Sunday, February 06, 2011

Is the modern anti-tax movement a product of increasing complexity?

The anti-tax movement in the United States has evolved from a fringe component of American politics 40 years ago into one that is central today. And certainly, the country has had a long history of tax protests, right? Actually, wrong.

While the Boston Tea Party is often cited as the inspiration for today's so-called Tea Party, the Boston Tea Party was an outgrowth of a movement to end "taxation without representation." The American colonists didn't object to taxes per se; they objected to taxes levied by a body--in this case the British Parliament--in which they had no representatives. That's hardly the situation with the modern Tea Party. The members of the modern movement may not like their elected representatives, but they do have them.

The Whiskey Rebellion is the only significant tax revolt in American history prior to California's Proposition 13, a 1978 ballot initiative which limited property taxes. The Whiskey Rebellion of the 1790s was about the unfair way in which the distilled spirits tax was structured. It was deeply regressive (i.e., small operators paid significantly higher effective tax rates than large ones) and designed by then Treasury Secretary Alexander Hamilton to drive small farmers and distillers in the West out of business in favor of large farmers and distillers in the East. Far from desiring a smaller federal government, the protestors wanted money spent on greater government protection against Indian raids and better roads to transport their goods to eastern markets.

And so, the historical animus that Americans supposedly have toward taxes has been largely manufactured to facilitate the propaganda machine of the modern anti-tax movement. This means that the long hiatus between the Whiskey Rebellion and Proposition 13 must be considered the norm in American history and that some recent change in American circumstances must be responsible for the modern anti-tax movement.

Joseph Tainter, author of the Collapse of Complex Societies, may have an answer. In a 1996 essay entitled "Complexity, Problem Solving, and Sustainable Societies" he explains the basics of his theory, namely, that increased complexity is a mode of problem solving; that it requires additional inputs, especially energy inputs; and that it eventually leads to diminishing and then negative returns. Diminishing returns make a society less resilient in the face of shocks and more subject to collapse--not complete destruction, Tainter says, but a simplification process that can be very painful and harrowing to live through and result in many casualties.

It is Tainter's notion of diminishing returns that sheds light on the modern anti-tax movement. It seems no accident that the movement grows up in an era, the 1970s, of constrained energy supplies. These supplies are essential to maintaining the complex functioning of industrial societies. In the earlier part of the century the colossal achievements of the Federal Government led people to respect its efficacy. It softened the blow of the Great Depression, led the country to victory in World War II, and built a superhighway system that connected the entire country as well as other infrastructure to power the economy and to protect the environment. But these were the low-hanging fruit.

Today, adding lanes to highways relieves congestion only until enough development takes place next to it to clog it all over again. We've reached the point of diminishing returns.

When the astronauts first set foot on the Moon, it was a staggering achievement. But the achievements in space since then have been less spectacular and more incremental. We have reached the point of diminishing returns.

Government spent lavishly on higher education and public schools in order to educate a new generation for a more complex society. There were dreams as recently as the mid-1990s that so-called distance learning would make college-level classes available to nearly everyone. But the dynamics of learning worked against this new complexity. People, it turns out, learn best in small groups with an actual teacher present. And, the increasingly complex information and techniques which students must now master call for even more personal attention, not less. We have reached the point of diminishing returns.

We need ever more educated people, but we have no way of turning them out more efficiently. So we must invest ever greater funds into educating the ever growing number of specialists we need. And, in education as in many other areas, these funds are showing diminishing returns. The returns are not zero, but no longer so hefty as they were.

Public health systems virtually wiped out many infectious diseases including polio through mass vaccination and better health practices. The results were profound and the costs were small. Now we spend lavishly on medical research to make incremental advances in treating chronic conditions such as heart disease and cancer which are in some respects products of industrial civilization.

A public used to such grand strides in all areas of life--strides aided in many ways by government expenditures--became increasingly frustrated by the declining returns for each additional dollar spent on government programs. They attributed this decline, however, to poor teachers or lazy civil servants. They could not think in terms of declining marginal returns; nor could they imagine that in a complex society the failure to maintain increasing investments in infrastructure and education would only make matters worse. So, they revolted. They looked for enemies and found them, namely, public employees. And, they began a campaign to defund them believing that they were taking too many of society's resources and not producing the results the public wanted.

The defunding campaign has weakened our infrastructure and left our children undereducated for the complex world they now find themselves in. The stresses created by increased complexity have caused Americans to embark on a path that can only lead to collapse, the kind that Tainter imagines. The public has been lulled into believing that "efficiency" in government such as we supposedly see in large corporations will solve the problem of declining marginal returns from investment in complexity. But corporations, as Tainter points out, face the same headwinds. The easy and obvious technical discoveries have been made. Huge investments are now needed just to obtain incremental progress. That doesn't mean technical progress isn't possible, only that it will not leap forward in the way it did in the first half of the last century.

There are those who will point to the computer revolution and now the biotech revolution and say that in these fields the leading businesses have overcome the problem of declining marginal returns. First, it is worth pointing out that both of these industries have significantly added to the complexity of society. And so, their connection to the declining marginal returns and even negative returns of technology cannot be dismissed. The effects of these industries must not simply be judged in a vacuum but within the context of the society they serve.

In fact, we have already seen some of the negative returns of a highly networked society in the form of the worst economic crash since the Great Depression and in the dangerous effects of biotechnology produced by companies that understand nothing of ecology and are therefore blind to the unintended effects of their inventions.

Tainter suggests that declining marginal returns from complexity may not be a soluble problem for a society structured as ours is. We have relied on copious amounts of fossil fuels to allow us to overcome many of our challenges. This cheap energy source has been perhaps the key input enabling increased complexity as an efficacious problem-solving strategy.

It is not obvious how we as a society could climb down off the cliff of complexity gracefully in the absence of increasing supplies of fossil fuels. But it is obvious that the anti-tax movement is pushing us toward that cliff more quickly because of its failure to comprehend that we need to plan for a less complex future using tools that are not so blunt as a simple-minded tax revolt. And, yet given the poor level of understanding among the public and the ruling elite about complexity and society, it is completely understandable that the debate is being governed by the false premises propagated by the anti-tax movement.


Christine Robins said...

Very nice article. The near-complete electronic interconnection of the industrialized world means that we're also very vulnerable to hackers, including those employed by governments. The Chinese,if they wanted to, could probably take down the entire US electrical grid in a matter of minutes, according to security expert and former Whaite House advsor Richard A. Clarke. His recent book Cyber War is quite eye-opening.

sv koho said...

There is no doubt about the US having reached the point of diminishing marginal returns and I am a big fan of Joesph who lives just south of me down in Logan, Utah. Frankly I think it is a bit of a stretch to link Joe's thesis to the Tea Party simpletons. They one of many groups who are bedazzled and bewildered by an out of control society well on its way to imploding in a variety of ways that is beyond their comprehension. They are responding in the way of all peoples who don't have the intellectual capacity to grasp the complexities of a society which has left them behind and so they embrace KISS as a working political strategy. There are a lot of marginalized folks striking out against a system which they cannot grasp. There is danger in their ire.

Greg said...

Very interesting column and compelling application of Tainter’s ideas. But there was something of a Tax revolt in the 1960s as well, led by JFK who reduced the top marginal income tax from 91% to 77%. This may not sound like much but it more than doubles the after tax income from 9% to 23%. It is somewhat shocking from today’s perspective that greater than 70% marginal tax rates persisted till 1980. I think there is a long tradition of tax resistance in the US, both left wing and right wing. The left-wing tax resisters often cite war as their objection to taxes. The right wing is more likely to cite government incompetence, inefficiency or over reach, and draw parallels to the Soviet Union, as you point out. Although vaccinations and modern medicine has done much to address a range of infectious diseases, I am not sure how much the public connected that to taxes and government. My impression is that people would more likely chalk it up to “modern medicine” rather than government. In a similar way, I suspect that much of the public would give credit to Bill Gates and Google for the communications revolutions that are happening now and not know how much government funded research or regulation is responsible.

In the late 1960s and early 1970s, there were several things that reduced the public’s trust in government’s ability to solve problems: Vietnam, inflation, urban riots, Watergate, Iranian hostage crisis, high interest rates. In some places there was great resistance to the Civil Rights Act, the repeal of Jim Crow laws, and court ordered integration of schools. Of course Reagan popularized the anti-government and tax cutting ideology, and it gained wide acceptance by 1984 when he was reelected by a landslide, as the economy expanded, inflation and interest rates had been substantially reduced and energy prices had fallen. But Reagan and his tax cuts had little or nothing to do with the apparent prosperity of the mid 1980s. Carter had appointed Paul Volker to be chair of the Fed, and he reigned in the money supply (which increased interest rates and caused a recession) but eventually reduced inflation. After the Soviets invaded Afghanistan, the Saudi royal family decided to retaliate by increasing its oil output, thus decreasing the world oil price, which hurt the Soviet Union economically because it depended heavily on the foreign exchange generated by their oil sales (Reagan may deserve some “credit” for encouraging the Saudis to do this). Tax cuts caused a large increase in deficit spending, and Reagan actually allowed a reversal of some of his earlier tax cuts in an effort to balance the budget, but that was largely ineffective and forgotten.

In the 2000 election campaign, both Al Gore and GW Bush promised tax cuts, although Bush promised a bigger one. At the time the Federal Government was running a surplus, which Bush said should be turned back to the people. Bush lost the popular vote. But when the recession started, and the surplus turned into deficit, Bush’s solution was to cut taxes to stimulate the economy. This had to be forced through the Senate using the reconciliation process (restricting debate and requiring only a majority vote), with Dick Cheney casting the deciding vote.

In 2008 Obama ran on allowing the Bush tax cuts to expire for the top income earners, and Obama actually won that demographic, although it is impossible to say why they voted for Obama. I am basically agreeing with you that the anti-tax ideology seems to be based on myth and lack of trust in government, but I am quibbling a bit about the sources of that myth and distrust. Greed might also be a factor, as Malcolm Gladwell recently pointed out:

mattbg said...

I think you're right about the relationship of taxes to complexity.

It's not that much of a mystery here in Canada, where healthcare is publicly-funded for all. The budget for healthcare keeps going up and up because more and more things are being included under the umbrella of what is considered a legitimate treatment to be paid for by taxpayers. The more "conditions" you discover, the more things you are obligated to pay for.

But I don't think that's all the Tea Party-like movements are about. I think there's a sense that government doesn't shrink in accordance with the economy -- that if our available funds shrink, government doesn't shrink along with them.

There's also the concern that, with the unlimited backstop provided by taxpayers, more and more interests will fabricate causes that need funding so that they can employ themselves and those close to them.

I think that the welfare state may work when you have a co-operative population that only takes what it needs. In certain time periods (i.e. immediately following WWII, with the lessons learned from scarcity) this has been the case, although I think the Greatest Generation rewarded themselves far too heavily for winning WWII.

But we now have welfare states in the West where the very people who provide them are in some ways more dependent on them than are the people they're serving. The fact that the population, too, is far more apt to try and get their money's worth rather than just taking what they need doesn't help, either.

What I'm saying, in short, is that there may be a time and place for welfare states. The fact that they worked when one national attitude was present doesn't mean that they'll work when a new national attitude has taken over.

555PPS said...

"Government spent lavishly on higher education and public schools in order to educate a new generation for a more complex society. ..... We have reached the point of diminishing returns."

"We need ever more educated people, but we have no way of turning them out more efficiently. So we must invest ever greater funds into educating the ever growing number of specialists we need. And, in education as in many other areas, these funds are showing diminishing returns."

"The defunding campaign has weakened our infrastructure and left our children undereducated for the complex world they now find themselves in ..... they began a campaign to defund them believing that they were taking too many of society's resources and not producing the results the public wanted."

What you seem to be saying is that society is so complex that when more money is given to govrnment that they still cannot provide us with what we want because we do not give them even more money.

I just don't get it.

Henry Warwick said...

"When the astronauts first set foot on the Moon, it was a staggering achievement. But the achievements in space since then have been less spectacular and more incremental. We have reached the point of diminishing returns."

I would beg to differ on this.

Putting a man on the the moon was actually a fairly simple affair. You get a couple of air tight boxes, put them on a rocket, use physics developed by Newton to get them there and back, and in the process take some photos and video. Wooptie-freakin-doo.

I would suggest that the Hubble space telescope and the soon to come on line Webb scope are FAR more complex devices, and are returning far more useful information, as in several orders of magnitude. The tiny solar buggies on Mars are another example of this optimisation.

This is the flip side of Tainter.

As one builds complexity, the rise in social value is exponential at first. Examples: Social Security, nuclear power/weapons, mass media, etc.

As the system switches into collapse mode, ***optimisation*** becomes the modus operandi, and, for a time, the benefits of optimisation are also exponential. Hence: getting people out of space allows us to send extremely complex devices in our stead, devices that don't need food, water, clothing, shelter, toilets, and entertainment. They are smaller, lighter, and dedicated. It's like the old saw about the superiority of drum machines:

They are always on time, they never get tired, and they never show up drunk for band practice.

Now, drum machines do have a certain sterility to their playing, and they aren't nearly as fun to watch, but when it comes to collecting scientific data, I don't care if it's a machine digging a hole on Mars or some clumsy astronaut with a shovel.

So, back to my point with Tainter. NASA is a total fringe benefit of large govt, and as said govt hits limits of complexity, but the need for data increases, the kinds of optimisation NASA has engaged in have actually served society very very well.

eventually, even this optimisation will reach limits and you will see fewer and fewer of these projects, and eventually, none. But in the mean time, optimisation is reaping massive rewards.

Weaseldog said...

Henry Warwick said, "But in the mean time, optimisation is reaping massive rewards."

I don't think you've quite countered the point. Your argument is excellent. But it actually reinforces the collapse argument. We are not investing ever increasing quantities of resources into the space projects. Instead, we're 1970s Gas Crisis mode, trying to squeeze more and more value out of less and less.

As the budget continues to get slashed, will we continue to see the rewards grow and grow?

And is the only purpose of the space program, to provide data, make money and to better wage war?

I remember a time when expanding our civilization into the solar system and capturing resources on the moons and planets was an often advertised goal.

I think it's clear that this goal is dead now. We've had to accept that we're not going to grab that brass ring. We're going to settle for a consolation prize, before our high tech civilization winks out.

Weaseldog said...

555PPS said, "What you seem to be saying is that society is so complex that when more money is given to govrnment that they still cannot provide us with what we want because we do not give them even more money."

What I gathered he is saying is that giving the government more and more money is no longer giving us exponential growth in services and products. We expect exponential growth forever. We blame the government that we are not getting it.

What we give the government now, is no longer enough to maintain our country and provide for all of our foreign adventures.

I see the Tea Party Movement, accomplishing quite a bit in next decade, as far dismantling domestic programs to save money. The government will dramatically cut infrastructure maintenance, education, and funding for a wide variety of programs that operate inside the USA.

But while this happens, government spending will continue to increase as lobbyists, using their Corporate Freedom of Speech to bribe politicians with kickbacks, will push for ever increasing spending bills to send money outside the USA.

This will not go against the carefully crafted Tea Party Memes, because the media will do their part in ensuring that domestic scapegoats can be blamed.

By killing the domestic programs (like spending for the interstate highway system repairs), money will be freed up, that will just get reallocated somewhere else. That freed up money will benefit whomever is handing out the choicest Free Speech Bribes. Then the media will get the Tea Party riled up about another domestic program...

We're in the process of getting looted by wealth internationalists, while the media is preaching that our neighbor's are our enemies. Argentina was looted and manipulated the same way, by Goldman Sachs and Bank of America. They got their employees installed in the top levels of government, just like they've done in the USA. Argentina wasn't being run by socialists when it was being destroyed, it was being run by the same bankers that run our country.

Notice the similar socialists are destroying our country meme at work? It's the same media campaign they used in Argentina.

Weaseldog said...

Texas is cutting $5 billion in education funds...

Eventually, the gov may have to get out of the business of financing schools. They just cost too much. And everyone in the Tea Party knows they are a waste of our tax dollars.