RealCurrents

First of all, in case anyone’s looking for it, here’s the official details on the IRS’ reasons for making April 17th the national deadline for filing your personal income taxes this year. It’s certainly also a good time to be thinking about how we could improve the system, something we all agree needs to be done, but can’t seem to agree how.

Of course, when you really get down to details, I’m not sure any of us quite knows quite what kind of tax system we’d prefer, but there are some basic qualities we could probably agree on. We need a system that no longer penalizes American business competitiveness, we need a simpler system (need I say more?), and we need a system that encourages - or at least doesn’t penalize - savings and various forms of investment and capital formation.

While a lot of conservatives might not agree on this last point, I think we also need a system that is modestly progressive, i.e. that gives a break to the poorest members of society. Even if you don’t agree with this philosophically, there is certainly a public interest in seeing these folks succeed financially, rather than linger on welfare rolls.

I don’t know all the specifics of the FairTax Plan, but this morning Houston City Councilman Michael Berry had Americans for Fair Taxation’s David C. Polyansky on, discussing this proposal. Here’s a summary taken from their website:

“The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 1025) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. …”

In other words, the FairTax plan would be based on consumption, not income or savings, so if you made a lot of money but lived frugally, saving and investing what you made - and so creating jobs and wealth - then you wouldn’t get taxed that badly. On the other hand, if you wanted to live like the robber barons, then you’d pay considerable tax - 23% (plus state sales tax, I presume) - but you wouldn’t have to hire an army of accountants and lawyers, nor would you need to worry about estate taxes. That last part alone would probably save wealthy folks enough to where many would gladly pay the 23% on consumption in order to have more financial flexibility.

Of course, I don’t know how they come up with these numbers, but that 23% would apparently include all Social Security and Medicare taxes, and since it’s a straight number, it would be easy to predict the tax impact of any transaction and, like sales taxes, the amount would apparently only be levied on the final purchase, so there wouldn’t be a bunch of “built-in” taxes that add to the cost of goods. While the combined federal and state tax would be about 30%, twice the European VAT, if it had a downward impact on inflation - and interest rates - it might prove a bargain for these reasons as well, without having the regressive characteristics for which value-added taxes have been criticized.

The FairTax Plan, which currently has about 60 mostly Republican co-sponsors in Congress, including Texas Sen. John Cornyn, is reportedly most strongly opposed by Washington lobbyists and some Congressmen in powerful committees, who would lose a lot of influence were it to pass. Perhaps this is the best reason of all for supporting it.

The FairTax would basically be a 23% federal sales tax on everything, that would be balanced by a “prebate” that would rebate the tax burden that would be paid by a family living at the poverty level. So as I understand it, you’d only be paying this consumption tax on purchases above the poverty level.

Moving to a consumption tax is key, because this would put our industries on a much more competitive basis with those of other countries. Right now, in Texas at least (I know some states are different), if you buy a $100,000 home, you have to pay property tax, on the order of 2.5%, every year on that home, which is made in America, of course. On the other hand, if you buy a $100,000 car imported from Germany, England, or wherever, you generally don’t have to pay this tax every year. But if you you buy a $100,000 aircraft made in Wichita, Kansas, you do!

Of course, this is property, not income tax, but it’s just one glaring example of how our system in some many subtle ways (double taxation of overseas earnings is another) rewards importers over domestic industries. A consumption tax would lower the effective cost of our goods overseas and make our manufacturing, agricultural, and other industries more competitive, while at the same time likely doing more to improve conservation of resources and protection of the environment than a lot of other measures would.

I’ve been putting off writing about immigration because it is such a difficult subject to really nail down. There are so many mixed emotions, conflicting interests, and pertinent historical precedents that it’s hard for even one person to agree with themself. I think Mark Belling’s comment on the Rush Limbaugh show Wednesday, that we can’t get agreement on immigration because we can’t find even two people who totally agree, is right on the money. This is very much an issue in flux, but it may no longer be an issue that can be deferred.

Of course, immigration is only one of many issues that U.S. voters have just wanted to keep sweeping under the rug. This rug is getting awfully lumpy nowadays, and these ugly problems are going to be emerging one-by-one (if we’re fortunate enough not to have to deal with them en masse) in the coming years. Any American can list half a dozen of these, e.g. the trade deficit, national debt, consumer debt, Social Security (i.e. even more national debt), Medicare (ditto), corporate pension plans, a disadvantageous tax and benefits structure for global competition, rapidly rising health care costs, and, oh yeah, a couple of looming possibilities - proliferation of weapons of mass destruction, and of various natural diseases such as bird flu.

To George W. Bush’s (and his staff’s) credit, they have been on the immigration issue for some time, but seemingly with little support from anyone, whether fellow Republicans or even Mexican President Vicente Fox. Fox’s anticipated good relationship with Bush seems, instead, to have proved to be largely dysfunctional. Unlike Social Security reform, which Bush was astute to push soon after the election but unfortunately with a scheme largely at odds with the public, on immigration I think he’s probably more in tune than other politicians realize.

Maybe the best way to solve this political, diplomatic and economic dilemma is by a process of elimination, because the reality is that most of the ideas Congress has offered will almost surely fail in practice. Are we really going to lock up church members who help illegal aliens or deport parents while leaving probably millions of “orphans” here in the U.S.? Are we going to deport millions of children who are American citizens? Are we going to destroy our agriculture industry, one area where - I hope - we still enjoy a trade surplus?

These “solutions” are just not going to happen. Are we really going to have another Trail of Tears down to Matamoros or Tijuana? Any politically workable solution is going to have to deal with the historical reality, not just the rhetoric of a bunch of folks who want the cheap housing and living costs of the Sun Belt while pretending the issue just suddenly got out of hand, and deserves some sort of abrupt knee-jerk response.

The hard fact is that when you let a situation go on for decades unchecked, you don’t have some of the options you would have if you dealt with it promptly. Whole generations have grown up in citizenship limbo, and to pretend you can just slice this gordian knot with one sharp legislative blow is nuts. We need to figure out where we want to go, and then figure out how to deal with the situation we’ve already got.

What you can’t stop, you regulate and tax, and this is really the only workable solution. If you raise the costs, you reduce the demand. Maybe someone can come up with a better solution, but it seems to me that in order to regulate the inevitable cross-border flows, a sizable guest-worker program will be needed. Incentives will have to be in place that cause most potential immigrants to be willing to go with the program, and disincentives such as more secure borders and harsher penalties for future violators will be needed to reduce the flows to a workable level. I don’t know what this level is, but it’s going to be more people than a lot of folks will like. Deal with it; in the long run we can probably reduce the pressure on our borders if we can encourage Latin American countries to reform politically (really key) and economically.

The guest worker program will need to be multi-tiered. Workers will have to meet higher requirements to move to the higher levels (allowing longer residency periods and possibly bringing in family members), and of course the highest level will be attaining citizenship, for some portion of the workers. All the workers’ earnings need to be taxed, and tax violations should be grounds for deportation. Health care, education and other issues will have to be worked out, but since they are guest workers, they shouldn’t be on welfare.

While a large guest-worker program may be hard for a lot of Americans to accept, there will also need to be measures taken that will be unpopular with many illegals and with many Hispanic Americans. We must do away with bilingual ballots and require that all citizens learn English as a qualification for citizenship. Bilingual education will remain, I’m sure, at least to teach guest workers’ children in public schools, which will obviously have to be compensated to some degree since guest workers may not own much taxable property. Nevertheless, instruction in Spanish should be only a stopgap, and all students should be required to take English, and have a limit on how many years of bilingual education they can receive before transitioning to regular classes.

Unlike other immigrant ethnic groups, English seems to be a real sticking point for a lot of Hispanics. I really don’t feel any sympathy here. My wife immigrated to this country from Taiwan, and she had to go to kindergarten not knowing any English. Now her vocabulary is probably better than mine. Everyone understands that it’s harder for the older folks to learn the language, but to insist that the next generation can just stay out of the loop of discourse is quite irresponsible. The United States is a republic, a representative democracy, which requires that its citizens be able to communicate with one another. To dispense with this would pose a threat to the whole fabric of our society.

I know that emotions are charged over immigration, with accusations of racism, ingratitude, double standards and the like being wildly thrown about. I hope folks will calm down and actually talk to one another. Hispanics have a lot to be upset about but they certainly should have seen this coming by now. I tend to sympathize with the students getting out and protesting (peacefully), but they need to realize they are sending an incredibly incoherent message, waving Mexican flags while demanding the rights of United States citizens.

Laws have to be enforced, or else they need to be changed. Millions of Hispanics have chosen to violate our laws, and they have no business being upset that we may now choose to change the law and then enforce it. On the other hand, I hope that as we prepare this spring to begin celebrating the 400th anniversary of the Jamestown Colony, that Americans pushing for immigration reform will remember that nearly all of us had ancestors who were once immigrants, and reflect on the somber fact that a measure of humility is, indeed, in order.

Since my first post Monday, more has come out about the Dubai Ports World deal to take over operations of six major eastern U.S. ports, plus some additional Texas terminals, apparently, at Beaumont, Corpus Christi, and the Port of Houston.

The UAE has been wise to back off and wait, rather than press to complete the deal immediately. As more facts emerge, it’s starting to look like the sale might not be as bad as it looked at first, but the U.S. is going to have to work through a whole bunch of thorny political issues. It’s amazing how many hot-button issues have managed to be bundled together in this DP World deal.

The most compelling argument in favor of the deal is that the key area for U.S. port security is actually in the overseas ports, rather than stateside. In other words, cooperation with port operations companies and foreign governments on the loading end is critical. The reality is that most ports are near major metropolitan areas, and inspection upon unloading might be too late to catch certain weapons of mass destruction, such as a nuclear device.

The U.S. has cooperative programs such as the Container Security Initiative that are designed to push the threat away from our shores. Nevertheless, it seems pointless to argue that allowing other countries to operate our ports will incur no security risk. Ownership brings access, and a lot of Americans were justifiably shocked to find out operations had already been outsourced to the extent they have.

Obviously, the outrage this sale has generated shows Americans are paying quite a bit of attention to homeland security issues and that the Bush administration’s attempt, once again, to say “simply trust us” isn’t going to work with such a sensitive domestic area.

If cooperation with foreign port operators and governments - so that manifests can be tracked and containers inspected far from our shores - is really key to port security, then the deal may represent an acceptable trade-off. Nevertheless, despite getting pretty much a free pass (and blank check) on Iraq for three years, President Bush is going to have to really make the case for how this will help security. Selling it on the basis of helping the global economy, as Michael Chertoff was reportedly doing this week, isn’t going to cut it.

In all, this is an amazingly complex political situation. Here are some additional factors deserving consideration:

• It’s still not clear exactly what DP World is “buying” in this transaction; obviously the operations of U.S. ports are not at all well understood by the public. Certainly Congress needs to take a new look at the port laws that are on the books and make sure roles and authorities are clearly and perhaps uniformly defined.
• Jimmy Carter’s quick support of the deal was puzzling. It would be easy to simply say the port deal is analogous to Carter’s giving back the Panama Canal, but consideration of Carter’s mindset about foreign affairs may shed some light on the politics. His assertion midway through his term that foreign policy was complex and beyond the understanding of the average American was what really sunk his presidency, and the current administration seems to have slipped into a similar error.

  Americans instinctively grasp there’s a balance to be struck in our political system between the ideals of republic and democracy. We leave most details to elected officials (republican/representative rule) but still must know enough to judge the performance of these officials (democratic elections). When officials start wanting to leave Americans out of the loop entirely, arguing that the issues are just too complex, the people know better, and there can be a swift political backlash as happened with Carter and again this week.

  Because Americans also understand the need for strong military leadership, there is more latitude given in this area to the President, but sometimes politicians presume too much from this. An example was the 1946 congressional election, when many were voted out because the country was fed up with wartime price controls that the government “experts” insisted must continue.

• The accusation that Americans are being xenophopic or even racist is way out of bounds. As long as Muslims insist on regularly blowing each other (and others) up, they’re going to have a real tough time persuading Americans they’re trustworthy. It’s hard to trust someone who seems to enjoy violence. The U.S. has fought a lot of foreign wars in the past century, but there’s always a lot of political pressure to end them and come home. We’ve got better stuff to do.

  Concerning the UAE, specifically, I’m not sure banking links to terrorists mean much, and Bush’s claim of strong military and intelligence cooperation gives support to the deal. On the other hand, to argue that everyone in the UAE supports the U.S., and so can be trusted, seems quite simplistic. According to AP’s Robert Burns, “the relationship is so politically sensitive in the UAE that the Pentagon does not openly discuss details.” It also has been reported that in 2004, the most recent year’s data available, the UAE sided with the U.S. in United Nations votes only 5 times, and opposed the U.S. 67 times.

• The media deserves some of the blame here for its monolithic coverage of the Middle East. This is very frustrating but unlikely to change, so if Muslim countries want to foster understanding in the U.S. and appreciation for Muslim culture, they will probably need to do the job themselves. The fascinating magazine Saudi Aramco World is a bright spot here, providing a glimpse of these cultures that is virtually unobtainable in the U.S.
• As I noted last time, the administration has gotten worse and worse at communicating its message, at a time when clear communication and articulation of strategy is needed more than ever. Obviously, changes in the White House staff are long overdue.

  Beyond that, the President needs to work a lot harder at sharing his vision of democratization of the Middle East, and be more forthcoming about what strategy, if any, he is following to get there. As I noted before, it is long past time for a real debate about our aims in the Middle East to take place in this country. It may be possible for Muslims to gain a glimpse of Western life and leave behind strife and unrest, but I suspect most, at first encounter with our culture, don’t understand its fundamentals any better than we understand theirs.

• Obviously, the failure by the Bush administration to recognize the volatile mix of terror, frustration over Iraq, outsourcing, unions, the $726 billion trade deficit, disgust with Mideast violence, and out-of-control borders, along with the casual approach it took to the deal were major political miscalculations. Bush quickly found Senate Majority Leader Bill Frist, from the landlocked state of Tennessee, opposing him on the port deal.

  Republicans now find themselves in the odd position of needing to avoid appearing outflanked by Democrats on the security issue, and the lax approach taken by the Treasury Dept. in approving deals may well have to go. Most of all, as I emphasized last time, Bush needs to avoid the tendency, or at least appearance, of only half-heartedly fighting a war that is still much too poorly defined.

Over the weekend, I was disturbed by a report from AgapePress that the Bush administration had somehow, incredibly, approved a deal allowing the UAE company Dubai Ports World to acquire six eastern U.S. ports (New York, New Jersey, Philadelphia, Miami, Baltimore, and New Orleans).

My main concern was that this was going to be another one of those outrageous stories that only the conservative press picks up, but this time I needn’t have worried. Despite the federal holiday Monday, Republicans and Democrats alike were quick to condemn the deal. Thankfully, I don’t need to check that “Press Coverage Holes” category this time.

Nevertheless, as RealCurrents is all about trying to highlight what isn’t already being said somewhere else, but that needs to be part of the discussion, there are several points deserving consideration:

First and most mystifying to me (and I’m a conservative Republican, by the way), this ports deal is just one more instance of the Bush administration refusing to demand, or even suggest, some sort of wartime economic/business sacrifice. First it was the insistence that Americans go on spending like crazy in the wake of 9/11, buying more and more gas-guzzling SUVs even as we went to war in Afghanistan, and as the neo-cons in Washington maneuvered to start another war in Iraq.

The inability of the administration to formulate an effective energy conservation strategy to go along with a protracted war in the Middle East is not merely irresponsible, it is strategically stupid. While the U.S. borrows hundreds of billions of dollars to fight the war, Americans are borrowing hundreds of billions more to pay to oil-producing countries that in many cases have been documented sources of terrorists. This is worse than what we did in the Cold War, spending huge amounts on defense procurement while propping up the economies of the Eastern Bloc.

If things get bad enough, will Washington demand a draft, with a lot of hoop-la about how wartime sacrifices must be made? Though relatively small by historical comparison, the casualties already being suffered in Iraq and Afghanistan are substantial and seemingly ongoing.

The administration likes to pull out the “we’re at war” card every time it’s convenient (e.g. reauthorizing the Patriot Act), yet quickly tuck it away when other interests come into play. I think most Americans would agree that if we’re really at war, then there are going to be some strategic assets that are not to be dealt away.

This is the patently obvious second point: most every homeland security study has shown that our ports are some of our most vulnerable infrastructure. That the administration could even consider turning these over to a Mid-East country shows exactly why this must not be allowed, even if the country is our “ally” (whatever that means with Muslim countries) and, oh by the way, extravagantly wealthy.

Whoever analyzed this deal is confident that safeguards will be in place. This is the problem with any bureaucratic organization - it begins to think it’s infallible, and before long will let anything get by it as long as it’s got all the right rubber stamps on it. In other words, bureaucracies excel at straining out gnats but sometimes miss the glaringly obvious. The FBI’s failure, despite repeated requests, to investigate a suspicious student who only wanted to learn to fly 747s, straight and level, is not only now a classic in the annals of bureaucracy, but also a painful warning of what can happen if we place too much confidence in government.

Of course, the Katrina disaster in New Orleans has provided fresh evidence that bureacracies at all levels can fail to handle the obvious, even when it was expected ahead of time. The simple solution is simply not to let this deal happen in the first place, even if global trade suffers a little bit.

Third, as Republican Sen. Lindsay Graham noted, the adminstration’s stance is “unbelievably tone deaf politically at this point in our history”. As such, it provides ample evidence (as if any more was needed) that the White House is just not being well-managed. Either the administration doesn’t have a coherent message in many cases, and/or it’s failing dismally to communicate that message. Even as I write this, Don Wildmon of the conservative AFA has sent out an email alert opposing the deal, noting that “Normally we don’t ask you to participate in issues such as this, but we feel that this one justifies your involvement.”

I used to be impressed with George W. Bush’s ability to be in touch with public sentiment, but there’s a clear disconnect that seems to have worsened ever since the neo-cons gained ascendancy. Bush clearly needs help, and he should start by restoring Karen Hughes to a top White House role. Then he should demand that the neo-cons play by the same rules as everyone else, i.e. they have to actually justify their points of view rather than just use a knee-jerk accusation of the other side.

Anyone who’s been on the net for long knows there are millions of thinking Americans who are totally outraged at the lack of a real debate on the war in Iraq and other key issues, such as federal spending. Most of these are Democrats, but the number of conservative Republicans among these is growing rapidly. Maybe this ports deal will finally get the real debate about the war on terror started.