23 February 2010

The Platonic Ideal of a Policy Initiative

There are some interesting thoughts at Porch Dog about the VAT, or rather, about the debate about the VAT.  I want to expand on those a little bit.

The basic idea is that we shouldn't compare new policy proposal to miscellaneous other, idealized proposals.  In this case there isn't much to be gained by saying "No, the VAT is rubbish compared to my flat tax proposal."

In general, I agree.  Especially considering that nothing comes out of the sausage factory looking as good as when it went in.  (Which should tell us something about the behavior of our sausage makers.)  We've seen this with health care and cap-and-trade and TARP and ARRA and ...

My concern is that people can misapply this argument in order to beg the question.  Merely by making a credible proposal for a VAT, for example, it becomes possible to shut down counter-proposals, say, for a flat tax, by demanding that people only debate the actual measure being considered.  The real question in this case isn't "What are the merits and demerits of the VAT?" it's "How do we raise more revenue?" so debating other policy proposals isn't really out of bounds.

I don't think that's what Porchy is trying to do, but some people are, and their arguments are going to sound quite similar to his on the surface.

A second point I'd like to make is that while it is silly to compare idealized proposals to those that have actually survived encounters with the likes of Ben Nelson, some policies are naturally more resistant to the legislative process than others.  That's a difference that's worth debating.  To continue with the tax example, both a new VAT or a flat tax lend themselves to less sausage making than redefining the current income tax code.  (The flat tax more so than the VAT, in my view, but both are cleaner and simpler and have less room for shenanigans than what we've got now.)  Would they eventually end up looking like our current tax system?  Sure, but for the next few generations we may have bought ourselves some simplicity.  Similarly a cap-and-trade system is always going to be easier for legislators to game to their advantage than a carbon tax would be.  I don't want to compare an idealized carbon tax to a legislative reality cap-and-trade system, but if you put both through the mill the carbon tax is going to come out closer to where it started than the cap-and-trade scheme will.  That's worth keeping in mind.

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