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March 14 1997 3:30 AM

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Landsburg's 2 Percent Solution

Like his previous columns, "Tax the Knickers Off Your Grandchildren," by Steven E. Landsburg, took a simplistic mathematical model with little connection to reality, extended it to absurd lengths, and stated that the conclusions are the only reasonable social policy. He truly embodies the worst stereotypes of both economists and radical conservatives.

"If U.S. per capita income manages to grow in real terms at a plausible 2 percent per year, then in just 400 years, the average American family of four will enjoy a daily income of $2 million," he writes. Using this logic, in 1597, the residents of my hometown of Pittsburgh should have let their economic policies be dictated by their estimations of what would happen here now. In addition, what Landsburg didn't say is that no society in human history has ever sustained very rapid economic growth for 100 years.

Landsburg goes on to berate and insult those who disagree, using phrases like "their pathological concern for future generations" and "an epidemic of hysteria," ending the piece with the diagnosis of "a mild air of intellectual schizophrenia" for those of us who don't subscribe to his beliefs.


In addition to his simplistic model and the sheer arrogance of his prose, Landsburg spews anti-conservationist nonsense that demonstrates a total ignorance of history. There are at least a dozen examples of man-made ecological disasters that led to famine and widespread devastation, and at least a couple of major civilizations that collapsed under the weight of ecological mismanagement. I'd bet that each famine-wracked region in history had at least one person like Landsburg who had been predicting 2 percent economic growth for centuries and ridiculing anyone who tried to consider the consequences of their actions.

One-third of our government budget now goes to pay the interest on the debt that Landsburg's friends ran up just 10 years ago. Most of that money went into short-lived schemes that no longer have measurable benefits (if they ever did to most taxpayers), yet the interest on that debt will dominate government spending for the foreseeable future. What Landsburg would have us do is pay this interest by borrowing more each year, and continue to do so indefinitely, or until the inevitable collapse, which he presumes would take over 400 years to happen. His silly little savings-account example does nothing to hide the staggering stupidity of that policy.

--Dr. Daniel Schwarcz

Tax the Trees


"Tax the Knickers Off Your Grandchildren," by Steven E. Landsburg, seems less like a well-reasoned editorial on economics than a weak rationalization for shortsightedness. He begins by suggesting that if the United States could achieve growth rates reported by South Korea in the past couple of decades, our grandchildren would eventually be earning $2 million a day. But it seems misleading, verging on irresponsible, to compare the economies of the most powerful nation on earth to a Third World country recently infused with the newfound growth of capitalism. It's akin to saying that if the Chicago Bulls showed the same growth as the Raptors, they'd eventually be winning more games than they're playing.

Based on this faulty assumption, Landsburg then goes on to make the assertion that since our grandchildren are going to be so rich, they won't mind being reduced to seeing things like trees only in photographs, and they "might prefer inheriting the proceeds of economic development to inheriting the redwoods," anyway. But this seems to be bred from the same kind of "intellectual schizophrenia" he attributes to those who would disagree with him: If economic growth is dependent on cutting down trees, what happens when the trees are gone, as he himself concedes will eventually happen? And if we can continue at this superb rate of growth after there are no more trees to cut, couldn't we continue with this rate of growth by stopping the cutting now?

He sees this "pathological concern for future generations" carrying over to the deficit as well, and has a similar defense of our spend-happy ways and insatiable need to consume: Our grandchildren are going to be a bunch of spoiled, rich little brats, undeserving of all the concern we've been giving them.

What if our economy doesn't grow at the rate of South Korea's, or even 2 percent a year, but stagnates, or, God forbid, goes down despite all the cutting of taxes and trees, and racking up of deficits? Then, I suppose those of us who support income redistribution wouldn't look so hypocritical and our grandchildren would have big debts, higher taxes, no trees--and be poor.


--Dylan Otto Krider

Steven E. Landsburg Replies:

Schwarcz thinks that the residents of Pittsburgh did the right thing in 1597 when they chose not to worry too much about how their consumption would affect their descendants in 1997. He's right; it would be absurd for people living in 16th century conditions to eat less well so that people living in 20th century conditions could afford an even more extravagant lifestyle.

Replace the 16th and 20th centuries with the 20th and 24th, and you'll see that he's making the same point I am.


Schwarcz's statement about rapid economic growth never lasting more than a century is incorrect. The world has enjoyed rapid economic growth for the past 200 years; worldwide per capita income is now 10 times what it was in 1800. That growth is fueled by technological progress, and technological progress is, if anything, accelerating.

On a completely separate issue, Schwarcz confuses the effects of government spending with the effects of government debt. Government spending consumes resources. It consumes an equal amount of resources regardless of whether it is paid for by debt or by taxation.

He has in fact made the standard freshman-economics error of viewing the interest on the debt as a cost, without accounting for the offsetting benefit: By keeping current taxes lower than they would otherwise be, the debt allows people to have higher savings and therefore to earn additional interest. That benefit offsets the cost. This is not a matter of sophisticated economic theory; it is a matter of simple arithmetic. Not even the federal government has the power to override the laws of arithmetic.

Krider is absolutely correct that achieving and maintaining South Korean growth rates for the next 400 years is unlikely. But that's an observation about an essentially parenthetical remark. The thrust of my argument--and the numbers that I used in the mathematical hyperlink--assumed a plausible growth rate of 2 percent.

Finally, Krider worries that the economy might not grow at 2 percent, in which case policies based on that forecast will have been mistaken. Sure. It's also true that the earth might get destroyed by an asteroid in 10 years, in which case all our sacrificing for future generations will look like a big mistake. It would be silly to say that we should consume everything we've got just because an asteroid might destroy us, and equally silly to say that we should engage in an orgy of conservation just because economic growth might slow to zero. We make the best estimates we can and plan accordingly.

Public Donations

Franklin Foer's "The White House and the Hatch Act" adopted the conventional response toward this affair: to find a way to sweep this unseemly activity under a rug.

The current cycle of shock and horror about White House sleepovers in the Lincoln Bedroom in return for large contributions to the Democratic National Committee is amusing. I remember this same response when the Republican Conference chairman, Rep. John Boehner, was caught passing out checks from tobacco lobbyists on the House floor. Howls of iconoclasm and protests against tainting the official chamber with Tammany Hall vote-buying rang then and ring now.

The corrective response offered by most media to both of these events is the exact opposite of what it should be. Rather than prohibit the solicitation of campaign contributions at federal buildings, the Hatch Act should be amended to designate these "hallowed places" as the only sites at which a candidate may solicit or accept a campaign contribution. It ought to require that the White House rotunda be the only place at which the DNC or the president may accept large contributions, and that the floors of the House and Senate chambers be the only places an individual or PAC may give a large contribution to a member of Congress.

The law ought to also stipulate the check(s) must be presented in a small, white canvas sack with a large "$" sign on it. The burgeoning surveillance possibilities of microchip technology ought to be applied toward a public good. The sergeant-at-arms or Marine guard at each site should attach a tag with a microchip to each sack that emits information about the contributor, the recipient, and the amount of the contribution. Then C-SPAN could run a stock ticker ribbon at the bottom of the screen conveying information on the current "trades."

Attempts at prohibition or limiting this activity have shown the proclivity of its members to simply move it underground to Washington hotels and Florida resorts in order to skirt responsibility for its appearance. By forcing candidates to conduct their fund raising at the places of the peoples' business, politicians will have to accept responsibility for the appearance and fact of the tie between influence and money instead of maintaining the fiction of a separation.

--Kris Lipman

The Check Stops Here

In reading the revealing article "The White House and the Hatch Act," by Franklin Foer, one major issue seems to jump out at me. We have heard Vice President Al Gore say that he has violated no law, and that may be true, within the narrow letter of these laws. The issue that bothers me is that, as the supposed paragon of virtue of the Democratic Party, why does Gore apparently go to the very limit of the definition to condone his actions?

If it is unlawful for any government employee, save the president, vice president, and confirmed appointed officials, to engage in fund raising from a government building, why do our leaders choose to walk the very thin edge of legality in their political activities?

What happened to the concept of a leader being a shining example to the people expected to follow? Are all now to presume that any activity we choose to engage in is fine as long as we can find a narrow definition that appears to exclude us from the responsibility of our actions?

--Lawrence R. Westin

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