Tag Archives: political economy

Collateral Damage

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In an era of antiseptic war, one fought with drones and precision weapons that limit to an amazing degree the collateral damage done by these limited strikes executed during very limited conflicts, we’ve gotten spoiled. We expect war generally to be antiseptic.

And our “leaders” in DC have gotten spoiled, too.

Several large-scale cyberattacks in recent months have prompted a number of lawmakers and policy makers to call for a more forceful response, including suggestions that the US engage in counterattacks that would disable or limit the culprits’ own networks.

But White House officials and some technology security experts remain skeptical that such “offensive” cyberattacks would work, saying they are concerned about the difficulty in targeting specific hackers without causing widespread spillover, among other things.

And so, in the face of this wide-open cyber war being waged against us, these White House officials and those “some others” insist that we do nothing, since what we would do would be imperfect and cause collateral damage.

…cybersecurity experts are mostly split on the merits of retaliation, with some saying it could distract companies from doing more to prevent breaches.

Because defense and offense cannot possibly be carried out simultaneously. Yeah.

Bob Gourley, late of the Defense Intelligence Agency:

Once the planners and everyone looks [into retaliation], it puts it on an escalation ladder we don’t want to be on. The first thing we need to do is protect our systems. Until we do that, we’re almost inviting them to attack, saying “Come on, take our stuff.”

Wait, what? You’re saying that after years of suffering cyberattacks from Russia, the People’s Republic of China, northern Korea, Iran, individuals, you still haven’t bothered to “protect our systems?” How does that work, exactly?

 

Certainly collateral damage should be limited to the extent possible, from both moral and efficiency perspectives. But this is war. Collateral damage is part of the messiness of war. If we let our fear of collateral damage paralyze us, we will lose the war, with catastrophic consequences to us, completely subsuming any collateral damage done us by this war.

It’s for those who sit in leadership chairs in DC to stop wasting their energy looking for excuses to do nothing and instead direct their energy to responding. Forcefully. As tidily as possible, but with recognition that there will be messes, sometimes big ones.

That response must include actually defending our systems, and it must include correcting this failure:

Businesses are largely prohibited by law from a practice known as “hack back,” which could either be done to punish a cyberthief or take back information that was stolen from any specific firm. That has left companies relying on the government’s response, which so far largely has come in the form of sanctions or criminal indictments.

A Fatal Flaw

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In a piece for Wired, FCC MFWIC Tom Wheeler offered rationalization for his decision to dismantle the Internet. He opened his apologia with this remarkable claim:

This proposal is rooted in long-standing regulatory principles….

That’s the problem. Regulatory “principles” proceed from the assumption that government regulation is a universal and primary good.

Of course, that’s precisely backward—and backwards. A free market is almost universally self-regulating: make a bad product, people find out and stop buying—the producer goes out of business. Lie about a product, people find out and stop buying—even if the product itself might be sound—and the producer or seller goes out of business. And so on.

Almost universally: yes, there are conditions within which government regulation is warranted. But such regulation must proceed from the fundamental assumption that regulating is bad or unnecessary, and the regulation proposer must prove—not merely justify—why this proposed regulation is necessary (not merely useful in some sense).

Wheeler’s regulatory travesty must be halted. Even its mere suggestion is sound reason for Congress to act—perhaps unsuccessfully until 2017 with a Republican President, too—now to reign in, to severely circumscribe, the regulatory authority of all Departments and Agencies.

The Party of Stupid on the Right

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A group of young conservatives, dubbed “reformicons,” are making inroads among Republican presidential candidates by arguing the party’s traditional reliance on broad-based tax cuts…isn’t enough to cure middle-class woes.
Instead, they are calling for crafting subsidies, tax credits, and other public-policy tools based on conservative philosophies and tastes to help the unemployed and other struggling middle-income households.

And

“For the past 10 years, our biggest issue was whether the top tax rate was 35% or 39.5%. I don’t care anymore,” said Michael Strain, 33 years old and an economist at the American Enterprise Institute think tank. One of his ideas gaining fans on the right: let employers pay some workers less than the minimum wage as an inducement to hire them and use the federal tax code to bump up salaries.

Leaving aside the abject surrender inherent in that “I don’t care” bleat, Strain’s small point—letting employers pay below-minimum wage rates under certain circumstances—is better achieved by curbing yet another government interference in the market, by getting rid of the minimum wage altogether.

Bob Davis’ article in The Wall Street Journal goes on in this vein, but you get the idea.

The larger point, though, is that these reformicons’ ideas are foolish. Using the tax code for social engineering or for favoring some Americans—which can come only at the expense of other Americans—is an inefficient and immoral use of people’s money. Even when it favors those Americans whom Republicans and Conservatives favor.

Government interference in the free market only inhibits the market, only caps what used to be equal opportunity, only reduces prosperity to the lowest common denominator rather than increasing the general prosperity by elevating the lowest common denominator.

These reformicons’ policies, worse, will only exacerbate the byzantine structure of our tax code and make it even harder to get to a single, low tax rate that every citizen pays; a rate based on all income, regardless of source and devoid of special treatment based on that income’s source; a rate devoid of gerrymandering with tax credits here, subsidies there, loopholes over there. A fair tax rate.

Threats

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Russian-backed rebels in eastern Ukraine and Russian troops there have renewed their offensive in an effort to expand their hold on the oblast of Donetsk and to seize the Ukrainian Sea of Azov port city of Mariupol as part of opening a land bridge from Russia to Russian-occupied Crimea. In response to this, western European leaders and President Barack Obama are making noises about extending existing sanctions and, perhaps, broadening them to include cutting Russia off from the international financial system. In response to this, Russia threatens.

Prime Minister Dmitry Medvedev said on Jan 27 that if Russia is cut off from the Swift international payment system as punishment for its actions in Ukraine, its response “will know no limits.” Andrei Kostin, the head of VTB, Russia’s second-largest bank, said excluding Russia from Swift would mean “war.” Igor Ivanov, the former foreign minister, said that a confrontation could involve nuclear weapons.

These are people with whom negotiation is impossible, with whom a negotiated withdrawal of Russia from Ukraine cannot be had.

Threats such as these should make any response impossible other than cutting Russia off from Swift, promptly. And arming Ukraine so they can defend themselves from this Russian aggression.

Higher Taxes

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Because that’s the Democratic Party’s one size fits all solution to all of the nation’s problems. Because they Know Better how to spend a citizen’s money than does that citizen. Here, via Fox News, is an abbreviated list of tax increases President Barack Obama wants.

  • Limit deductions for top earners to 28% rate, even if income is taxed at 39.6%: $603.2 billion
  • Impose a 14% one-time tax on previously untaxed foreign income: $268.1 billion
  • Impose a 19% minimum tax on foreign income: $206 billion
  • Modify estate and gift tax provisions: $214.4 billion
  • Change the taxation of capital income: $207.9 billion
  • Other increases from reform of US international tax system: $135.8 billion
  • Impose a financial fee on large financial companies: $111.8 billion
  • Increase tobacco taxes and index for inflation: $95.1 billion
  • Repeal LIFO (Last In First Out) method of accounting for inventories: $76.1 billion
  • Conform SECA (Self Employed Contributions Act) taxes for professional service businesses: $74.6 billion
  • Other revenue changes and loophole closers: $47.9 billion
  • Eliminate oil and natural gas preferences: $45.5 billion [Note: don’t eliminate “green” energy tax breaks and other subsidies]
  • Implement the Buffett Rule by imposing a new “Fair Share Tax” (making millionaires pay at least 30% tax rate): $35.2 billion
  • Reform the treatment of financial and insurance industry products: $34.4 billion
  • Limit the total accrual of tax-favored retirement benefits: $26.0 billion
  • Other loophole closers: $24.3 billion
  • Reinstate Superfund taxes: $21.2 billion
  • Tax carried interests as ordinary income: $17.7 billion
  • Make unemployment insurance surtax permanent: $15.7 billion
  • Eliminate coal preferences: $4.3 billion [Note: see oil and gas preferences]
  • Reauthorize special assessment from domestic nuclear utilities: $2.3 billion [Note: see oil and gas preferences]
  • Increase and modify Oil Spill Liability Trust Fund financing: $1.6 billion
  • Repeal tax-exempt bond financing of professional sports facilities: $542.0 million

Notice that many of these tax increases are solely to raise taxes and have nothing at all to do with any real reform of our tax code or of anything else: LIFO elimination, for instance, and those financial and insurance “reforms.”

The total tax increase from these? Nearly $2.7 trillion. Think about how much that will hurt our economy by taking that much money out of it. That is, after all, 13.4% of our GDP, of our economy.