OCTOBER 10, 2005
FOR GOV OR MONEY
The new New Deal proposed by Niall Ferguson and Laurence J. Kotlikoff contains “something old, something new, something borrowed, and something blue” (“The New New Deal,” August 15). In borrowing from the national sales tax idea, it will run smack into the objections that the plan has always faced: fairness, transition costs, and economic dislocation. One major objection to a sales tax is that it hammers the elderly. Those who have earned and paid taxes throughout their lives will suddenly find their life savings taxed again at even higher rates upon consumption. It might be worth it to be rid of our current tax, Social Security, and health care systems, but I’d like to see the authors get their ideas past the AARP.
San Jose, California
Ferguson and Kotlikoff’s plan for reshaping American tax, retirement, and health care policies is simple and brilliant, and I’m sure their math works as well. All we need to put it into effect is a parliamentary government and a thumping majority for the Ferguson-Kotlikoff party. The genius (or misfortune) of the U.S. system is that it is built for incremental change. Sometime over the next decade or so, we will need major revisions in our |system of social insurance provision. Some academic Democrats get mesmerized by white-board solutions, but the more pressing need is for sustained incremental slogging in the political trenches.
Charles R. Morris
New York, New York
NIALL FERGUSON AND LAURENCE J. KOTLIKOFF RESPOND: Incremental change has left our tax, health care, and Social Security systems on life support. Our new New Deal offers simple, efficient, transparent, and truly fair ways to collect taxes, deliver universal coverage, and modernize compulsory saving. Yes, taxing retail sales, as we propose, would place a larger tax burden on the elderly, but only the rich elderly. The poor elderly would actually be better off, thanks to the indexation of Social Security benefits and the proposed sales-tax rebate. The rich elderly need to contribute to limit the crushing tax burden facing their grandchildren. Rich aarp members have grandchildren and should be willing to sacrifice on their behalf. Eliminating the personal income tax, the corporate income tax, and the payroll tax and providing our proposed rebate will dramatically raise workers’ disposable incomes, leaving them with the wherewithal to pay our proposed 33 percent retail sales tax. With a 33 percent sales tax, a dollar of income buys 25 cents of goods and services, so our effective tax on income is just 25 percent. Finally, we don’t need a Ferguson-Kotlikoff ticket. We need a Democrat who cares more about the next generation than the next election.
It has long been customary to read Robert Novak for the latest regurgitation of Republican talking points (and worse), but it is surprising to see The New Republic follow his lead (“Loss Leader,” August 22&29). Republicans in the House have been working hard to distract the press and the public by hurling baseless allegations at anyone who questions them. But the record must be corrected. Recommending a former aide for employment by the Democratic Congressional Campaign Committee, as Representative Bob Menendez did, may be offensive to Republicans, but it’s neither a novel move nor a violation of any House rules. Contrary to your contention that Democrats have shied away from exposing Republican ethics violations, the reason that the GOP has been unable to sweep their ethics violations under the rug is that House Democrats—led by Minority Leader Nancy Pelosi, Whip Steny Hoyer, and Menendez—have waged a persistent campaign to highlight their abuses. Democrats have challenged both individual ethics violations and the overall corruption by Republicans of the House itself—through which the GOP leadership has offered campaign support on the floor for votes, allowed lobbyists to draft legislation, and attempted to neuter the Ethics Committee, which polices violations. House Democrats will continue to expose abuses to the American people through every available means.
Communications Director House Democratic Caucus
Without naming me, Leon Wieseltier quotes my assertion—published in The Forward—that it is natural and proper to feel a sense of mourning over the loss of Gaza (“The Fall,” September 5). “The disengagement from Gaza,” Wieseltier writes, “is not our loss.” For his part, Wieseltier “will not squander” his “powers of sorrow” on those places or feel “tribal” empathy for the suffering of those people who, at their government’s behest, settled the sand dunes and have now lost everything. Wieseltier’s “powers of sorrow” may be more precious than those of the rest of us and therefore worthy of being meted out more judiciously. But we—who, admittedly, cannot quite shake off our unenlightened “tribal” empathies—continue to feel it is natural and proper to share the sense of mourning with those who have lost their homes, their livelihoods, and their sense of community—whether it be by an act of God (a hurricane or a tsunami, for example) or a political decision.
National President Amcha—The Coalition for Jewish Concern
Riverdale, New York
LEON WIESELTIER RESPONDS: At their government’s behest? Rabbi Weiss must be kidding. The settlers were not dragged kicking and screaming into the territories. They had uses for various governments and various governments had uses for them. Now the old tricks are not working, and they wish to be called victims. They are not victims, they are losers. It is not the same thing. One cannot feel equally for everybody. This is an elemental fact of ethical life. The soldiers who lost their lives and their limbs in the defense of the settlers, and the families of those soldiers, have more of a claim on my sympathy than the settlers who lost their “sense of community.” Why should I wear sackcloth for the settlements if I believe that they injure Israel strategically and spiritually? I guess Rabbi Weiss loves the Jewish people more than I do.
Jonathan Cohn defends requirements to purchase health coverage that “most Americans ... deem essential” (“Pick and Lose,” August 22 & 29). But, if “most” Americans find such coverage essential, why not just let those who want that coverage purchase it? Why require everyone to buy it, especially when that makes coverage unaffordable for some? Cohn also defends laws that increase insurance premiums for some to reduce them for others. But that results in: younger, healthier individuals dropping coverage; a higher number of uninsured; risk pools becoming older and less healthy, which further increases premiums; and the whole process repeating itself in a grand race to the bottom.
Cohn claims that, with more choices, some consumers would be defrauded by unlicensed carriers. Yet the legislation he criticizes would require carriers to be licensed. He may have a point if he means that states would have to research more carriers to weed out the crooks. But consumers would do much of the weeding by gravitating toward carriers with solid reputations. Moreover, states should be shifting resources away from costly regulation and toward prosecuting fraud—an area where Cohn acknowledges that some states are failing. Finally, contrary to Cohn’s assertion, the Cato Institute does not endorse legislation.
Michael F. Cannon
Director of Health Policy Studies Cato Institute
JONATHAN COHN RESPONDS: Even smart consumers need protection from scams. Just ask the Florida fraud victims who bought coverage through legitimate agents. Yet, allowing insurers to sell across state lines, as the Health Care Choice bill proposes, would overwhelm the already overmatched state regulators.
Michael F. Cannon opposes regulation because it makes insurance more expensive. But that’s what happens when you force insurers to give good benefits and offer coverage to people with serious illness. Yes, higher prices might convince more people to decline insurance, either because they are unable or unwilling to afford it. But, in at least some cases, it’s a worthwhile tradeoff, since it’s the only way to secure health benefits for the medically needy.
It would be better still to require good benefits and prohibit discrimination against the sick and keep insurance affordable. But, as I said, there’s only one way to do that: universal health insurance, which Cannon opposes because it would be compulsory. Of course, Social Security, another program that spreads financial risk, is compulsory, too. And only libertarian extremists object to that. Speaking of the Cato Institute, Cannon is right about one thing: Technically, the think tank doesn’t endorse legislation. Only its scholars do. I should have been more precise.
These letters originally ran in the October 10, 2005 issue of the magazine.