Christ is Risen!

It’s resurrection day. It’s the day we celebrate the fact that Jesus rose from the grave and conquered death. Forget all that secular stuff about chocolate, eggs, and bunnies. The real point of today is that JESUS IS ALIVE! He has conquered death.

Why did Jesus Die?

Today is one of the two most important dates in the Christian calendar. Today is the day we celebrate Jesus’s death. Which, on the face of it, is a bit weird. Jews don’t celebrate the deaths of Abraham or Moses. Muslim’s don’t celebrate the death of Mohammed, nor do Buddhists celebrate the death of Buddha. Even in secular ideologies, the idea of celebrating a death is unusual – Communists don’t mark the deaths of Marx or Lenin. So what is it about Jesus’ death that makes it not just worth celebrating, but makes the official commemoration one of the two most important dates in our calendar?

The answer is both incredibly simple, and something that can exhaust an entire lifetime of study. The simple answer is that Jesus’ death (combined with his resurrection) dealt with the sin that separates us from God. It allowed fallen human beings to come into a right relationship with God. There is, of course, at least a lifetime’s worth of theological study to be had investigating this in more depth. I expect that I’ll still be marvelling at it throughout eternity. If you want a good introduction to the topic, have a look for John Piper’s book Fifty Reasons Why Jesus Came to Die – available from good Christian bookshops everywhere (or from Amazon if you must).

Today, I thought I’d outline some of the reasons behind the cross. Bear in mind as you read this that some of these are highly offensive to 21st Century Western culture. The God of the Bible is not the nice fluffy “loving God” of popular culture (He is loving, but not in the way that our society often imagines). CS Lewis coined the phrase “He’s not a tame lion” to put across this truth.

The Wrath of God

One Biblical truth that is offensive to Western culture is that sin – all sin – is deadly serious. God is holy – set apart from the world – and righteous. Sin is highly offensive to Him. God has the same reaction to our sins that most parents would have on hearing that their daughter has been gang raped and then brutally murdered. Sin demands a punishment, and the proper punishment is death. But, as well as being a God of wrath, He is also patient and loving. He provides a way out. In the Old Testament, God gave the Jews a practice that pointed to this way out. When you sinned, you could have your guilt expunged by sacrificing an animal. The animal died the death you deserved. The cross was the ultimate fulfilment of this. God came to Earth as a human, and then suffered and died in our place. The Son took the wrath of the Father on Himself, bearing the punishment we deserved.

Buying us back

The New Testament often uses the word redemption to describe what happened on the cross. The analogy is one of buying a slave out of slavery and into freedom. One of the effects of sin is to bind us up and trap us. Once you start sinning, it is incredibly difficult to stop. Without God’s help, the best we can manage is to replace one sin with another which we find less disagreeable. The cross represents the price paid to free us from this bondage. We are free from the chains of sin. Yes, Christians still sin, but we have a way to replace slavery to sin with the joy of knowing God as our Dad.

Conquering Death

Including this one here is almost cheating, because it’s not until Easter Sunday (the other one of those two most important dates) that we get to celebrate it. But at the cross, Jesus triumphed over death. By being raised to life again, He made a way for Christians to enjoy eternal life. Yes, we will still die (unless we are the generation that will see Him return), but because of this we will experience eternal life in relationship with God – who is the most awesomely awesome being imaginable.

In this post, I’ve not even scratched the surface of what Jesus accomplished on the cross. If you’re a Christian reading this, I hope I’ve helped remind you of how amazing the cross is. If you’re not a Christian and you’re reading this, then have a look into it. If Jesus’ death really did do what we believe it did, then you really need to find out more.

I’ll leave you with a reminder of what Jesus went through:

Dealing with Boom and Bust

This is the next in our series of posts critiquing Wayne Grudem’s book Politics According to the Bible. Today we’re finishing up the chapter on economics by looking at the issue of recessions, and how best to get out of them.

This section starts by talking about the state of the US economy around the time President Obama took office. At that point, the economy was crashing because of a financial crisis. Banks had lent lots of money in mortgages to people who couldn’t afford to repay them. They had then packaged up the loans and sold them (or, technically, the income from them) on to other financial institutions. These investments had been certified as top quality by the credit ratings agencies. However, enough people had now started to default that that rating was clearly wrong. However, because it was impossible to tell which set of packaged loans contained the risky investments, that the entire system was in crisis. If nothing had been done, then the financial system would have completely collapsed, and the rest of the economy with it. Grudem doesn’t mention the selling on of the loans, but it’s a detail worth bearing in mind.

Grudem then gives a brief introduction to the two different approaches to dealing with recessions in a capitalist economy. The first is Keynsianism. This view recommends increasing government spending in order to keep the economy going. The second view, which Grudem calls the “free market” approach (but which is more commonly called monetarism) is to cut taxes and trust that the free market will sort everything out.

He notes that Obama’s approach was Keynsian, and claims that the spending programs in question were far beyond anything that any government has ever spent in the history of the world. Although this is probably true in terms of the absolute number of dollars spent, it may not be the case in real terms (i.e. adjusting for inflation), or in relative terms (measuring as a proportion of the nation’s economy). I haven’t done the sums, but I suspect that World War Two was significantly more expensive in both real terms and proportional terms. Either way, the US national debt increased significantly.

Grudem has two strands of criticism of this approach. The first is the question of where the money comes from. If it’s debt, he wonders what happens if the creditors see increasing deficits and then demand a higher interest rate. In such a case, he imagines that such a situation would require vastly higher tax rates to ensure the debt is repaid (even though he believes that lower tax rates bring in more revenue). He also worries that printing more money means that you are increasing the size of the economy without bringing in any extra value, hence causing inflation.

His second strand of criticism is that he believes that the specific programs funded by the stimulus are designed to promote the Democrat party’s ideal of society, rather than economic growth. He repeats his belief that the private sector is always better than the government when it comes to growing the economy, and that a permanent decrease in tax revenues would have been a better solution.

The Benefit of Hindsight

Because I’m writing this a couple of years later than Grudem, I have an unfair advantage – I can see some of the results of the policies that both the US and other nations have pursued to deal with this economic crisis. So let’s look at his analysis and see how well it has fared.

Governments around the world have taken different approaches to the financial crisis. The Western nations that have gone furthest down Grudem’s austerity route are Greece and Portugal. If you’ve been following economic news, you’ll be aware that their constantly increasing financial problems are dragging the Eurozone down with them. This has lead to some major demands from their creditors and several bail-outs. The US, which has taken a much more Keynsian approach than other countries, has weathered the storm a lot better. The main problems with the nation’s creditors have come not as a result of stimulus spending, but by the threat of the (Republican-controlled) congress refusing to raise the debt ceiling (the total amount borrowed), which would have amounted to a de facto default.

When it comes to the question of creating money out of nothing and causing inflation, this is arguably what the financial institutions whose actions caused the crash had been doing. Their growth had been a major part of the world economy (here in the UK, it was the main driver of our national economic growth). Most of this growth was as illusory as any growth caused by governments doing “quantitative easing”. It’s worth nothing here that Grudem blames the crisis on 1070s legislation which made American financial institutions lend in poor non-white neighbourhoods, rather than on the banks who repackaged those loans as dodgy securities, or on the relaxation of regulation that allowed them to do so.

On the question of what the purpose of the US government’s stimulus plan was, Grudem is – once again – guilty of drawing a dodgy picture of his opponents’ motivations. The initial spending was simply to keep the financial system from collapsing. Subsequent spending included projects that would create jobs in the middle of rising unemployment, and bailing out companies like General Motors (and, therefore, keeping an awful lot of people in jobs). Gordon Brown’s stimulus package in the UK was broadly similar. The aim was to keep the economy afloat, and to prevent as many job losses as possible.

As for the question of which approach (government spending or tax cuts) works better, it’s worth noting that the financial crisis is the worst since the Wall Street Crash in 1929, and the decade of depression which followed it. Whilst economics rarely provides provable results (it’s very difficult to isolate the effect of any one variable), it is generally accepted that the Depression was ended by massive government spending. Initially this was the likes of Roosevelt’s New Deal program, but eventually it was the massive spending on waging World War Two. Earlier responses to the Depression had been much more along the lines of monetarism, and are generally believed to have had little effect.

Whilst Grudem believes that lowering taxes (and, as a result, putting people in public sector jobs out of work) would lead to more jobs being created than were destroyed, there is no evidence to support this assertion. Since the 2010 election, this is the approach that has been tried in the UK. Unemployment has not fallen. This suggests that, whilst Grudem’s approach may be the better one in some circumstances, it would not have been a very effective approach in the current crisis.

Weekend Links

Here’s a selection of things that are of some interest.

Those familiar with government consultations know that they frequently have significant flaws and inbuilt biases. However, Thirsty Gargoyle has had a look at the new consultation on gay marriage, and the consultation is particularly badly flawed (h/t Peter Ould).

Rowan Williams has resigned as Archbishop of Canterbury, and Peter Ould has some thoughts about who might replace him

There’s apparently a scientific paper that provides solid evidence that God heals through prayer. However, according to the Advertising Standards Authority my last sentence was illegal.

Meanwhile, Gillan at God and Politics in the UK has done an excellent summary of a recent Christians in Politics review.

And you may remember that a year ago 145 people were arrested for holding a peaceful sit-in protest against tax avoidance and evasion in Fortnum and Masons. 30 of them have been brought to trial (in three batches of 10), and it’s highlighted some of the failings of our justice system – most notably that three different trials for the same crime (and with the same actual evidence) have had three completely different verdicts. Trials B and C have been happening over the last few weeks, and I’ve been reading accounts of trial B part 1 trial B part 2, the trial B defendants’ statement, the first part of trial C, and the final report from trial C.

Finally, it’s always good to bring up an old link, and I’ve found one which highlights how much we pay for our TV channels. Which gives me an excuse to post the following video, which points out some of the good things about having the BBC.

Healthcare: Right or luxury?

This is the latest in our series of posts critiquing Wayne Grudem’s book Politics According to the Bible. Today we’re looking at his arguments about the healthcare system. Although the section on this issue is relatively short, it is probably the part of the economics chapter that I have the greatest issues with (and if you’ve been following this series, you’ll know that’s saying something).

Healthcare Systems for Dummies

Before starting on Grudem’s comments, it will be helpful to outline the three different types of healthcare systems that exist in rich-world countries.

The first is the state-run healthcare system. The UK’s NHS has been the prime example of this since it was founded (although the recently passed NHS bill looks set to change that). In this system, the government owns the hospitals and directly funds GPs (that’s “family Doctors” in American) out of taxpayers money. Private healthcare is still available for those that want it, but healthcare is provided completely free at the point of use (the NHS has two exceptions – there is a standard charge for prescriptions and a standard charge for dental treatment – neither of which apply for children or those claiming certain benefits, and both of which are quite modest). In 2011, a study found that the NHS was the second most efficient health service.

The second is the state-run health insurance system. This is the standard in mainland Europe. The state funds healthcare treatment, but does not directly run hospitals. These schemes are usually a lot more expensive than the NHS, but often produce better overall healthcare results. In such systems, patients often have to pay upfront for treatment – and some of this money may not be refunded by the system.

The third is the US system. In the US, the federal government funds health insurance for the poorest, the elderly, and veterans. It may also fund part of the health insurance plan for its employees. Everything else is left to private health insurance. Health insurance used to be largely funded by employers, but this kind of benefit is often not available. There is a long history of Americans being denied health insurance due to pre-existing medical conditions. The US system is the most expensive in the world, and the nation does very poorly compared to other rich nations in the vast majority of healthcare statistics. It also causes some unique problems – such as medical bills being the main cause of bankruptcy, and people being stuck in certain jobs (or forced not to work) because it’s the only way they can afford the healthcare they need.

Grudem’s take on healthcare

My main problem with Grudem’s take on the issue is not that he tries to portray the US system as superior to the alternatives, nor that he lets his economy ideology decide his stance on the issue. It’s that his case is based on what, frankly, is a pack of lies.* Here’s a list of them (in the order they occur):

  1. Barack Obama’s healthcare plan was based on the idea that the federal government should control all medical care in the US. The actual reforms they passed simply regulated existing healthcare schemes. Whilst many Democrats would like a government-run health insurance scheme that would provide universal healthcare, that option wasn’t even on the table when the bill was being made.
  2. Free market competition reduces the price of healthcare. Which might be plausible if the two most cost-efficient healthcare systems weren’t Ireland and the UK – two nations in which the government directly runs most of the hospitals – and the least cost-efficient wasn’t the US – which has the most free-market system in any rich-world country.
  3. State control of healthcare leads to rationing, because the government can’t an infinite supply of healthcare. Except, of course, that the government doesn’t need to provide an infinite supply of healthcare. It simply needs to provide enough so that all genuine medical needs can be met within a reasonable timeframe. And services like the NHS usually manage that. If there is rationing in such systems, it is done purely on the basis of clinical need. In the US system, by contrast, healthcare is rationed on the basis of ability to pay.
  4. The quality of healthcare available in the US in 2009 was the best available in the entire world. Which is a claim unsupported by evidence. Given that the World Health Organization ranked them the 37th nation in the world (between Costa Rica and Slovenia) in their 2000 report, that would be a remarkable turnaround. It may be true that some of the hospitals are the best at particular procedures. But if people who need healthcare can’t get access to them, that surely indicates an inferior healthcare system. Grudem’s concern with this point seems to be the idea that letting more people access healthcare would be a bad thing, because the quality of care might not be as good as a result.
  5. Grudem claims that reforming the law around medical malpractice would save $5.4 billion out of the $35 billion that the US spends on healthcare each year. A quick google reveals that US healthcare costs are much higher than that (figures seem to be in the range of $2.6 trillion), and that instead of contributing around 15% of the US medical bill – as Grudem’s figures state – they only contribute around 2.4%. This proposal (the centrepiece of his party’s healthcare proposals) would only have a marginal effect on the cost of US healthcare.
  6. He claims that by making it impossible for US states to prevent their citizens from buying healthcare from another state, costs would decrease. Whilst this may does have a ring of truth, such a measure would mean that health insurance companies relocate to whichever state has the most lax regulation (as has happened in other similar industries in the past). This would inevitably mean that the quality of available health insurance diminishes, and may well mean that people end up having to pay for more of their healthcare out of their own pocket.

Where Grudem is on sound factual ground is that allowing states to charge higher premiums for high-risk customers (such as those with pre-existing conditions) drives up the price of health insurance for the average consumer. However, he fails to note that these are the people most in need of healthcare. If they are priced out of the market for healthcare, then either you have to let them die (the complete opposite of what Grudem established when covering the topic of Euthanasia) or somebody has to provide healthcare for them.

It’s pretty universally accepted that charities can’t meet all the demand (if they could, which means the only option is for the state to pick it up (which is, essentially, Grudem’s stated solution). To put it another way, Grudem’s proposed healthcare system is one where the government provides healthcare for the most expensive patients, whilst private health insurance/healthcare companies pocket the profits from providing health insurance/care for the least expensive patients. And he proposes this in the same chapter as he advocates a low tax/low spending model of government. A more coherent approach to the subject might come up with the idea of cutting costs for the taxpayer by also providing health insurance to the low-cost patients. But Grudem appears to have ruled out this option due to a combination of free-market ideology with his belief that state-run healthcare takes away our freedom.

Right or luxury?

Finally, I admit that neither I nor Grudem actually addressed the question in the title of this post. In rich world countries other than the US, access to healthcare is generally regarded as a right. In any healthcare system that provides universal coverage, it’s pretty much inevitable that this will become the majority view. In a system like the US where universal healthcare coverage will require a major change in the attitude of politicians, it remains a de-facto luxury. Whilst many on the left of American politics do view access to healthcare as a right we should all enjoy, that idea is adopted by very few of the people who could actually make it happen.

Whilst universal access to healthcare isn’t taught in the Bible, most readers of this blog live in societies where it is relatively easy to design a system that will make it happen (most, and probably all, of you live in rich-world countries). Given the Biblical command to love our neighbour as ourselves, it seems to me that the Christian approach to this issue should be to advocate some kind of universal healthcare system. Leaving this task solely to businesses and charities has been proven not to work, so the real question is what model of government involvement is the most effective.

* Whilst I say that these arguments are, essentially, a pack of lies, I don’t think that Grudem is out to deceive anybody. He’s simply believed things that are widely parroted within the political party he supports.

Should we have Pensions?

This is the latest in our series of posts critiquing Wayne Grudem’s book Politics According to the Bible. Today we’re looking at the section on what the Americans call Social Security. This scheme covers old age pensions, sickness and disability benefits, and healthcare for the poor and the old. It’s the US equivalent of the UK’s welfare state (although it covers far less). It’s paid for by mandatory insurance payments (similar to the UK’s National Insurance payments), which is collected as a percentage of income (although earnings above a certain level are exempt). Healthcare is dealt with separately, so this post will deal with what Grudem says about benefits and the cost of them.

The Pensions Time Bomb

Grudem starts by outlining the history of the US Social Security scheme, which goes back to 1935 (the UK started paying out old age pensions several decades earlier). He points out that the scheme, as currently set up, is projected to start paying out more than it receives in by 2016, and to run out of money in 2041. He also claims that the rate of return on a private pension is far higher than the rate of return on a state pension, and supports claims that gradually privatising social security would solve the problems.

Grudem’s Approach

Grudem starts by pointing out a philosophical problem with the system, that it is – to a large extent – paying healthy, potentially productive people not to work. He cites 1 Thessalonians 4:10-12 and 2 Thessalonians 3:6-12 as Bible passages which establish the principle that those who are able to work should do so. He goes on to claim that the system, as set up, is deceptive – your contributions go towards paying today’s pensions, rather than being invested to pay your future pension. Grudem characterises this as a massive transfer of money from hard-working people to non-working people, many of whom have no need of it.

On the other hand, he does say that it is right for government to provide some form of support for those who are no longer able to work due to old age, disability, or involuntary unemployment. It isn’t clear why he thinks that the state should have this role, but not the role of paying out universal pensions. In addition, he supports the idea that people should be able to take partial payments and only semi-retire.

He also claims that there are several benefits of privatising the system. Firstly, he claims that it would bring the system back into financial solvency. Secondly, it would increase individual liberty and responsibility. Thirdly, it would decrease government power. He claims that the reason that the Democrats and some Republicans have blocked the reforms he wants to see is because they see it as a means of retaining and increasing government power. He insists that this is often a primary but unspoken goal of those who seek to increase the power of government.

Is he right?

Firstly, I should note that Grudem’s comments about the motivations of politicians who want the state to play a big role in the economy are a potentially libellous straw-man caricature. He’s right in saying that, for some politicians, it is a matter of political survival, but since Grudem believes Democracy to be the best form of government, that shouldn’t be a problem. But ignoring the question of how popular anything is, nobody actually believes in increasing government power for its own sake. For most, it is because they see the state as the best institution for solving the problem. For others, it might be about making their mark on history. Others may be on an ego trip. But in all cases, increased government power is a means to an end, rather an end in itself.

Furthermore, by characterising the pursuit of a more powerful government as an unspoken goal, Grudem is attributing motives based on pure supposition. Finally, the exact same argument could be levied at politicians he does support. There is something of an inconsistency between small government rhetoric on economic issues and arguing for increased government intervention on social issues – which is precisely the combination of policies that Grudem is arguing for throughout the book.

On the issue in question, though, Grudem is right that the old age pension is a modern innovation that doesn’t have any Biblical support. In most societies throughout history, the old and infirm have been cared for by their families. But in our modern industrial/post-industrial society, the institutions that used to take care of those people have been very much eroded. The extended family has been replaced by the nuclear family, and even that has been seriously eroded over the last few decades – broken families (where the parents have split up) have become normal, and other social institutions – of all kinds – have become weaker. In such a society, it’s no wonder that this function has been institutionalised. The state is the only institution which has the ability to pick up the pieces across the whole of society.

The main question, therefore, is whether the current model of caring for these groups is both practical and sustainable. The main problem with pensions is demographics. The “baby boom” generation was significantly larger than the one before it, yet had proportionately fewer children. Because the pension age was not raised over time, and because modern medicine means that people are living longer, that means that more money needs to be paid in in order to pay out decent pensions. The same problem would apply if the money was invested privately. Whether the income comes from taxation or dividends on investments, the money that is paying for pensions ultimately has to come from the work done by the people who are still of working age. Grudem may or may not be right in saying that there would be more money in the pot if pensions money were invested privately, but the demographic problem would not be entirely eliminated.

The solution of allowing individuals to invest their pension contributions privately also brings up two other problems. Firstly, it would likely make the existing state pension system insolvent more quickly. Fewer people would be paying in, but the number of people claiming their pension would still be going up as the Baby Boomers retire. Secondly, what happens if and when some of the private investments go bust? In the 1980s, the Maxwell pension scheme famously went under – those who had contributed lost their entire investment. In such cases, the government would have no option but to support these people. Even if the system is privatised, the government would still be bearing all the risk.

It’s also worth noting that old age pensions do have some positive social effects. They allow pensioners to undertake voluntary work that would not be possible if they were still in full-time employment. They do not prevent people from taking up part-time jobs that are compatible with their age and health (and in some cases, retirement age prompts them to do just that). Given that our economies have structural unemployment (there simply aren’t enough jobs to go around – sometimes not even when we’re in the middle of an economic boom), they do help ease the problem of unemployment. Finally, whatever solution is found for the pensions problem, it is unthinkable that pensions would be withdrawn from those already claiming them. In order to be considered politically viable, any solution must include continued government support for existing pensioners.

Death and Taxes

This is the next in our series of posts critiquing the arguments of Wayne Grudem’s book Politics According to the Bible. Today, we’re going to wrap up the section looking at taxation, by covering some specific taxes.

Taxes on inheritance

Grudem deals with the American estate tax (this is the same thing as Britain’s inheritance tax – and the points made apply to any similar tax), a tax on the estates of people who have died. He titles this section “The death tax (estate tax)”, which is a term often used by opponents of such taxes, because it makes it sound like it’s a tax on somebody dying, rather than what it actually is – a tax on the income and assets acquired from a dead person’s estate. Estates under a certain value (£325,000 in the UK, and $1,000,000 in the US – though this has currently been raised to $5,120,000 by laws that will expire in 2013) do not have to pay the tax. Estates over that value only have to pay tax on the amount over that value. The tax is levied before the estate is split, so that sometimes the executors might have to sell some of the assets (e.g. a house) in order to pay the tax.

Grudem’s first argument against the tax is that the money belongs to the deceased taxpayer and their descendants, rather than to the government or society, and that the government does not have the right to take it away. He justifies this by pointing to verses like Proverbs 13:22 and Proverbs 19:14, which show that inheritance was a normal practice in Biblical times, and Numbers 27:8-11, where God gives Moses instructions on how the money should be distributed. He claims that the fact that the Bible doesn’t mention taxes on inheritance is significant.

He also says that such taxes are a disincentive to entrepreneurship, because business owners will not work as hard if they can’t pass as much of their wealth to their families or the charity of their choice. He argues that large corporations benefit, as they often buy businesses that have to be sold off in order to pay the tax. He cites simulations run by the Tax Foundation (a right-wing think-tank) which showed that it has roughly the same effect as doubling the rate of income tax (which Grudem believes would reduce the size of the economy).

There are many counter-arguments that Grudem doesn’t address. On the question of whether the government has the right to tax a dead person’s estate, we’ve already seen that the Bible endorses the right of governments to levy taxes. When we looked at the question of private property, I said that the land in Biblical Israel was not to be treated as an individual’s property (as Grudem seems to think), but as property belonging to the tribe and family. Also, if we take Grudem’s view that the passages he cites are prescriptive, then there’s a good argument to be made against the practice of allowing people to write legally binding wills. On their death, their property should be split amongst their family, rather than them having any say in what happens to it.

Also, when we looked at the issue of economic equality, we saw that there were limits on any person or family accumulating too large a share of the ability to create wealth. In short, there’s nothing in the Bible that prohibits governments from levying inheritance taxes, and several things that seem to be in harmony with the idea.

The question of whether inheritance taxes act as an incentive to entrepreneurship is more hotly disputed. Firstly, under current UK and US laws, the vast majority of the estates will not pay a penny/cent in tax, so it shouldn’t play any part in the average person’s thinking. Secondly, those rich enough to pay it can almost certainly afford to pay an accountant to find loopholes that allow them to pass assets on before they die. Whilst the tax may have a disincentive on some kinds of work, any disincentive effect is not particularly rational – you still get to pass the vast majority of the fruits of your labour when you pass on, and if you want to ensure that your next of kin get at least a certain amount, inheritance tax might even encourage you to be that little bit more productive.

As to the research, Grudem cites, I hadn’t heard of the Tax Foundation before reading his book. but a quick look at Wikipedia shows that they have been accused of using poor methods in many of their published findings. As predictions in economics very strongly depend on the assumptions you make, I would have to have a lot more information about their model before I assume that it is correct.

Transaction Taxes

Grudem looks at proposals that some have made to replace the US Federal tax system with a sales tax (the equivalent to VAT in the UK), adding a certain percentage to the cost of every item. Grudem dislikes this for a number of reasons. Firstly, that it would require a very high tax rate. Secondly, he worries about the possibility of tax creep from adding a new type of tax, and the possibility that the other taxes would creep back in. He also expresses concern that this would place a much higher tax burden on poor people. He mentions the effect of abolishing existing tax exemptions for charities, worries that it would cause a black market in order to avoid the tax (and, hence,make society less likely to obey the law in general), and finally thinks that the revenue generated might not be as much as suggested (a good argument to ensure that any radical changes to the tax system are made gradually).

On this, I am pretty much in agreement with Grudem on the effects. I think he vastly overstates the potential of such a system to create a black market economy to avoid tax. The 20% rate of VAT in the UK hasn’t produced such problems on any large scale, but then it wasn’t introduced overnight.

Other Taxes

There are a whole range of other taxes that could be enacted, but which Grudem doesn’t comment on. Poll taxes (everybody pays a set amount), “sin taxes” (taxes designed to discourage certain activity – e.g. a tax on cigarettes), land/property taxes (like council tax in the UK) and carbon taxes are probably the most commonly used and/or proposed. There are, of course, an almost infinite variety of other taxes that could be enacted. Britain famously used to have a tax on the number of windows on a house.

Grudem doesn’t say anything that addresses these kinds of taxes. Hiss approach is to take some of the taxes currently in place at the federal level of the USA and comment on them. He doesn’t attempt to establish a coherent framework for his theology of taxation, and doesn’t really provide any guidelines for his readers to work out whether a particular tax (or proposed tax) is morally justified. That, combined with the tension between his agreement that the government has the right to levy taxes and his clear disapproval of every single tax he mentions are the real weaknesses in his treatment of the issue.

Taxes: Who should pay what?

Today we’re continuing our critique of Wayne Grudem’s Politics According to the BIble by looking at the issue of taxes. Last time, we looked at some wider questions about the tax system, today we’re looking at the balance of tax between rich and poor, and between people and corporations.

Income tax: who should pay what?

Grudem begins his look at income tax by explaining how the US system is set up. Like most (and probably all) Western nations, it has what’s called a progressive tax system, which means that the more you earn, the higher the rate of tax you pay. Tax systems where everybody pays the same proportion of their income, or where the poor pay more are called regressive tax systems. Both terms can be applied to an individual tax, or the tax system as a whole.

Anyway, he points out that income tax is calculated by tax bands. In 2009 single Americans paid 10% on the first $8,350 they earned, 15% on anything between $8,351-33,950 and so on. The UK system works in the same way, and I presume that every income tax system on the planet follows the same basic structure. As an incidental note, Grudem says that the marginal rate (the amount you’ll be actually be paying on any increased income) affects peoples’ decision-making. Which, given how few people actually plan their finances, seems somewhat optimistic.

He then says that the fundamental question is whether such a system is fair. He starts looking at this question by pointing to the Old Testament law, and its demand that everybody pays a tithe (10%) to God (Deuteronomy 14:22-23 and Leviticus 27:30-32). He also points out that there was a point (Exodus 30:13-15) where there was a census tax that was the same for everybody. The thing Grudem doesn’t mention here is that none of these examples are of the regular taxes that pay for the continued running of government. They can’t reasonably be used as evidence for or against a progressive tax system.

Grudem then argues about the question of fairness by using a string of examples of various income levels at a flat rate of tax. In short, he argues that notions of fairness are, in practice, often a relative concept – everybody judges it relative to themselves and their situation. He then suggests that the truly fair position is that everybody deserves what they have legally earned in a year – citing Luke 10:7, 1 Corinthians 3:8, and Luke 19:17. He dismisses the idea that what is fair depends on what somebody has left after paying taxes. He then insists that, even if somebody’s wages are thought to be unfair – or just too high – that they have come across because society as a whole has “voted” with their money for these wages – market demands are, in Grudem’s view, a fair way to decide these things, because people choose to pay for the product that ultimately pays for the wages. If we don’t like it, his view is that we should change the habits of society.

There are, of course, several problems with this view. Firstly, if we deserve to take home what we have legally earned in a year, then either nobody deserves to pay any taxes at all, or everybody deserves their post-tax income rather than their pre-tax income. As we’ve already established (see the previous post in this series) that the government has a right to levy taxes, then we have to take the second option. And that means that this principle is irrelevant to the question of what tax levels should be.

Secondly, the idea that I’ve “voted” for the wage levels of high earners simply because I’ve watched their film, or brought goods from their company is somewhat laughable. Unless (unlike most people) I have the option of shopping exclusively from small businesses, and actually do so, I have no option but to buy products from large corporations. And in large corporations, pay levels at the very top are rising at a rate that bears no relationship to general wage levels, inflation levels, or even company performance. If I think such wages are unfair or unjust, then I cannot easily protest by spending my money elsewhere. And, in any case, voting with my spending means that the high earners automatically have a bigger say than I do.

For most people, the most effective way of protesting against excessive remuneration is, in fact, by pressuring politicians to enact laws which reign in the potential earnings of such people (whether by introducing maximum wage laws, or by increasing tax rates). And Grudem doesn’t offer any argument why changing things through the political process should not be an option. He seems to just assume that it should not be.

Grudem also looks at current tax receipts in the US. He says that the top 50% of earners paid 97% of taxes in 2006, with the richest 1% paying 40% of income tax. He compares it to 1990, when the richest 1% paid 25% of income tax and 2000, where they paid 37%. Unfortunately, he misses the key statistic that might give us any idea how fair this is – how much of the national income that top 1% got. If, for example, the richest 1% had 60% of the income, then that tax rate is unfair by anybody’s measure.

Capital Gains: fair or dangerous?

Grudem also argues against capital gains tax. When you buy something expensive (e.g. a house) and later sell it at a substantial profit, you pay capital gains tax, rather than income tax. In most countries, capital gains tax is set at a much lower level than the standard rate of income tax. Grudem emphasises that this is a tax on the increased value of something purchased as an investment. He argues that, because the owner pays taxes on the annual income from the investment, it is unfair to pay taxes on the increased value of it. He also says that it should be abolished to encourage investment in the economy. He also cites claims by the Heritage Foundation (a think-tank which promotes right-wing political viewpoints) that an increase in the US level of Capital Gains tax would damage the American economy.

There are, again, several problems with this approach. Firstly, many of the richest people in Western nations make their living from buying and selling assets. Warren Buffet (who is one of the richest men in the world) pays a lower proportion of his income in tax than his secretary because almost all of his income is from capital gains. If capital gains were abolished, then people like Buffet would pay virtually no tax.

Secondly, many investments are not (at least directly) investments in the economy. Whilst buying new shares in a company is investment, buying existing ones is simply buying somebody else’s share of the profits. Buying a plot of land is only investment if you then use it for something. Many financial products (such as derivatives or investments in the futures markets) are so far removed from real businesses that they are more like gambling than genuine investments.

Thirdly, many people who trade things that are subject to capital gains taxes don’t see annual returns on the investment – they sell it off at a profit (or, sometimes, a loss) before they see any regular returns on their investment.

Should companies pay tax?

Grudem also addresses the issue of corporation tax. He argues that, instead of being a tax on the rich, it has the effect of causing higher prices, and hence is a tax on everybody He claims that lowering the rate of corporation tax would stimulate the economy, bring in foreign investment, increase the incomes of corporate employees, and therefore result in higher overall tax revenue.

Again, there are a number of issues with this analysis. Firstly, the idea that lower rates of corporation tax will lead to lower prices, more jobs, or better pay for employees is simply wishful thinking. Companies don’t exist for the benefit of their customers or employees – they exist to make their owners money. When it comes to publicly limited companies, they are legally obliged to make as much money for their shareholders as they can. Therefore, the effect of cutting corporation tax will be to transfer money from public services to shareholders. Now, this might lead to productive investments in the economy, thus offsetting some of the lost revenue, but the chances that all of it would do so, and that it would do so to an extent that it creates greater tax revenue seems unlikely at best.

Secondly, there’s a related issue which makes corporation tax much fairer. Businesses (particularly big businesses) have been quite successful at what’s called externalising their costs. Basically this means passing on the costs and risks of business activities to somebody else – usually the governments of the places they operate. For example, a company might dump toxic substances knowing that it will be the government that pays for the clean-up, and the costs to the local people and environment. Insurance companies refuse to insure nuclear power plants against the risk of an accident, so power companies rely on government guarantees if something does go wrong. There are examples of this kind of practice for almost every industry. Governments also subsidise business training costs, and pay direct subsidies for companies that engage in a whole range of activities.

In the light of this, corporation tax can be viewed simply as the government making businesses pay for the handouts they get. If it were abolished, then it would only be fair to stop all government subsidies, and make companies pay for the costs they have externalised. And it’s far more likely that doing so would cause higher prices and damage large sectors of the economy than it is that cutting corporation tax would benefit the economy enough to make up for lost tax revenue.

Next Time

So far, in the section on tax, Grudem has argued for the principle of taxation, but argued that income tax should be lower (and fall less heavily on the rich than it does at present), and argued against two of the other three major taxes that are commonly levied (capital gains tax and corporation tax). Next time, we’ll finish up the issue of taxes by analysing what he says about smaller sources of tax revenue.

Power vs Principle?

There’s been a bit of controversy within the Green Party recently (yes, this is a Green Party specific post – if you’re not a party member this post may be a waste of your time), which I think illustrates the problems with trying to do principled politics in the real world. If you’re a political geek, then you’ll be well aware that Brighton and Hove Council is the first Green-run local authority in the UK, and that the Greens are a minority administration – they can be outvoted by the other parties (in this case Labour and the Tories).

A couple of weeks ago, the council held their vote on the annual budget. The Greens had proposed a 3.5% Council Tax rise – which would have left the council £5.4 million better off over a two year period – as a way to significantly reduce the impact of cuts being imposed by central government. Labour and the Tories put in an amendment that removed this money from the budget. Up to this point, there’s no real controversy. The Greens are opposed to the principle of implementing massive cuts to public services, whilst the other two parties are in favour of the principle. The voting up to this point simply showed the local parties being in step with their national policies.

What did cause controversy, however, was that all but one Green councillor decided to vote for the budget as amended (i.e. without the extra money), and that the Greens decided to stay in office to administer the budget, rather than handing over power to a Tory-Labour coalition. Because these actions were seen as Green councillors supporting a cuts budget, a number of prominent and long-standing Green Party members have resigned in protest. I’m told that this issue dominated the party’s spring conference (I didn’t make it this time, but some of what I’ve heard isn’t pretty).

I can see and sympathise with both points of view. The Brighton and Hove Greens want to protect the people of their city from the impact of the cuts, and believe that a Green administration would do so better than a Labour-Tory coalition. I’m told that the relevant trade unions asked them to stay on for just this reason. The budget doesn’t contain their major proposal, but does contain almost everything else they put in.

The party members who object, however, view this as a case of the party becoming indistinguishable from the big three parties when it comes to the crunch. Some view it as the party’s elected representatives selling out for a taste of power. Others think that the B&H Green Party naively walked into a trap set by the other parties. Either way, their decisions make it more difficult to claim that we as a party take a different approach to the cuts – which will continue to be the defining issue in UK local government for the next few years. There’s a good case to be made that the right thing for the Green councillors to do would have been to abstain or vote against the amended budget, and also a case to be made that as the amended budget was essentially a Labour/Tory budget, they should have been made responsible for implementing it.

The root of this disagreement lies in one of the inherent tensions within politics. Usually getting your agenda through requires some degree of compromise. Whether it’s party policy, election promises, or enacting policy at any level of government, sometimes you’ll have to water down proposals in order to get them through or sacrifice some policies in order to get others through. Like it or not, this is how politics works once you’re on the inside (single issue lobby groups usually don’t have this problem). The question is this: how far do you have to go down this route before you’ve sold out and betrayed your principles?

The Irish Green Party is a good example of being clearly on the wrong side of this line. In the 2007-2011 Dail, they propped up a right-wing party’s austerity budget, achieved nothing of substance as a result, offered empty assurances to their members, and were completely wiped out in the 2011 election. Their compromises achieved nothing, cost them all their seats, and may well lead to the dissolution of the party.

The Brighton and Hove budget proposals were clearly on the right side of the line. Even if they had been able to get everything through, the scale of the cuts to the money they get from central government means that some jobs and services would have gone. By law, if a council sets a deficit budget, the local finance officer (a civil servant) takes over to set a balanced budget – and is under no obligation to take the views of the public into account (whilst the Greens did as much as possible to engage the public in the budget-setting process). Therefore some compromises did take place, but their proposed budget was about as close to Green principles as it could have been in the circumstances.

The Brighton and Hove Green group’s reluctant support for, and willingness to administer, the amended budget falls in the grey area where it’s not clear whether the compromise was worth it. It has certainly damaged the national party’s reputation amongst left-wingers who hope that the Greens will get the chance to articulate a genuinely left-wing politics on the national stage (something that Labour hasn’t really done since the 1980s). It also highlights the danger of the Greens going down the New Labour route – putting the pursuit of political power above holding to the principles that we are supposed to be fighting for. Unlike those who have resigned, I don’t think we’ve done that yet – but this controversy does serve as a warning that we are capable of doing so.

Is censorship the right response to protecting children?

Gillan at God and Politics UK has a post in support of plans to force Internet Service Providers (ISPs) to block pornographic material. However, he hasn’t really considered whether such a policy is actually going to make a difference, so I thought I’d fill in the gap.

Firstly, the best way to protect children from harmful content online is parental supervision. Even if there are filters on both the ISP and the home computer, some harmful material will still get through. Parents should take responsibility for taking whatever methods they feel necessary to protect their kids online. Filter software on the home computer, making sure that it is in a family area, rather than the kids bedrooms, and checking up what their kids have been up to online are basic common sense. Parents will need to do the same things to protect their children whether or not the ISPs filter out some harmful content. The danger is that some parents will assume that the ISP’s filter will protect their kids, and hence shirk their responsibility.

Secondly, filters will inevitably block some perfectly innocent content. The Australian government has a filter intended to stop child pornography. When the list of sites was leaked in 2009, it turned out that about half the sites should not have been on the list. Blocked sites included online poker, youtube videos, “regular” porn sites, Wikipedia entries, euthanasia sites, websites of fringe religions, fetish sites, Christian sites, the website of a tour operator and even a Queensland dentist. If a filter designed just to stop the most extreme and objectionable pornographic material blocked so many sites outside its remit, imagine how much a filter designed to stop all porn would block. And because the filter would be on your ISP’s server, rather than your computer, you wouldn’t even be able to adjust it when you discovered that it had got it wrong. Nor would you be able to change its settings if your definition of pornographic material differs from theirs.

So, in short, the proposed policy is almost certainly the wrong approach to the problem. It’s not possible to block all harmful material, and any attempt to do so will block a whole load of material that isn’t harmful. The most effective way of protecting our children is to teach parents how to do it themselves.