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Monday, October 27, 2003

A Matter of Degrees

After reading Howie's last post and the embedded website, "Debt the Wrong Enemy," I felt a need to reply. It seems to me you are falling victim to oversimplification. If the last tax cut was good for the reasons you cite in your postscript, how about another one? And another one? If I follow the path you're suggesting, it would end with no tax levies at all, and all government spending being debt-financed (say, about $2 trillion per year).

Howie, as you know, these are subtle issues. Your website friend cites the success of Walmart's debt management. And, indeed, Walmart has managed its debt well. Many companies have not, and have run into liquidity problems resulting in bankruptcy filings. As we also know, it can happen to countries, too. The U.S. doesn't appear to be on the brink -- interest rates would be much higher if it were -- but I'm not too thrilled about a number of longer term trends that may push us into dangerous waters, such as the potential for retiring baby boomers to stop saving, stop producing, and start consuming savings.

I'm not sure who holds the mortgage debt record among us, but mine is $638,000. Believe me, that keeps me highly attuned to my ability to handle that debt.

Interestingly, I think your website friend is basically correct. The difference of opinion arises with regard to decisions within the Adam Smith model. In my opinion, we're over-"investing" in security, and we're underinvesting in education, infrastructure, and a stable currency.

Here's a link to an interview with Bill Gates, Sr., about his campaign to reinstate inheritance taxes. He, for one, believes our government has, in general, done tremendously good things with its investments of taxes collected.

Frankly, I find it amazing that Bret and Howie sympathize with the statement of Janice Rogers Brown. The results she lists do not, in general, square with our historical legacy. We have had a strong, active government for over two centuries, and, in general, the results of governmental engagement have been good. Or, are there some among you who feel that slaves should not have been freed, women should not have the vote, non-elite children should work and not attend school, the races should be segregated, the disabled should be left to their own means? Yes, sometimes governments -- even ours -- do become horribly corrupt, and visit upon their citizens horrible consequences. But, to blame all those ills on government per se, rather than on lack of good leadership within government, seems to me to be a terribly distorted view of causality.

I'll end on a general point of agreement, with one small caveat. I agree that we need to do many more local experiments. Perhaps the most powerful federal leadership would be one that devolves more power to the states (and to counties and cities beyond that). Even on some issues of national importance, such as education, devolution of power and money to the local level makes sense. Here's the caveat: some problems are not efficiently solved at a local level. I've experienced this in ChevronTexaco where we are currently in the process of moving toward more standardization across our business units so problems don't have to be solved again and again at the local level, and so suboptimization doesn't take place. In government, also, some things are probably better done at a federal level. Some standards, some infrastructure, national security, the general system of justice -- probably better done federally. Bret, I'll be interested to read your articles on this issue of experimentation when they're ready for peer review.

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