Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
When Hot-Take Ideas Meet Economic Reality
Even though it’s now a thing on the left, we really don’t want to MAG: Make America Germany. Or any other nation, necessarily. As I recently wrote for The Week, politicians here shouldn’t breezily suggest we do things just like policymakers over there — and then offer some 3-5 point plan that fails to acknowledge potential costs or show awareness of key differences.
For instance: Might radically altering the rules under which American corporations operate to mimic those in Germany have negative unintended consequences? The US certainly wouldn’t want to accidentally import Europe’s difficulty in generating tech startups. It’s not obvious that Elizabeth Warren’s Accountable Capitalism Act reflects serious thinking about that and other unwanted outcomes.
The Economist magazine isn’t as harsh with the Warren ACA. The author of “The Democratic Party’s left flank has ideas for fixing the country” calls the bill’s three main provisions — respectively — “relatively modest,” “vague and unenforceable,” and “hardly the stuff of revolution.”
Harsher words, though, for two other ideas. First, charging firms a de facto head tax to force a higher minimum wage. This is a weird one from Bernie Sanders since it conceptualizes the safety net as a corporate subsidy and “implies that for those at the bottom of the earnings distribution, wages would rise if the safety-net were slashed.” And as my AEI colleague Michael Strain asks in a Bloomberg column, “Should we view any national health-care program as a multitrillion-dollar taxpayer subsidy to business?” Economists leaning left and right don’t think much of this idea.
Second, Kamala Harris would give generous tax credits to citizens who spend more than 30 percent of their incomes on rent. It’s an idea that ignores the problem of constrained housing supply in many unaffordable cities such as San Francisco. From the mag:
Published in GeneralFueling demand with billions in government cash while housing supply is stuck means that prices will only rise. The winners would be landlords, who would pocket most of the vast expenditure. Ms Harris’s proposal would encourage people to rent flats well beyond their means. Those making less than $25,000 would get 100% of their excess rent subsidized by the government. In San Francisco, the costliest city in America, this means that such a person would pay at most $625 a month, even for a flat costing $4,681 a month. Uncle Sam would kick in the rest. Because the policy abruptly shifts reimbursement rates around cut-off points, those making $75,000 in San Francisco could lose as much as $8,500 of tax credits by making an additional dollar. In cities with high rents, those making up to $125,000 a year, hardly a needy bunch, would qualify for subsidies.
Presidential wannabes come up with loony ideas that don’t make economic sense. I guess they don’t have to, since voters are dumb and the Left has bad instincts.
The “why can’t America do things more like [insert country name] never takes into account:
I.e., Sweden is much more homogeneous demographically and geographically than is the United States. Most of the people in Sweden are the product of a culture that comes from hundreds of years of Scandinavian history. Few Americans come from that particular cultural history.
Listen to Epstein’s podcast on Warren’s economic ideas. He’s not gentle.
@fullsizetabby @iwalton: Unfortunately for the Swedish argument, Sweden is becoming less and less homogeneous and less and less Swedish. It will be interesting to see how things are working out in 10, 20 years. Yeah Professor Epstein was so shy on that podcast and did not tell us at all what he really thinks about Warren’s ‘plan’ – not.
And a couple of years ago, James Pethokoukis had on his podcast a researcher who said there is already evidence that even the native Swedish culture has been changed after 40 years of a generous welfare state: younger people were less naturally inclined to work, quicker to claim government benefits, and less socially attached to the society around them.