Friday, November 9, 2012

Rolling Jubilee

It's heart-warming to read about people apparently hacking the system to do good. In this case, to make the world a better place by forgiving distressed debt - the people's bailout.

Then again, I can't help but wonder what effects this campaign will have, if it goes beyond a bit of hipster activism. It's like the Heisenberg uncertainty principle - you can't participate in a market without affecting it. The interesting questions here are, how big a player in the debt market is OWS likely to be, and what is the price elasticity of demand for debt?

Also, while at 5 cents to the dollar it doesn't seem worth getting worked up about it, I'm never quite comfortable with do-gooders taking on a burden that isn't theirs. And yes, that means I don't believe in charity - or at least most of it. Of course there are narrow-interest causes that are appropriate to fund by charitable donations, but others, like this problem of almost ubiquitous quasi-odious [1] debt, are broad social problems. Broad social problems should be addressed by broad social mandates - exactly the sort of thing governments are intended to do. If everybody bears the consequences of a social problem, then I think everybody should also contribute to its solution. By means of, say, income tax. And then you can segue into another interesting topic - how the burden of income tax should be distributed.

And that's the irony here: OWS is all about contrasting the burdens of the 99% with the privileges of the 1%. Like the phenomenon that many wealthy people are able to structure their income such that they pay a far lower effective rate of tax [2] than not-so-wealthy people do. And then OWS go ahead and voluntarily tax themselves with the cost of forgiving debt.

It still seems like a morally positive thing to do, and I still hope they shake things up.

[1] Nobody held a gun to anybody's head and made them take a $100,000 student loan for a liberal arts major. Other examples may seem more legitimately odious.

[2] Tax in general, not specifically income tax. Which is part of how they do it - by structuring their income such that more of it appears as capital appreciation, which attracts the far lighter capital gains tax.

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