Beer Friday: On the Proposed Alcohol Tax Increase

Filed Under Barack Obama, Beer, Economics, Economy, Foreign Affairs Desk, Health, Hillary Clinton, In the News, John McCain, Politics, Porchy, Too Blunt for Presidency | Comments Off

I like beer and I like politics and if I had a musical ear I’d write a song to that effect. Instead I like to blog it when those two worlds collide, which, thanks to so-called “sin-taxes,” the continued efforts of theists to force their beliefs into law, the residual effects of the temperance and prohibitionist movements, and the high social costs of alcohol consumption, is often.

You may have heard that the Senate Finance Committee is considering an across the board hike on alcohol products as a way of helping to raise funds for Obama’s healthcare proposal. I think this is a good thing!*

According to the USA Today the tax would fall something like this:

Beer taxes would go up by 48 cents a six-pack, wine taxes would rise by 49 cents per bottle, and the tax on hard liquor would increase by 40 cents per fifth.

According to Igor Volsky at Think Progress’ The Wonk Room this would raise approximately $28 billion dollars over five years.

I’ll try not to get too wonky which should actually be pretty easy since, when it comes to tax policy, I hardly have a wonky bone in my body. Nevertheless I have spent some time here (and in some related posts) exploring what I think are fundamentally sound economic principals as they relate to taxing beer. In those post I mostly came down on the laissez faire side of things, more or less siding with those that don’t want to see a tax increase ever but especially not now. Superficially this may seem at odds with what I’m about to say.

What I said then and still agree with is that if Oregon, or Delaware, or Wisconsin, or any one state decides to tax beer they are shooting themselves in the foot, especially if that state has even a modest representation of out-of-state breweries that have a plant or a distribution arm in that state. If Oregon, for example, starts taxing beer made in Oregon it will make beer made outside of Oregon relatively cheaper which would direct profits (and jobs) out of state. It also provides an incentive for breweries with a multi-state reach to move their operations out of Oregon so as to take advantage of that marginal advantage in pricing. It is doubly damning that states proposing alcohol tax hikes are also suggesting they would simultaneously use new funds to decrease budgetary shortfalls and increase new spending in alcohol treatment–the two just can’t go side-by-side that way.

There are people in the world who are just enemies of taxes on principal. Not because they deprive them of money, but because new or increased taxes are a precursor to or a sign of a larger federal bureaucracy, more government interference into private citizens lives, and because they have a chilling effect on the incentive to work hard and make money.

That’s fine and I see their point. On the other hand, in order to perform the tasks that the government has been mandated to do by its citizenry, the government needs money and the way it gets money is through taxes. So, if it’s an established truth that we will be living in a world with taxes, then we have to shift the debate from “should we have taxes” to “what will be the nature of the taxes we have?”

As Matt Yglesias said not that long ago when talking about the proposed tax on sodas, the dampening effect on behavior that derives from taxes really only exists at the margins. The potential health benefit from a tax on sodas will likely be very small, just as the negative effect on labor as a consequence of an income tax is also very small. So either option might make a good way to raise funds, but in comparing them head-to-head, it would be better to implement a tax that has a net social gain–even if only marginal, rather than one that–at the margins–decreases our incentive to work hard or take entrepreneurial risk–a net social loss.

But more importantly alcohol, as much as I love it, has a high social cost.

Take this bit from the Encyclopedia of Mental Disorders:

The lifetime prevalence in the general population for alcoholism is between 9.4% and 14.1%.  Alcoholism and alcohol abuse affect 20% or more of hospitalized and ambulatory patients.  Approximately two-thirds of Americans older than 14 years drink alcohol. People who drink excessive amounts of alcohol . . . account for almost all the socioeconomic and medical complications of alcoholism at an annual cost of $100 billion. Alcoholism ranks third in the United States as a preventable disease and accounts for 5% of the total deaths in the U.S. amounting to about 100,000 people dying annually. [emphasis mine].

By some estimates that $100 billion dollar figure is wrong by nearly half. According to the Center for Science in the Public Interest the actual socioeconomic and healthcare costs caused by alcohol each year is closer to $184 billion. The cost of healthcare alone costs $22.5 billion. [PDF]–almost as much healthcare costs each year that the proposed tax will raise over five years.

As of now those costs are paid by all of us, drinker and non-drinker alike. A beer tax would reallocate a very small portion of this cost away from the general consumer and place the burden on those that support that lifestyle and incur those costs. Volsky calculates the burden thus:

- 35 percent of adults pay nothing at all.
- 80 percent of drinkers pay at most $26.50 per year, about 7¢ per day.
- Half of beer drinkers pay at most a penny a day.
- The heaviest drinkers (top 5%), who average some 11 beers per day, pay on average $215 a year, about 60¢ per day.

That first line above, the 35% that would pay nothing, means that an alcohol tax increase is a net gain for them across the board. The < $6 billion dollars raised each year by the tax would not come from them but it would still reduce the size of the bill they are already footing.

The likely effect of an alcohol tax would be to decrease the total socioeconomic cost of drinking (for example Yglesias cites Philip J. Cook at Duke who estimated that a 10-cent tax per ounce of ethanol would reduce motor vehicle fatalities by 7%–the current tax proposal isn’t this high but you get the idea) while simultaneously moving the costs to those who incur the vast majority of those costs–heavy and problem drinkers (those least likely to change their habits due to the tax increase). All in all, while I won’t enjoy spending $2 more on a case of Natural Ice, I really want the uninsured to be insured and I would like to see the overall social costs of liquor diminished even if only slightly.

* I always feel I should add a few disclaimers since this a known haven for pinko leftists nonsense: I am a hearty drinker and make my own beer. I’m also dirt poor. So there is absolutely no incentive for me to laud the notion of an alcohol tax except that I think it has the potential to promote the public’s welfare.

Souter and the Pre-Replacement Squabbling

Filed Under Barack Obama, Big Ideas, Cultura Latina, Domestic Politics, Foreign Affairs Desk, In the News, John McCain, Politics, Porchy | Comments Off

Everybody loves a good Supreme Court nomination fight. I’m not much for the senatorial grandstanding that takes place at normal confirmation hearings; but, I sat through all of both Roberts’ and Alito’s hearings. Good times! I have fairly fond memories of the famous Pubic Hair on a Soda Can hearings of Clarence Thomas and I’ve read absolutely fascinating opinions on the Robert Bork hearings. I am desperately waiting to see what horrible failure Obama first floats the name of. No offense to the future Mr. or Mrs. Hopefully Reliable Liberal Vote, but Obama’s track record so far of passing high profile appointments pass the press and the conservative bloc have been….less that optimal.

Nevertheless, I thought I’d spend a little time commenting on the commenting I’m reading. Conservatives, of course, are freaking out that our black, communist, socialist, fascist, atheist, Muslim, black, liberal, abortionist president gets to pick a Supreme Court justice and they are already impotently declaring their standard “He better not think he’s going to get some Muslim, woman, abortionist activist judge” or Texas will secede and take Florida and parts of Kansas with it (or whatever) threats.

Less rabid conservatives but no less inane conservatives are already shouting that “white judges need not apply” because the diversity-focused Obama is sure to pick 1) a woman, 2) a Hispanic, 3) a blasian* 4) a Muslim or some combination thereof.

Liberals, for their part are saying that such a pick is a necessity. While I don’t agree with the conservative argument that: we live in a post-racial America or that “minorities are already well enough represented on the SCOTUS,” I’m not particularly impressed with the liberal argument either.

As certain commentators have pointed out 51% of the nation is female, as is 48% of law school graduates. For women to be “well-enough represented” one would expect half of the nine justices to be female (4.5!). As for race we would expect about 6 justices to be non-Hispanic white. Then we should have 1.25% Hispanic, 1.25% Black, .75% “Other Race,” .25% Asian, and then 1.5% some combination of “Two or more races,” Native American and Native Hawaiian/Pacific Islander.

A multi-racial woman of some sort seems to be the pick that can most effectively make the Court “more representative” of the American population.

Nobody seems to care what percentage of justices are rural or urban, how many have been divorced, how many have served time in jail or smoked weed. Nobody seems to care which religions are represented on the bench or how many are first generation college graduates. Nobody seems to care how many southerners or northeasterners or westerners are represented, nor how many have served in the armed forces or worked as a waiter/waitress before law school.

There’s a lot of demographic concerns that aren’t even addressed by the complainers.

I’m simplifying and I’m being specious in the process. I’m not sure the Supreme Court should be bound by the need to reflect the gender, racial, and ethnic makeup of our society–there’s only nine justices after all and north of 300 million Americans getting ethnically, if not racially and genderly more diverse all the time. But if it should be. the concern, of course, is which political minorities have a voice on the bench. But if it is, it doesn’t seem like there’s a lot correlation between either the race or gender of the justice and the way they’ll vote on a particular piece of legislation, which to me is the far more important qualification.

  • Nixon very much wanted a nice, stodgy old white man to help him defeat Johnson’s civil rights legislation, so he picked reliable conservative Earl Warren. What he got was a Supreme Court that reliably voted unanimously in favor of racial equality.
  • When George H.W. Bush picked Souter, he hoped to get a reliable conservative vote on the bench. But instead he got …well …Souter…a reliable lefty vote (even if a somewhat tempered one).
  • If anybody hoped for a solid vote to help protect Democratic affirmative action legislation when Bush Sr. picked Clarence Thomas, there is no doubt they’ve been sorely disappointed.
  • Reagan’s legacy is Kennedy who, on the liberal/conservative spectrum has split his time swinging his vote all over the place. Certainly not the consistently conservative vote he’d hoped for.
  • Of the four most consistently conservative votes one of them is a clear minority, Thomas. One is Scalia who is practically a minority (or at least a previously marginalized “other”) since he identifies so strongly with his Italian roots. And the fourth is White Bread Captain Roberts.
  • Three of the consistently liberal votes are white white white men, Breyer , Stevens, and Souter. The fourth of course is Ginsberg who, at this point one has to realize is, along with Roberts, the exception to the rule of “the president not getting what he wants” from his justices.

Personally I don’t care what gender or minority gets to sit next to Roberts and the rest. There’s obviously some symbolic value in properly “representing” the gender and ethnic makeup of the nation but that concern is, and must be, secondary.

The most important thing Obama needs to do is find a justice that has a good understanding of the law, jurisprudence, and the likely effect of their opinions on future executive and legislative action. They should be firmly grounded specifically in Constitutional law and they should have a good understanding of whether or not a law as written is in and of itself unconstitutional and they should have a good understanding of whether or not a constitutionally written law has been applied in an unconstitutional manner. The only way to know if the potential justice in question can do that is by reading opinions and articles they’ve written.

All talk of “strict constructionism” or “activist judges” or “legislating from the bench” is total nonsense–always has been.

If Obama can find a woman, a Hispanic, an African American, an Asian etc etc that can do that, then by all means, say their name and get them under the jurisprudential knife. If not, I’m happy to forego the symbolic victory and have him nominate a white man who fits the bill.

*Justice Tiger Woods?

The Social Science of Torture

Filed Under Barack Obama, Foreign Affairs Desk, In the News, John McCain, Patriotism, Politics, Porchy, Terrorism | 1 Comment

Last week while listening to the world, once again, kvetch and moan about whether or not the American government has a right or an obligation to torture people I started thinking about the effectiveness of torture and I stumbled across a notion I thought was interesting and wondered why it hadn’t already been covered by the bloggers I read that seem most interested in the subject.

Put simply we have no concrete way of knowing whether or not torture works. There’s some anecdotal evidence, offered by the likes of Captain Planet-esque ex-world leader Dick Cheney that torture has been an invaluable method of obtaining lifesaving intelligence. And then there’s the commonsense argument brought to you by people with even an ounce of decency which repeats what we have known about torture since (at least) the Spanish Inquisition: people subjected to torture lie. Some of those people will add to this obvious grain of truth that once they lie, the government is then compelled to waste a lot of time and resources in tracking those phantom data for anything useful.

The fact that those subjected to torture lie is so well documented that defenders of torture often resort to saying that waterboarding is not torture. But this is simply an error of a different sort that goes something like this:

  1. if we torture someone then they will lie
  2. therefore:  if we do not torture someone then they will not lie

Or in a slightly longer form:

  1. if we torture someone then they will lie
  2. therefore: if waterboarding is torture then those waterboarded will lie
  3. if we do not torture then they will not lie
  4. therefore:  if waterboarding is not torture then the victims will not lie
  5. Waterboarding is not torture
  6. therefore: information gathered from waterboarding is useful

The flaw is a little easier to see in the short form, but it is identical in both constructed arguments. Put into the more concise language of symbolic logic it becomes evident that the first argument above is one of the first fallacies taught in the most basic logic class:

It is wrong to conclude from “If A, then B” that either “If B, then A” or “If not-A then, not-B”

We can see why assuming that if “A, then B” is equivalent to if “B, then A” is flawed by instantiating a simpler case:

“If it rains then some cars will get wet,” is clearly a sentence that we can agree with unless we assume some pretty outlandish things about the world we live in (“What if every car everywhere found a carport, garage, or cave to pull into?!?!?!?”, but “If some cars are wet then it rained,” is clearly a sentence with which we might have commonsense disagreements. What if the cars in question had gotten splashed with an errant water balloon, or driven through a car wash, or hit with a maverick sprinkler system? This sentence would also sound potentially false if re-worded in terms of “if not-A, then not-B,” “If it didn’t rain, no cars are wet.”*

We can imagine sentences that can be successfully reversed in this way but the point is that to assume the identity principal (where both sides of the equation or always reversible) is something that cannot happen automatically and must be proven before it can be asserted.

Of course this is simple and pure propositional logic and not social science. But in an effort to stay to true my skeptical principals and treat even the most ludicrous sentence as potentially worthwhile, I thought it deserved a little more scrutiny than I was granting it. After all, as I said, it is sometimes possible that “If A, then B,” and”if B then, A.” Could this be one of those times?

If the above logic held, then it would also be the case that those being interrogated wouldn’t lie during conventional questioning. But we know that must be false because if they just told the truth when asked questions, there would be no need for torture at all, except, potentially as a threat. So we know that those interrogated lie under both torturous and non-tortuous interrogation methods.

We also know that torture cannot offer enough deterrence against lying since the threat of torture alone does not prevent lying during conventional methods nor during the torture itself.

So we need to discover specifically whether or not people lie more during conventional or tortuous interrogations. To do that we would have to round up a statistically significant amount of people, divide them randomly into test (torture) and control (conventional) groups. Questions get asked and answered. The answers become subject to verification and then grouped into lies and truths. Then the amount of lies in each group can be measured and the speed and quantity of truths can also be measured, and then a legitimate comparison can be made. Brendan Nyhan a tragically infrequent blogger mentioned something similar here.

The fact that we will never do such a thing (this is a fast track entry into Nazi Doctor territory, after all) is why we will likely never know whether or not torture is effective or not.

The best we can do is offer some cost-benefit analysis based on the quality of information derived from conventional and torturous methods. But for that to really provide us definite answers we would need total disclosure of the derived information and the method(s) used to obtain it.

We will also never have that information either. So we are left to make decisions about torture from the naturally incomplete and infrequent stories that make the headlines…and our own common sense of course.

I also add that the “If not-A, then not-B” flaw pointed out here is not the root of our ignorance. This is merely the path that I took to asking the question that led me to the social science question in the second half of this post. There are a lot of flaws with the pro-torture argument. Matt Yglesias points out a good one here: if waterboarding is legal and wildly effective, how come its usage has been so abysmally low, and why don’t we extend waterboarding to domestic criminal investigations–especially of organized crime networks?

There are countless potential flaws in the pro- and anti-torture arguments specifically because we don’t have anything but anecdotal arguments presented by ideological proponents and opponents and any of them could have led me to question the root fact of the matter. It just so how happens that this is the one that got me there.

*This sentence would actually be written, “If it did not rain, then some cars are not wet.” which, due to the more loose structure of real language sounds like a true statement, because” the word “some” in propositional logic has a precise meaning not reflected in real language. B means “some cars are wet.” The opposite of “some cars being wet” is not that “some other cars are wet” but that “no cars” or “not any cars” are wet.

Someone tell McCain he lost please.

Filed Under Domestic Politics, Economics, In the News, Jeremy, John McCain | 2 Comments

Okay, so here is my first venture into the world of politics (at least while blogging).

Is it me or is John McCain proving to be a sore loser and out of touch? It seems he has been spouting nothing but negative comments like “we [Republicans] are clearly prepared to sit down, discuss, negotiate…” while implying that the Democrats are just “ramm[ing]” the bill through Congress. First, as one commenter at the above link mentions, the Dems don’t have to negotiate…privilege of being the majority, but yet the President, leader of the Dems, has been sitting down with Senators of both parties to get their input. Is John upset simply because not all of his (or Republican) ideas being put in the bill?

Along that line, what is one of McCain’s great ideas? More tax cuts including a $15,000 tax credit for home owners! (Okay, putting economist hat back on). The first problem with this is that subsidizing home ownership is what got us into this mess to begin with! One of the draws of home ownership is that you can deduct the interest rate you pay from your taxable income; subsidy number one. The FED over the several years leading up to this crisis kept interest rates at around one percent making money cheap allowing people to buy very big homes; subsidy two. Then congress mandates that Fannie and Freddie Mac buy up shaky mortgages of low income homeowners to encourage more home ownership in America and making more money available to people whom the private banks would not lend to; subsidy three. Finally, here is the biggie, in an attempt to encourage people to maintain their homes, the government allows some interest from home equity loans to be deducted from taxes; subsidy five. People respond to incentives (rule #1 in economics) and so people with small incomes starting buying houses which drove up values so those with houses start cashing in their equity to gain access to cheap money. When bubble finally popped, it left us all soaked in debt and owning more on assets than they are really worth. Do we really need another subsidy for housing to encourage more irresponsible buying?

The second problem is who is going to get this subsidy. Those hurt most by the current economic crisis are, generally, those same people that are loosing their homes [yes, a generalization but the evidence is that it is not a big leap]. By loosing their homes they no longer qualify for this assistance because they do not own a home!

Finally, a quick glance at the IRS 1040 instructions shows that a $15,000 tax credit would, in and of itself, make everyone with an Adjusted Gross Income of $74,000 (single) or $89,250 (married) to have a zero burden. Guess what, that means that 75% of tax payers have a zero tax burden …what do you think that will do the deficit Mr. McCain?

-JG

Danzig at Top Cabinet Post

Filed Under Barack Obama, Domestic Politics, Foreign Affairs Desk, Hillary Clinton, In the News, John McCain, Politics, Porchy | 1 Comment

Mike Allen of Politico states that Richard Danzig+ will be Robert Gates’ deputy at the Depart of War…er…Defense.

+I know, I was disappointed too \m/

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