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Jim Manzi’s High-Tech Heresy

Steve Russell
5/27/14

Jim Manzi could almost be described as a conservative theologian. He made his fortune wrangling software, but now he’s a contributing editor of National Review, the brainchild of the late William F. Buckley that has become, as Buckley intended, the intellectual voice of American conservatism. Manzi’s also a senior fellow at the Manhattan Institute, a conservative think tank that so far remains stubbornly tethered to fact-based reality while the Republican Party drifts farther from it every day.

Manzi’s bona fides as a conservative make him an outlier in the world of high tech. He seems to have resisted the liberal conspiracy that everybody knows twists the impressionable minds of American college students. His connection with National Review was probably begun with a job as research assistant to Mr. Buckley.

All of this is context to Manzi’s influential essay in the latest issue of National Affairs, titled “The New American System.” While those on the left attribute American riches to the theft of Indian land and African labor at a time when land and labor were the twin pillars of wealth creation, Manzi credits “an almost ruthless pragmatism” in public policy. Almost?

Students of history understand that the left and right narratives are both correct to the extent neither crowds out the other, and this is where Manzi’s stubborn tether to fact-based reality leads him to advocate “decisive government investments in infrastructure, human capital, and new technologies.”

Those of us who have always understood that government cash seeded steamboats, canals, railroads, civil aviation, interstate highways, the Internet—the list could go on---are not surprised.

Those of us who dream of tribal governments functioning as governments rather than mere social clubs that give voice to legitimate historical grievances understand that those investments are no less necessary on Indian land, whether the capital is acquired from outside investment or by taxing what little we have to tax.

Sovereignty cannot be exercised from a condition of dependence, and the conservative thinker Jim Manzi points the way to independence of Indian nations as much as the way forward for the United States at a time when the economy has been stagnating.

Let’s look at Manzi’s governmental desiderata from the perspective of both colonial and tribal governments, starting with human capital.

For the US government, the major issue begins with the grief that began, like most US economic grief, in what we call the Reagan Revolution, the vast redistribution of wealth in the opposite direction of what FDR redistributed in the New Deal.

Student aid has moved inexorably from scholarships and grants to loans. By the time Mr. Obama became POTUS, the privatization of student loans had proceeded to the complete absurdity that banks were allowed to charge for being middlemen in the transaction while the government still guaranteed the loans. Gov. Romney, had he been elected, promised to reinstate what President Obama had changed in the interest of getting more money to more students at lower rates. I never heard Romney explain why this would be good public policy beyond the GOP bromide that the private sector can do anything and the public sector can’t do anything, a position belied by the historical account in Jim Manzi’s essay.

The upshot of this turn to privatized loans is a debt bubble with serious economic consequences for us all.

One consequence is the slow recovery of the housing market, once driven by first time buyers, who now graduate with too much debt to qualify for a mortgage.

Another is the securitization of student loans in the same manner that mortgages were securitized before the great crash in 2008, because the Dodd-Frank reforms to prevent it have been watered down and tied up in the rulemaking process by the investment banks, who don’t do student loans but do have an interest in all kinds of derivative securities.

I met another consequence of student aid policy in the last two weeks, when I had occasion to chat with three medical students who were interning under doctors I was visiting. They all knew about the impending shortage of family practice docs because Obamacare allows people to seek medical care they could not afford when uninsured. Two of the three would enter family practice if they could, but felt they needed the higher income of specialization to deal with their student loan debt.

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stevef's picture
So Steve, I like and agree with portions of your article. We do need to spend more money on educating our youth. Tribes are infamous for talking the talk of our kids are our future, but it all to often ends there. Well, unless that kid has the right last name. So, you propose to fix the roads and bridges, educate our youth, fix the power grid, invest in green power, etc, etc, etc. So, do you propose to put us into the 55% tax bracket or do you venture away from 'classic liberalism' and actually propose to .....dare I even say the word....I dare, I dare.....CUT some dollars to move money to these 'new' priorities? Or, are you of the other philosophy to just fire up the printing presses and print more money? Kinda like the personal money budgeting philosophy of making the payments on the MasterCard with the Visa!
stevef
swrussel's picture
stevef, You are asking whether I advocate higher taxes? YOU BET I DO! I will not bore you with the top marginal tax rates among the nations the US competes with beyond saying that if low taxes made us competitive, we would be on easy street. I will bore you with some history of top marginal tax rates and, as important, capital gains tax rates in the US. Understand that the top marginal rate has nothing to do with what the average American pays, which depends on where lower brackets fall. But I invite you to dipstick the strength of the economy over time in relation to tax rates. FDR set the high at 94%. That was WWII and the US still ran a monster deficit. Going forward, you will see the capital gains rate (in parens). Eisenhower, 92% (25%). JFK, 91% (25%). LBJ, 91% (26.9%). Nixon, 77% (36.5%). Ford, 70% (39.875%). Carter, same as Ford. Reagan, 69.125% (28%). I cannot resist noting that Reagan's reshuffle of the brackets really hammered ordinary people while he was dramatically cutting the capital gains tax. Bush I, 31% (28.93%). Clinton 39.6% (29.19%). Bush II, 39.1% (29.19%). Obama, 35% (15%). If you are done whining about the top marginal rate, 'splain me the theory that says if you coddle the rich they will "create jobs" (Why? They are in fact incentivized to create jobs when any further earning goes more to the government than to them.) but you must not coddle the poor or they will have no incentive to work?
swrussel
stevef's picture
Steve, I think you and I have a dramatic different opinion of what 'should' the size of our government be? It also sounds like you know a lot more about the history of the tax rates than I. I loved what I read about John McCains 'Flat Tax' that he proposed during his run for the prez years ago. I have heard that Indian Country Law and Tax Law are two of the most difficult to understand. Tax law because of hundreds of years of just adding more pages to the tax laws until you have 10s of thousands of pages of tax laws. I liked the 110 page flat tax idea. We may argue at what that 'flat rate' should be to decide how big the government should be, but to a much greater degree, it would be more equitable to the middle class. One of my favorite to pick on is some of the stimulus spending, right here in Pendleton, OR, they got some Obama Stimulus money and built a 'road to nowhere', it is great for me because I am a cyclist and it is a fantastic road to ride on, but what a huge waste of tax payer monies! I don't claim to know the answers, I just claim that socialism is NOT the answer....in my humble opinion! That is where I see us headed.
stevef
swrussel's picture
It is not rational to speak of socialism as if it were a thing when every post-industrial economy on the face of the planet, with the possible exception of North Korea, has a mixed economy. It is rational to evaluate the mix of socialist institutions, such as public libraries and fire departments and free public education, along side economic growth (the capitalist pole star) and objective measures of well-being, such as mortality and morbidity rates, literacy rates, and my pole star--social mobility. If you do that, you will quickly lose your fear of socialism...and perhaps see how the American right has successfully associated it with excesses engineered from the top down with no regard for public opinion. Does it not bother you that "Old Europe" now has more social mobility than the US? It bothers me. Anyway, my point is that you can't talk about socialism as if it were a thing...you can only talk about where this or that policy tends on a continuum. I suggest you make yourself a chart with whatever measure of economic health you choose along side tax rates and the aggregate demand curve since WWII. One is closely associated with economic health and the other is not. Now, break the figures in the aggregate demand line into public and private, and you will have a rough proxy for the size of government in relation to the entire economy. What does that chart tell you about tax loads? About the optimal size of government?
swrussel