The Banality of Good: The Pale King by David Foster Wallace

David Foster Wallace's last work, the unfinished novel The Pale King, is fractured, disjointed, and incomplete; and so too will this review be fractured, disjointed, and incomplete.  As with many incomplete works, roughness adds to the novel's mystique, and unfinished plot lines stimulate the reader's imaginative faculties in ways polished and completed works of fiction cannot.  It is a rare chance that we readers get to invade the mind of a master so fully as to behold his thoughts frozen in progress.  [NOTE: For totally anal readers, the passages below may contain spoilers, but I don't think knowing some of this stuff really takes anything away.]

David Foster Wallace is a relatively new discovery for me.  When Infinite Jest was published in 1997, I was thirteen years old.  When Wallace's groundbreaking essay on television, e unibus pluram, was published in 1993, I was nine.  Wallace's work was beyond me and still remains beyond me more often than sometimes.  Since becoming an adult and a writer, I had been vaguely following Wallace's work throughout the years, often stumbling across a piece in the New Yorker or Harpers, always making mental notes that I'd have to get around to checking out his catalogue someday.  

Since Wallace's suicide in 2008, I have paid much closer attention to his posthumous publications.  The Pale King is the first full-length work of Wallace's that I have read.  He is, for me, the first writer since Victor Hugo whose works I have immediately wanted to consume in their entirety after reading just one.  (The others are Jorge Luis Borges from my adult life; nothing from college since reading for pleasure is anathema to university curricula; Philip K. Dick and Franz Kafka from high school; and from my childhood: the writers of wild fantasy C.S. Lewis, Susan Cooper, Brian Jacques, Dr. Seuss, and Michael Crichton.) 

The premise of The Pale King as unfinished novel (or what may have been the intended premise - Wallace's last work reads like 500 pages of exposition.) is that it's 1985 and there is a WAR going on within the IRS.  On one side are idealists who believe in enforcement of the tax code as patriotic duty: the IRS is a moral entity, and IRS examiners are the modern equivalent of heroes.  (There is something about the 1980s in particular that elevates the banal to heroic.)  On the other side are pragmatists who believe the IRS should be run like a business: its sole job is to generate revenue as efficiently as possible.  The pragmatists want to replace human examiners with a computer, and they are preparing for a demonstration - a la Garry Kasparov vs. Deep Blue or Ken Jennings vs. Watson - where they pit the most productive human tax examiners (some of whom possess superpowers, such as the ability to maintain total concentration in the face of pure boredom or the ability to keep one's eyes open and unblinking for several minutes) against the computer A/NADA.  (From my reading, I interpret the idealists as protagonists - or, the team we are supposed to route for, but this may just be projection; the pragmatists are, of course, "correct" in the sense that they win and necessarily so, which would make The Pale King a tragedy in the classical sense, albeit without a catharsis.  Although I can perceive the irony of having tax-payers forfeit a percentage of their earnings to a machine vis-a-vis the pragmatist position.)

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The Best of State Tax Expenditure Disclosure

President Obama proposed comprehensive corporate tax reform in the State of the Union.  An crucial first step is disclosing who benefits from expenditures.  Currently the federal government offers no insight into where an estimated $1 trillion in tax breaks go every year.  Some states are beginning to provide information about which corporations benefit from local tax spending programs. None of their state websites are perfect, but their strong suits could be combined to create a powerful tool for disclosing federal corporate tax expenditures. Here are some highlights from state tax expenditure websites:

Best Graphics: Michigan

The Michigan Economic Development Corporation’s Project website literally shows users where their tax dollars are going. They can zoom in on their community and see who got what. As beautiful as the site is, it would be nice to have a database mode for easy access to the raw data. Besides, showing private investments on the front page, while requiring a click through to see how much in taxes a company avoided is burying the lead.

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Taxes 101

I sat through a relatively slow lecture on deadweight loss today and I realized something: most people don't really understand what taxes do to the economy!  Pretty much everyone knows/assumes that taxes slow the growth of the economy, but most people don't know why.  Learning this is the key to understanding why our current tax system is so terrible- but also why it is possible to design a tax system that actually doesn't have a particularly adverse effect on economic growth or societal well-being.

Unfortunately, to understand taxes you have to know a little bit about basic economics

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Grownups Appreciate Dad; Only Kids Believe in Santa

Image by Kevin DooleyVia Yglesias, a fantastic article on supply side economics by Kevin Williamson in the National Review.  His basic point: supply side economics as it is popularly understood never existed:

It is true that tax cuts can promote growth, and that the growth they promote can help generate tax revenue that offsets some of the losses from the cuts. When the Reagan tax cuts were being designed, the original supply-side crew thought that subsequent growth might offset 30 percent of the revenue losses. That’s on the high side of the current consensus, but it’s not preposterous. There is, however, a world of difference between tax cuts that only lose only 70 cents on the dollar and tax cuts that pay back 100 cents on the dollar and then some.

That a significant portion of the right believes tax cuts actually increase government revenues exemplifies magical realism in policy.  Supply-siders did not believe in "voodoo economics" and either naked opportunism or incompetence led politicians to misrepresent the possible gains from cutting taxes.  Either way, it has proven to be a boon to Republicans used to taking an unpalatable political stance on deficit reduction:

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Liberalism After Liberalism

Tom Friedman thinks that both political parties have succeeded at their historical goals:

If you step back far enough, you could argue that George W. Bush brought the Reagan Revolution — with its emphasis on tax cuts, deregulation and government-as-the-problem-not-the-solution — to its logical conclusion and then some. But with a soaring deficit and a banking crisis caused by an excess of deregulation, Reaganism has met its limit. Meanwhile, President Obama’s passage of health care reform has brought the New Deal-Franklin Roosevelt Revolution to its logical conclusion. There will be no more major entitlements for Americans. The bond market will make sure of that.

In other words, both major parties have now completed their primary 20th-century missions, first laid down by their iconic standard-bearers. The real question is which party is going to build America’s bridge to the 21st century — one that will strengthen our ability to compete in the global economy, while practicing much more fiscal discipline.

 I am a liberal, so it will not surprise what party I think is more likely to realize this new direction.  The fact is, the left has already absorbed the lessons of the right, while the right seems unable or unwilling to declare victory.

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A Good Tax

The U.S. tax system has become a worst possible solution to a problem: the government needs funding, but using a complicated personal income tax system involves 6.6 billion hours a year and as much as 20% of revenue for compliance.  Between the Alternative Minimum Tax and nearly a century of Congress using income tax law to fund pet ideas, like home ownership and employer medical insurance, our current system has devolved into a national embarrassment.  With record deficits and ballooning entitlement costs as the Baby Boom retires, it will be necessary to increase government revenue, yet the current system is unwieldy and Congress has not passed a tax increase since Clinton's 1993 budget.  In order to make increased government revenues palatable to conservatives significant changes to the tax system will be necessary; scrapping the current system entirely will push the reset button on tax complexity and allow a more efficient system to replace the current labyrinth of exceptions, deductions and cascading penalties.  In an ideal world, the government would tax activity it wanted to discourage- that's why a pack of cigarettes in "Daddy Knows Best" Bloomberg's New York costs ten bucks- and government shouldn't want to discourage income.  A better designed tax will encourage better behavior from taxpayers, even while it possesses enough ideas that are attractive both sides of the of the ideological spectrum to become law.  I believe that the foundation of such a tax comes from Robert Frank, who proposed an annual consumption tax to replace income taxes

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Book Review: Bruce Bartlett - The New American Economy

Bruce Bartlett's conservative economic bona fides are apparent in his resume: he started as a member of Ron Paul and Jack Kemp's Congressional staff, then became Executive Director of the Joint Economic Committee during the Reagan administration and later served as Deputy Assistant Secretary of Economic Policy at the Treasury Department under H. W. Bush.  He literally wrote the book on supply-side economics, with Reaganomics: Supply-Side Economics in Action in 1981.  With such unimpeachable conservative economic credentials, Bartlett feels free to slaughter some of the right's sacred cows in his recent book, The New American Economy: The Failure of Reaganomics and the New Way Forward.  He rehabilitates John Maynard Keynes as a misunderstood conservative, calls for the victory celebration and subsequent retirement of supply-side economics and defends President Obama's stimulus plan as the only thing to do.

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A Final Note on a Softer Economic Policy

There is a famous joke about the tendency of economists to consider their chosen field akin to the natural sciences: a physicist, a chemist, and an economist are stuck on a desert island.  A can of beans washes up on the beach.  The physicist devises a mechanism using twigs and rocks to attempt to force open the can, but after several hours with no results, during which the economist sits and smugly smiles, the physicist gives up.  The chemist attempts to extract some sort of substance from plants on the island to melt the can.  The economist continues sitting and smiling arrogantly as the chemist also fails in his efforts.  “What?” the physicist and chemist say, “do you have a better plan?”  The economist stands and walks proudly towards the can on the beach: “Let’s assume we have a can-opener.”

This joke is often told by economists to economists at economic conventions or by economics professors to economics students during economics class, which was where I first heard the joke.  Yet the same economists who make this joke forget their own lack of hard science credentials when they make predictions; and non-economists seem to forget the incorrectness of the last prediction when they hear the next prediction.  In times of trouble, the poor track record of economists at predicting the future is never called into question, and political leaders often blindly surrender national sovereignty to “experts.”

I undoubtedly believe that central economic planners are capable of coordinating and herding hundreds of millions of people to some greater economic purpose by simply printing money and increasing government spending, but I also believe that the negative consequences of these policies usually outweigh their beneficial effects.

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The Bank Tax: Hardly Townsfolk with Torches and Pitchforks

The Obama Administration's proposal for a new tax on bank and insurance debt to repay TARP funds is a stroke of policy genius, albeit only an opening gambit.  The best policy is easy to sell, understand and is beneficial to the country and the government.  This tax accomplishes all of that.  The rough outline is that banks and insurance companies with assets in excess of $50 billion would pay .15% interest on all liabilities apart from insured savings deposits and "Tier 1" capital: stock, disclosed cash reserves and retained earnings.  Making the exceptions, rather the inclusions, explicit ensures that all tricky derivative financing will still count as debt.  With one fell swoop this policy will quiet populist outrage at huge bonuses amidst a painful recession, discourage banks from becoming "too big to fail" and raise needed revenues for the government.  Nevertheless, the Obama administration should improve the proposal by toning down the populist rhetoric, making the link to TARP less explicit and increasing the tax rate and generated revenue.

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Brookings Goes Rogue

Education level versus births outside of marriageBrookings is often described as a liberal thinktank, the other side of the coin to the Heritage Foundation or the American Enterprise Institute.  However, while they certainly were pressed into the opposition during the Bush years, this article on their website is enjoyably heterodox and non-partisan- a point of view we hardly endorse.  It lays out five myths about America:

1. Americans enjoy more economic opportunity than people in other countries.

 Actually, there is relatively more economic mobility by poorer people in Nordic countries and in the United Kingdom, though America does provide excellent opportunities for immigrants.

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Goldman's Selfish Altruism

Lloyd Blankfein, CEO of Goldman Sachs.There is a line of thinking that nothing can be done purely selflessly, because even charity inspires a positive self-image.  Anyone who believes that will be giddy to learn that Goldman Sachs is considering getting into philanthropy.  Nothing like charity designed to misdirect attention away from the stuff that inspires people to become pitchfork wielding mobs, which is the express purpose according to a senior level executive:

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