I’m coming up rather rapidly on my 30th birthday. Oh, for the age of eight, when the rise and fall of the Roman Empire could be comfortable sandwiched in that last week before one’s birthday. A much younger friend of mine recently asked me what it was like, and I responded with the standard litany: body parts breaking down, everybody I know getting married and having babies, an inability to understand pop culture – kids these days with their doo-wop and baggy pants. But another incident came to mind – I recently found myself defending status quo bias in a way I would have found inconceivable not too long ago. I fear my life is turning into a bad Billy Joel song.
As a way of introduction: my MA thesis was essentially a 60 page rant against structural status quo bias . Governmental institutions, I argued, only work well insofar as they are appropriate for the people in them. If people change, the institutions work less effectively if at all. My argument was that institutions should be easier to change so they could keep up with the times.1 As my example, I presented the filibuster in the U.S. Senate. The potential for a 60-vote senate has been around for over a century, but a bunch of things – norms towards civility and collegiality, ideologically incoherent parties – staved it off for quite a while. But in the last thirty years we’ve had the realignment of the south and cable news, and the result:
Picture from Ezra, who’s been great on this issue.
Boom. Gridlock, and at a terrible time.2 Not only is it tough getting legislation through – which depending on your political predilections may be a good thing – but empty seats on the federal bench, empty seats at the Fed, and a slew of “acting directors” all across the federal bureaucracy.
All of this is just to say, status quo bias is not on my Christmas list. Which is why I was surprised at my reaction when my brother sent me this video:
I’m obviously not the intended target of this – the fellationics over free enterprise sounds hollow to me instead of inspirational. And I laughed out loud when former Congressman Inglis said that conservatives don’t believe in free lunches, because the other guy in the video with him was Art Laffer, the guy who came up with the idea that if you cut taxes enough you’d actually raise absolute revenue because of the economic growth – the most famous example of free lunch thinking in modern economics.
But I am a huge fan of the carbon tax – not just as a means of reducing pollution, but as a method for raising revenue. The conservative hit on the income tax has always been, “If you want less of something, tax it,” so if you tax income, people will go out and make less money. 3 The same principle drives taxes on cigarettes, alcohol, and inappropriately-sized soft-drinks. So what’s not to love?
Well, first off, any kind of consumption tax – be it a sales tax or carbon tax or cigarette tax – is incredibly regressive. A Bentley doesn’t use a whole lot more gas than an old Chevy, and though a millionaire probably spends more lighting his house than I do powering my apartment, the rate is far less progressive than the status quo. In the fantasy carbon tax plan I hashed out with my brother, the revenue gained from the carbon taxes would go towards refundable tax credits (functioning like the EITC) that would phase out with wealth, and with what was left over we’d slash the corporate tax rates. Ah, fantasy.
But this video brought the carbon tax from (either my personal or general liberal) fantasy to reality. And made me realize how trivially easy the carbon tax could be used as a massive upward transfer of wealth. The carbon tax, if introduced by a Republican Congress and White House may include those tax credits – but I doubt they’d be large enough to offset the increased price of goods as a result of the carbon tax, and they almost certainly would be nonrefundable. The rest would go towards cutting taxes on the upper brackets and capital gains, as per usual. Most Dems would oppose it, but the GOP’d get enough of them to cross the aisle for accolades from the environmentalists that it’d pass.4
It drew me aback. Like I think most young (or just plain immature) I had always viewed status quo bias as a form of either blindness – unable to see the possibilities, man! – or cowardice – just sitting their hugging their government-subsidized Mohair blanket and afraid to risk disruptive change. But now I was freaking out at the possibility of a Republican-lead carbon tax. Me, who had mere months earlier blithely recommended constitutional amendments and even a whole new house of Congress, secure in my belief that change just had to be good.
I don’t have any children, and I’m not noticeably wealthier than I was when I was 22 (in fact, I’ve got more student loans than when i came out of undergrad) so I don’t think this is my personal circumstances changing my beliefs. I think it’s just, you know, that I’m getting older. I still support the carbon tax, and I my default expectation is that a change will bring about good. But watching Laffer and Inglis stump for the carbon tax was a hair-raising experience, akin to perhaps JFK speaking with the voice and words of Ronald Reagan. It also made me realize three things:
- My cavalier attitude towards institutional change in my MA thesis was terribly, horribly naive, in a “I hope the admissions committee members didn’t actually read it” sort of way
- I should have far more sympathy for everybody who puts up with all the ridiculous subsidies and out-of-date rules and frustrating imperfections of our public institutions, because their fear that the alternative could be worse is more rational than I had previously believed.
- I really need to get a lawn, so I can yell at people to get off it.
- I think I may have gone so far as to say that institutions should have a bias for change. What can I say, I was young and foolish. ↩
- Naturally this is glossing over a shitload. If you want to argue about it with me, I’d love to. If you want to know more, pick up Filibustering. And then we can argue about it. ↩
- I don’t think most really disagree that people would work more if they could keep 100% of their income, though of course everybody disagrees to what extent they’d work more and whether inhibiting growth through taxation is worth all the good things you can do with the money you’ve raised. ↩
- In my original email attempting to explain this phenomenon to my parents and the few other unlucky souls on the email chain, I attempted to use European expansion into the new world as a metaphor for the options that would be open to legislatures if a reliance on the carbon tax forced all parties to re-litigate the progressiveness of the tax code from scratch. That metaphor has been omitted form this post as a public service. ↩