Monday, January 23, 2017

Is a Border Adjustment Tax a Smart Move for Corporate Tax Policy?

Since his presidential campaign, Mexico has been a sticking point for President Trump. Trump wants to deport millions of undocumented Mexicans back to Mexico, which would not be a good idea. During his campaign, he also suggested slapping a 35 percent tariff on Mexican goods, which would be disastrous for the American economy. He even wants to renegotiate the North American Free Trade Agreement (NAFTA), although it is currently unclear as to how he will go about that. There is one Mexico-related policy idea coming from the Republican Party that is not Trumpian in nature: the border adjustment tax.

What exactly is the border adjustment tax? Also known as a destination-based cash flow tax, the border adjustment tax (BAT) is a tax levied on imports while the exports are exempt, i.e., the tax is based on where the product ends up instead of where it is produced. The BAT is different from a tariff in that the BAT simultaneously taxes imports and de facto subsidizes exports, unlike a tariff, which only affects imports. The reason that the BAT would be a de facto export subsidy is because imports would no longer be deductible from taxable income, while exports would be. Another way of framing the Republican Party's proposal is that it would convert the current corporate tax into a destination-based flow tax that would de jure tax imports at the proposed 20 percent while exempting exports from any taxation, which would de facto be the equivalent of an import tariff of 20 percent and an export subsidy of 12 percent. This huge tax break for net-exporting corporations would essentially be a value-added tax with a deduction for wages.

The purpose of the BAT is to incentivize corporations to produce and export more while importing less. Since the BAT does not allow for corporations to reduce their taxable income via deductions of their overseas expenditures, the BAT theoretically is able to create these incentives. The other bit of economic theory is that the import tax portion is to be offset by the export subsidy portion of the BAT, which is why some do not view it as a distortion to international trade. While imported goods would initially be more expensive and exports would be cheaper, what would mitigate the distortionary effects of the BAT is that the dollar would appreciate in value. The appreciation of the dollar would, in theory, offset the trade advantage the United States would have. The catch is how quickly or completely the value of the dollar would change to mitigate these concerns. Goldman Sachs found that the dollar would have to appreciate by 24 percent in order to offset the 20 percent tax, which would adversely affect the global economy.  If the dollar does not appreciate as a result of the BAT, then consumer prices would increase, which would be bad for many Americans.

What would be the outcome of such a tax? It's difficult to say because, as the Department of Treasury brings up in its January 2017 analysis of the BAT, the United States really doesn't have experience with cash flow taxes. Other countries already have value-added taxes, which account for goods produced in a foreign country but consumed in the domestic country. That could potentially give some insight (although border adjustments make more sense for a sales tax than a business tax), but applying the BAT in an American context makes the scenario more unique, which is why economic modeling has to be used to make an educated guess. The BAT might work to the point where it can eliminate the incentive for companies to move their tax residency abroad, raise $1 trillion in tax revenue over the next decade, and rectify trade imbalances since more corporations import than export. It's weird to see both the Left-leaning Center for American Progress and the Right-leaning Tax Foundation agree. However, it's also possible that it would drive up consumer prices, mess up global supply chains, stimulate illegal immigration, cause increased tax fraudexacerbate the woes in the global economybring us closer to a value-added tax, make it more difficult to lower tax rates in the future since it would cause even bigger government growth (which affects tax competition), and/or prompt retaliation from other countries, which could either be in the form of a WTO dispute or even starting a full-blown trade war.

Trump is right in that the BAT is too complicated. Given everything at stake, I don't think it's the best way to go about corporate tax reform. If the BAT is created in part to disincentivize corporations from going overseas, how about simply lowering the corporate tax to an amount that would keep them here instead of creating a corporate tax system of exemptions and loopholes? That way, you can get rid of the major distortion caused by the current 35 percent corporate tax that makes corporations want to move production overseas. Or how about trying something else (see here and here)? If Trump wants to spur pro-growth tax reform, a simpler tax code is a better tax code, and the border adjustment tax does not bring the United States economy towards that goal.

Tuesday, January 17, 2017

The 401(k): Revolutionary or a Cause of a Retirement Crisis?

About a couple of weeks ago, the Wall Street Journal (WSJ) came out with an intriguing article on the 401(k), mainly that the early champions of the 401(k) lament what they have unleashed. Their issue is that it was not meant to be a primary retirement savings tool, and that the initial projections were overly optimistic. This ties together with my blog entry a couple months ago on poverty reduction in Social Security, and how we can best ensure that retirees have enough money saved to make it through retirement.

The 401(k) is section of the IRS Internal Revenue Code that passed in 1978. The 401(k) provision allows for individuals to defer a certain portion of revenue (maximum of $18,000 annually) in their 401(k) account. The deferral is significant because the amount put into the 401(k) account is exempt from being taxed. The ability to exempt this portion is significant because in a progressive tax system, it reduces one's overall tax burden and incentivizes retirement savings (the even bigger incentive is the ability for employers to match their employees' contributions). The 401(k) is different from a traditional pension in that it is defined-contribution, i.e., the balance is determined both by the contributions made to the plan and the performance of the plan's investments. So what about it is appealing, and what about it has critics in arms?

The Good
  • Per the WSJ article, the 401(k) has more portability than the traditional pension, which is especially important given that people switch jobs more frequently than they used to.
  • According to Gallup polls, 74 percent of retirees are living comfortably. Even better, two studies from economists from my alma mater, the University of Wisconsin-Madison, project that 75 to 85 percent of Americans have been adequately saving for retirement since the 401(k) began (Scholz et al., 2009Scholz et al., 2004), as well as this study from Rand Corporation scholars (Hurd and Rohwedder, 2011).
  • As a matter of fact, the Boston College Center for Retirement Research concluded that the shift to 401(k)s did not reduce retirement savings. 
  • A shift toward the 401(k) has coincided with a large increase of people with retirement plans because let's be honest: those who glorify the traditional, defined-benefit plans forget that most workers did not have pension plans (i.e., at its peak, only 40 percent did). 
  • As the Right-leaning American Enterprise Institute points out that since 1996, Americans went from having their combined savings increase from 269 percent to 413 percent of incomes. AEI also points out that this improvement has not just been for the top 1 percent, but for working Americans, as well. 
  • From 1989 to 2013, individuals 65 and older have had their annual incomes increase 34 percent higher than inflation (Biggs, 2013, p. 14). This same paper by AEI scholar Andrew Biggs shows that private sector plan contributions as a percent of private wage sector wages is also increasing (p. 9), and that increase is happening for the "bottom 90 percent" of wage earners (p. 10).
  • I suppose that this is good news because it's not bad news: pension wealth was about 13 percent of wealth in 1984, and it is about 13 percent now (Munnell et al., 2015, p. 5). While the WSJ article stated that there are less savings, Left-leaning Mother Jones points out that there is more than one way to save. When you account for savings and housing equity, the percent in retirement wealth stays relatively stable as a percent of disposable income. 

The Bad
  • The Employee Benefit Research Institute found that 40 percent of retirees outlive their savings, which means the 401(k) does not provide lifetime protection for a significant number of retirees that use the 401(k), which is something with which Boston College's Center for Retirement Research concurs.
  • Individual retirement accounts, such as the 401(k), are subject to both market boons and market crashes, i.e., traditional pensions have more stability than the 401(k).
  • According to Gallup polls, more than half of non-retirees are worried about having enough saved up for retirement. 
  • In its lengthy report on retirement in America, the Left-leaning Economic Policy Institute makes an argument that the 401(k) exacerbates income inequality. 
  • A study from University of Kansas sociology professor ChangHwan Kim found that workers with a college degree are to save 26 percent more in a 401(k) than those with only a high school degree, although that could stem from lower financial literacy or lower availability of 401(k) options for less-educated workers. Part of the solution to help out these individuals is to make sure they have the tools and knowledge to navigate so they can save for retirement, as well. 

Looking at the available data, what I can say is that while 401(k) retirement accounts are far from perfect, we should not cling onto a false nostalgia that traditional, deferred-benefits pension plans were wonderful because they were not. Given that a) 401(k)s have not caused a retirement crisis, and b) 401(k)s are not going anywhere anytime soon, the focus should be on how to improve the 401(k). Just a few policy alternatives I could find: we can provide plan participants with more information so they can make well-informed decisions, give private-sector workers access to the federal Thrift Savings Plan, implement the Guaranteed Retirement Account, caps on management feespermit greater usage of annuities, make 401(k) an opt-out program [instead of an opt-in program], create a lower-cost option for smaller businesses so more people have the option of a 401(k), or modify the 401(k) so that small businesses could join 401(k)s without being considered fiduciaries. Especially since politicians don't feel the need to seriously reform Social Security and its path towards insolvency, we should at least find ways to improve the 401(k) so there is even better hope for future retirees.

Friday, January 13, 2017

The Illogic of Hate Crime Legislation

Last week, four African-Americans kidnapped a mentally disabled, 18-year old Caucasian and tortured him for hours on Facebook Live. The victim was gagged, tortured, forced to drink toilet water, and endured racial epitaphs. While carrying out this despicable and sadistic act, the assailants were screaming "Fuck white people" and "Fuck Donald Trump." As a result of this heinous act, the Chicago Police attached hate crime charges to the initial charges. This racially charged crime brings up a question: Should hate crime laws exist?

A brief explanation on hate crime laws. While the statutes vary from state to state, hate crimes refer to prejudice-motivated crimes in which the perpetrator targets a victim because of a [perceived] membership within a given social group, typically one that is perceived as a protected class under the law. These characteristics are based on such factors as race, gender, sexual orientation, disability, or religion. Under modern-day American jurisprudence, hate crimes are considered worse than regular crimes because hate crimes are considered conduct that inflict greater individual and societal harm. The biases that motive hate crimes are viewed as more likely to invoke retaliatory crimes, which contributes to the justification of the enhanced sentencing.

As someone who identifies as a libertarian or classical liberal, I strongly believe that people should be treated equally under the law. I know that justice is not equally applied in reality, but I would at least like to strive for an ideal in which justice is blind to differences in gender, race, sexual orientation, religion, etc.

My main issue with hate crimes is that all violent crimes are by definition hateful. One is already showing plenty of hate and disregard for the individual that is being victimized simply by committing an act of assault, arson, sexual abuse, or murder. The message that hate crime legislation says is that the identity of the assailant and the identity of the victim somehow merit sentencing enhancement.

If Dylann Roof, the mass murderer of the Charleston church shooting in 2015 who killed nine black people, murdered nine white people instead, the victims would be equally dead. He would have shown the same disregard for human life. Doesn't murdering nine people adequately show hatred? Going back to the recent incident in Chicago, doesn't the kidnapping and torture of an individual already show hatred and disregard for others, regardless of the identity of the victim?

Better yet, who gets to define what is considered a hate crime? Hate crime legislation can be all too easily manipulated to score political points. Plus, hate crime legislation is semi-arbitrary because it is an ad hoc normative judgement that merely predicts which crimes will be pursued most aggressively. It punishes one's thoughts instead of punishing the heinousness of the act itself.

Don't get me wrong: motive plays a role in sentencing because it can be used to determine if the cause of a death or other form of harm was accidental or intentional. Beyond that, it becomes clear if an individual commits a murder, rape, kidnapping, or act of assault or torture, it is a safe bet that hate is motivating the violent act. If we are to get past divides on a racial, religious, or other level, we need to stop categorizing people and work towards the goal of blind justice and sending the message that murder, assault, and other violent crimes are an assault on human decency and justice, regardless of the identity politics of the perpetrator and the victim. Until then, we have legalized the mentality of "us" versus "them," and that is only going to lead to more divisiveness down the road.

Monday, January 9, 2017

Should the Trump Administration Build New Nuclear Power Plants?

Nuclear power plants aren't getting any younger. According to the U.S. Energy Information Administration, the average nuclear power plant is 35 years old, and licenses last 40 years with the possibility of a 20-year extension. 20 percent of the United States' electricity, as well as two-thirds of zero-carbon electricity, comes from nuclear power, which is more than the combined 7 percent from hydroelectricity and 6 percent from other renewable sources. The Center of Energy Economics at the University of Texas estimated that 40 percent of nuclear power plants are to close over the next decade due to becoming too old. Due to aging nuclear power plants, there is a distinct possibility that nuclear power undergoes a revival in the U.S.A., especially since he mentioned it on the campaign trail. The question is whether Trump should revive the nuclear power sector. While I'm a bit time-constrained to cover every last aspect of the nuclear power debate, I figured that I ought to cover a few here.

Safety: By and large, nuclear power has a good safety. There are three main nuclear accidents that have occurred: Three Mile Island, Chernobyl, and Fukushima. Three Mile Island is actually an example of how to contain nuclear accidents with proper concrete containment structures, especially since there were no long-term adverse health effects. An explosion such as Chernobyl wouldn't repeat itself since it didn't have the safety features found in Western nuclear power plants. Even with Fukushima, the World Health Organization (WHO) found that a) there are no discernible health risks for those living outside of Japan, b) there was a small absolute risk of cancer in the Fukushima prefecture, and c) there were no fatalities linked to short-term radiation exposure. In the big picture, NASA found that coal and natural gas are actually more unsafe than nuclear power.

Carbon Reduction: According to the IPCC, nuclear energy would need to double or triple to part of feasible carbon reduction, which would need to entail the construction of 29 to 107 new nuclear power plants a year (p. 564). The EIA also found that the 2040 levelized cost, i.e., the cost of all inputs, for nuclear power are less than wind power and solar thermal energy (p. 17).

Cost: One of the biggest gripes I have with nuclear power is the cost. Looking at levelized costs for plants entering service in 2022, nuclear power is cheaper than wind or solar power, but still more expensive than natural gas (EIA, p. 7). Similar to wind power, nuclear power needs a lot of subsidies to stay afloat. The International Energy Agency (IEA) found in its World Economic Outlook that 21 percent of nuclear power costs are supported by nuclear power, which is only second to wind power at 41 percent. Capital and operation costs remain high without subsidies, which makes me wonder how well it can pass a market test. See more on economics of nuclear power here.

Footprint: A 1,000 megawatt nuclear power reactor only needs a square mile to operate, whereas solar power and wind power requires much more land, 75 times and 360 times the land, respectively. When looking at the amount of building materials used on a per-megawatt basis, nuclear power also surpasses other zero-carbon options. In contrast, if we were to switch over to wind and solar to reduce carbon emissions by 80 percent, we would need an infrastructure the size of Texas and West Virginia combined, as well as tens of thousands of miles of new high-voltage transmission lines.

Postscript: I could go into other factor such as uranium mining, radioactive waste disposal, terrorism, energy security, or other factors, but on the whole, my view on nuclear power is more ambivalent than it was once was. I see its great to potential to be a zero-carbon form of energy with high capacity. On the other hand, it is quite expensive. Even so, nuclear power has a certain reliability that many other energy sources do not. I don't suspect that nuclear energy is going to be removed from the energy portfolio anytime soon, especially given its positive characteristics. As for whether we should construct more plants, that one I am not so sure about, especially with the low cost of natural gas. Since the average plant takes five to seven years to build, if Trump does opt to build new plants, he should get started shortly after Inauguration Day.

Monday, January 2, 2017

Israeli Settlements Are Not an Obstacle to Peace in the Middle East

Israel has gone through a couple of rough weeks when it comes to the international community chiding Israeli policy. First, the United Nations adopted UN Security Council Resolution 2334, which calls Israeli settlements a flagrant violation of international law. I find the Resolution to be more problematic because it berates Israel for "occupying" East Jerusalem, which includes the Jewish Quarter, the Temple Mount, and the Western Wall. The presence of Jews in Jerusalem and the influence of Jerusalem on Judaism predates Islam. Saying that the Jewish people have no connection to Jerusalem is as inaccurate as it is asinine. I wouldn't expect anything less from an organization that inaccurately and disproportionately maligns Israel while turning a blind eye to the travesty in Aleppo. The fact that the United States abstained, instead of asserting its veto power, has been criticized as another example of Obama being anti-Israel. I'm just glad that under the Pacific Settlement of Disputes, UN Resolution 2334 is merely a recommendation and not actually binding international law. UN Resolution also does not replace UN Resolution 232, which is quite frankly a relief, although it attempts to modify it.

It gets even better when a few days later, Secretary of State John Kerry goes on for 45 minutes about how Israeli settlements are an obstacle to peace while barely mentioning any culpability of the Palestinians, as if they have been angels all this time. How about we go into why John Kerry is dead wrong in his assertion that Israeli settlements are an obstacle to peace between Israel and Palestine?

  • The issue with settlements dates back to 1967. Not only are settlements predated by the Six-Day War of 1967, but also the War for Israeli Independence. Arab leadership had been trying to destroy the Jewish state before the first settlement was even built. Let's not forget that when Jews were forbidden to live in the West Bank from 1949 to 1967 (i.e., there were no settlements), Arab leadership refused to make peace with Israel.  
  • As I have explained before, the West Bank is not occupied territory, but is a disputed territory. Given that Jordan never had legal title of the West Bank from 1949 to 1967 (i.e., Jordan was illegally occupying the West Bank, and whose illegal occupation was formally recognized by Pakistan) and was not legally considered the sovereign at the time, this means that Article 49 of the Geneva Convention, which prohibits the forcible transfer of people from one state to another, does not apply due to Article 2 of the Geneva Convention not applying to Jordan. Even UN Resolution 242 does not stipulate the extent of Israeli withdrawal from the disputed territories, which once again means that Israel is not obligated to completely withdraw. Per UN Resolutions 242 and 338, until meaningful peace can be achieved and terrorism ceases, there is no legal basis to bar Jewish settlers from being in the West Bank. 
  • Palestinian leaders such as Yasser Arafat were able to get to the negotiating table even when settlements were being constructed. Arafat didn't ask for settlements to be halted as a pre-condition for the peace process. As a matter of fact, Arafat signed the Oslo Peace Accord even when settlements in the West Bank were on the rise. There was even a time at the beginning of his term when Mahmoud Abbas participated in peace talks without demanding a settlement freeze. Using the precondition of a settlement freeze really only became prevalent under the Obama administration, and even when there was a settlement freeze in 2009-10, Abbas still refused to negotiate peace. 
  • Israel completely withdrew from the Gaza Strip in 2005, which included removing 8,500 settlers who were previously living in Gaza. You know what that got Israel? Being bombarded with rockets and having to deal with more bloodshed. If settlements were an issue, wouldn't there be peace between Israel and Gaza right now instead of ongoing conflict? Given the vulnerability that Israel would face from withdrawing from West Bank and risking a two-front war, I hardly blame Israel here.
    • In addition to the Israel showing its willingness to relinquish settlements for peace (e.g., 2005 withdrawal from Gaza and the withdrawal from Sinai in 1982), there are examples of Israeli Supreme Court ruling against settlements that were constructed illegally, including MigronAmona, and Netiv Ha'avot.
  • Israel has been able to absorb 1.7 million Arabs into its country of 8.5 million. Aside from the settlers only occupying about 2 percent of the West Bank, there are nearly 350,000 Jewish settlers in the West Bank, which has a total population of 2.7 million. Israel can handle twenty percent of its population being Arabic, but the West Bank is so incapable of handling the reality that 12 percent of its population is Jewish that the only response is to kick all the settlers out? That's called ethnic cleansing, and the fact that the Palestinians want the West Bank to be Judenrein (that's German for "clean of Jews") is absolutely telling about how the Palestinian government feels about Jews. And you know that if the Israeli government were to hypothetically expel its Arab citizens, the international community would have an absolute fit and call it racism, but somehow, the Palestinian Authority gets international sanction. 
    • Looking back at most of the Israeli-Palestinian treaties, the borders would have been drawn up in such a way where about 75-80 percent of the settlement population would have been incorporated into Israel. 

While it is evident that the Israeli settlements are politically contentious, it is equally evident that the settlements are not an obstacle to peace, let alone the main obstacle. If you are looking for some barriers, here are some of the bigger problems facing the peace process: the Palestinian education system that demonizes Jews, a Palestinian government that funds terrorists to attack Israelis, or how about a Palestinian government that cannot even recognize the existence of a Jewish state? A two-state solution only works if both sides are committed to a two-state solution, and based on this fixation on settlements, we know that the Palestinian government is not ready for peace.

Sunday, January 1, 2017

My Best Blog Entries From 2016

With 2016 coming to a close, I look back to see what kind of year transpired. I don't do this simply in light of all the celebrity deaths or the unprecedentedly crazy election cycle that ultimately ushered in Donald Trump and a Republican Congress into power. I also look back at the blog entries I have written to see what kind of blogging year I have had. This year has had the greatest amount of readership, which I continue to thank you for. With that, let's recap the best blog entries from this year:

  1. Single-payer healthcare. Not only did rip into Bernie Sander's plan for single-payer healthcare, but I took a look at the three largest countries with single-payer healthcare, and the results were not flattering.
  2. Liberty versus Security. This age-old argument played out in the form of whether the FBI should have backdoor access to the iPhone of one of the attackers from the San Bernardino terrorist attack. Can we preserve both liberty and security in a digital age? Only time will tell.
  3. Trump and Tariffs. Even before becoming the Republican presidential nominee, Trump's view on tariffs worried me. If he actually enacts the high tariffs on Mexico and China that he was talking about, he would start a trade war that would make life worse off for the American citizens he was trying to protect with a policy that has no real economic basis. 
  4. Transgender Bathroom Ban. A controversial solution to a non-existent problem. 
  5. Brexit. While I am not a fan of the European Union, the United Kingdom leaving the European Union will, in all probability do more harm to the United Kingdom than good. Considering that it looks like the United Kingdom is going to go through with it, we will see if the prediction among so many experts plays out. 
  6. Police Officers and African-Americans. This piece parses out that the arguments from Black Lives Matter and Blue Lives Matter have kernels of truth, and the reality is more nuanced than "black people hate cops" or "cops are out to get black people."
  7. The Iran Deal. One year later, do we see the Iran Deal as completing its main goals? In spite of some Right-wing fear-mongering, the Iran Deal is on track to stop Iran from becoming a nuclear power.
  8. John Oliver's Take on Charter Schools. This blog entry received the most views in 2016. While John Oliver has his funny moments, his view on charter schools was half-cocked and one-sided. 
  9. Trickle-Down Economics. Differentiating between trickle-down economics and the liberalized markets that a more capitalistic society aims for. 
  10. Regulating Condom Usage in Adult Films. California attempted to pass a Proposition that would have required condoms to be used in adult films. This Proposition was much more than public safety, and fortunately for the State of California, it did not pass.  
  11. Trump and Flag Burning. Shortly after being elected, Trump tweeted that he wanted to punish flag burners by revoking citizenship, which is such a bad idea for more reasons than one. 
  12. Judaism and Masturbation. In spite of the arguments that traditional Judaism has against masturbation, I found that when scrutiny is applied to the traditional arguments, they just don't stick. 

Happy New Year!

Thursday, December 29, 2016

Lighting for Chanukah: Olive Oil Versus Wax Candles

Plenty of us are familiar with the part of the Chanukah story where of how a ragtag team of Maccabees overcame the Greeks and were able to liberate and rededicate the Temple. Part of this rededication was the famous oil that was supposed to only last one night, but lasted eight nights (Talmud, Shabbat 21b). Fewer people know that the oil was olive oil, and that the usage of olive oil during that miracle still has bearing on the Jewish laws behind Chanukah. While it is permissible to use wax candles or other types of oil, the Shulchan Aruch (Orach Chayim 673states that it is best to use olive oil. The simplest answer to why olive oil is used is because the Chanukah miracle involved olive oil (Mishnah Berurah 673:4). While it is an acceptable explanation to pay deference to the initial miracle, I would like to see if there is deeper meaning behind using olive oil, and then get into the significance of using wax candles.

Why Olive Oil?
  • Retaining one's unique identity. This article from Aish entitled "Assimilation and the Chanukah Oil" was illuminating. The article points out that oil is "probably the most politically incorrect of all liquids" because it refuses to compromise its uniqueness. Part of the Chanukah story is for the Jews to retain their distinct identity in the midst of a world that encourages one to assimilate. Especially in today's society, my main issue with this article is that it presents a false dilemma between separation and assimilation, when in fact one can integrate. Yes, Jews can maintain their distinct identity with distinct practices, but Jews can also interact with greater society without losing that distinctiveness. It's not easy, but it can be done. Going back to the article, because it's not easy, for those of us who take the integration route need to be even more mindful of making sure we don't assimilate. After all, living in a world of gray (i.e., that of nuances and complexity) is more difficult to manage than that of black and white. 
  • Reliving the Days of the Temple: The Maharal takes the argument of "that was the oil of the original miracle" argument a step further. It is not simply about reliving the miracle, but of recreating the spiritual mood of the Temple because olive oil was used during the Temple days (e.g., Exodus 37:20). Under normative traditional Judaism, the Temple represents the epitome of spiritual connection with G-d. We should emulate that mood while lighting the menorah. 
  • Going for the best and purest: Going off the explanation of the Temple, the Talmud (Menachot 85b) teaches that it wasn't enough to procure just any oil: it had to be from Tekoa because it was the highest-quality, purest olive oil in existence. Much like they used the purest olive oil in the days of the Temple, we should also make sure we have the best and finest when we perform any mitzvah, which in this case, would be the usage of pure olive oil. 
  • Symbolism of Wisdom: According to the Talmud (Menachot 85b), the other reason why Tekoa was the best place to get olive oil was "because the people there use a lot of oil, they possess much wisdom." The Talmud (Bava Batra 25a) also associates wisdom with the menorah. We should use olive oil to exemplify the wisdom that Torah provides us. As King Solomon (Proverbs 20:27) said, "the spirit of man is the lamp of G-d." Much like oil permeates within the olive, G-d's Likeness (צלם אלוהים) permeates in each human being.  
  • Symbol of Steadfastness. Part of why olive oil has particular symbolism is because it represents the steadfastness within the holiday. When discussing the use of olive oil for the Temple, the Midrash (Vayikra Rabbah 31:10) uses a parable to parallel a legion faithful to its king to the olive branch that the dove in the Noah story brought to Noah. Rabbi David ben Yehudah Luria, also known as the Radal, took this to meant that because the olive branch withstood the corruption that took place during the Flood, the olive was chosen as the symbol of rebirth and renewal after the Flood narrative. The olive tree itself is also one that has strong roots, holds on to light and non-rich soil, and can withstand droughts, disease, and fire. Brining the symbolism of the olive back to the Chanukah story, maintaining that steadfastness under external pressures is what makes olive oil so special. We are meant to endure and maintain our Jewishness. 

I would like to touch upon another bit of legal history that turns all this symbolism about olive oil on its head. Even with all the lauding about olive oil, it is perfectly permissible acceptable to use wax candles. The reason for this? In pre-modern times, it was difficult for Ashkenazi Jews, i.e., Jews primarily of Central and Eastern European descent, to acquire olive oil. Because of the economic burden it would have caused, R. Moshe Isserles (the Rema) ruled that although olive oil was preferable, it was nevertheless acceptable to use wax candles.

The argument of using different oils was hardly a new one, even for the Rema. We already see this play out in the Talmud (Mishnah Shabbat 2:2) where it was acceptable for Jews to light for Shabbat with other oils, e.g., sesame oil, nut oil. While discussing lighting Chanukah candles, the Talmud does not even bring up that olive oil was used during the miracle. The discussion in the Talmud is about which oil works best. In the Talmud (Shabbat 23a), Rabbah bar Nachmani suggested using sesame oil because it lasted longer, but he acquiesced to R. Yehoshua ben Levi's opinion about olive oil because olive oil shined brighter. The Meiri (Shabbat 21) confirms this viewpoint of preferring olive oil for practical reasons. We also have to remember something else, which is that the mitzvah is first and foremost about kindling, and not about whether we use olive oil.

I find this tension to be a metaphor about how we deal with struggle and tension within the Jewish tradition. On the one hand, we are supposed to aim for our best and purest, which is what the olive oil is supposed to represent. On the other hand, I find that allowing for wax candles represents an acknowledgment of our humanity in the sense that we have limitations, whether they be economic or otherwise. Not everyone has the best or the purest, but we are still able to fulfill the mitzvah just as adequately with wax candles, or in a more spiritual metaphor, we can still bring just as much light with what we are able to provide. In Pirkei Avot 5:27, Ben Hei Hei said "according to the effort is the reward." This is not to say that intent is everything (because it's not) or to say that "anything goes in Judaism" (e.g., most believe that an electronic menorah does not fulfill the mitzvah of kindling Chanukah candles, although some rule otherwise), but that within the confines of Jewish law and Jewish values, there is more than one way to be Jewish, which is why there are multiple branches on the menorah.

We might not all be at the point where we can literally afford olive oil or metaphorically be on a spiritual level that olive oil is supposed to represent. However, G-d has given us other ways to still fulfill the mitzvah of kindling the Chanukah lights. What's even better is that Chanukah brings the message that we can spiritually grow, even with whatever shortcomings we might have. There is that classical debate in the Talmud (Shabbat 21a) between R. Shammai and R. Hillel about how to light the candles. R. Hillel ultimately won, and standard practice is to light one candle the first night, two the second night, etc. This is to teach us the importance of spiritual importance of gradualism. We start off with just one light (plus the shamash candle), and by the end, we reach maximum capacity. This is how we should view our spiritual ascent: with gradualism. Metaphorically speaking, most of us cannot make the automatic leap to olive oil. We have to ease ourselves into a level to reach our maximum potential. That is what I think the wax candles represent: the dichotomy for reaching higher while still being able to accomplish a great deal (in this case, the mitzvah of kindling Chanukah candles) without reaching the high point. The debate between olive oil and wax candles should remind us that our ultimate goal is to serve G-d to the best of our ability and to remember what is ultimately important: to bring spiritual light into this world.

Whether you use olive oil or wax candles, I hope you have a meaningful Chanukah that leads to spiritual growth in your life.