Taxes and the US Economy

In the article “America Needs an Alternative Maximum Tax” John Cochrane,professor of finance at the University of Chicago Booth School of Business in the April 15, 2013 issue of the Wall Street Journal argued that the US needs a Alternative Maximum Tax. Within the article he also brings up another point about taxation, which will be summed up here in the interest of short space allotted.  The modern political debate on taxes finds law makers unwilling to give up programs and funding and so they are sorely tempted to increase taxes. “Make all pay their fair share!”, is often their cry. Certainly in justice we should all pay taxes, but how much is often the question. When does the percentage of taxation become over burdening? Those in Europe, for example many of the northern European countries find income tax to be greater than 50% of their incomes. They argue that in return they receive better services. Yet if for example we had a 100% income tax rate, then no one would work—there would be no incentive—and we would all expect to have services from the now bankrupt government. Should someone making more than a certain amount be forced to pay an exuberant amount of taxes as “their fair share”? It should be remembered that on top of this percentage there is of course all the other taxes small and large that must be paid. Of course there is always the classic argument that if the rich are overtaxed then there will be no economic growth. Of course the AMT is slowing creeping in and doing exactly this, but not just to the rich. Soon those who are making $100,000 are becoming eligible to have the AMT applied to them. Yet, what if the AMT strangles these households (as it is not adjusted to inflation)? When will they start to be paying far more than “their fair share”? A socialized America will be slow to take care.

Laissez Faire Economics in Light of Kuhnian Paradigm Shift

A few days ago I decided to throw this idea out, but I am now coming back to it. The idea intrigues me and I would like to develop it for further.

I recognized this week while reflecting on how this trend could logical play out, that this theory could fall into Marxism very quickly, particularly on the level of falling into a determinist view of the progression of economic history. These economic paradigm shifts through history are not always positive. The fall of the Roman empire, Mercantilism etc. are all cases of a lapse in the progression. They are as well not necessary. Each shift is caused by human events which in themselves are the results of free choices. Once this is recognized, this theory holds water on a greater level, though there are still some holes.

The paradigm shift of this period was a transition to laissez-faire economics. One can see the “frenzy” accompanying this shift especially in the United States and to a lesser extent in Britain. The United States’ economic might was built upon the policy. Having been founded in this period, the country was built from the ground up with this policy to guide the building of infrastructure and industry.

The shift itself came about through the change, another paradigm shift in itself, of the the focus of political theory being based on society to being based the individual. The West inherited the political philosophy of the Greek that the body politic was based upon society with the individual playing a part in it. Actions on the political level were judged according to how they affected the whole. Thus Aristotle treats ethics and politics in the same books and overlaps them. Exile from the community was seen as a punishment in that one could no longer participate in society. The seventeenth century saw a shift to the individual being the basis of politics. The “State of Nature”, the natural state of man, was one in which he was alone. It was only because of some privation (starvation, other men stealing, death etc.) that he had to band together with others in order to fend for himself. Government is a necessary evil.

In light of this shift, business men, especially merchants, who had always found government regulation cumbersome to deal with, demanded a more efficient means to do business. Laissez faire and it will work. The individual could govern his own actions on this level. There was a shift towards this in the middle ages with the merchant guild system of international trade, but absolutist mercantilism cut it short. The dawn of democracy in the US and the shift towards it in Britain gave the provided the proper arena for this paradigm shift to come to fruition.  

Entrepreneurship as Participation in the Divine

Last night I attended a talk by Andreas Widmer the director of Entrepreneurship Programs at CUA and President of the Carpenter's Fund. I did some further research last night on Mr. Widmer and found this quote: 

Entrepreneurship is an invitation to be creative, to participate in God's creative act. The human person is the only investment with teh potential of infinitie returns. Thus person-centered entrepreneurship is a most noble calling.

During my philosophy studies, I was particularly intrigued by the ontological concept of participation. Karol Wojtyla's thought continuing into when he was Pope as John Paul II, centered greatly around Personhood and his participation in the Divine person. He went to state that by work man participates in the divine work of creation. I agree with Widmer in that entrepreneurship is a most noble calling--a vocation. In it not only does one's "creation" benefit one's person, but it also has repercussions into the rest of society, allowing others to participate in one's "creation" which is itself a participation in the divine. 

Ability to Learn

This last week I attended a panel of CUA alumni who now work on Wall Street. The main lesson learned, in the words of Michael Pascale, senior VP - Investments of a private client group at Wells Fargo Advisors: "Be willing to do whatever it takes to learn".

Entitlement to work, job safety, or success is no longer the norm. From what I have heard in the past month of listening to successful business people, what one does at work often is not what one was trained to do. Hard work and the ablility to learn on the job has become key, especially in this age of changing technologies. 

Logical Positivism Applied to Economics

In these past few weeks I have come upon an idea that has tied my studies in Philosophy, History and Economics together. I have come to realize it is wrong, but at least is an interesting idea and is still worth sharing in a short format. 

The American Philosopher, Thomas Kuhn in his 1962 book, The Structure of Scientific Revolutions talked about how science does not proceed linearly, but rather in large steps. For example, when Eisenstein came along all of science took a large leap forward and in a sense left behind anything that had to do with the old system. Being a Logical Positivist of the Vienna Circle he believed knowledge to be progressing on a certain path. 

Now let us back up to the Middle Ages. Dr. Sautet of Catholic University of America in his lectures often emphasizes the concept that for the greater part of economic history accumulation of wealth was simple: plunder, rape, and pillage. We still see this panning out, even with the Church and her moral norms. The Feudal system, Colonialism, Absolutism were all just different forms of the same basic and simple economics. 

It was not till the Industrial Revolution that there was paradigm shift. Those that followed it experienced a large increase in wealth (England, US), those who didn't see the shift did not (Russia). These shifts can be followed into the computers and then global markets. 

First, this idea is wrong because it borders closely to Marxism. I do not want to go there. Second, it fails to recognize the deeper trends and realities in Economics for most of human history. 

Hard Work Brings Fulfillment

“Wat wan mann?”

He was from St Andrews Parish in Jamaica and drove a taxi down there in the winters, coming up in the summers to work in the orchards.

“Ire, mann”, I responded.

I had mud pasted pants and a sweat streaked shirt on. My elbows to my wrists throbbed with poison ivy. My machete hung limply in my right hand. I had cleared an acre of thick tall brush that day.

“Op in, mann, and we go.” He said.

I hopped in the truck and we pulled out of that field. I had made it through that summer—my last day of work there. That summer had been spent on ladders thinning pear, peach, and plum trees, stringing nets over blueberry bushes to keep the birds out, and weeding countless miles between pumpkins and fruit trees where the harrow or herbicide could not reach. It wasn’t what some would consider distinguished work, but to me it was important.

From harvesting fruit, I learned the value of hard, but honest work, and how this is fulfilling. Hard work teaches a man that fulfillment isn’t freely given, it is tediously earned. The work day in modern business is long and the work place is unfixed, but I see it as a great frontier to work with people and commit, honestly to hard work. I know real business requires quiet professionalism and hard work, and that excites and inspires me to pursue this career path.