Donald Trump: ‘Republicans May Be The Worst Negotiators In History’: via HuffPost

Donald Trump: ‘Republicans May Be The Worst Negotiators In History’: via HuffPost The concept of a “prisoner’s dilemma” has much application in politics. The basic idea of a “prisoner’s dilemma” is that the best outcome is only possible if both sides act altruistically and against their own interests, with a worse outcome for both if both sides act selfishly. So by acting in their own interests the parties act against their own interests. That type of thought experiment isn’t idle philosophy, problems – big problems- of that structure happen all the time. With the recent tax negotiations, the ideal outcome would be to have more focus on what tax rates ought to be for various groups to balance the budget and for other factors. The democrats seem to have fallen in to a traditionally republican trap, advocating for unfunded tax decreases. That kind of pandering can advance politicians temporarily while tending to undermine everybody in the long run. If the parties stood together to convince the public of appropriate tax levels the public would be likely to accept it. There is such an effect even when it is undesireable, such as with increasing bipartisan encroachment on civil liberties. But the temptation is always there with taxes for those pretending to be against them voting against tax increases or voting to reduce taxes to advance their own narrow interests with populist manipulation. The recent agreement is a codification of this, where both parties have agreed to abdicate responsibility in a way where neither gets an advantage. It is not as good as agreeing to actual fixes so that neither side gets an advantage. There is also an undue emphasis on reducing income taxes. It is especially critical for business that taxes be income taxes wherever possible. There is always a legitimate concern that new taxes or financial obligations will tip a marginal business over. That can create a cascade effect of falling dominoes. Taxes that are not income taxes are riskier to businesses. Income tax on net income comes from profit and should not tip businesses over. If you look at all the tax and other burdens government puts on business there is a great administrative burden on business. Much of this burden arises from the obsession of Norquist and other morons on income taxes. It’s like putting a heavy weight on playdough. If you squish it down you push it out sideways. What we need is more of a Richard Branson approach. Bundle as many business obligations as possible into one big obligation, tie it to ability to pay, and let them write one cheque to be free and clear. That could include, for example, business obligations under Romneycare. Change the corporate tax so that it will raise the revenue to cover their collective obligations and have the government handle it, saving everybody enormous administrative costs while reducing the impact of the program on business, especially on viability. But that would involve problem solving and running the government like a business and there’s no appetite for that. Krugman has been perhaps overconcerned about the fiscal cliff. Economics is more than counting beans. He may be right that allowing the tax increases right now will put downward pressure on and increase the risk of recession. On the other hand, even if there is no mathematical reason the budget needs to be balanced right now, economics is in important respects a confidence game as much as it is about bean counting. Most of us have been at one point or another been a passenger in a vehicle that we thought was driving too fast for conditions, say on a winding road in the mountains. And we got home. So maybe the driver was right and it was safe. But that didn’t stop you from being tense, did it? Tense investors can be skittish and the impact of choices on their confidence is important. We should also bear in mind that the closer we get to a problem, the more we empower malicious parties to push us over the edge, either with an agenda such as happened with Italy or with just malicious intent period. Italy was in good shape in 2011 until pond scum used it’s financial vulnerability in the bond market to generate an artificial crisis to engineer a hostile, undemocratic takeover of the government. Italy’s fundamentals were little worse that the US’s now before that nonsense. Italy’s primary mistake was the Euro, which rendered it defenseless to that form of predation. We should take the matter as a warning. Note in Trump’s message above the underlying message error- he is implicitly accepting that the democrats represent the 99%, and the republicans the 1%. The tax cuts should be either a victory for both parties or a loss for both parties. The constituents they nominally represent aren’t so different.


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