Unhelpful Paywalls

It happens quite often—sometimes many times a day—that someone gives me a link to information somewhere that they think I should read. Many of those those links don't actually take me where the person referring me meant for me to go. There's an intermediate stop at a paywall, a chance to subscribe to someone's information source.

Another time I'll talk about what's wrong with news pricing, but for today I hope we can agree that some news subscriptions are too expensive for mere mortals, and even free subscriptions aren't really free—they take time to sign up for, and they promise cascades of unwanted email. So when people reach one of these paywalls, there are various reasons why they often either can't or don't go beyond it. If not out-and-out barriers, paywalls are major impediments to obtaining timely information.

They are also more likely to be actual barriers to someone who is poor than someone who is rich, so they create a stratification of information availability by class in our society, dividing us along familiar lines into “haves” and “have nots,” informationally speaking.

Sometimes the downstream effects of that information imbalance just seem very unjust.

Insisting on a “Paywall Exception”

While I'd like to propose a wholesale rethinking of how we fund our news industry, for now I'll propose something simpler—a “Paywall Exception” for some topics: that are just so important that it isn't in the public interest for them to enjoy intellectual property protection. I just don't want to see paywalls keeping the public from knowing about and sharing important categories of information:

• For impending storms, lives are on the line. Advance notice could make the difference between life and death. If there is information about where those storms are going or how to prepare, that information should be freely available to all. Anyone who wants to profit on such information is guilty of sufficiently immoral behavior that we need a strong legal way to say “don't do that.”

• For pandemics, a lack of information is a danger not just to each citizen's own personal health, but to the health of those impacted by people making poor decisions that might lead to transmission. It is a moral imperative that everyone in society have access to best possible information.

• For existential threats to democracy or humanity, we cannot afford to close our eyes. The stakes are far too high. Democracy is under active assault world-wide, but especially in the United States right now. Climate is similarly urgent, and aggravated by how societally mired we are in deep denial, unwilling to even admit how very serious and rapidly evolving the problem is. Disinformation campaigns are a big part of both situations. Those peddling misleading information are most assuredely going to make their propaganda as freely available as possible. Truth can barely keep up. We don't need further impediments like paywalls on top of that, or else, soon enough, there won't be any of us left to matter.

I get that news outfits need to make money, but when I see critical information about an upcoming storm, or a possible pandemic, or assaults on democracy or climate change, I get more than average frustrated by seeing that such information is stuck behind a paywall.

There must be no secret storms, no secret pandemics, and no secret existential threats to democracy or humanity.

They should make their money another way.

 

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Author's Notes:

If you got value from this post, please “Share” it.

It's beyond the scope of this essay, and would have complicated things too much to mention it in the main body, but there is also the issue of how to implement this exception. It could be voluntary, but I doubt that would work. Or people using the information could assert fair use, but that's risky given the economic stakes in copyright violations. Three strategies occur to me that perhaps I'll elaborate on elsewhere. (1) We could expressly weaken copyright law in some areas related to news, so that it exempted certain topics, or shortened their duration to a very small amount measured in hours or days, depending on the urgency of the situation; (2) we could clarify or extend the present four criteria for fair use; or (3) we could (probably to the horror of some of my lawyer friends) extend intellectual property law to have the analog of what real estate law calls an easement, a right of non-property holders against property holders to make certain uses. I kind of like this latter mechanism, which leaves copyright per se alone and yet could be better structured and more reliable to use than fair use. (One might even sue for such an easement where it didn't occur naturally.) But that's topic for another day.

The graphic was generated at Abacus.ai using Claude Sonnet 3.5 and variously either Dall-E or Flux.1. There are many reasons I'm not entirely sure I'm happy with so-called “AI”—or Large Language Models (“LLMs”)—but for now I am using graphics generation to experiment with the technology since, like it or not, we don't seem to be able to hold the tech at bay. The prompts used were, respectively:

1. (Flux.1) «Design a 500x500 image of a fancy signpost, with text on a brown background and white gold trim, that bears the words "Entry Restricted" with a horizontal line below that text and above additional text that says "Critical Info Beyond Only For The Rich".»

2. (Dall-E) «Design a color image of photocopier under glass with a sign attached that says "In case of societal threat, break glass." A small hammer is affixed, attached by a chain, to help in the case that the glass needs to be broken.» (But then the hammer was not correctly placed in the picture. It was detached from in the chain and in a strange place, so I had to fix that in Gimp.)

3. (Flux.1) «Draw a 1000x500 image of an elegant sign, with a brown background and white gold borders and lettering, in copperplate font, that has three messages, each on a separate line which are "No Secret Storms", "No Secret Pandemics", and "No Secret Existential Threats", but make these messages share a single use of the word "NO" in the left hand column, tall enough that the rest of the phrases can appear stacked and to the right of the larger word "NO".»

Capitalism's Dominion

I've seen a lot of news reports explaining why even though the Dominion law suit was settled out of court, we in the public should still see this as a victory.

I just want to say this is bunk.

The problem here is one of reductionism, by which I mean taking a hard problem that's hard to think about and reducing it to some other proxy problem that appears to represent the original problem so that the problem is easier to think about. This is a common and sometimes defensible practice, but one must always double-check when solutions start to arise in the proxy space that the original problem is being solved.

Just as an example, we hear proposals to address carbon in the atmosphere by taxation. This is because people think that taxation will create economic pressure to spend in ways that will fix the problem. But if you look at how the rich do their taxes, they mostly do not in fact spend in ways taxation is trying to make them. Rather, they invest in accountants who find loopholes, or they invest in regulatory capture to create loopholes. And then they smugly claim they did their part on the original problem, when they didn't.

Too often in recent years, media has gotten to the place where we have serious societal problems for which they have on-hand experts they can call in when something happens. When something happens for the first time, sometimes it's good to call in an expert to hear how they think about it. But finding a way to understand technical detail is not always a substitute for good journalism. If one becomes too practiced at calling up an expert on speed dial, one stops asking the question "What really happened?" and "What does the public need to know?"

Because here's the thing: What the Dominion settlement really exposes is the stranglehold capitalism exerts on society by insisting on reducing civil disputes to money. While clearly Dominion suffered enumerable economic harm, just as clearly the real damage was non-monetary, to our democracy, our society, and civilization. And none of the news outlets are saying that. They're so focused on how we have experts in law that they aren't focused on the question of whether our system of law is serving us at all in this case. It simply is not. It may serve Dominion. They may take home quite a payday. But that is not why this was a big story. And the big media places have lost this point.

We as a society have no standing to sue. We hoped in vain this would proxy for us, yielding results as non-monetary as the damage. Of course that was fantasy. But it explains the crushing sadness many of us feel. Pundits too practiced with procedural expertise keep missing this.

We as a public are sad, but this sadness is not a failure to understand process, so stop trying to tell us what a historic win this is. The public understands acutely that even a historic win is not helping them. This was not a success for society no matter what career policy wonks say. Ordinary folk know.

What we as a society need is a recognition that there is both process due and none to be had. We need to be allowed to express our pain. That pain needs to be acknowledged. If you want to call in experts, call in grief counsellors or experts in how to change government because from where we sit, the problem is that only the rich can change government, and that's why we are in collective pain.

Not only will it be busines as usual for Fox, but they will write off a big piece of their payment as a tax deduction (meaning the public will pay for some of this), and the rest will be passed along as costs to subscribers (which means viewers will pay more). Some will tell us that increased costs to viewers will hurt Fox and that this will ultimately do well. But meanwhile they will go on lying and issuing propaganda in exactly the way they did, and the real, non-monetary damages will continue to mount without recourse.

The Big C

Climate Change. There are a great many things I could say about Climate Change, but today I want to make a pretty simple point about the likely health effects of Climate Change: They won't be good.

It's also common in discussions of Climate Change to talk about the effects on large systems, like cities or business sectors, or on large groups of people, sometimes even the entire population of entire countries. Such talk, I worry, can make your eyes glaze over, like trying to talk about whether the war cost one or three trillion dollars. Who can even know the difference? And yet, the difference most certainly matters.

So I'm not going to focus on large systems or groups. Most assuredly, they'll come up incidentally, but really I'm just going to talk about myself, what I fear will be the impact on me personally. But really you should know I'm not just talking about me, or meaning to say my situation is more important. I'm just using my situation because I know it best. There will be many like me. If you like, as you read along, substitute the name of someone near and dear to you, and substitute their situation. If you find a way to put a personal face to Climate Change, I'll have achieved my goal today.

Cancer is another aspect of it for me. I was diagnosed with thyroid cancer last year. I was fortunate to be covered by decent health care. Just lucky. There was a gap some years back where I could not afford health insurance and, had the cancer happened then, it might have ended differently. Fortunately, I was beyond that rough economic time and evaded what might have otherwise been a death sentence. Others have been less fortunate, which upsets me greatly. We should have universal health care.

I didn't write about my cancer at the time it was happening. Well, I did, but only indirectly. I wrote a post about roller coasters the night before I went into surgery as a metaphorical way of expressing how out of control I felt. Everything was on autopilot, and I was plenty scared. But at the time I didn't want to acknowledge the situation publicly. In fact, this article is my first time writing about it in a web-accessible location.

Frankly, I'd really rather have such matters remain private. It's a curious thing about politics. I've been a strong advocate of privacy rights for all of my adult life. My personal web page begins with an essay talking about the separation between my public and private persona, and how I don't like volunteering personal information to the public eye. There are too many ways to abuse it. There are a lot of things about me that are not the world's business and that ought not be fodder for people at search engines to browse or for marketeers to slice and dice for sale.

Citizen participation in a democracy sometimes requires otherwise, however. It's no one's business what my religious beliefs are, what I think of abortion or being gay, or how my family chooses to deal with end-of-life issues. Yet modern American politics is typified by invasive meddling in areas such as these, and so I find myself joining those who feel the urge to stand up and be counted on such important matters, even at the sometimes risk of having what should be our private lives out on display. I don't like it at all. But I see no way around it.

To speak of my medical position is scary because it's possible the information can be used against me. Of course, my medical situation comes as no surprise to insurance companies which can force me to disclose my medical history as a condition of coverage. At least, thanks to recent legislation, they can no longer exclude me for having a pre-existing condition. But they can still raise my rates, or those of an employer who has me in their “pool.” So an employer at some point in the future may quietly let me go or another may fail to hire me, never saying the reason. Who can know? What I do know is that insurance companies pay people to figure out clever ways to get around government restrictions and back to business as usual.

I guess that's why I read every day in the news that voters are ready to vote the Republicans back in. I guess voters think the protections we have now are too strong, and they'd rather go back to a time when the insurance companies weren't screaming in pain from the thumbscrews to which we consumers have put them.

Commerce is also a key component in my story. Adam Smith's much-touted “unseen hand” of capitalism has seen fit to decide that we should not make things locally any more, you see. We buy them from elsewhere. Who knows where? We assume the fuel will continue to flow, and flow cheaply, to get things from here to there. We assume there won't be floods intervening. We assume there won't be disease that causes us to restrict travel. We assume a great many things. And because of those assumptions, we're comfortable believing that commerce will just continue to function reliably no matter what.

And as long as it does, I'm probably fine. Or as fine as one gets having had a recent cancer. There are no guarantees. A highly competent surgeon removed my thyroid and with it the cancer. So I'm ahead of the game in that regard. I can't complain. I probably had more problems fighting the provider of my short term disability coverage than the cancer itself. At least with the cancer I had skilled professionals acting as my advocate. With the insurance company, it was the other way around. But I persevered in spite of administrative obstacles, and subsequent tests have so far shown me all clear. Odds are that I'll die of something else, not thyroid cancer. Of course, I still have to manage life without a thyroid, but that's mostly a routine matter in modern society. I just take some pills every day, which I can always get from the local pharmacy. Always. No matter what.

And that brings me back to Climate Change. It threatens us all in so many ways. The water level might rise. There might be more and stronger storms. The food supply is certainly in danger. If that falters, there could be famines, even wars. Any of those things could affect me, but I don't dwell on them a lot, at least not in the obvious way. But all of these problems have something in common, and that's where my mind often goes: Even in mild form, they can disrupt the normal flow of society.

Carrying capacity of the planet figures in here, too. It's defined by Wikipedia as “the population size of the species that the environment can sustain indefinitely, given the food, habitat, water and other necessities available in the environment.” I've had many debates with people about what that number is. I agree with those who think we're already there. I've heard others suggest that carrying capacity is not a number but a function of technology—that as technology improves, so will carrying capacity. I don't agree. Hanging our hopes on technology is dangerous because if technology ever fails us, we will suddenly and “unexpectedly” find ourselves with far less ability to sustain ourselves than we thought we had. It's not written in stone that technology will get ever better and more accessible.

Ask someone who's been through a hurricane or a flood and has had to back up and start over. The march of increasing technology is more variable than we sometimes allow for. The temptation may be to dismiss such things as “local effects,” but there can be global disruptions. Peak oil and the looming shortage of rare earth elements will have profound effects on the sustainability of present technology. And Climate Change is affecting food supplies in the ocean and even on land, as Russian droughts have caused a global wheat shortage. We've also built a society that relies on global assembly of goods; things are not made in one place any more. If transportation becomes suddenly expensive or inaccessible, that's a problem that can be highly disruptive.

When the stock market crashed, we found suddenly that we had been overleveraged. People who thought they were making enough money or spending it in the right places came to realize that they had based these thoughts on assumptions that the world would always be precisely as it was, only always better. Suddenly they realized how fragile this assumption was and how little prepared they were for deviation. Climate Change is going to be a rude awakening that we have spent our technology enabling spectacles rather than increasing basic robustness. I think we'll find that this is what carrying capacity is really about—not how are we living in normal times, but how capable are we of surviving exceptional times, of dodging the global extinction events that have taken down the dominant species of past eras. Do we have good plans for emergencies? I look at events like the Katrina hurricane and shudder.

Calamity, you see, has this very personal aspect in my mind. If the complex engine of our society's continues on track, if commerce continues without interruption, I'll probably continue to have access to the pills that compensate for my missing thyroid. My most personal fear isn't all those big things—the sea level rise, the storms, the fires, the pests, the diseases, the famines, the wars. If those problems happen, we all have to fight them. I won't be alone.

It may seem silly, but I just worry the drug companies won't make my pills any more. Or they'll make them, but the free market won't find enough value in getting them to my town, especially in an emergency. I'm dependent on what feels like a Rube Goldberg mechanism to get them from wherever they come from into my hands. If that breaks down—if the stores close, or can't get stock—I worry no one will notice. It's such a small thing that I fear it will be overlooked. I'd love to stock an emergency supply, but my doctor has to prescribe only what I need, and the insurance companies work to prevent my buying pills ahead of when I need them. Talk about death panels. They try to placate me by noting the pills don't have a long shelf life. Or they mention I can buy a 90-day supply instead of a 30-day supply. But, 30-day or 90-day, they still make me burn that supply down to almost zero before I can get more.

So I obsess about what may seem to others as a comparatively mild risk of Climate Change—about the mere interruption of business as usual. It's not the biggest effect one could imagine. But it's how I personalize it. Your circumstances being different, you'll probably personalize it differently. That's okay. Just please do try, once in a while, to think of Climate Change not just as a global phenomenon, but as something more local, tangible, and personal. After all, Climate Change won't just affect the future of our species and perhaps of all life on Earth, but it will also, as part of that, affect you and me personally.

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Author's Note: If you got value from this post, please “Share” it.

Originally published September 14, 2010 at Open Salon, where I wrote under my own name, Kent Pitman. I have reproduced the article here, but to read the original discussion, you'll need to click through to the snapshot created by the Wayback Machine.

Tags (from Open Salon): politics, climate change, cancer, citizen participation, convergence, carrying capacity, calamity, catastrophe, personal, personalize, supply chain, leverage, over-leveraged, stock market, crash, medication, drugs, supplies, hurricane, drought, war, disruption, society, capitalism, planning, population, overpopulation, zpg, health insurance, health care, health, bad for your health

Rethinking Mega-Corporations

When the Microsoft antitrust case came along, the issue seemed to be that Microsoft controlled too much of a market that needed to be substantially more free. But the problem was that people didn't like the government deciding how to partition up the space. The problem is that government intervention in how to divide up market spaces is too subjective, leaving open options for corruption, bad understanding of a market, etc. The sense was in some that this is something best decided by vendors, and yet the problem was that if you left it to Microsoft, it didn't seem to be deciding the issue well.

“EU Competition Commissioner Mario Monti could never build Microsoft Windows or successfully sell it, yet he and his antitrust regulators get to decide if a great American corporation may or may not improve its products,” said Nicholas Provenzo, chairman of The Center for the Advancement of Capitalism.

I thought about this a lot at that time and have continued to ponder it since. I always come back to the same conclusion—that there probably needs to be something like a maximum size company or at least an incentive for not creating ever larger companies. I don't quite have the entire idea fully fleshed out in my head, but I'm confident enough that there's a good idea in there that I think it's time to at least throw it out for discussion, even knowing it will be controversial. But the point is to have some objective measure or incentive that leads to the desire of a company to stop growing.

No matter how smart the leader of a company is, we should be encouraging that person to teach others his or her skill, not to acquire ever-more power for himself alone after the company is above a certain size.

As companies grow super-large, the number of them necessarily grows super-small. This implies reduced competition, which eliminates the exact reason we allow markets and competition in the first place. We need to incentivize companies to seek an intermediate size for many reasons; in light of recent events, one way to express this is as a need to avoid the “too big to fail” phenomenon.

It's my understanding that increasingly in recent years antitrust legislation is not pursued in cases where consumers seemed to be seeing lower prices, on the theory that no matter what the structure of the industry, lower prices for consumers is always unconditionally good. That sounds wrong, and the recent fiasco in the marketplace seems an illustration of why that might be.

The problem seems not just to be the inappropriate manipulation of markets, but merely the reliance on a single company at all; because this implies that really only one human mind—or a small number of human minds—is making decisions for too many people at once. In effect, it implements a kind of corporate dictatorship, or at best rule by a very few people.

In the best case, that leads to a single person having the power to make something extraordinary that others might not think to make. But the problem with that is that if any such individual fails, they bring their company and everyone in that company down with them. There is, of course, a risk that these super-leaders are truly unique souls and that no other person could possibly cause what they did to come to pass; but, if so, there will be huge confusion once they're gone. Worse, our structure also allows them to pass on the power they have amassed to someone who did not earn it. The company does not go back to being disorganized after they leave, the power they perhaps rightly assembled is now a simple commodity to be passed along to someone who didn't earn it by being truly unique. And yet there may be many people, not just one, who are at the next tier waiting to shine.

To see the problem, suppose a person could reliably be said to have ten times the combined intelligence and insight of five people who report to him. And so we allow him to be their leader for a time. Now it becomes time to step down. By definition, this same is not true of the five who stand to rise to his position. It may be that they are capable of stepping into the mechanics of the original leader's position, but the original justification of giving them this position based on the extraordinary thing that only they could do is no longer there. And certainly if it's the case that any one of them was close to the insight and intelligence of the person who dominated, the world would be better off with both of those people at the helm of a company rather than with only one.

Of course, you could iterate this truth all the way down and find that there was no justification that was ever a reason to make a company. And that would be wrong, too, but mainly because it isn't really objectively knowable who is the right person to lead. It's a gamble. And so having many companies of intermediate size allows a compromise between gambling on no corporate organization and on total corporate organization.

Perhaps individuals should be limited to having a majority share in only one company, and minority shares in other companies, again encouraging many human minds to have a serious say in the market. Underlying this thought is something I call my “many minds hypothesis,” that the world will work better if there are a lot of smart people competing rather than just a few. In effect, the current practice in the market involves big fish eating little fish until there is really only one fish and no remaining competition.

A company that has no competition is stifling the creative power of the people within it, who are asked to be conformists to a particular way of thinking. I don't think it's healthy for the individuals, for the company that has come to dominate, or for society.

Since establishing a maximum bound on a company size is hard to do, it seems to me that a possible alternative might be to allow tax rates on a company to increase as the company size increases, creating the possibility of companies consolidating to improve efficiency, but only if the efficiencies are really important.

People sometimes claim that we must have market efficiency, but I think the ultimate efficiency will come when we're all replaced by robots. I don't think that's going to do a lot of good for us or for the environment. And at some point, we may even find the robots think humans are superfluous. But, for now, we have a lot of people who need jobs, and it seems to me that a bit of inefficiency in the market, especially in the form of redundancy and competition, would help a lot.

We've been hurt very badly by the present super-banks losing. If they had been kept from ever getting this large, we'd be in much better shape because there would have been more brains involved and more chances that at least some of those banks would have protected themselves.

Author's Note: If you got value from this post, please “Share” it.

Originally published March 15, 2009 at Open Salon, where I wrote under my own name, Kent Pitman.

See also my related post Fiduciary Duty vs. The Three Laws of Robotics.

Tags (from Open Salon): inefficiency, market efficiency, singularity, ai, robots, free market, market, robustness, diversity, many minds, many minds hypothesis, competition, maximum size corporation, maximum size company, megacorporations, politics, economics, business

Credit Cards: A Tax on “Being Poor”

A long time ago, credit card interest was deductible. I think it should be again. The present system is not fair—certain practices are not acknowledged for the substantively regressive hardship they present.

The Public Government Safety Net

In times of need, we may draw on savings or turn to friends, family, and community resources. But when these fall short, we look to government as our final safety net. Since the time of the New Deal, and later the Great Society, and as our society has become more affluent, we have tended toward acknowledging the importance of the role of government in protecting our weakest citizens. I have argued that a society that is both prosperous and humane should take on the goal of providing a safety net for reasons that go beyond mere charity.

Anything from food to clothing to health care to education still needs to be paid for when one has no job, and yet—whether by oversight or by deliberate design—the government isn't always racing in with help.

Unemployment insurance sometimes helps, but it is limited in its scope to less than the person was making while employed, so there's a problem right out of the box. And it doesn't cover health care, which is often tied to the employment and typically becomes very expensive at that moment of a layoff when the unemployed person is suddenly paying not only their own contribution but their employer's as well. Everyone's situation is different, but the point is this: the public safety net we now offer has holes in it big enough for people to fall through.

It's nice to say that people should always plan ahead, but sometimes they don't, and quite often they can't—probably more often than appeases the conscience of the Haves in a society that is increasingly sharply divided into Haves and Have Nots. But for whatever reason, the situation comes where help is required and no help is there even from the government.

And yet life must go on.

Payments for mortgages, medical bills, home heating (and cooling), and food must still be made even at times that are financially inconvenient.

Commercial Lines of Credit

So when you're out of work and have bills to pay or when you're sick and cannot afford health care, if the public government cannot help, and regular bank loans are not readily available, all paths lead to the option that doesn't pester you with stupid, demeaning, or embarrassing questions about why you need money when you're making no money—the option that doesn't force you to admit the obvious, that you wouldn't be asking for an unsecured loan if you had an asset to offer as collateral.

We are at our most vulnerable when we're out of work, and yet it's assumed that the free market will resolve matters. Yet the free market knows that it can prey on people in times like these and get concessions no reasonable person would want to make—because for an individual thus alone, thus abandoned by their job, there is no other option. These are often people who did not let their company down—their company let them down. And yet we treat them as if they have nothing to offer and throw them to the wolves by allowing them to negotiate credit at these most vulnerable of times.

Commercial business needs credit at these times, too. But the government makes lines of credit more easily available to them, and at much better interest rates. Many prospective businesses have no asset to their name and may well outright fail, even spectacularly, and yet loans are available to businesses at rates that are not 25%, 36%, 75%, etc.—the kinds of rates that the free market capitalists tell us are not usury and are merely the market working happily to reach a fair price.

It isn't that the risk of business is less. The entire business world just collapsed around a hard-working workforce, and even now the government is seeking to offer single-digit rates to businesses that have a track record of failure to get them back on their feet, while doing nothing to help hard-working individuals who have never failed to do their job. It's just that the Public Government cares more about business than about ordinary citizens , especially those at low income levels. Public Government actively monitors and manages the economic health of business credit. Not so for the lesser class—for people, especially people who are not “of means.”

It's become fashionable for people who have not run into economic difficulty to claim that everyone should cut up their credit cards and operate with no such safety net, but I find it doubtful that business would advise shredding their line of credit. Credit is necessary to span unpredictable variabilities in expenses and income. It's one thing to not use a credit card. It's quite another to not have one.

While a commercial line of credit is an ordinary business tool, a credit card really is not. For one thing, it is not adequately regulated. So thinking of it as a poor man's business tool is not quite right. Let's try an alternate metaphor more suited to the lack of control that ordinary people experience when dealing with credit cards.

Private Government, and Commercial Safety Nets

A credit card issuer is a kind of private government, issuing passports freely in times of calm, allowing you to pretend a credit card is really just a charge card, something you pay back every month.

Those who are not wealthy know another truth about these cards: They are a place to request economic asylum when bills get out of hand.

Government is “a compulsory territorial monopolist of protection and jurisdiction equipped with the power to tax without unanimous consent.”
   —The Myth of National Defense, page 8, as quoted by Wikipedia

As private governments, they offer a safety net to their citizens not offered to many citizens of the United States. Yes, they take people at their most vulnerable. Yes, they dictate their own terms with no fear of retribution. Yes, they tax mercilessly. But they provide aid where the public government does not, shelter in life's most awful of storms. As horrible as they are, they are also the savior of many people because they offer a chance just to survive where there may be no other chance.

So if one doesn't have cash and no one, including the public government, is offering help, there may be little other option than to use credit cards if they are available. This is true even of people who have faithfully maintained a zero balance on their cards. Because when you need money, you take it where you can get it at the rates it is offered.

It's sometimes easy to get lulled into believing that all problems with credit cards are the result of casual overspending that could be avoided by merely applying more self-control. Doubtless that's sometimes true. But not always. It is important to see that credit cards often serve a critical societal function that is not so easily dismissed: They offer necessary economic insurance to those to whom the public government turns a blind eye.

Private Tax

Black’s Law Dictionary (sixth edition, page 1457) defines a tax as a “pecuniary [i.e., monetary] burden laid upon individuals or property to support the government,” and goes on to call it “a payment exacted by legislative authority.”

Credit card interest rates operate as a “private tax.” The operating costs of citizenship in the private government of a credit card issuer are paid for by these taxes. It's set high by the credit card companies and there's no one there to say it should be otherwise. Congress has better things to do. But with their silence, they give consent. And Congress does the various laws to stand that provide enforcement of whatever these private governments decide about how the lives of certain people will play out.

What the credit card companies decide is, effectively, law. It's easy for the affluent to say that people could opt not to use the cards, or they could go for a different card, but the decisions that bind one to a credit card company are made at times when these are really not options, and when there is no one there offering alternatives. Such assertions show callous ignorance of the true burdens of being poor.

And, of course, if these interest rates were really recognized as what they are, a tax, the real government, the public government, would allow a tax deduction, not just on investment-grade loans like rich people with houses can afford, but also on street-grade loans like ordinary people who can't afford houses are left to take. It's not normally considered ok to tax someone twice. But it is when it's the poor. Who's going to speak for them? They're too busy working to pay their taxes to complain.

It can happen that all of one's income is going into paying this private tax even while the government—the real one, the public one—is looking at the person's income and thinking all of that money is available to be taxed. The ordinary citizen, the person who depends on credit cards to make ends meet, does not get a break on this.

If they were a business, they could deduct this interest. Because the government that caters to business—the public government—cares about this matter. Not only does a business get a lower borrowing rate, it gets a tax break to help pay the interest on money borrowed. But private citizens of the private government, the government of the lesser class, get higher rates and no help from the public government in paying the interest.

They may be living at a subsistence level with all of the money they pay credit card companies going toward interest. That means they are creeping ever more into debt and yet the the public government is still taxing them as if they have net income they should be sharing—ironically, so that more affluent people, those who really do have net income, don't have to pay tax. No wonder the poor cannot climb out of this state. The basic accounting is simply not fair.

Handouts vs. Double Taxation

There are some who manage their finances in such a way that they save up money for emergencies. And sometimes this works. But it's disingenuous to say that this can always work. It's trivially possible to show that there are possible emergencies that can come up in life that are bigger than one has had time to save for. Those who don't run into this case should count themselves lucky, but should stop claiming that just because that worked for them it will necessarily work for others. In the general case, it simply can't. And while it's clear that an increased savings rate would be helpful, it's not a complete solution.

Also, insurances such as life insurance and medical insurance are luxuries that many simply cannot afford because they already have too little money to meet today's needs, much less tomorrow's. Such people go uninsured not because they are too stupid to realize that insurance matters, but because they simply have no other choice.

It would be nice if money were made cheaply available to poor people in urgent need, as it is to rich people and businesses in urgent need. But I'll make the case for that another day. We can't solve every problem at once. Sometimes people have to help themselves.

That's my point. A person asking to not be taxed twice is not asking for a handout. They are trying to help themselves. But if they are faced with double taxation, they are not going to be able to do that. To borrow a phrase so often heard from Republican lips (usually when talking about the need to reduce “onerous” taxes on millionaires): “it's their money.” It only becomes the government's money when the government sees the opportunity to prey on them. It isn't asking for a handout to say that a person who is not breaking even should not be taxed; it's just asking that the government refrain from kicking people when they're down by doubly taxing them.

Pay-As-You-Go Socialism

Maybe we'll fix some of these inequities in upcoming years—health care, for example—but we probably won't fix all of them. People will still have emergencies they're not prepared for. So since the US is not a socialist state, we offer the capitalistic alternative: “pay-as-you-go socialism,” in the form of credit cards, available at market prices to those too poor to qualify for the well-regulated and more affordable interest rates the federal government offers to people of means. And, realizing credit cards are their only available alternative, less-well-off consumers swallow their pride and agree to pledge allegiance to these private quasi-governmental entities and to pay whatever private tax is required, in exchange for the financial services they require to get them through times of need where the real, public government has left them helpless.

And perhaps this seems fair to die-hard fans of the free market. But I'm not so sure that's a fair analysis since, the terms under which these cards are offered are not really subject to market forces. And, importantly, people of greater means would not have to be going through this because they qualify for government-sponsored loans at much lower rates.

They're in this position not because of some crime, but merely because they're poor. Had they been a bit richer, they might have qualified for the better loan rates straight from the government, or for tax deductions. So yes, maybe they do voluntarily enter into the agreement with the credit card company once they realize they are involuntarily not part of the elite club of people who don't need to do that. But I find that way of saying it just a little disingenuous; pardon me if I prefer other phrasing.

When people of greater means have access to lower interest rates and tax deductions, while people of lesser means do not, social justice cannot be achieved. People who have very little option but to use high rate credit cards to get them through hard economic times must put up with a practice that amounts to double taxation tax on money already consumed by their payment of this private tax. If you don't like the terminology I've picked, it doesn't change the fact of the inequity. One way or another there is an extra tax that needs to be accounted for. Call it, if you prefer, a tax on being poor.

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Originally published January 9, 2009 at Open Salon, where I wrote under my own name, Kent Pitman.

Tags (from Open Salon): line of credit, paygo, pay-as-you-go, capitalism, socialism, government handouts, safety net, public taxation, private taxation, public tax, public government, private tax, private government, interest, interest deduction, deductible interest, great society, new deal, double taxation, taxation, charge cards, credit cards, politics