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Post details: Who is the Fairest of Them All?

Who is the Fairest of Them All?

The Buffet Rule - a provision requiring millionaires to pay higher taxes - took the center stage in Washington politics this Monday. As you might imagine, the political fireworks were spectacular. Comandeering other people's money is like a catnip to politicians. Any time the revenue for public spending appears on the agenda, both sides of the aisle explode in a flurry of impassioned argumentative tomfoolery. So much so that sometimes I worry that they might be sued by the three stooges for copyright infringement. As they toss the rhetorical cabers left and right all over the floor, the very concept of "fairness" (which both parties love to worship) gets flipped more times than a burger at Larry, Curly and Moe's Grill Party.

The big battle of political wills ended in a draw this time - even though the bill technically passed in the Senate (51:45), it was immediately filibustered by Republicans, which means - for all practical purposes - it was dead on arrival. Unfortunately, much of the "fairness" inherently involved in killing it was severely misplaced.

No, I do not mean the fact that capital income is valued more than that coming from labor as exemplified by Mitt Romney's benign tax rate of 15%, where most of us pay way over 25%.

I am also not alluding to those opulent junkets in Las Vegas which some public servants consider to be the best way of spending taxpayers' dollars, second only to the secret service traveling all the way to Colombia for a refresher course in Kamasutra.

Nor do I mean the question of who exactly benefits from waging a war in some rugged desert north of Waziristan, especially now that the world's most wanted terrorist has been consorting with heavenly virgins for more than a year.

The central omission in the discussion of "fairness" is the mindbogglingly obscure nature of the funding for our federal budget. Without balancing our books and seeing who pays for what you cannot even begin to address "fairness". When the Fed engages in its quantitative machinations (i.e. buying the government debt with money that they literally make up), the accounting becomes so blurry that any notion of what is fair loses its meaning. To find it, we need clearly visible lines between assets and liabilities and transparent book keeping.

Another way of saying that is that we don't really pay for the services we receive. Indeed, had we paid them straight from our pocket, we might have realized that perhaps we didn't need some of the expenditures. But rather than having a hard adult discussion of what our priorities are, we shift part of the financing burden onto our children (through future taxation), and part onto the poor and middle class (through inflation). In this situation, accusing the lower income brackets that they do not pay "fair share" is a bit disingenuous. And disregarding the perspective of children, whose future is being systematically plundered, does not smell like "fairness" to me either.

But that's just how DC operates. Whatever is beyond the 4 year horizon is simply invisible. In the meantime, there is plenty of muck to hurl around. While one side of the aisle yells "class warfare", the other one screams "income inequality" with equal gusto. And in a sense they both have a piece of truth. But in order to make any reliable judgment on this issue, we have to see the true bottom line. So how do we get our representatives to balance our public books?

Well, I have an idea. Why don't we make their pay decrease proportionately to the budget deficit. After all, it is their job to compromise and negotiate for the common good, right? And deficit is an obvious failure to do so.

So let's see - with a mature economy we cannot expect to grow more than 3%, so deficits should stay under that threshold as well, otherwise it will become increasingly difficult to finance them. Now, if they manage to come up with a budget hole smaller than 3% - good - they get their usual pay. But for every 1% of the deficit, they lose 10% of their pay. Say you come up with a 10% deficit - that is 7% over the 3% target - so that would be 7*10% = 70% off your paycheck, Ladies and Gentlemen. And guess what? They will make a compromise before you could say "Popocatepetl".

But don't hold your breath for this measure to ever materialize. You will sooner see 435 lizards bowing on ice during the Stanley Cap finals than our representatives tie their pay to actual performance.


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