a hard-right conservative, a moderate conservative, a centrist Democrat, or a hard-left Democrat, universal health care is coming to America and anyone with some remaining faith in capitalism or free markets should be rooting for a market-based health care system that provides universal coverage, including for pre-existing conditions, and against a single payor system. This means everybody must be required to purchase coverage. Those who genuinely cannot afford to do so will end up on Medicaid. Those over 65 can choose Medicare (which is not “free”, which grossly underpays providers, but is subsidized by the private market)

Education and Student Debt.  There has been for some time now much clamoring babble about a federal bailout for federally funded student debt.  Such student debt stands at roughly $1.7 trillion today. See here. This is nearly twice the amount of total credit card debt (about $900 billion) outstanding in the country today. This is a staggering number.  There is no reason for people who paid for their education to be responsible for those who didn’t.  There is no reason for people who chose to forego an education to pay for those who did not forebear. And so on.  This is not to say, however, that the student debt problem should be ignored or left unresolved.  It should not be ignored, and it can be resolved through straightforward market mechanisms. 

As I have written before in these pages, federally guaranteed student debt, like an IRS obligation, is not dischargeable in bankruptcy.  There is little reason not to change this; student debt should be dischargeable in bankruptcy.  Beyond that, the universities and colleges who take the money that students borrow should be required to pay back one half of the debt in the event the student becomes obliged to discharge the obligation in bankruptcy.  This would provide colleges and universities with some real incentives to have a stake in the future success of their students.  This in turn might cause them to think about their curricula and its relevance to the real world.  That would be refreshing.  It would also be refreshing to require all high school graduates to be able to pass the same tests that immigrants have to pass in order to obtain citizenship.  This might assure some minimal knowledge of American history, which today seems to be largely lacking.

Education and Political Bias. Most colleges and universities accept federal monies for a variety of research and other purposes.  A condition of accepting such funds ought to be a commitment to evenhandedness in faculty hiring and something approaching balance in tenured faculty and curricula.  I appreciate that this is potentially quite a slippery slope.  I doubt we want the government too involved in our educational curricula. However, the universities can no longer be trusted to supply anything approaching balance in their own curricula so somebody with a stake in the balanced education of our population needs to step in.  This is an issue as to which the details would need to be worked out.  But the federal money ought to have some strings attached that tether the universities to the national interest to some extent. Many developed democracies have a core curriculum requirement, and this works to their advantage in labor and management markets. It could do so here.

Education and National Service.  There is a strong consensus in this country that education is important.  I do not necessarily mean higher education in the sense of a four-year college or graduate school, but education sufficient to provide schooling that can sustain a comfortable middle-class life for a married couple with children.  Many people cannot pay for even a junior college education, much less a four-year college education or graduate school.

One way of facilitating an educated population is through national service.  I believe that we lost something valuable in this country when military service became wholly voluntary and the population divided into those who would never dream of serving their country in the military and those who, for economic or other reasons, chose to serve their country (or who had no practical economic choice).  Thus, during the Vietnam war, half of the country came to hate the military and perhaps even hate the country itself, while the other half developed a subtle contempt for the former.  Things have gone further downhill to date.  It is time to consider a national service program.  At its simplest, a program might work something like this: a person giving two years of national service (military or civilian) would be entitled to two years of college education at any public or private institution.  This would be geared toward trade schools or junior colleges.  A person giving four years of national service (military or civilian) would be entitled to four years of collegiate education at any public or private institution.  A person giving seven years of National Service (military or civilian) would be entitled to additional years of education (e.g., medical school, law school, business school, etc.).

The essential idea is that people would do low-paid national service work and thereby earn a worthwhile education.  The system might not have to be year for year; perhaps certain types of military service (e.g., combat-related) might be worth more;  and there are certainly circumstances where the education might precede the national service (medical, for example), but the basic bargain or contract would be national service for education.

Income Taxes.  Few topics in America are more controversial or less well understood than taxes.  Who pays what percentage of what taxes involves nothing more than a collection of objectively determinable facts.  I provided a variety of objective facts on this topic in my very first article for this publication last Fall here.  The pandemic changed the circumstances.  The national debt is now much larger; the economy has shrunk; and tax receipts have gotten smaller.  Taxing the rich out of existence might be satisfying to some, but it would impoverish the country even in the short term, and dramatically so in the longer term.

It seems beyond obvious that we are not going to spend less on Social Security, Medicare, Medicaid, and the military, which together account for roughly half of our entire Federal budget of $6.15 trillion.  Defense spending, by the way, which many people seem to think is a source of unlimited money to spend on other things, is about half of the Medicaid/Medicare budget.  The actual federal budget deficit now stands at $3.4 trillion, and national debt at $26.5 trillion.  The human mind is barely able to comprehend how large a number that is, but it puts national debt at 133% of the nation’s gross domestic product. During WWII it was comparably huge as a percentage of GDP.  Economic prosperity is when countries should run budget surpluses. But until the onset of Covid-19, we were enjoying an economic boom, and yet the national debt kept rising.  This is not sustainable and yet politicians on both sides of the aisle seem content to ignore this elephant in the room.  This is probably because interest rates have been at unprecedentedly low levels for so long that politicians cannot imagine the consequences of interest rates rising from about 2% to 6-8%.  Should that happen, the interest on the national debt ($386 billion) would triple (to $1.2 trillion) or quadruple (to $1.5 trillion almost overnight. In these circumstances it is hardly surprising that younger generations heap contempt upon the boomers who have superintended all of this.

So, what to do? Whether we are talking about the top 1% or the top 5%, there is not enough money there to make a serious dent in this problem.  To address this massive deficit, we would have to increase taxes on the middle-class and perhaps even tax the 49% of the population that pays no federal income tax at all.  But there is neither the political will nor the political courage to do that in this country now or in the foreseeable future. We are not a serious enough country anymore to do such things.  Therefore, it seems almost certain that we will have little or no choice but to do what nearly every country in the world has done: institute some kind of a Value Added Tax (VAT) – essentially a national sales tax.  Such a tax would be introduced as a “very small” and perhaps “temporary” tax, a minor annoyance.  But over time, just a few years really, it would probably grow to something between 10 and 15% or more as it has elsewhere. Cynicism aside, a party concerned with fiscal rectitude should consider embracing this solution now, while there still might be time to rein in the recklessness of the current tax and budget policies.  Eventually, politicians of all stripes might well embrace this solution because of its relative political costlessness.  In other words, this is a call or plea for political cowardice, not political courage, but sometimes the outcome can be the same. We need to pay for all the services our representatives vote to provide. A VAT could do the job. Not pretty, regressive, but likely effective. Also a necessary counterweight to the Tax the Rich and their Heirs  attitude beginning to seep into mainstream democratic thinking if the NY Times is any longer a measure of anything.

Finally, there is the matter of optics and equity. I believe there is much to be said for feathering in somewhat higher tax rates for couples making more than $500,000 or individuals making more than $250,000.  While the actual amount of money raised might not be significant, there is an optics issue with taxing individuals making $250 million a year at the same rate as an individual making $250,000 per year.  I see no rational reason for not adding a percentage point of marginal tax rate for those making $1-2 million or more; and an additional percentage of marginal tax for each $5 million above that.  For example, at $2 million of ordinary income, the marginal tax rate might be, say, 40%; it would become 41% at $7 million; 42% at $12 million; 43% at $17 million and so forth.  It could be capped at between 50 and 60% or perhaps even more.  This extra tax would largely be felt by highly paid corporate executives, investment bankers, hedge fund managers rock stars, and highly paid athletes. This would have the salutary impact in many cases of letting people put their money where their mouth is.

Capital Gains Taxes.   The history of capital gains taxation in this country has been one of change and inconsistency.  See here.  Taxation of corporations and shareholders is also nuanced and subtle, although all of that is lost when public debate and political discussion is involved.  Today’s mantra if that capital gains tax rate should be the same as ordinary income.  This would be terrible economic policy since it would encourage consumption over savings or investment.  But terrible economic policy does not often get in the way of political ambition.

On the other hand, the spread between ordinary income taxes and capital gains taxes has rarely been more than it is today, and this creates legitimate optical issues of inequality and unfairness.  There is good reason to decrease the spread between ordinary income taxes and capital gains taxes.  Some of the underlying detail can be found here.  Let us begin with some simple propositions. Let’s say you invest risk capital in a stock and invest $10,000, money on which you have of course already paid taxes. Now, after more than a year has gone by, you decide to sell that stock.  Let us say you sell it for $20,000.  Let us say further that your marginal federal income tax rate is 37%% and your state rate is 13%, for a total of 50%.  What is the “proper” amount of capital gains tax that you should pay on the $10,000 profit?  There is no perfectly right or perfectly wrong answer.  This is a policy question.  The answer supplied by those whose animating political principles involve the phrases “tax the corporations” and “tax the rich” will say that you should pay $5,000 of tax on that $10,000 profit because there should be no difference between capital gains and ordinary income.

But a policy designed to encourage investment of capital, which is risky, and hence to encourage business expansion and job creation, would likely observe that taxing capital gains at a somewhat lower rate than ordinary income would provide investors an incentive to invest this risk capital, which could be a key benefit to society at large.  Today, the capital gains rate is almost one half of the ordinary income tax rate.  For political reasons, perhaps apart from economic policy reasons, this spread seems unnecessarily large.  A spread of 10 percentage points seems generally adequate and consistent with the average spread over the last many decades.  It might also be possible to have tax brackets within capital gains that would tax modest capital gains at a lower rate than massive capital gains.  The main point for now is simple: encourage investment, the creation of factories and jobs; the creation of prosperity. In short, a sensible and maybe bi-partisan approach would be to tax capital gains in such a way that the total federal and state take would be about 10 percentage points less that the federal and state rate on ordinary income.

There are obviously some very important details that would have to be worked out, but in terms of a high-level approach, slightly higher taxes on the very rich does not seem especially burdensome and might do much to bring a sense of unity to the country.  Could a left-leaning government restrain itself from putting into place confiscatory taxes?  Perhaps not, but maybe.    Could a right-leaning government resist lowering taxes on the upper brackets and thereby doubling the national debt?  We have seen the answer to this, and it seems to be mostly “no.”

Immigration.  The immigration problem in this country only seems insoluble because it has become so hopelessly politicized.  It is in fact solvable.  If there were any political will, it would be relatively simple to harden the border and eliminate most of the illegal immigration that goes on every day.  If the border were secure it would then be possible, one hopes, for a political process to deal with those now millions of people who were brought to this country as children illegally, and who are now adults but who have no obvious path to citizenship.  These are the so-called “Dreamers” and they number about 3.6 million out of a total population of the illegal immigrants of 11.3 million (although there are different categories of Dreamers; only about half of these-1.8 million-entered the United States before their 16th birthday.  Only 800,000 of these have qualified for DACA protections over the five years of the program see here). They need to be given a path to citizenship, but they also need to demonstrate that they have earned citizenship.  It could in some cases be a path to deportation. The absence of a serious criminal record might be one important criterion; the regular payment of taxes might be another.  Military or other national service might provide special consideration as well. This should not be as hard a problem as it has turned out to be.  The illegal immigrants who overstated their visas now exceed those who entered illegally.  See this.  Their absolute numbers are unclear, but they simply should be deported.  To the extent there is a path to citizenship for the majority of the illegal/undocumented immigrants, it should involve going to the back of the queue along with other aspirants. Again, our unseriousness in problem solving is revealing itself with stubborn persistence.  

Vocabulary.  Relatively recently, vocabulary in America has become full of prohibited words, some of them normal everyday words that have been now declared objectionable as microaggressions.  This has created a massive generation divide. One dares not use certain words.  The works of famous authors are being burned and destroyed because of their use of certain words.  The First Amendment notwithstanding, I cannot even use them here without undue risk of retribution of various kinds.  Freedoms get lost in small bits until one day they have gone underground.

But there is one ubiquitous insult that can be freely applied today to essentially anybody in America – “racist.”  That word, which was not even published in any dictionary prior to 1902, once had a relatively specific and narrow meaning: “a belief that race is the primary determinant of human traits and capacities and that racial differences produce an inherent superiority of a particular race.”  Today, some 150 years after the end of slavery in America, there are without doubt many traces of vestigial racism.  A close observer would take note that this was and is meaningfully true with respect to earlier groups of immigrants who were subjected to discrimination: Italians, the Irish, the Chinese and others.  But the legacy of slavery has made this charge of racism against blacks much easier to hurl; more likely to stick; and indeed, more likely to be a valid charge in certain cases.  But in many cases, it is not a valid charge and the making of the charge creates its own dangerous and maybe silent but angry backlash. Or maybe it creates an atmosphere among the targets of the charge of uncaring indifference – a tuning out of the “conversation.”  It was just such a silent backlash against identity politics that elected President Trump.

In the circumstances, I believe it would be helpful if we could come up with a new word to describe the perceptions that whites have of blacks and browns and that blacks and browns have of whites (and of each other too).  I am not sure what that word should be, and I am not going to try to invent one today.  But the more the word racism is tossed about at all whites, all blacks, all browns, or others, the greater its negative impact.  The 94-year-old woman from New York City who was filmed punched in the face by a 33-year-old black youth with 103 arrests (and who fell down and smacked her head on a fire hydrant while the man looked back and casually walked away)  is now very afraid of young black men.  That does not make her a racist.  Asian or other business  owners whose stores in New York, Minneapolis, Atlanta, Walnut Creek, California and elsewhere were completely looted by marauding gangs of young black men and women with guns and sledgehammers while the police stood by and watched may have developed an understandable fear of young black men and women, particularly in large groups.  I doubt this makes them “racists,” although in some cases it might.   Young black men who experience regular traffic stops by white policemen may have a justifiable fear for their lives.  This does not make them racists, but it does make them understandably fearful of even routine traffic stops by white police officers. Police enforcement of laws against blacks and browns does not make the police officers racists. In New York, more than half of the police are blacks and browns.  People who have suffered at the hands of Islamic terrorists may be fearful of Islamicists.  This may make them Islamophobic.  This is in many circumstances no more shameful then being afraid of spiders – Arachnophobic.  The point is that rational and reasonable fears based on actual events have become so stigmatized that they are considered more heinous than the events that caused the reaction. This is evidence of an unserious and to a degree purposeless society eating itself.

I would welcome the introduction of a new word or vocabulary to describe this fearful wariness that groups of people may have with respect to other groups of people.  To lump all such wariness under the word racist and racism seems about as smart has throwing gasoline at a small fire: it surely assures a larger fire or explosion.  Sadly, it is the media and the politicians who hurl these charges about in hopes of gaining votes or ratings.  In this way they have become more part of the problem rather than part of the solution.

The Police and Taxpayer-Funded Unions.  Whether the entire police force in New York City should be defunded because of the actions of several police officers in Minneapolis is a question that, one would think, answers itself in the negative.  But the war between the police and the rest of society seems to have captured the media and is spreading all over the country.  This is sad, particularly since it is happening at a time when dashboard cameras and body cameras are becoming ubiquitous and the accountability of police departments is becoming more apparent.  But police departments are being defunded, in most cases quickly and mindlessly.  The results are available on YouTube. The YouTube clips of looting on a grand scale, literally superintended by local authorities (examples here), represent the truly frightening side of anarchy. To be fair, and to provide some perspective, there is also The Onion’s trenchant headline and story about the outrage of protesters looting without first creating a private equity firm. The droll humor of The Onion aside, does anyone wonder why federal background checks associated with gun sales during the month of June were at the highest levels since such statistics began being recorded in 1998?  Indeed, according to yesterday’s Wall Street Journal, 40% of these 3.2 million June background checks were associated with first-time gun buyers. The Guns of June. This will continue through July and August, one suspects.

It is not possible in a paragraph or two to begin to do justice to this entire topic.  But it is possible to note as a placeholder that taxpayer-funded unions tend to gather extraordinary political power, most especially in large cities.  It is not much of an overstatement to say that publicly funded unions effectively enter into bargains with urban administrations, almost always democratic, and those bargains involve trading votes for economic benefits, including particularly (a) early retirement benefits and (b) union benefits that limit and often virtually eliminate individual accountability. Local administrations literally delegate to the unions the hiring, firing and disciplinary problems. This problem has been decades in the making and it is a problem that may never be solved unless and until the political subdivisions involved wind up in bankruptcy, which is happening slowly but steadily around the country.  For the most part, it is only through bankruptcy that the administrations that entered into the budget busting contracts are able to abrogate those contracts.  They do not seem to have the political will to do so otherwise. If they did have the will, the defunding or elimination of many public employee unions could be a good starting point since it only benefits some especially powerful unions and the career politicians who buy their support. 

In any case, and to end up near where I started; things are a mess and getting worse. Anyone who thinks otherwise has probably not been paying attention, which would be understandable. There is a need for some unity going forward.  I am hopeful that the bulk of the propositions set forth here can form the core of a unified view as to how this country might most justly and sensibly move forward without constant hostility and rancor and how the country might recapture a sense of purpose beyond individual and generational self-indulgence.  

As I get further into these topics, you can follow me on Twitter @jdqb