Not sure about those other ones. But I can say that a gallon of cooking oil renders only slightly less than a gallon of biodiesel, and biodiesel has only about 90% the fuel efficiency of normal diesel.

Making something into gasoline is a lot harder (because of the nature of gasoline) and a lot more dangerous. I'm guessing we'll get useable biodiesel well before we get a real replacement for gas.

I've been thinking about taxes today, finding myself a bit frustrated with the way politicians routinely tell us they can lower our taxes, keep our valued government programs untouched, and still lower the deficit, and we keep routinely believing them, even after they fail (unsurprisingly) to make this happen.  I've come up with a new system that I want to run by you guys, to see if I've made any obvious errors in reasoning, and to get an idea if it'd be at all sellable to the US public.


Basically the idea is that instead of letting politicians come up with ways to pay for the money they spend, we set up a system that automatically sets the tax rates where it needs to be to pay for them.

I'm thinking of doing this as a VAT or national sales tax.  So if the tax rate is X%, then when you spend a dollar, you pay another X cents to the government in tax.  But the rate X is set each year in order to bring in revenue equal to the net government expenditures in the previous year.  This would take some degree of estimation, since we can't predict perfectly how much everyone will spend in total each year, but I think we can get close enough that it's not a huge problem.  Any short-falls or surpluses due to mis-estimation of the needed tax rate will be applied to the next years total expenditures, so that if we underestimate one year, we have to pay more the next, and vice versa.

Politicians can still institute other taxes, which will decrease net expenditures, and thus lower the VAT in the following year.  So taxing gasoline would bring in money, and thus reduce the VAT rate.  You could still have an income tax, which would also bring down the VAT, and which you could make progressive (since one possible objection to the VAT would be that it hurts lower-income people more).  You could cut those other taxes if they were in place, but doing so would lead to an increase in the VAT unless they were accompanied spending cuts.

The advantages of this are that:
1.  it would effictively balance the budget automatically.
2.  we would see the true cost of government spending very quickly (less than 12 months), so people in general would have a much better idea of how much they're giving up to get the government services.
3.  it'd be much harder for politicians to promise us the impossible, since they'd no longer have the ability to cut taxes while raising spending, so promising that they would do so would be easily seen through.  If they wanted to say they would lower the VAT, they'd have to tell us how, since they wouldn't have the power to just lower it by chosing to do so.

It'd be easy to have a website where you could go to see the previous years budget in terms of this years VAT rate.  for example you could go and see that you pay 3% tax due to military spending, 3% for social security and medicare, -1% because of other taxes collected, .01% for a particular ear mark, etc.  This would also be available to help predict next years tax rate, so people wouldn't be caught off guard by a large change in the tax rate.

What do you guys think?  Is it too simple or too inflexible?  Would the US public go for it?

Too simplistic. It sounds good on paper and sounds simple until you get to the point where expenitures, revenues, and the next year's economic performance have to be estimated.
Also I think it would wind up wth politicians spending more money as they would start to see this VAT as a perpetual source of revenue that they don't have to vote for, leading to massive taxes in the VAT and eventually an enormous black market to avoid it.

Why not go in reverse?

Set the VAT tax, and then have all government salaries and benefits adjusted annually to balance the budget.

They'll cry, no, that's terrible, that's unfair, that's cruel, that's...

that's...

exactly how the self-employed live.

Expenditures and revenue don't have to estimated--they're taken from the previous year's budget, so we know for certain.  It's just accounting, not estimating.  We do have to estimate the next years economy, but that can be done well enough, I think, to make it feasible.  And since any surpluses or short-falls are carried over to the next year, we don't have to be entirely precise.


Politicians already spend more money than they have.  This way just leads to people having to pay for it (nearly) immediately, instead of having it just tacked on to the debt.  If people didn't like the VAT rate, it'd give them real incentive to vote for politicians who were going to cut spending, rather than just voting for people who lower taxes by increasing the deficit.

The black market concern is a valid point, though other countries seem to manage a VAT okay, so it doesn't seem entirely infeasible.  And I suppose pretty much any tax can be avoided to some degree or another.

Budgets change more quickly than year to year and even a budget *is* an estimate. Corporations change tehir annual budget quarterly and also rview to see where tehy deviated from the budget they drew up the previous quarter.

Again, that's why it's based on the previous year's expenditures.  It's not what they plan to do, it's what they did do.  You might set out a budget at the start of the month, and you might change it a bunch of times, and you might not even stick to it after you change it, but at the end of the month, all I have to do is look at your bank statement to see how much you spent and how much you brought in.  Predicting how much things will cost is tough.  Adding up how much they did cost is fairly easy.
This message was last edited by the GM at 13:26, Fri 16 July 2010.

So we what, borow money each year and pay it back the next year? Better include interest in that calculation as well. Plus we still have estimations of how teh economy will perform included in the model.
Personally I think a much simpler model would be to work on a savings basis- taxes can be set wherever they want but aside from some minimum functions congress can't spend moeny until they have it saved and in the bank.
Of course getting tehre from a deficit situation could be a problem...

You can think of it that way if you like, but it's probably a bit better to think of it like a business--we earn money today for the goods we made yesterday.  We get paid each year, and we spend each year, even if the amounts are based on different years.


Yes, probably so.  I think I'd set it up so we'd have to pay all interest on debt, and 1% of principle on debt each year, though that's something that can be quibbled about by reasonable people.  But even if interest isn't explicity put into the system, it still gets paid.  When we pay back the loans we take out, with interest, that's an expenditure for that year, and thus changes the next years VAT rate.


True, but again, I don't think we're really horrible at that.  Maybe we misjudge the GDP by 10% some years, but I'd be surpized if we're off by that much very often.  And since surpluses and shortfalls are carried over, it just delays things a bit due to poor estimation.  If we're feeling risk-averse, we could set the VAT so it's expected to bring in slightly more money than necessary (again, with surpluses carried over to the next year), so if we over estimate the economy, we don't get hit too hard the next year.


Hmm...that's interesting.  My initial concerns would be:
1.  how to start it, since it seems like we'd have to spend at least a year not spending any money before we could have any in the bank, and that'd be pretty catastrophic.
2.  responding to emergencies would be hard.  I think there are many times when it's reasonable to spend money immediately, and collect taxes to pay for it later.  Disaster relief, wars, etc. come to mind.
3.  Politicians would benefit from their predecessor's savings, and/or be able to punish those that come after them.  I get elected in year X, save up half the money I need for a project before I get replaced, and now the next guy spends all the money on donuts for his staff.
4.  I think it might be harder to 'force' politicians to stick to this kind of rule.

I do like the idea, though, and will give it some more thought and try to come up with fixes to those problems.

Set the VAT tax, and then have all government salaries and benefits adjusted annually to balance the budget.

Government salaries and benefits, irregardless of what you've been led to believe, only take up a minuscule percentage of the overall budget of the government.

Sorry I missed this earlier.  Like Falkus says, government salaries and benefits don't really have an major impact on the budget.  As much as we might like to make politicians suffer by lower their salaries and cutting their health insurance policies, it wouldn't affect the deficit significantly.

If you mean just set the VAT, and then force the politicians to stay within a balanced budget, I'm all for it if you can find a way to do it, but it just doesnt seem to work.  We've got PAYGO now, and politicians always assume it's just for the other guys.  Dems say extending unemployment benefits is an emergency, so they don't need to find offsets.  Republicans say tax cuts just don't need to be offset at all.  Leaving it up to them to figure out how much money they can spend, and not going over that amount just doesn't seem to have worked well.

Also, letting them pick the VAT first doesn't hold individual law makers accountable.  They can vote for a really low VAT rate, and then vote for all manner of spending.  They won't get it, but they'll get all the political rewards for their votes.  They can tell people "I voted to cut taxes AND I voted to expand all programs.  If only they'd have listened to me, things wouldn't be so bad now!"  The poor shmo's who actually voted for a reasonable VAT, and voted down spending to balance the budget would get pummeled at the polls.

If it were just up to one person to decide the whole budget it might work, but with politicians having vote on it, accountability gets lost.  People who know they're not going to win the vote can propose absurd things that will be popular, and never have to worry about the negative consequences their proposal would have.

With the "pay for last year" method I'm thinking of, everything gets paid for in the end.  It only takes into account the governments net expenditures, so politicians can't game it by saying "oh, this doesn't count, its an emergency" or whatever.  They can't promise us free lunches, and blame the bill on other politicians (well, they could, but it'd be very easy to check their claims and see definitively that they're full of it).

Corporate budgets get voted on approval all the time, the difference is there aren't 100 people elected by just anyone with an opinion in the vote. First thing we need to do is cut down the size in raw numbers of the Senate and Congress. 2 congressmen per state was fine with 13 states, now it should be more like 1 per state.

What possible difference could that make?

I would be more inclined to reduce the number of representatives than the number of senators. There are states with senators actively opposed to each other, and reducing it to 1 senator wouldn't permit that diversity of viewpoints. (Although if we returned senators to being appointed by the state governor, I think it might make more sense then.)

The current size of teh top level of administration in teh legislative branch is excessive to actually getting things done. Like I said, 26 congressmen were enough when the country was founded, 100 is excessive, and senators even more so.

The current size of teh top level of administration in teh legislative branch is excessive to actually getting things done. Like I said, 26 congressmen were enough when the country was founded, 100 is excessive, and senators even more so.

There were thirteen states when the country was first founded, and now there's fifty. How can possibly claim that a hundred is excessive? It's the exact same proportion.

Because porportion of an administrative body to it's constituent system is non-linear. A $30 million company has generaly has a Board of Directors of 3-12 members (depending on the industry and other factors) a $30 *billion* company has a 12-18 member board of directors, not a 3k-12k member board. Imagine trying to get anything done with a 3k member board...

That's a false comparison. People aren't money, and a board of directors works entirely different from the congress.

The general principle of non-linearity still applies. The $30 billion business employs similarly more people, has similarly more shareholders, but the fact is that large groups do not manage effectively regardless of the size of the organization. when the organization grows you add middle management, not top management.

One could argue, perhaps, that congress is a better analog of middle-management (with the executive being top-level management).  Congress isn't meant to "manage" per se, and is largely split up into smaller committees, working groups, etc.  I'm not sure if I'd agree that the inefficiency of congress is due to there being too many people there.  Rather, it's more due to it being a democratic system, with very partisan members.  To a degree, it's set up to be intentionally "inefficient" at making changes (ie, the system makes it very difficult for a group to get all their ideas put into law).  Is that a problem?  Possibly?  Should it be changed?  Possibly.  Would just cutting the number of people involved do that?  I'm not so sure.  It might help somewhat, but I don't think it's the biggest factor of any of the problems with congress.

Congress sets the budget and passes laws. that is very much a top tier role. In the constitution the legislative and executive branch are held to be equal. If you thin the congress is middle management you have failed civics. The democracy of teh legislative branch can be maintained with smaller numbers- this is after all a republic not a direct democracy and the diea that 'ineffecient is better' is pure absurdism. A 50 member congress and (to pick a number out of my, er, hat) 250 member senate would be no less democratic than the numbers we have today, but they would be more efective at getting things done when they need to get done.

I think you misunderstood what I was saying.  Congress is "middle management" not in terms of its 'power' or being 'below' the executive branch, but because it deals with the nitty-gritty of putting the big ideas into action.  It's not the "we need a health care plan that covers everyone and takes care of costs" place, it's the thousands of pages of legalese about how to try to actually do that place.  They're the 'worker bees' of the three branches, in some sense.  They actually have to get their hands dirty, and do the heavy lifting.  It's full of task-forces, committees, sub-committees, working groups, etc.  It's not a perfect analogy, but I think there's more in it than you're giving it credit for.  Boil it down to 10 members, and it still won't function like a board of executives, because it's task is different.  Top management doesn't make up every rule and procedure for their company.  They come up with the big picture, and delegate the details to people below them.  Congress has to actually come up with all the rules and details.

Yes, the democracy of the legislative branch would be maintained with fewer people in it, that's my point.  Part of the inefficiency is that it is a democracy, and that inefficiency won't go away by reducing the numbers.  I'm not saying we have to keep more members in order to keep it democratic, I'm saying keeping it democratic with almost any number of reps will keep it at least somewhat inefficient.  You tell me that 50 members would be just as democratic as 250, to which I agree, but then you say that it'd be better at getting things done, and on that I'm unconvinced.  The reason things take so long to get through congress isn't because no one thinks it's their job to write laws, and they're all just waiting for someone else to volunteer, it's because there are two factions that disagree with each other about a lot of things and try to stymie the other side in anyway they can.  Sure, it might take less time to actually count votes with less members, but the filibuster won't be affected by reducing the number of reps, nor will most of the other parliamentary procedures that hold things up.

As for inefficient being better, it depends.  The system was intentionally set up to make it difficult to make large changes.  It's inefficient at implementing large changes by design, because the framers didn't want the government changing laws too quickly or too easily.  A system that was extremely efficient at changing laws would lead to major government overhauls every two years, most likely, oftentimes swinging back and forth between competing sets of laws.  In many cases, we don't want that kind of "efficiency."  To a degree, the goal of democracy isn't efficiency at getting the best solutions, but rather simply avoiding the worst solutions.  It's a "hedge our bets" system, that we know isn't going to be the best, but we're also pretty confident that it won't be the worst.

To be clear, I'm not saying reducing the number of reps would necessarily be a bad thing (I'm not particularly fussed either way, really), I just don't think it would have as much impact as you think it would.

No, they aren't. They currently engage in micromanagement, which is itself a contributor to gridlock and ineffeciency, but the congress sets policy. It may *currently* produce thousand page documents for it's laws but that is not it's role. The individual agency heads would be the middle management that are engaged in the how to do it and the nitty gritty details. Even if you were to assume that congress *should* be producing massively over-detailed legislation it isn't the actual congressmen who come up with the legislation, it's their staff. We have too many chiefs in the legislative branch.

Okay, what do you think will change if we have less of them?  Do you think democrats and republicans will start agreeing about everything if there's less of them around?

I think it is easier to have an amicable working relationship with 49 people than with 99. I think that with a smaller group there would be more familiarity and less demonization.