My radical centre

I think of my political location as centre-left, largely because I’m a lefty yet prepared to say nice things about free markets [1]. But I don’t like to think that centrism implies moderation. So here’s my list of fantasy radical centrist policy proposals, presented with the caveat that I have barely given a moment’s thought to feasibility.

Inequality

Imagine a progressive tax schedule that eventually reaches a marginal tax rate of 100%, at which point there would be no point in being paid any more because the government would get the lot. Beyond this point, a windfall like that experienced by JK Rowling, would be entirely scooped up by the state. This tax schedule could be shown as a line on a graph. The curvature and slope of this line describes the rate at which the government starts to take more of your money, the more you earn. Now imagine making this schedule a function of inequality. We would choose a (potentially quite complicated) rule that maps from the national income distribution to the progressiveness of the tax schedule. The idea would be to choose a rule so that chief executives and other high paid types could actually increase their own take-home pay by giving badly-paid workers a rise. The lower inequality gets, the lower taxes on higher incomes get. That could be achieved both by moving the point at which 100% kicks in, and by adjusting how rapidly it gets there. Of course there is collective action / free-rider problem here — any one CEO giving out pay rises won’t notice any change until other CEOs follow suit, and if many CEOs do it, other CEOs would be tempted not to. Well fine. If your ahem rational self-interest prevents all y’all from moving collectively to a better outcome, poetic justice I say.

Perhaps there is no need for tax rates ever to hit 100%, but I reckon astronomical earnings are usually economic rents that should be taxed, and if we are really bothered about inequality let’s put a cap on earnings. We’d may have to think a bit harder about capital gains, to keep all those entrepreneurs hoping to make squillions in the country. Perhaps allow capital gains from the sale of enterprises or IP to be amortized over a period related to how long they took to create. But even there, my guess is that most entrepreneurs do it for the love of it, and the hope of a few millions. If government confiscates capital gains in excess of a few millions, spread over a few years, I don’t think the impact on entrepreneurial effort will be too great.

Inequality 2

Introduce a Posner Weyl wealth tax, where everybody pays a tax on the self-reported price they’d be willing to sell their assets for. You are then legally bound to sell your asset at that price, if anybody wants to pay it. So for example, the market price of my house is e.g. £500,000, I would post a price of say £800,000 which I would consider sufficient compensation for being forced to sell my family home and go through the trauma of buying another house. Posner and Weyl put forward arguments based on economic efficiency — I just like the idea of a wealth tax.

(Although I do not at present know a good reason to prefer a wealth tax to a progressive consumption tax)

House prices

Insanely high house prices are a curse. Not least because we are all forced to spend most of our income on the roof over our heads [2]. It doesn’t have to be that way. The most painless way out of this fix would be for house prices to stay flat in nominal terms, so nobody get stuck in negative equity, whilst inflation gradually reduces prices in real terms. So why not target flat nominal house prices? We could, for example, give the Bank of England some new instruments — perhaps variable rate property taxes and stamp duty — and ask them to set up a committee to adjust these to target zero change in some house price index or other. In principle that might be quite painless, if people believe the government will hit its target, they will stop buying houses expecting to make money from capital gains and prices will stabilize without the BoE having to raise its housing taxes until the pips squeak. And we keep the flat normal target in place until the ratio of house prices to median income halves, or something, and which point the target can be changed to zero real house price growth.

Housing

I like the idea of universal basic income (possibly complemented by a job guarantee) because, among other things, I like how it removes the unemployment ‘trap’ created by getting your welfare payments cut when you get a job. But that beneficial effect on incentives is obliterated if your housing benefit gets cut when you get a job. If housing benefit is means tested, your disincentive to work is high. Plus, especially when house prices are high, housing benefit is unappealing because it gives money to private landlords and creates resentment from those who pay exorbitant rents or mortgage and observe others having that covered by the state.

Solution: universal basic housing. Every citizen of the country who wants it, is provided with basic accommodation, for free. This should be decent but relatively unappealing (cramped) accommodation in relatively unappealing places, with good transport links and amenities (schools etc.). You wouldn’t be asked to leave if you get a job, but you would probably choose to, once you can afford to. It would not make sense to try and provide free housing in highly desirable places. This idea would probably require the government to build a lot of new houses (and covert some existing social housing) which implies building on the outskirts of existing towns and cities or other neighborhoods where land is cheap. As more basic housing is built, private house prices and rents would fall until demand for additional free basic housing falls to zero. The big risk is the creation of ghettos (and the unhappiness of those turfed out of existing council housing in desirable neighborhoods, sold to help pay for this). Hopefully the ghetto risk would be low because all sorts of people would prefer free but modest housing, and movement in and out would be quite fluid.

I have no idea how affordable this would be. Housing benefit already costs a lot (£27bn annually) and that should be cut to zero. We’d also need some insurance scheme to cover short-term inability to pay, so those in private housing don’t lose it immediately they run into trouble, but after a while you would be asked to move into free housing, not paid to stay where you are.

People’s Quantitative Easing.

Richard Murphy writes a lot of nonsense, but I’m half with him on his idea for ‘People’s QE’. I do not go all the way with him, because I do not think that PQE would amount to ‘spending without borrowing’, at least not whilst the BoE is still inflation targeting (as I explained, rather poorly in retrospect, here). Where I half agree with him is that I do not see a good reason not to indulge in direct money-financing of public expenditure whilst inflation is below target, or whilst inflation is less of a concern than unemployment, as in the wake of the 2007 crisis. Because the expenditure could be sold to the public as money-financed, and hence not affecting the deficit, it should be more politically palatable, which would help mitigate the evident austerity bias of ‘mediamacro’. And so what if, in the long-run, the debt finds its way back into private sector hands as the BoE reverses the QE (or perhaps deprives the government of seigniorage revenues)? That just means People’s QE shouldn’t be oversold as ‘free’ money, it doesn’t invalidate using a spot of money-financed spending as a stabilization tool. And I think there are some scenarios in which the quantity of outstanding debt would end up lower than had the same expenditure been conventionally debt financed.

Obviously letting politicians turn on the monetary taps at will would be a bad idea, but why not set up some mechanism whereby the BoE could directly finance government expenditure when it thinks useful, rather than just rely on the interest rate and then conventional QE at the zero bound? The money could be earmarked for investment, but it needn’t be.

The distributional impact of using money-financed expenditure as a stimulus tool within an inflation-targeting setting might be more progressive than using monetary policy alone, and it might be healthier for the financial system too.

Institutional normalization of assisted suicide.

Suppose I have a pot of money I want to pass on to my heirs, my quality of life is deteriorating and meanwhile the cost of keeping me alive is rising, depleting my bequest pot. At some point, assuming I am still in possession of my faculties, I may choose to end my life, because I’d rather not spend my money on prolonging a life no longer giving me much enjoyment, and give the money to my kids, or whoever, instead. I might choose to instruct others to end my life, should I lose my faculties. Of course because medical care is socialized or insured, paying for end of life care does not directly deplete our own bequest pots, but something like that is happening on a society-wide level.

If assisted suicide is normalized, it could be even be quite a positive thing. Death is inevitable, so why not try to make it a good one? I have watched people die slowly and painfully from cancer. If it was regarded as perfectly normal for people in that position to say, right enough is enough, gather round friends and loved ones, I am shipping out, I reckon plenty would take that option.

Litter picking

(This idea is probably better described as conservative rather than radical)

One of the problems with a job guarantee is finding something worthwhile for workers to do. Much of the UK is a dump. We have lots of ugly buildings, barren and dilapidated housing estates, and there’s litter everywhere. I would spend big on refurbishment, demolition and renewal, new parks, playgrounds and pleasant urban public spaces, and on making sure all that litter is picked up. I’d have snipers waiting in the bushes next to roundabouts, waiting to execute anybody who throws their crap out of their car window. I reckon this would go down rather well with the voting public. I genuinely think it’s nuts that a wealthy nation does not expend more effort to ensure our country is a pleasant place to live in, and I think it would improve lives. Spending would be targeted on areas with high unemployment. The usual objection to this is ‘how can we justify money on that when the NHS is short of cash’ but if we are talking job guarantees, this is one way of creating jobs for people without nursing qualifications.

[1] Yes, I know there’s no such thing if you insist on being drearily literal. However the phrase usefully distinguishes something from “not-free markets” — think of a free market as an economic system where, subject to some regulation and state-backed property and contract rights, economic actors are largely free to choose what to sell, who to hire, what prices to charge and wages to pay, and can enter new markets, or exit, more or less at will.

[2] I am assuming high house prices imply high rents. Another problem is only those with well-off parents stand a chance of getting on the housing ladder.

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