Posts tagged with: unintended consequences

When it comes to Swiss bank accounts, pop culture brings to mind wealthy people who hide assets from various groups, such as the IRS or their jilted family members. Our sympathies do not align with the type of people we imagine hold Swiss accounts. In fact, it is easy to get quite envious of the idea of holding a Swiss bank account, or possibly resentful that others can that are well off can avoid paying as much in taxes as possible.

Sadly, our perceptions lead us astray and throw up barriers to peaceful trade. Last year, a measure to go after tax avoiders who used Swiss (and other foreign) accounts was included in the jobs bill. Now, that law (known as FATCA) is harming Americans and Swiss workers alike. The New York Times has the story.

“Congress came in with a sledgehammer,” said H. David Rosenbloom, a lawyer at Caplin and Drysdale in Washington and a former international tax policy adviser for the Treasury Department. “The Fatca story is really kind of insane.”

Essentially, the law is so onerous to foreign banks that many say they do not want American business at all.  In fact, the law affects more than just Swiss banking. It actually imposes costs on virtually all foreign banking that deals with Americans. From the NYT:

“The Fatca legislation treats all Americans with overseas bank accounts as criminals, even though most of them are honest, hard-working individuals who happen to be living and working or retired abroad,” said Jacqueline Bugnion, a director of American Citizens Abroad.

This is incredibly inconvenient to Americans abroad, who may earn income in foreign denominations which would normally be easier to deposit in foreign banks. On the flip side, we have foreign based firms who operate in the United States. A Swiss firm is set to bring 150 jobs to Youngstown, Ohio in September. Do you think a Swiss firm might have Swiss bank accounts? Thankfully, the law does not seem to have scared off this investment, but it’s possible this was planned long before FATCA came to be.

We should be very wary of policy that is born of the rhetoric of envy. According to the NYT article, the treasury expects to take in about $8 billion from the new law, which may be much lower than the costs that foreign banking institutions face in complying with the new rules. As Jordan Ballor wrote last year, taxation should be primarily be about raising revenues. Can a law that causes more economic harm than it raises in revenue be a good law for revenue? The politics of envy and resentment seem to have clouded our judgement so badly that we are going to create a greater economic harm than the fiscal benefit to our country. Envy and resentment are natural, but we should recognize them for what they are: vices. It’s not surprising that vices lead to bad law.

H/T to Matt Welch

Blog author: jwitt
Wednesday, December 21, 2011
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My recent piece in The American Spectator took the left to task for its misuse of the terms justice and social justice. The piece was more than a debate over semantics. In it I noted that Sojourners and its CEO, Jim Wallis, continue to promote well-intended but failed strategies that actually hurt the social and economic well-being of poor communities. I also called on everyone with a heart for the poor to set aside a top-down model of charity that “has trapped so many humans in a vicious cycle of paternalism and dependency” and instead to focus “on cultivating political and economic freedom for the world’s poor.” Sojourners’ Tim King responded here and then emailed me to ask for my thoughts on his response. I’ll start by emphasizing a few areas of agreement, adding a caveat here and there so as not to overstate the areas of overlap, and then I’ll move on to some areas of difference.

First, it’s a matter of record that politicians and other opinion leaders from both major U.S. parties have supported various forms of government-directed charity over the past several decades. Tim King is completely justified in pointing this out, and it’s important to recognize this state of affairs, since it reminds us that transforming the way we do charity won’t occur simply by voting one party out of power. Substantive change will require cultural transformation.

A second area of agreement is that, yes, there is such a thing as smart aid. PovertyCure has a good discussion of smart aid versus damaging aid here, as well as a page here on the good, the bad and the ugly in efforts to fight malaria. And in this Acton Commentary, Jennifer Roback Morse discusses some of the lessons learned in the battle against AIDS in Africa.

Third, Tim King’s blog post gives the reader the impression that that I consigned all uses of the term “social justice” to everlasting perdition, or that I want to ban the use of adjectives from the English language or something. My position is actually a bit more nuanced than this. In my article I noted that the term social justice has “a justifiable raison d’être,” “stretches back to 19th century Catholic social thought” and “was used in the context of nuanced explorations of law, ethics, and justice.” I didn’t have space to elaborate on this in the Spectator article, so I pointed to additional resources in this follow-up blog post.

King went on to say that the adjective social in social justice “highlights that justice deals with systems and structures within a society, not just with individual people. Justice can occur through the punishment of a single person for wrongdoing, but also through ending slavery or apartheid.” Absolutely. Justice deals with those things, a point I underscored in my article.

The thing is, though, that’s not how the religious left generally uses the term social justice, a reality that Tim King himself demonstrated by immediately pointing to the Circle of Protection statement as an embodiment of social justice principles. The statement is about preserving top-down government spending programs on behalf of the poor.

Another way to see how ordinary justice is being leeched out of Sojourners’ brand of social justice is to look at its official position on abortion. On the organization’s Issues page, under “What is Your Position on Abortion?” Sojourners emphasizes that “All life is a sacred gift from God, and public policies should reflect a consistent ethic of life.” Sounds like justice, plain and simple. But then look at their specific recommendations for how to protect the sacred gift of unborn human life:

Policy
Dramatically reduce abortion. Our society should support common ground policies that dramatically reduce the abortion rate by preventing unwanted pregnancies, providing meaningful alternatives and necessary supports for women and children, and reforming adoption laws.

Notice what’s missing from the list: A call to extend the most basic human right to unborn babies by making it illegal to kill them. What’s missing, in other words, is a call to extend ordinary justice to the unborn. In its place is a call to prevent “unwanted pregnancies” and to create attractive alternatives to killing unborn babies.

Sojourners and its leader say that laws against abortion are unattainable and ineffectual. But these laws wouldn’t be unattainable if the religious left joined religious conservatives in the fight to extend the right to life to the unborn. And as for ineffectual, University of Alabama professor Michael New studied the question and came to a very different conclusion in State Politics and Policy Quarterly. Here’s how he summarized his findings:

Planned Parenthood and many groups on the Catholic Left often argue that pro-life laws are ineffective. They claim that contraception spending and more generous welfare benefits are the best ways to reduce abortion rates. In reality, however, there is virtually no peer reviewed research, analyzing actual abortion data, which finds that more spending on either contraception or welfare has any effect on the incidence of abortion.

Conversely, this study adds to the sizable body of peer reviewed research which finds that legal protections for the unborn are effective at lowering abortion rates …

The study is now part of a substantial body of academic literature showing that such laws are effective in cutting abortions — and back up the anecdotal evidence seen in states like Mississippi, Michigan, South Carolina, Missouri and others where abortions have been cut by half from their previous highs thanks to the passage of several pro-life measures limiting abortions.

What Sojourners and many others on the left support for the unborn is more of their ineffective brand of redistributionist “social justice,” and never mind about the most basic form of justice for the unborn — a right to life protected by the law.

I’ll close by calling attention to one other thing in Tim King’s response, and that is Sojourners’ whole post-partisan meme. It’s a little surreal that they keep trotting this dog out after the George Soros funding fiasco. As my old colleague Jay Richards and others have reported, Sojourners had already received significant funding from the ultra-liberal, ultra-secular George Soros when Jim Wallis denied it in a public interview, going so far as to answer the charge by saying that World magazine editor and Acton senior fellow Marvin Olasky “lies for a living.” Then it came out that Sojourners has in fact received major funding from Soros, along with major funding from a who’s who list of left and ultra-leftwing organizations.

Sojourners keeps trying to hunt with the “we’re deep, not left” meme, but the dog won’t hunt anymore. A better approach would be to simply identify themselves as members of the religious left and forthrightly make a case for the specifics of their position. An even better approach would be to rethink that position from top to bottom, looking not at just the immediate and obvious effects of various government wealth transfers, but also at those long-term effects that are less obvious and often destructive.

In the mean time, if you are looking for a clear alternative to A Circle of Protection, one that emphasizes the dignity and creative capacity of the poor and the role of Christian worldview in promoting human flourishing, take a look at PovertyCure’s Statement of Principles or PovertyCure’s Facebook page. To sign a letter that directly answers the Circle of Protection, go here to Christians for a Sustainable Economy.

Friedrich Hayek called it a weasel word. The American Spectator has my new essay on it here.

More on social justice as it appears in Catholic social teaching here. And more on social business here.

There’s a story that I heard, of a miner, a family down in– it was in the Appalachia area and the church there really thought that they were doing a great deal because they would go in, they said they would pick the poorest families and they would take them Christmas gifts and turkeys and that sort of thing. So they did. They went to this family and they presented them with all the gifts and gave them to them and all the children had gifts; they had a hot meal on the table. The church was so pleased with what they had done, and then they left. And the husband just broke down and cried because he said, “You mean in this community, we are thought of as the poorest family in the community?” The shame that came with that, with the charity that had been given so lovingly out of the best of intentions, but it absolutely shamed him and it destroyed his life. I heard it from his son. He said, “It destroyed my father because he said he was so shamed in front of the rest of the community because they didn’t think that he was a person of worth that they had to take care of his family for him.”

C. Neal Johnson, from an Interview Oct. 8 at a Partners Worldwide Conference in Grand Rapids.

From the movie Fight Club (1999):

Narrator: Tyler, you are by far the most interesting single-serving friend I’ve ever met… see I have this thing: everything on a plane is single-serving…
Tyler Durden: Oh I get it, it’s very clever.
Narrator: Thank you.
Tyler Durden: How’s that working out for you?
Narrator: What?
Tyler Durden: Being clever.

The Hill reports that Dems feel healthcare fatigue.

Blue Dog Earl Pomeroy (D-N.D.), who voted for the health overhaul, said the debate has shifted to the Obama administration, which must now implement the bill. “The healthcare bill is done,” Pomeroy said. “The action on healthcare is now in the executive branch as they implement the bill. It’s critically important that they implement it in a sound way, and I believe the attention of Congress is best spent on overseeing the sound implementation of this bill.”

Clever. Vote to nationalize the U.S. health care system even though you didn’t bother to read the 2,400-page bill. Then walk away because you’re “tired” and want to leave the heavy lifting to the White House. Plus, more photo-ops and press releases about health care from Rep. Pomeroy’s office would only serve to keep this on the mind of North Dakota voters.

Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) agreed with the premise that “members would be wary of major health legislation after we’ve spent so much time — we do have other priorities.” … “I could see that people would be exhausted if we were doing something major and controversial,” Waxman told The Hill. “So I think that we’ll probably limit ourselves right away in terms of what we’ll be pursuing.”

Paul Howard at City Journal looks at Obamacare’s Hidden Costs, a phenomenon certain to increase the fatigue factor among Obamacare supporters in the months and years ahead:

While the full cost of President Obama’s health-care legislation won’t be apparent until federal subsidies to the uninsured start flowing in 2014, Americans are getting an early glimpse of some of the unintended—but very costly—consequences of rushing through a 2,400-page bill affecting 17 percent of the economy. Since the president signed the bill into law on March 23, dozens of companies have reported to the Securities and Exchange Commission the losses that they expect to take as a result of the legislation. (Companies that offer drug benefits to their retirees will now be taxed for the partial federal subsidy that they receive for each retiree.) The U.S. Chamber of Commerce estimates that as many as 40 major companies will take a hit, for a total of $3.4 billion; other cost estimates run even higher.

Greece, once again, provides a warning. Investor’s Business Daily asks, Guess What Greece Has To Jettison?:

Greece was told that if it wanted a bailout, it needed to consider privatizing its government health care system. So tell us again why the U.S. is following Europe’s welfare state model.

The requirement, part of a deal arranged by the IMF, the European Union and the European Central bank, is a tacit admission that national health care programs are unsustainable. Along with transportation and energy, the bailout group, according to the New York Times, wants the Greek government to remove “the state from the marketplace in crucial sectors.”

This is not some cranky or politically motivated demand. It is a condition based on the ugly reality of government medicine. The Times reports that economists – not right-wingers opposed to health care who want to blow up Times Square – say liberalizing “the health care industry would help bring down prices in these areas, which are among the highest in Europe.”

Of course most of the media have been largely silent about the health care privatization measure for Greece, as it conflicts with their universal, single-payer health care narrative.

In the Rapids City (S.D.) Journal, columnist Rick Kahler quotes an anecdote from an fellow financial planner:

“I have some good friends (dual Greek and U.S. citizens) who live in Athens. They tell me corruption is rampant and every tax increase is met by an exponential increase in the underground, noncompliant economy. There is no sense of duty to pay taxes. There is no sense of dishonor asking someone to transact business outside of the system.

“Greece’s health care system just about collapsed when it became socialized. First, long lines led to treatments being scheduled so far in the future that costs were reduced because patients routinely died before the treatment date. Citizens responded by taking paper bags filled with paper currency to doctors in exchange for prompt treatment.

“When this practice became common, the government eventually began arresting doctors.

Did this make the system function properly? Nope. The doctors simply used their nice European Union passports to leave the country and seek work elsewhere.

“Nurses were then expected to provide medical care they hadn’t been trained to do. This at least made costs go down—nurses started fleeing, too, so that salary expense declined. My friends in Athens report many Greek hospitals are ‘just walls—no doctors, no nurses, not even anyone worth bribing. When we need care, we buy a ticket to the U.S.”

Check out the Acton Institute resource page on Health Care.

I have close friends here in Michigan who are out of work–talented, principled, hard-working people who are either unemployed or seriously underemployed. My heart breaks for them and for everyone eager to work who has been blindsided by the current recession. Unfortunately, government policies to help sometimes make the situation worse. A recent Detroit News story offers fresh evidence, evidence suggesting that Michigan’s bloated nanny state is creating perverse incentives in the labor market, incentives that are both economically and morally degrading:

In a state with the nation’s highest jobless rate, landscaping companies are finding some job applicants are rejecting work offers so they can continue collecting unemployment benefits.

Members of the Michigan Nursery and Landscape Association “have told me that they have a lot of people applying but that when they actually talk to them, it turns out that they’re on unemployment and not looking for work,” said Amy Frankmann, the group’s executive director. “It is starting to make things difficult.”

Chris Pompeo, vice president of operations for Landscape America in Warren, said he has had about a dozen offers declined. One applicant, who had eight weeks to go until his state unemployment benefits ran out, asked for a deferred start date.

“It’s like, you’ve got to be kidding me,” Pompeo said. “It’s frustrating. It’s honestly something I’ve never seen before. They say, ‘Oh, OK,’ like I surprised them by offering them a job.”

Some job applicants are asking to be paid in cash so they can collect unemployment illegally, said Gayle Younglove, vice president at Outdoor Experts Inc. in Romulus.

State benefits last for up to 26 weeks.

The unemployed can then apply for extended federal benefits that increase the total time on the public dole up to a maximum of 99 weeks.

The federal jobless benefits extension “is the most generous safety net we’ve ever offered nationally,” said David Littmann, senior economist of the Mackinac Center for Public Policy, a free-market-oriented research group in Midland. The extra protection reduces the incentive to find work, he said.

The solution isn’t to walk away from charity. The solution is to return the lion’s share of charity work to families, churches and local communities. This is charity with a human face, charity that can make important distinctions informed by local knowledge, charity that promotes human flourishing rather than dependency and dysfunction. It’s a change that will require governments to stop crowding into the sphere of private charity, and for families, churches and community organizations to prayerfully crowd back into charitable work they may have turned over to the government in decades past.

No system of charity is perfect, private or otherwise. And government-directed help has its place, such as in the case of some natural disasters. However, the evidence continues to mount that long-term, state directed charity leads to moral and economic disaster. It’s time to change.

Earlier this month “Red Letter Christian” Tony Campolo wrote a blog post for Jim Wallis’ God’s Politics blog that criticized the American government for not properly taking into account the effect its foreign policy has on fulfilling the Great Commission.

Here’s a bit concerning the Iraq war:

It doesn’t take much for Red Letter Christians to recognize that the hostilities between Muslims and Christians have increased greatly as of late because of certain geopolitical events—particularly as we consider what has been happening in the Holy Land and the consequences of a U.S.-led invasion of Iraq.

Mark Tooley of IRD does a thorough job fisking all of the faulty assumptions and oversights in Campolo’s piece.

One of the things Campolo is right about is the victimization of Christians at the hands of militant Muslims in Iraq. He writes,

For the first time in a thousand years, churches in Baghdad are being burned down. The Coptic bishop of Iraq was kidnapped and later found dead. Christians, facing persecution, have fled Iraq by the tens of thousands, so that a Christian community that once numbered more than 1.3 million is now down to 600,000.

The problem is that Campolo is acting as if the proximate cause of Muslim violence against Iraqi Christians is anger at American occupation. As Tooley notes, in the Iraq conflict as in so many other genuine Muslim-Christian conflicts around the world, Campolo fails to see the belligerent militancy of Muslim extremism. Campolo, among others, “can never admit that radical Islam itself is innately violent and spiteful, and would remain so, even if the United States were to curl up and die a quiet death.”

A much more plausible explanation for the suffering of the Iraqi church is that the protections of minority groups, including Sunnis and Christians, that were in place under Saddam Hussein disappeared during and after the invasion, and have not yet been adequately reinstated. As Robin Harris writes, “With other (still smaller) religious minorities, such as Yazidis and Mandaeans, Iraq’s Christians are suffering sustained persecution. While constituting less than 4 percent of the population of Iraq, Christians constitute 40 percent of the refugees leaving the country. Most of these have found refuge in Syria and Jordan, where they are living in utterly degrading conditions.”

The plight of Iraqi Christians in post-invasion Iraq is an important reminder that all government actions, whether domestic or international, have unintended consequences. Again, Robin Harris:

Unfortunately, until now there has been a conspiracy of near-silence. Some in the U.S. administration have been unwilling to have public attention drawn to the problem, for fear it would undermine support for the surge strategy. Other countries — with the notable exception of Germany — do not wish to do so either, for fear that they will be expected to take in more refugees. (Britain has a particularly shameful record in this respect). Meanwhile, diplomatic circles have a politically correct repugnance against any initiative directed towards helping a particular religious group — especially, of course, a Christian one. At an international level, only the pope has called for urgent action to avert the tragedy.

The best thing the U.S. government can do for Christians in Iraq is not to beat a hasty retreat and withdraw, as so many “Red Letter Christians” desire, but rather to acknowledge the unintended consequences of its foreign policy, including the increased persecution of Iraqi Christians. This also means taking responsibility for those unintended consequences. As so many have observed regarding the invasion of Iraq, once you decide to invade a sovereign nation, you take on all kinds of responsibilities for what happens afterwards. This applies in no small measure to the suffering of minority groups, including especially the Christian church in Iraq.