

Warren Buffett has me Confused - DanielBMarkham
http://www.whattofix.com/blog/archives/2011/08/warren-buffett.php

======
jackpirate
I think the author is making a small fallacy regarding investments. He assumes
that as the capital gains tax rises, investment will fall because the investor
will make less money. This seems true for small investors, who might decide to
"not invest" their money, and instead find starting their own business will
have a higher return than buying GOOG stock.

But if I have $1 billion to invest, then I don't have the option of "not
investing" that money. It _has_ to sit in stocks, bonds, or some other
financial instrument. A higher capital gains tax may change which instruments
I choose to invest in, but that money will all still be invested.

A legitimate argument against higher capital gains taxes is that really great
investors (i.e. the kind you _want_ selecting investments, such as Buffet)
will have less money to invest. This would hurt the economy, unless the
corresponding good caused by government spending is greater.

I think everyone would agree there is a happy equilibrium _somewhere_. Most
rich people think it lies on the side of less taxation. Buffet, in contrast,
seems to think that quality investors don't add as much value as they want to
believe.

~~~
glenra
> _If I have $1 billion to invest, then I don't have the option of "not
> investing" that money. It has to sit in stocks, bonds, or some other
> financial instrument._

No it doesn't. I could buy an extensive auto collection. Or a yacht or some
paintings. Something that is pretty much guaranteed to depreciate, but at
least I'll get some use value out of it in the meantime. (This is why when
Britain had top tax rates close to 100%, people bought Bentleys and Rolls-
Royces.) When investment is taxed at punitive rates, consumption becomes more
attractive.

~~~
jackpirate
I've three gripes:

First, I suspect most mega-rich find investing in all conditions far more
enjoyable than anything that money might be able to buy.

Second, even if they wanted to buy, it takes time to spend billions of
dollars. In the mean time, that money will be put to work in some form of
financial instrument. Even if it's only sitting in a bank, the bank will make
a more lucrative investment with it.

Third, it's not like buying an expensive auto collection is wasted money. That
money will be used to build the infrastructure of those companies. This has
the same shocking benefits of "pure" investment, although it is probably
mildly less efficient.

~~~
glenra
> First, I suspect most mega-rich find investing in all conditions far more
> enjoyable than anything that money might be able to buy.

Um, why would you suspect that? Do _you_ find investing just to be investing
more enjoyable than anything money could buy? Why would the mega-rich be any
different?

> Third, it's not like buying an expensive auto collection is wasted money.
> That money will be used to build the infrastructure of those companies.

What I had in mind was an _antique_ auto collection of the sort featured in
reddit a few days ago. Buying a warehouse full of deusenbergs, corvairs, the
taxi from seinfeld and a batmobile doesn't really "build the infrastructure of
those companies" Anyway, by that logic wouldn't _all_ consumption be
beneficial? Going on a round-the-world cruise _builds the infrastucture of the
cruise company_ , right? Heck, pay a prostitute enough and she might buy a
house with the income - that also "builds infrastructure"...

~~~
jackpirate
_Um, why would you suspect that? Do you find investing just to be investing
more enjoyable than anything money could buy? Why would the mega-rich be any
different?_

I picked my job because it is very enjoyable to me. I would do it for free if
I had too. The job of the mega-rich is to invest. They are under no financial
pressure (like say a Mexican immigrant) that forces them to take that job.

 _Anyway, by that logic..._

I totally agree that it's not the best use of the money, and would definitely
rather see it invested wisely. At the same time, it's not like the money's
just being burned. It adds a small inefficiency into the investment cycle, but
apparently Buffet thinks this inefficiency is not as big as most other people
do.

------
voxmatt
The primary point of Buffett's article isn't even addressed here: most people
pay a much higher percent of their income to the federal government than do
the "mega-rich" (I do have to say that don't really like Buffett's term there)
and, furthermore, that the economy didn't suffer one drop when the rates were
more reasonable (and in fact, did much better than under the historically low
capital gains rates of the last decade).

In fact, if you read this article closely, it really doesn't present an
argument, it just says "I don't wanna."

~~~
thematt
Buffett pays a lower percentage of income _by choice_. Meaning, he derives his
income from investments that get taxed at the capital gains rate. Everyone
else is free to make the same decision, but they don't. They "invest" in
houses, cars and other lifestyle purchases and then rely on their daily job to
provide their income...hence their tax rate being so high.

Rather than punishing the rich for making smart decisions, let's instead
educate the other people so they can make the same good decisions.

~~~
justinph
What?

Tell me how people should choose to not to get born into poverty or a family
that can't afford college.

You seem to think people should make their money from investment rather than
production, which has little value for a society. We should encourage people
to make money from actual productive work, rather than shuffling paper around.
Having higher taxes on wages (actual work) rather than capital (shuffling
paper) doesn't do it.

------
cjy
When the blog author argues that "Warren Buffet should write a check" he is
not oblivious to the fact that asking everyone in your tax bracket to pay more
taxes generates more revenue than making a voluntary contribution. Rather, he
is arguing that Warren Buffet feeling guilty about not paying enough taxes is
not a good basis for rasiing taxes on everyone in that category.

Rather, taxes should be placed where they will do the least harm to the
economy. Check out <http://en.wikipedia.org/wiki/Optimal_tax>. Ideally, taxes
should be placed where they will not distort people's behavior. So, the
relevant question is whether increasing taxes on capital gains will have a
change investors behavior making the economy less efficient. Buffet says "My
rich friends will invest no matter what!" But, he provides no evidence to
support this. On the margin, some investments will not be worth it with a
higher tax (as described by lionhearted). How big of a problem this is up for
debate. But we shouldn't make tax decisions based on Buffet's anecdotal
experience with rich friends.

~~~
chairface
> So, the relevant question is whether increasing taxes on capital gains will
> have a change investors behavior making the economy less efficient.

This presumes that we currently have an optimally efficient economy. You're
not allowing for the possibility that increasing the capital gains tax will
make the economy more efficient, seeing as how, in your own view, the system
is plenty distorted.

------
geebee
I think this post may understate the economic impact of low taxes on high
incomes. While I agree that in the short term, the deficit actually isn't the
biggest threat to the US economy, I do think we need to close it long term,
and the main options are 1) spending less and 2) raising revenues. If you can
get the second through growth, that's much better, but you have to be
realistic about how much growth you're going to get.

If you agree that some revenues are an inevitable part of good governance,
then taxes become inevitable. So while I'd agree that taxes (usually) deter
desirable behavior such as work, investing, saving, spending, and so forth, it
doesn't really make sense to talk about how taxes are innately bad. You need
to think about what level of taxation you can get away with, and where
taxation will do the least damage.

This is where I tend to part ways with most fiscal conservatives (though I
like to think of myself as one).

My take on it is: estate tax? No, I don't like it. I'd much rather allow a
person who has created great wealth to decide who to give it to.

Payroll taxes? No, don't like them. I'd much rather not deter work and put an
immediate regressive tax burden on people who get off their asses and work
poorly paid jobs.

So which is worse. A 10% tax on estates above $5 million, or a 13% tax on the
lowest income workers in America?

Which tax cut provides more benefit to the economy? A decrease in capital
gains from 15% to 10%, or a decrease in marginal tax rates for the middle
class? Which one would lead to more spending if you need to jump start the
economy?

You can tell which way I lean, I'm sure, but I consider these good questions
for reasonable debate. But I do think that a higher tax rate on very wealthy
individuals that enables a lower tax rate on low income individuals (through,
say, a reduction in the payroll tax) could bring a lot of tax relief where it
is needed most, and might be a better jump start to the economy than "trickle
down" economics.

------
aterimperator
> Investing is the science and art of placing money where it does the most
> good

Err, no it isn't. It's the science and art of placing money where it will grow
the most. That is neither equivalent nor synonymous with "does the most good".

------
tzs
Here's where the author gets lost:

    
    
       Either Buffett is making a point so fine I have missed it,
       or he's just blowing smoke up my ass. He doesn't know people
       who don't invest when you decrease their return by a
       significant percentage? What? If he's not fighting for
       each percentage point here and there, just what the
       heck kind of investing is he doing? Can I get in on
       some of this action?
    

This is in response to this statement of Buffet's:

    
    
       I didn't refuse, nor did others. I have worked with
       investors for 60 years and I have yet to see anyone
       -- not even when capital gains rates were 39.9 percent
       in 1976-77 -- shy away from a sensible investment
       because of the tax rate on the potential gain.
       People invest to make money, and potential taxes have
       never scared them off...
    

What the author has overlooked is that taxes lower the effective return on all
investments. If capital gains generating investment X is better than capital
gains generating investment Y when capital gains is taxed at 15%, X will still
be better than Y if capital gains is raise to 20% or even to the 39.9% it was
in 1976, and so in choosing between X and Y, the rational investor will still
choose X.

~~~
DanielBMarkham
_What the author has overlooked is that taxes lower the effective return on
all investments. If capital gains generating investment X is better than
capital gains generating investment Y when capital gains is taxed at 15%, X
will still be better than Y if capital gains is raise to 20% or even to the
39.9% it was in 1976, and so in choosing between X and Y, the rational
investor will still choose X._

This certainly might be a true statement, or not, depending on the specific
tax policy. Can you tell me exactly what policy Buffett was advocating?
Because I couldn't find it.

There are 3 possible arguments here.

Argument 1: I, being rich, should pay more money. I don't think Buffett is
saying that, because if he felt that way he would just pay more.

Argument 2: The government needs money. We have it. They should come and take
it. I couldn't find any mention of government need. He's not saying that the
super rich should pay more because it's needed. He's saying they should pay
because it's the right thing to do.

Argument 3: The rules should change so that things are "fairer". If this is
his argument, which I think it is, then what, exactly does he want to change?
Without knowing that, you can't make heads or tails of whether or not tax
policy would effect everybody the same or not. Note that if he's arguing for
specific policy, it might be that he personally ends up paying no more, or
even less. If this is his thesis, then how much he or his buddies actually end
up paying has nothing to do with it. He should describe what exactly would be
"fair".

There's no argument here, really. It's just Buffett saying he should pay more
of his fair share and some friendly poking at the Republicans. His piece seeks
to convey feeling, not make a case and support it (Note the folksy telling of
how much experience he has and how rates don't matter.) That't great -- it
could still be an awesome article. But it doesn't hold together well to try to
take the ideas and go somewhere with them.

~~~
festivusr
"But for those making more than $1 million -- there were 236,883 such
households in 2009 -- I would raise rates immediately on taxable income in
excess of $1 million, including, of course, dividends and capital gains. And
for those who make $10 million or more -- there were 8,274 in 2009 -- I would
suggest an additional increase in rate."

That is his recommendation. Is it not specific enough?

~~~
DanielBMarkham
By how much? 1 Percent? 20 Percent? Does "taxable income" include muni bonds?
Ex-pat VCs? Enterprise zones? Minority-owned businesses? Sales of primary
residences? And so on.

I'm not trying to be pedantic. The tax code is a mess. Simply saying you'd
raise taxes on folks making more than a million of taxable income a year
doesn't really say very much.

Something like an elimination of capital gains for startup investors and an
increase to 35% of gains made over $5 Million per year would at least have
some meat to it. Heck, just come up with a number. 20% rates good enough?

How can I evaluate "fair" based on that statement? Could you? I could make
assumptions -- such as the definition of "taxable income" staying the same or
perhaps the capital gains tax matching the income tax rate, but then I'm
arguing with myself, because I'm adding detail that wasn't present.

Nobody needs a 30-page whitepaper. A couple of paragraphs with specifics isn't
too much to ask. After all, it's the core of his argument.

~~~
festivusr
He posits that people making over a certain amount should be ponying up more
in taxes. A reasonable assumption to make is that taxes would be raised in
such a way that those people would be taxed more, and people who make less,
wouldn't be. The specifics are irrelevant to the general argument.

~~~
DanielBMarkham
You asked me a specific question: was that detailed enough?

The answer was no. Simply because it's detailed enough for you doesn't enter
into it.

Unless you're prepared to say that those folks paying one dollar more is fair,
then we have to have a number.

And note: Buffett didn't say they should pay more. He said the rates should be
raised. These are two completely different concepts. You could raise the rates
and have people move their money in such a way as to not pay any more at all.
From Buffett's position, simply talking about rates, this would be an
acceptable outcome.

I think we're at a spot where we can agree to disagree. Whether or not rich
folks owe their fair share or not is a meaningless conversation unless and
until you can actually start describing what you mean by "fair share." Without
those details, it's just political feel-good bullshit, sadly. I expected more
from Buffett.

~~~
festivusr
Let's say I have a buddy, Bill, and we go out for dinner every so often. He
doesn't make as much as me, but he fights me for the bill every time. I end up
paying less than he does most of the time.

I tell my wife, "You know what, it's not fair that Bill pays so much all the
time. I should pay more."

My wife then says, "Your argument is confusing, and what's more, it's feel-
good bullshit. You didn't give me a specific number on how many dollars you'd
want to pay. Would you pay with a credit card? Traveler's Cheque? Based on
total after tip or before?"

The supposition between reasonable people _should_ be that I pay some
reasonable amount more than I have been paying, but I don't go over the top
and foot the entire bill. Is it fair to _ask_ how much more I'd be paying? Of
course, and the final justification of just how fair the arrangement is would
depend on that number, as you've said. However, it's perfectly reasonable to
say someone should be paying more, and have a discussion on that topic,
without having to go deep into the specifics of how much more.

------
drags
If there is more demand for government bonds (due to higher capital gains
taxes, for example), I imagine the yields on government bonds will decrease.
That would probably help the economy more than hurt it.

Taxes (in general) apply to _gains_, inflation applies to _principal_. If
30-year Treasuries start paying 2%, capital gains could be taxed at 50% and
people would still invest in equities just to have a shot of not having the
real value of their wealth cut in half over the next 20 years.

The apocalyptic vision expressed in the article (nobody will invest in bonds!
and nobody will invest in stocks!) is overblown. The market will adjust to
demand, and the fear of inflation will grow as bond interest rates decrease.

------
Yxven
Buffet says the mega rich aren't being taxed enough. Daniel assumes this means
"raise the capital gains tax" and argues that it'd hurt a lot more than the
mega rich.

If there's anything government can do well, it's the ability to tax
creatively. A simple solution (and I'm not saying it's the best solution)
would be to expand the income tax to cover all forms of income (lowering it in
the process) and eliminate the capital gains tax.

~~~
DanielBMarkham
I didn't want to get into the discussion here on HN -- seems like everybody
wants to fight the battle of taxes 2012.

But I did want to point out that the purpose of my article was to demonstrate
my confusion and ask you guys for help, not necessarily to state that policy
would hurt more than the mega rich. I understand the reasons pro and con for
tax reform -- it's a great topic. What I didn't understand is what the hell
Buffett was trying to argue: fairness, social efficiency, marxist philosophy,
what?

As part of that, I felt that I had to come clean and show my position -- I
think the entire debate is phony and just a way to control the masses. But I
really, really didn't want to get into the politics. My interest as a writer
and outhouse philosopher was the clarity of his piece, not the validity of the
argument. (Commenter Ron came by the blog and made a great defense of
Buffett's position. You should read it if you're interested.) Once we state
our case clearly, then productive discussion has a chance to begin.

And it beats the living shit out of me how asking questions can somehow be
taken as challenging Buffett or talking outside my expertise. The whole idea
of asking questions is to demonstrate you don't have knowledge and to ask for
help. People act as if I somehow called Buffett out. Geesh.

~~~
festivusr
You said "I understand that people want higher taxes on the rich. I think it's
stupid, but I'm not going to argue about it." This is not a question, it's a
statement, and a provocative one at that. Saying you're not going to argue
about it is not going to stop discussion on exactly that point.

You also said "His real argument is probably too snooty of an argument to make
in print, but something tells me that's what he's really getting at. I wished
he'd have just come out with it, though. It would have been a lot more
honest."

This strongly implies that the author (Buffett) is dishonest in his arguments.
I'd say that's calling him out.

~~~
DanielBMarkham
"Honest" as in "straightforward," "direct" As opposed to convoluted or hard-
to-interpret. Not honest as in telling the truth. If I tell you that it was
about time to make an honest offer on a house, that doesn't mean that somehow
you have been lying all along. The social utility argument was, in my mind,
his best one. He should have been more direct about making it.

The first part was simply an expression of my bias. I owed that to the reader.

Good grief.

~~~
festivusr
I'd posit that your real point is exactly that which you say you don't want to
argue. It's a strong statement and worthy of discussion.

Much more interesting to discuss that than how clear Buffett's argument is.
(Which is quite clear, in my opinion.)

~~~
DanielBMarkham
Last comment: this has long ago passed the point of diminishing returns.

I originally wrote "intellectually dishonest" mostly out of habit. It's a
phrase I like. But then I looked at it and realized that was way too harsh of
a statement. Buffett is not lying here. He's just a nice old man (probably a
little on the cranky side) who wants to play at politics a bit.

I don't think there was any subterfuge or lying at all going on. What I think
is that he could have used a good editor, but probably when you are worth 3
kazillion dollars it's tough to get somebody to take you out to the woodshed
and tell you to tighten up your piece, make a thesis, and then support it. I
have structural problems with the article, not concerns about the honesty of
the author.

------
Hyena
Note bene: since the effective tax rate on the wealthiest Americans is lower
than that of almost everyone else because of how tax law treats investment
income, Buffett's argument is for the time being indifferent between
progressive and flat taxation.

------
lionhearted
For people saying "It won't make a difference on capital investment" I point
you to the Windfall Profits Tax in Mongolia. It was a 68% tax on any mining
deposits found.

Well, so what? If you're profitable, who cares if some is taken off the top?

But if you thought that, you'd be mistaken. Simplified example:

You're thinking of building a mine. It's going to cost you $100M. There's a
50% chance the mine contains $220M in deposits and a 50% chance it's a total
dud.

With no windfall profit tax, your average return is:

.5 _(-$100M) + .5_ ($220M-$100M) = +$65M profit, for a 65% return.

Of course, you'll never get $65M. You'll either wind up -$100M or +$120M.

Buuuut, if the government taxes that at 50%, your new EV is:

.5 _(-$100M) + .5_ [($220M-100M)/2] = -$40M average return, for -40%.

Those aren't funny numbers. A 50% tax on profits drives capital out of risky-
but-lucrative industries, since you're holding the bill if it fails but you're
writing a fat check if it succeeds.

It's a simplification. In theory, you could maybe create a conglomerate that
averages all sorts of bets like that together. But in reality, there will be
some companies that have a 50% chance of losing everything, and a 50% chance
of more than doubling your money... that work out mathematically with low-ish
taxes, but aren't endeavored with higher taxes.

Mongolia repealed the windfall profits tax a few years ago, by the way, and
billions of investment capital went in almost immediately into mining.

~~~
tzs
That doesn't seem correct. For the second case, where the mine contains $220M
in deposits, shouldn't it be:

    
    
        -$100M cost to build mine
        +$220M revenue from sale of deposits
        ------------------------------------
         $110M profit
     

That leaves you with $220M from the sale of deposits less $55 million for the
50% tax on the $110M profit, so you end up with $165 million.

So, starting with $100M to invest, half the time you end up with $0, half the
time you end up with $165M, giving an average outcome of $82.5M, for an
average return of -17.5%.

Without a tax, half the time you end up with $0, and half the time you end up
with $220M, so the average outcome is $110M, for an average return of 10%.

------
joe_the_user
Wow,

 _I think my group should pay its fair share_ (paraphrasing)

OK, lets do little example.

Suppose a large group of your friends a pizza and half the people just hadn't
paid. Would you say "hey, I'll pay for all these people" or "hey, we all need
to pay our fair share".

How hard is that to understand?

~~~
mikeash
If I'm out with my friends, you're damn right I'd want to pay for the ones
struggling with a minimum-wage job and consider that to be my fair share.

~~~
jackpirate
You missed the point. That's exactly what Buffet wants. In the pizza example,
the people who are not paying their fair share are not the minimum-wagers, but
rather the mega-rich who pay only 15% capital gains.

~~~
mikeash
The post I'm replying to placed "pay my fair share" in opposition to paying
for the pizza eaten by the people who didn't pay for themselves. I'm pretty
sure that the point you're making is not the point he was making, which to me
sounded like the standard argument against progressive taxation.

~~~
joe_the_user
No, you're misinterpreting my original post.

jackpirate is correct.

~~~
mikeash
Thanks for clearing that up. Sorry I got it wrong. At least we all agree!

------
earl
Let's start with the first argument: "His message seems to be 'I'm rich, and I
want the super-rich like me to pay more in taxes.'

That's great. Write a check."

But him writing a check isn't the point. If Warren writes a check, we get that
check's worth of new government income. If taxes are raised, for Warren's
contribution of the same check, we get much larger pool of spending. Put more
simply: plan (a) warren donates $10 and we get $10 of government income; plan
(b) warren is taxed +$10 and we get $10K of new government income.

The rest of the blog is well characterized as Dunning Kruger in action.

~~~
lionhearted
You picked the least interesting point of Markham's to disagree with.

These two were more interesting:

> Ok, I'm calling bullshit. What does "sensible investment" mean? Does it mean
> the amount invested, the risk, and the amount expected in return? Because
> last I checked, you'd take the amount you're getting in return and decrease
> it by your tax rate.

He then goes on to note tax-deferred and tax-advantaged investments will see
capital move to them if tax rates are changed.

Which is a good point. And yes, every serious investor calculates their after-
tax return and makes it one of their decisionmaking criteria. That's a crucial
point that's obvious when written out, but many people miss it.

> The rest of the blog is well characterized as Dunning Kruger in action.

This should be Godwin's Law II: Whoever accuses someone else of Dunning Kruger
loses the argument. There were interesting points in there. You apparently
disagree, but that's not a good reason to be flippant. Just address the points
you disagree with. Changing tax laws changes the suitability of investments
and changes the allocation of investments made and legal structures used.
Those are good points and seem correct on a glance.

~~~
pyoung
Anyone who has the imprudence to argue with Warren Buffett, the savviest
investor of all-time, is most likely a victim of the Dunning-Kruger effect. If
you can't understand why, then you also may be a victim of the same effect.

~~~
thestranger
How about this? [http://www.gabrielweinberg.com/blog/2008/05/the-dumbest-
thin...](http://www.gabrielweinberg.com/blog/2008/05/the-dumbest-thing-ive-
heard-warren-buffet-say.html)

~~~
jackpirate
It's so dumb, I'm 403 forbidden to see it.

------
Astrohacker
Force is unethical. The government's fundamental tool--which distinguishes it
from most other organizations--is that it forces people to do stuff under the
threat of violence (and it often actually employs violence to demonstrate that
it is serious). The government is therefore unethical. Taxes shouldn't exist
at all, because it just a protection racket from a scaled up version of the
mafia. The answer is not to scale the taxes on the rich up, but to scale the
taxes on everyone down to zero. Exchanges between people should be voluntary
only. This is the only ethical solution. This will require a cultural change
where everyone realizes how unethical it is to employ force to get things
done.

/controversial view

~~~
Locke1689
_This is not initiation of force. It is enforcement of contract, in this case
an explicit social contract. Many libertarians make a big deal of "men with
guns" enforcing laws, yet try to overlook the fact that "men with guns" are
the basis of enforcement of any complete social system. Even if libertarians
reduced all law to "don't commit fraud or initiate force", they would still
enforce with guns._

~~~
glenra
> in this case an explicit social contract

It's _explicit_? Great! Can you tell me exactly what this explicit contract
says, who signed it, and how it is that whoever signed it managed to get my
power of attorney?

~~~
Locke1689
_The constitution and the laws are our written contracts with the government.

There are several explicit means by which people make the social contract with
government. The commonest is when your parents choose your residency and/or
citizenship after your birth. In that case, your parents or guardians are
contracting for you, exercising their power of custody. No further explicit
action is required on your part to continue the agreement, and you may end it
at any time by departing and renouncing your citizenship.

Immigrants, residents, and visitors contract through the oath of citizenship
(swearing to uphold the laws and constitution), residency permits, and visas.
Citizens reaffirm it in whole or part when they take political office, join
the armed forces, etc. This contract has a fairly common form: once entered
into, it is implicitly continued until explicitly revoked. Many other
contracts have this form: some leases, most utility services (such as phone
and electricity), etc._

~~~
glenra
That argument is fundamentally silly for all the reasons identified long ago
by Lysander Spooner (<http://en.wikipedia.org/wiki/Lysander_Spooner> ) in _No
Treason: the Constitution of No Authority_ (
<http://lysanderspooner.org/node/44> ).

wikipedia quote: " _Spooner bolstered his argument by noting that the federal
government, as established by a legal contract, could not legally bind all
persons living in the nation since none had ever signed their names or given
their consent to it - that consent had always been assumed, which fails one of
the most basic burdens of proof for a valid contract in the courtroom._ "

Adding "and the laws" is problematic because "the laws" are vague, unknowable,
constantly changing and in fair part contradictory with one another and with
the constitution.

The argument that the government contract even _could_ work this way pretty
much assumes what needs proving: that the government "owns" the country and
all the land and people in it. If the government _doesn't_ automatically own
your land and your kids, it can't be assumed that you've contracted with the
government by virtue of buying a house or being born. But if the government
_does_ own your land and your kids, no social contract is needed - your
allegiance is already mandated without it.

~~~
Locke1689
Actually read my post this time. The argument clearly addresses Spooner's
argument that there is no signing of names or giving consent. Your parents
explicitly give consent by making you a citizen of the United States when you
are born or, if you immigrated, by explicitly pledging allegiance.

Also,

 _"No Treason" is a lengthy rant that doesn't take longer than the first
paragraph to begin its egregious errors.

For example, in the first paragraph: "It [The Constitution] purports, at most,
to be only a contract between persons living eighty years ago." Thus he
focuses his attention on the Preamble, and evidently ignores Article VII,
which says EXACTLY who contracted for the Constitution:

"The ratification of the conventions of nine States shall be sufficient for
the establishment of this Constitution between the States so ratifying the
same. Done in Convention, by the unanimous consent of the States present, the
seventeenth day of September, in the year of our Lord one thousand seven
hundred and eighty-seven, and of the Independence of the United States of
America the twelfth. In Witness whereof, we have hereunto subscribed our
names." [signatories FOR STATES omitted.]

He's wrong on this simple matter of fact: the constitution says who contracted
with whom. But then he goes on to make a big deal about the people of that era
being dead, as if contracts between organizations lapse when their office
holders depart.

The rest of his "analysis" is equally shoddy, and consists largely of calling
government a collection of thieves and murderers at least 75 times. David
Friedman, in "The Machinery of Freedom", says Spooner "attacks the contract
theory of government like a lawyer arguing a case": but REAL presentations of
cases have to cope with counterarguments, and can't depend so heavily on
invalid presumptions which are easily shot full of holes._

As for the argument that the laws are vague, unknowable and constantly
changing -- part of the law is that the law will be interpreted by the courts.
Yes this does mean that you can be in unknowing violation of the law. However,
it was part of the contract that you agreed to. By staying in the US as a US
citizen you are continuing to re-up your contract. If you don't like this
contract then you are free to emigrate.

~~~
glenra
Look, if I wanted to read Huben's "non-libertarian FAQ", I'd do that. I don't
need you quoting random snippets at me (without linking to it) as if they
contained actual information.

But tell you what, two can play at that game. I wrote a counter-FAQ a decade
ago. I'll quote from that. :-)

> He's wrong on this simple matter of fact: the constitution says who
> contracted with whom.

(from <http://www.impel.com/liblib/NNLFAQ.html#9> )

 _What the constitution says regarding its own ratification procedure is
essentially irrelevant to the argument that Spooner is making. Spooner's
comments speak to the question of who this contract should be considered
binding upon. Article VII is not overlooked, it is simply irrelevant to this
question.

To illustrate: Suppose I wrote a document which I called the "NNL
Constitution" that included the line, "Glen Raphael hereby has the legal right
to seize Mike Huben's television and automobile."

In Article VII of this document I would write this: "The ratification of the
conventions of three Fiefdoms shall be sufficient for the establishment of
this Constitution between the Fiefdoms so ratifying the same. Done in
Convention, by the unanimous consent of the Fiefdoms present, the nineteenth
day of January, in the year one thousand nine hundred and ninety-six. In
Witness whereof, we have hereunto subscribed our names." [signatories FOR
FIEFDOMS omitted.]

"I'd sign this as a representative of my fiefdom. I'd get a couple other
libertarians to sign for the other two fiefdoms, one of which is defined to
include Huben and his property. The head of the fiefdom having jurisdiction
over Huben would have been duly chosen for that role in a "popular vote" that
didn't happen to include Huben . Now, is the NNL a valid document with respect
to Huben? The answer is clearly no. No matter what the document says, the
people who signed that document didn't have his power of attorney so they have
no ability to contract on his behalf. They can make binding contracts with
each other but not with him, without his consent._

Googling up and regurgitating talking points made by people "on your side" is
no substitute for thinking about what the person you're talking to is saying.
If you want to see where Spooner is right or wrong, there's no substitute for
reading Spooner. Reading Huben's dismissive take on Spooner is not going to
make you more informed.

Just as one can't use what it says in the bible as evidence that we are bound
by what the bible says, you can't use what it says in the constitution as
evidence that we are bound by what the constitution says. It's a document.
Anybody can write a document and make claims about it. The question is: are
those claims reasonable and legally binding? Spooner had interesting things to
say about this. Huben...not so much.

>By staying in the US as a US citizen you are continuing to re-up your
contract. If you don't like this contract then you are free to emigrate.

Suppose I live in a bad neighborhood where my car regularly gets broken into
or my apartment burgled. You could say that by staying in that neighborhood, I
agree to a "social contract" that includes these sort of infrigements. And if
I don't like it, I could move. That _is_ the "contract" we have with the US -
essentially the same one might have with a local mafiosa. The organization
lets you keep your livelihood as long as you stay in line, under threat of
force if you step out of line. Don't try to pretty it up.

It's not an _explicit_ contract, it's an _implicit_ one and it is coerced. The
idea of a "social contract" is a theory about how consent _could_ have been
acquired in some society, but it's not relevant to any actual society - the
governments we've got generally got in through terror and force and the
populace tacitly putting-up-with-it. We "consent" because we don't want to go
to jail, because we want to go along with the crowd, or because we don't see
any other options. Not because our parents made some grand gesture they didn't
even realize they were making. The random assortment of actions you say
constitute signing a contract all have in common that they don't involve
actually, you know, _signing a contract_.

~~~
Locke1689
It's a sad fact that I can quote from a Usenet piece years ago and you're
still making the tired points he refuted.

~~~
glenra
There's a difference between "refuted" and "dubiously asserted, ignoring all
arguments to the contrary". :-)

Looking back on this exchange, the core of our disagreement is the word
"explicit". A contract is an agreement. If I sign a piece of paper saying I
agree to something, that is an "explicit" contract. But if you merely _infer
based on my actions in some context_ that I've agreed to something, you are
arguing for the existence of an _implied_ contract.

Huben's text confuses _the agreement_ with _the terms being agreed to_. The
legal codes might be written down explicitly but my consent to them is _not_
written down - it is at best _implied_. There is no explicit social contract.
If you claim there is, what's the basis for your claim? When you say agreement
is established by doing X or Y, how do you know that? Just because Huben said
so? What is the _source_ of your knowledge that these ten acts establish a
contract and some other set of acts don't? Could I not with equal
justification claim that, say, picking your nose makes you a citizen of
Hackerstan and subject to some random set of laws I've written down?

~~~
Locke1689
Your citizenship is the explicit signature on the contract. As long as you are
a citizen you are a signatory. You can remove your name at any time.

~~~
glenra
> _Your citizenship is the explicit signature on the contract._

A "citizenship" is not a tangible thing. I didn't do anything specific to get
a "citizenship", so how can my allegedly "having" one constitute an _explicit_
anything?

Do you not see how circular the argument is? Is your claim _really_ that (a)
I'm bound to the US legal code because I "have a citizenship", and (b) I "have
a citizenship" because the US legal code says I do? Are you sure you've
thought this through?

> _As long as you are a citizen you are a signatory._

I'm sorry, but to me the word "signatory" implies _having signed something_.
Your claim makes about as much sense as saying "as long as you have red hair
you are a signatory".

> _You can remove your name at any time._

That is not actually true; you can't renounce citizenship without the
government's consent which it only grants in limited circumstances. You can't
do it while residing in the US and if you have significant assets or income in
many cases you need to either keep paying income tax for TEN YEARS after you
leave or are required to pay a huge one-time lump sum. The practicality of the
situation is a bit like being born a slave and having the (limited) right to
purchase your freedom later in life.

