The Wondering Mind

The article in the NY Times is correct, but I think a bit misleading to the lay reader. The benefit they are talking about is only in the tax payable on the investment, not on the whole loss amount. In other words, if you lost $1 million, then you can reduce your taxable income by the amount of your loss, so that the amount of tax you calculate you owe is reduced.

Clearly, value of this reduction in taxes will only be a fraction of your actual loss. So it helps make your net losses smaller, but that is not really going to help people who have been completely wiped out by this.

While he may have some good ideas, I usually find Thomas Friedman too pompous and in love with his own words to stomach. But I’m glad someone, even if it is Friedman, finally talking about the issue of paying taxes in the U.S.

Republican rhetoric on the economy only makes sense superficially because they talk about cutting taxes and cutting the size of government to balance budgets. But from a practical standpoint, it’s nothing more than wishful thinking, since almost everything the government does benefits someone, and those people are going to fight like hell to keep their benefits. So you often get tax cuts, but an increase in government. The national debt isn’t going up because people are burning money.

So if you keep increasing government spending but won’t even maintain your taxes, never mind actually raise them, where is the money coming from? As Friedman points out,

… printing more money or borrowing more money.

The former leads to inflation and the latter results in China and the Arab oil-states literally owning the country. This is not only an unpatriotic thing to advocate, it’s just bad economics and national policy.

Friedman has a quote from Justice Oliver Wendell Holmes which I particularly like.

“I like paying taxes. With them I buy civilization.”

It reminds me of something very similar I heard once, which is that civilisation does not come cheap. It costs money, and usually a lot of it. Looking after the elderly and the sick when they cannot look after themselves costs a lot of money. Giving aid to poorer countries costs money. Making sure that people aren’t homeless and go hungry because they are unemployed costs money. Being civilised is expensive.

Which is why societies throughout the world and history have used it was a way of demonstrating their wealth and power. And frankly, not only is it the most benign way to flaunt your power, it is also the one which arguably makes the greatest impression. Not just because of the generosity of the act, or the demonstration of the naked wealth and power, but because it demonstrates a people’s self-confidence and optimism.

So it should come as no surprise that as American civilisation appears to be on the wane, international admiration for the U.S. has declined along with it. This doesn’t necessarily mean international hostility to the U.S. as some suggest.

It means that the people the world over, along with the majority of the American people it seems, recognise that the American Dream and civilisation is built on the hope and optimism of Obama, not the hate- and fear-mongering of McCain-Palin.