Perspective found in quiet evenings

We don't stand still. Our minds are beehives that are distracted by functions. The busy toil of everyday living impedes our ability to understand life. As a consequence we become mere drones whose sole purpose is to maximise over a grid of decisions. If only this grid was a vast field of endless possibility, then perhaps we would have expressed our desires in a way that is more soothing to the soul. This two dimensional constraint in which we operate allows us limited movement. We can only maximise over a set of combinations, which for some might seem infinite. It is strange that we cannot construct something truly unique and original. The best that we can do is combine existing elements into a form that serves a particular function. Yet, by being able to move above, or below the two dimensional space we might find something extraordinary.

Life becomes boring. We experience both failure and success in various degrees. And since we seem to enjoy success so much, and are even more averse towards failure, we do everything to succeed. How futile our existence to strive for success when we don't even really benefit from it. If you want to make a success out of work you sacrifice peace and family. If you want to be a great writer you must work hard at writing well and be able to sell a story only to worry whether you are a good writer. We toil and spin and learn nothing from the wise men. We get excellent examples of how to live life. The Bible tells us to observe the lilies in the field and the birds in the air. They neither toil nor spin. They do what comes naturally to them and cannot worry about the future. Yet we continuously define our success, or failure, in terms of human dictates.

What I miss most in life is quiet evenings outdoors where the sky is dark yet filled by little lights. I miss those evenings because it is quiet and my mind finds rest. My prayer becomes silence and all that remains is me waiting upon God. I feel Him walk beside me and I feel His presence calming my soul. Only then do I get perspective about life, only then do I focus on things that really matter.

Seek first the Kingdom of God

Despite our best intentions, we continue to be betrayed by our desires. We preach the gospel, and make ourselves the subject instead of the gospel. By criticising hypocrites we implicate ourselves. How often do we really get a message across that is pure and innocent of hidden motives? You see we work hard to make progress, we argue to win, we earn to own, we cry to feel sorry and we complain because we lack. Nowhere is God the constant object of our everyday lives.

We are to seek first the Kingdom of God. Then only will everything else follow. Adam and Eve's behaviour was only a precursor to that which was to come. In absolute disbelief did they deny God by trying to obtain wisdom and knowledge through their own effort. Unable and unwilling to let God rule their lives, they wished rather to be masters. No one is free from this. Even Abraham who many  see as the symbol of the expression of faith failed by conceiving a child with a woman other than his wife. We want to be masters of our own lives when we take the glory for things that happened by our hands but were given by God. Moses made this mistake when taking the glory for the flowing water from rock. We are to seek first the Kingdom of God, and only then will everything else follow. Kierkegaard puts this phrase into action by pointing out that we have the choice to do this. It is such a delicate decision, one that is not forced upon is, but one that will set in motion the accent to righteousness. In Matthew we learn that the Kingdom of God  is like a man stumbling upon a great treasure. He sells everything to buy the land in which the treasure was found. If man is open to receiving the good news God might have mercy on Him and give him life. In this discovery he is willing to forgo everything to have everything - God. The Kingdom of heaven can also be expressed  as a fisherman searching his whole life for a specific pearl, and upon finding it he is willing to let go of everything, because he has found what his heart desires. Man will find God if he really wants to find God. And finally, the Kingdom of God is like a net cast into the ocean sweeping up all sorts of fish. The fisherman than takes with him the good fish and returns the bad fish to the ocean. Here believers will be separated from unbelievers. Those who are open to God, and those who seek Him will find Him. But those who do not wish to know God will never know Him, since the Holy Spirit does not work in someone who actively denies Him.

While the details of everyday life are important, they add to many unnecessary complexities to living life. Once again, by focusing on the details we subtract from the main objective, which is to seek the Kingdom of God first. We naturally, but wrongly, assume that we exercise control over outcomes. Outcomes are not always proportional to our inputs. If we used this logic we put faith into our own hands, instead of simply relying on God. Adam and Eve failed to see that they had God right there beside them. That the source of everything was walking with them and that any question they might pose be answered in perfect harmony. They had everything, but they lost it to gain everything for themselves. And in doing so they divorced themselves from everything only to gain nothing.

So, the only logical conclusion to make when going through life, is to make God the centre of everything. Everything else loses purpose when we change this equation. 

Along this path you will most likely venture off in a different direction. But that is ok since you know what it is to follow the right path. Hopefully you won't be too stubborn to turn around and continue on the path that is intended for us all.

To live out your salvation means to live like Christ. It means to choose humility over praise, to  sacrifice over being lifted, to be last so that others will be first. It is by lifting Christ that we are lifted up to heaven. If God is the centre of your world, then the world and all its worries are inconsequential. For to gain Christ is to truly gain life.

Should we just close the budget deficit?

I am sure most people are aware of the difficulties faced by the US government regarding their debt ceiling. It has sparked debates from academics and politicians alike on the best way to deal with state debt.

A nice lesson of how fiscal policy works is summarised by Jeffery Frankel. He discusses the mistakes made by US and UK governments in the 1930's and how that time is applicable now. To summarise:

1. Fiscal expansions can be justified when interest rates are low and unemployment high (usually when a country is growing below potential)
2. Fiscal expansions should be countercyclical (save in good times and spend in bad times). Unfortunately this is usually dependent on output gap calculations
3. A 1 dollar increase in government purchases grows the economy by more than 1 dollars. I.e. the fiscal multiplier is larger than one
4. High debt is not always bad, unless markets perceive it as bad. Expectations are more important than the actual number

How does this story apply to South Africa? 

1. The SA government has run countercyclical policy (automatic stabilisers ensured that tax revenue automatically adjusted and expenditure growth increased)
2. Fiscal multipliers are < 1 but can be big SA fiscal multiplier paper
3. Debt is growing but set to stabilise at around 40% to GDP (SA has been downgraded, and might face another downgrade if debt exceeds this ratio)
4. Unemployment has increased by quite a bit (might have been worse if it was not for fiscal stimulus)

SA GDP growth has been low, and the Budget Reviews are revised frequently (under collection in taxes). The output gap is closing, but expenditure growth is not moderating (will have to see when the new Budget Review comes out in February). So how does SA go about consolidating its budget deficit (if it is warranted). For one you need to either increase tax rates (see previous post on this) or cut spending. Cutting spending is not that easy given that government is committed to social objectives such as reducing inequality and unemployment. It would be a very tough sell to cut back on wages and transfers to households (more than 80% of government expenditure is government consumption and transfers). This leaves one with very little room to cut back spending (mainly investment). 

SA's VAT rate has remained constant for quite a while (maybe for good reasons). Maybe government could increase the rate on VAT to finance the current expenditure path. On the other hand, tax collections should increase as the economy recovers...

For the next time I will talk about the impact of debt on the economy (for those skeptics out there who think that debt is not necessarily bad).

Higher tax rates in South Africa

Most countries have increased their sovereign debt levels since the 2008/09 financial crisis to stimulate slowing economies or bail out the greedy bankers who tried to make more money for greedy investors. It is a sad thing really. Now governments are facing probabilities of default (just type in sovereign debt crisis EU in google to understand just how bad things are). To minimise the probability of default governments have to increase tax rates, cut rebates or reduce spending. All these measures have negative consequences for economic growth. The point is that some governments simply don't have a choice as capital to finance expenditure dries up. The Obama administration is letting the Bush tax cuts expire (which effectively means that tax rates increase http://www.thefiscaltimes.com/Columns/2012/12/04/Why-the-GOP-Wont-Admit-Supply-Side-Econ-Has-Failed.aspx#page1). Unfortunately the question about which tools to use to appropriately consolidate the budget deficit is a rather complex one. In economics we learn that fiscal spending and taxes have multiplier effects (i.e. a dollar increase in spending increases economic activity by x dollars). If taxes have a lower multiplier than spending, then increasing taxes will harm the economy less than cutting spending. But calculating the multiplier is a very difficult task and one cannot simply rely on any old estimate. However, there seems to be empirical support that taxes have smaller multipliers than spending.

Let us assume that taxes damage the economy less than spending cuts, what taxes do we change and what rates do we set? This question is also very complex. One has to consider the redistributional preferences of government, the public's aversion towards income inequality, the possibility of tax evasion and tax avoidance and the possibility of immigration. Most undergraduate textbooks show that lump-sum taxes are Pareto efficient (the point where an increase in welfare of one individual cannot take place without decreasing the welfare of another). This tax strategy also assumes that government is efficient in distributing revenue collection efficiently. Unfortunately inequality exists and governments are far from efficient. This is why we have progressive taxes which addresses vertical (people with higher incomes should pay more taxes) and horizontal (people with the same income should pay the same amount of taxes) equity concerns. This unfortunately implies a Pareto-inefficient outcome as the tax liability lies with the minority of the population. This is very true for South Africa!

So, is it at all possible to increase the tax rates of the tax paying population further? Can these people afford a higher tax rate? Most probably yes. It is important to know that there is a difference between the effective tax rate an individual pays and the statutory rate. If person A earns R600 200 per annum he would fall in the top tax bracket. Assume that the cut-off point is R600 000 with a lump sum tax of R100 000 and 40% tax of anything in excess of R600 000. His total tax liability would then be (R100 000+(R600 200-R600 000)*40%) R100 080. Assume that the tax rate would increase to 50%, then his liability would be R100 100 which is only a R20 increase. His effective tax rate before the change is ((R100 000+R80)/R620 000) 16.141%. His effective tax rate after the change is 16.145%. That is why you always need to look at the change in rebates, tax rates and lump-sum taxes when the Budget is revised.

We know from theoretical and empirical (see Mirrlees (1971) and Saes (2012)) work that tax setting depends on:

1. The ability of labourers to shift their productive labour hours when taxes changes. Their preference for hard work diminishes as higher taxes are implemented (Frisch elasticities and labour-supply elasticities)

2. The distribution of tax payers (wealth is usually Pareto distributed)

3. Income and substitution effects. One's income is directly affected by taxes but substitution effects depend on labour-supply decisions. Elastic labour supply means that people can change their labour decisions (either choose more leisure or work harder to maintain a similar income as before the tax change). If the elasticity is larger than one, then increasing the tax rate could result in less revenue collection as more people decide to work less (either by reducing the amount of hours worked or by simply not being as productive while working the same amount of hours). When the elasticity is smaller than one then increasing the tax rate could result in higher revenue collection as people work at the same levels as before (same amount of hours and at the same productivity level).

In South Africa one would, a priori, expect labour supply to be very inelastic (smaller than 1) across income earners. Using StatsSA's Labour Force Surveys (LFS) suggests that the labour supply elasticity is close to zero (even while controlling for other costs such as transport or grants received). That means that one could increase tax rates and collect more revenue. But South Africa's top income earners also have access to other income types, which means that they can shift their labour income to capital which has a lower tax rate. I.e. some top income earners have a lower effective tax rate than middle and low income earners which violates the vertical equity principle. A business owner might not get his benefits in terms of a salary (which is subject to labour income tax), but gets his benefits in the form of higher dividends or company profits (which are subject to much lower rates than labour income tax). Thus raising taxes at the top end of the income distribution might only result in tax shifting. One possible policy remedy would be to increase tax rates on capital. Now this comes close to Lump-sum taxation (which implies Pareto-efficiency). Obviously there are different trade-offs involved in taxing capital such as a decrease in investment incentive.

Setting tax rates are notoriously difficult. Just looking at South African data would suggest that it is possible to increase the top tax bracket, or even introduce a new top income bracket. This would not necessarily result in a significant increase in tax burden as the effective rates are still low. This is definitely one way to close the budget deficit without incurring much harm on the economy overall. The only problem is that South African's do not necessarily get a return on their taxes as spending on education and health in the past has yielded little to be happy about (more on this later).

 

Jobs and technology

Unemployment problems will continue to exist for some time to come. A recent article in the NY Times (http://www.nytimes.com/2012/12/05/business/unionizing-at-the-low-end-of-the-pay-scale.html?partner=rss&emc=rss&_r=1&) discusses how people are now becoming part of unions to earn a higher salary. Technology is not solving the unemployment problem either; fewer workers are necessary to complete a specific task as computers and machines do the job more efficiently. Some economists argue that unemployment exists because some people are simply unemployable, or do not fill the needs of a company. The solution they propose is to improve the levels of education since one's wages should be equivalent to one's ability and skill. This still does not solve long-term unemployment. The rate at which machine and computer efficiency improves exceeds the rate at which education improves. My guess is that the future will have computers do the jobs of even skilled people. Demand for goods and services will not decline necessarily as the few rich people will demand more of these goods and services equivalent to the rise in their income...Capitalism will create market winners which absorb all competitors...in the end capitalism will become a weird perverted form of communism. Maybe Malthus was right...the world is perhaps over populated, or maybe we are focussing our time and energy on all the wrong labour market strategies. Low skilled labourers should work for companies that require a low skill level. Agriculture is one such industry. I find it odd that governments, especially South Africa, has not redesigned its agricultural programmes. More on this topic later.

Have faith and conquer

Do we understand little of life when we cannot put into practice our teachings? Is this a psychological anomaly? Merely having knowledge about the way we ought to conduct ourselves does not necessarily imply that we are able to live life as such. How is it then that man possesses the knowledge of evil, yet fails to resist it? We experience inert urges that rebel against our trained minds. We often yield to these urges and afterwards our guilt condemns these acts. Either we don't truly understand the teachings, or we are simply rebellious. Under the one we are ignorant and under the other we rebel against what we know. Kierkegaard understood this well when he provided a detailed description of despair in The Sickness Unto Death. Although Kierkegaard goes to great lengths to describe why men despair and offers a cure, he does not deal with the origin of every man's sin nor with the continuation of sin. Kierkegaard defines sin as standing before God not wanting to be oneself or wanting to be oneself without the Power that constitutes us (God). In this sense we have all sinned, and still sin. We know, and some truly believe, that Christ has died for us so that we can be free from sin. This means that sin is erased from past, present and future for those who believe in God. Yet if sin is forgiven, no matter the time space, why do churches preach that man should continually repent from sin? Does this mean that man has no faith every time he sins?

Here we are faced with two tough questions? One, why do we continuously sin (or do we?) despite our deepest beliefs about life, and two, does sinning imply that we lose our faith?

We know from the book of Romans that the wages of sin are death. We also know that Christ's death paid those wages in full. Thus, when believers sin, they are not subject to death. Yet the church, and the Lord's prayer, teaches us that we should pray for the forgiveness of sins. This would imply that if we did not pray for the forgiveness of sins that we would not be forgiven, and this then would imply that sinning is equivalent to not believing. But this seems at odds with the meaning of Christ's death and its implication for the forgiveness of sin. Or did we perhaps misinterpret the scripture? An answer might be given in our definition of faith, since it is by faith that we are saved. Kierkegaard provides such a definition: It is in the hopeless state of man when he realises that it is impossible to save himself that he cries out to God for help for whom all things are possible. Thus, by asking God to forgive our sins we express our faith in its purest form. We recognise firstly that we are broken, and then subsequently cry out to God to save us from this misery since there is no way that we can escape it by our own means. The reason we sin then is because we are broken. We were broken since birth. And we inherited sin from Adam and Eve. Even new born babies sin (read Augustine's Confessions for examples). So does God then take away our sins? In one way yes, and in another no. Since we are forgiven for our sins through grace by expressing our faith, sin has no power. But, all of us still sin, by lying, gossiping, stealing, lusting, etc. Hopefully we become better the more we come to appreciate what this forgiveness of sin really means. God, knowing how imperfect we are and knowing what imperfect decisions we will make, still chooses to forgive us. There is absolutely nothing that you can do and hence no possibility for you to rectify the mistakes of the past. It is purely by God's grace that you are made clean. It is thus a sin to lament your actions. You are not being pious when you throw ash over yourself, or shave your head as a sign of mourning. Instead you are showing great signs of arrogance. If God forgives you, what gives you the right not to forgive yourself? Of course it is important to repent, since repentance is an expression of faith.

So we know that we continue to sin because we are broken and at times lack faith. But we also know that sin has no hold over us since we are forgiven by God. Now, does sin, in light of believing in God, imply that I do not have faith? This would seem to be the case. Because sinning means to stand before God and rebelling against Him, or not wanting to be yourself. And this means that you put possibility (possibility of earning one's salvation) into your own hands, by thinking that you can find just cause for ill-behaviour. What else does this mean when you lie, murder, cheat, steal, gossip and commit adultery? Yet we cannot simply judge all these acts in a generic manner. We have very little understanding of man's psychology let alone a man's soul. So we leave these things to be judged perfectly by God. So we sin quite a bit after conversion by displaying a lack of faith. That is why every time we sin (whether it be out of ignorance or rebellion) we ask for forgiveness so that we can express our faith and be forgiven. That is why Kierkegaard also says that every unrepented sin is a new sin - i.e. every moment is a new sin while we neglect to ask for forgiveness. While one could argue that all sins are the same (see previous entry), with the exception of the sin against the Holy Spirit, so too can we make a case that faith is different in varying degrees. We have numerous examples in the Bible of people whose faith increased (the impossibility of the self, but the possibility of God: "Father let me become more like You and less of myself"). It is through faith that Abraham could obey God in putting Isaac on the offering altar, it is through faith that David defeated Goliath, it is through faith that Jesus withstood the Devil's temptations and it is through faith that we daily fight evil in this world. This faith needs to be expressed in prayer and in praise.

To sum up: we all sin because we lack faith, but even a little faith is enough for us to be forgiven. We express this faith in prayer and in praise by seeking God's forgiveness.  When our faith increases sin dies. We can boldly express this faith because Jesus died and defeated sin by defeating death.

So do not be disheartened when you sin. We know that there are no more wages of sin. We know that we can ask God to forgive us. We do not need to hang our heads in shame when we sin. We need to acknowledge how fallible we are and how impossible it is to free ourselves from sin's bondage. We need to acknowledge that for God all things are possible. This possibility has freed us from sin's bondage. We can express daily our faith by coming in prayer to God and repenting. We understand that repentance is not just reciting words, but giving over to God every aspect of our lives because we know how hopeless we are.

Sin's equality

My friend and I had a very interesting conversation this morning regarding sin. It started off with the controversial story of late UK disc jockey Jimmy Savile. Jimmy was knighted by UK monarchy and received a special mention by the Catholic church for his many philanthropic deeds. Then came a damning documentary alluding that Jimmy was an alleged paedophile who committed many vile acts. Now the question we posed was whether Jimmy was naturally inclined to commit such an act, whether soberness of mind or lack thereof had anything to do with it and what the consequences of such an act are.

In order to understand these questions we must provide a framework for these actions.  This framework can be neatly summarised as sin. And here sin is meant in both a religious sense when man turns his back on God and in a secular sense where man harms himself and those around him (you could make the case that both have the same practical implications).

I think that it is fair to say that every human has sinned in his life. We often judge the severity of sin in the sense that it exhibits harm on fellow man and this leads to judgement of the sinner. Should the sinner and the sin be judged equally? What about the mental state of any two men - Let us assume that we have two murderers. The one commits murder because he thinks that he does society a service by eliminating a type of person while the other murders a person out of hatred. The first person, one could argue, is mentally ill while the other had perfect ability to know that there was nothing wrong with the person he murdered but yet still did it. My logic dictates that the heart of the second murderer was more ill than the heart of the first murdered. How then are we to judge the sinner? The sin makes them equally guilty for the outcome was the same, but the sinners were completely different in that their motives differed with varying degrees of "wrongness". C.S. Lewis gives us a perfect example of the difference between the heart of man and the psychology of man. Assume that two soldiers are inhibited from entering the battle field due to a crippling effect of fear. Assume that psychology is able to remove fear from both men. The one man freed from the burden of fear exclaims his joy and now wishes to defend his country at any given cost while the other man makes the choice to run out of a sense of self-preservation rather than fear. The heart of the first man was sincere and good, while the heart of the second man was ill and evil. How are we then able to judge the sinner? That is why God tells us to leave any kind of judgement to Him. We are all imperfect judges!

We are now able to discern that sin and the sinner cannot be judged the same. Now, can we truly distinguish between different kinds of sin being worse than others? We usually assign some hierarchy to sin. We might assume that a lie is not so bad as stealing, that stealing is not bad as murder or that murder is not so bad as rape. But it can it not be argued that we should view sin as all the same? There is a saying in Christianity that tells us that every man would carry a cross and that God will not tempt a person more than what that person is capable of handling. A certain individual finds it easy not to lie but struggles not to commit murder. Another person continuously lies but the thought of murder does not cross her mind. Both these people have an affliction to a type of sin. In each their desire to commit the sin is equivalent. If they both give in to their desires they both sinned and the sin has the consequence of making them both guilty for not resisting. You see, we only look at what happens after the sin or the outcome of sin, which is either a lie or a death, but we don't see that their affliction (the desire to lie or to murder) was the same. Is this not perhaps what Christ meant when He defended the prostitute from stoning by saying the man with a clear conscience should be the first to cast a stone. Christ also said that you commit adultery by just looking at another women in a sensual manner. Once again, this makes us imperfect judges of sin.  

I am in no way defending Jimmy. And of course I agree that we should have a secular court ruling on the consequences of sin. Mad men who inflict harm upon society should be locked away. Sane men who inflict harm upon society should be locked away. But let us not be mistaken. We have all sinned in some way or another. We have all given into the desires of our hearts. We are all equally as guilty and we are all sinners. Thus, before we judge another we should remember that I have done exactly the same thing, that is sin. What only separates us the consequence of sin. Other than that we are equally guilty of sinning.

Is there redemption? Some believe that you can do many good deeds that would outweigh bad deeds. But this does not cancel out sin. The sin has already left a stain. Others believe that living out ones sentence is fair pay for sin. But now we are punishing the consequence of sin and not the sin itself. The Bible tells us that any sin is punishable by eternal death. God gives us a way out: Christ. Christ had to endure the same temptations as man and yet did not yield to sin. Yet He took up the cross and bore the burden of man and was nailed to the cross so that man would stand guilt free before God. Our inheritance should have been death, yet what we got was eternal salvation. This is love at its maximum.