Redistribute This

If you were watching the third Presidential debate, you may have noticed that John McCain had hit on a new line of attack: Barack Obama wants to “redistribute wealth.” To those of us who interpret phrases by attaching meanings to the individual words within them, this comes off as pretty weak sauce. Of course Barack Obama wants the government to redistribute wealth; so does John McCain. That’s one of the things that government does. Every time the government takes money in the form of taxes or fees, or spends money on social services or public works or anything else at all, it redistributes wealth. Most obviously, we have a progressive tax system: people with higher incomes (supposedly) pay a higher percentage of their income in taxes. This is nothing new, and no mainstream candidate for national office proposes to do away with it.

Admittedly, as a country we are not very good at redistributing wealth. The gap between rich and poor in the U.S. is larger than in any other developed country. And progressive taxation isn’t nearly what it appears at first blush:

Even in the United States, the rich pay a disproportionate share of the federal income tax, which mildly reduces inequality. Other taxes, however, like Social Security, are regressive: the rich pay a lesser share. Thus, the upper tenth of households pay 70 percent of the income tax, but only 52 percent of all federal taxes. State sales taxes make the system even more regressive, because poorer people spend a higher share of their total income on them. Kevin Hassett, of the American Enterprise Institute, estimates that a family of four earning $50,000 pays exactly the same share of its income (30 percent) on taxes as one earning $150,000.

There’s little question that Obama’s policies would be slightly more redistributive than the status quo. Most obviously, he wants to raise taxes on the upper few percent of earners, and cut taxes to the middle class; he also proposes to expand health care coverage quite a bit. These are concrete policy proposals that are squarely in the mainstream of popular debate — his health care proposal was notably less ambitious than those of Hillary Clinton or John Edwards — but are certainly arguable; a freeze on health-care spending and a giant tax cut for the wealthiest Americans is also squarely within the mainstream of popular debate. Here is the graph of the impact that Obama’s and McCain’s tax proposals would have on different income groups:

Obama’s plan would hit the upper 1%, who benefited the most from Bush’s tax cuts, and it would lighten the burden on the lower 80%; McCain’s help is targeted at the top 20%, and (by virtue of not raising taxes on anyone) would cost an extra trillion dollars over ten years. Given what passes for a mainstream consensus in contemporary U.S. politics, the choice between these two options is considered to be a close one. So there is nothing crazy or desperate about criticizing Obama’s proposals on the merits.

But McCain and his supporters aren’t fretting over graphs of the growth of American inequality, or even over the distribution of tax rates. They are fretting over this, the histogram of likely electoral-college outcomes from fivethirtyeight.com:

As a response to this stark reality, they have decided to seize upon “redistribute wealth” not in terms of the actual meaning of its actual words, but as a slogan of SECRET SOCIALISM. For whatever reasons — this is a matter for future psychohistorians, not for humble physicist/bloggers — a substantial segment of right-wing punditry refuses to believe that Barack Obama is what he says he is, or what he has actually acted like his entire adult life: a thoughtful center-left politician. They have no doubt that he is the most radical figure ever to come this close to the Presidency.

Obama’s entire campaign is built on class warfare and human envy. The “change” he peddles is not new. We’ve seen it before. It is change that diminishes individual liberty for the soft authoritarianism of socialism… Unlike past Democrat presidential candidates, Obama is a hardened ideologue. He’s not interested in playing around the edges. He seeks “fundamental change,” i.e., to remake society.

To these folks, “redistribute wealth” isn’t a straightforward description of how the government operates under the present system. Rather, it’s a slip of the tongue, revealing the dictatorship-of-the-proletariat leanings hidden behind the nonthreatening exterior. And here is the revealing moment to which McCain was referring in that debate, when Obama explains to Joe the Plumber how his plans will remake Amerikkka as a socialist utopia:

Whew. Scary. This sort of wild-eyed communism is just what leads to endorsements from the Financial Times.

Which is why McCain’s allies are crowing with glee over the discovery of a 2001 radio interview with Obama, in which he again uses the phrase “redistributive change,” which is not precisely the same but close enough. Here is the kind of reaction this dramatic finding is receiving:

We have, in our storied history, elected Democrats and Republicans, liberals and conservatives and moderates. We have fought, and will continue to fight, pitched battles about how best to govern this nation. But we have never, ever in our 232-year history, elected a president who so completely and openly opposed the idea of limited government, the absolute cornerstone of makes the United States of America unique and exceptional.

If this does not frighten you — regardless of your political affiliation — then you deserve what this man will deliver with both houses of Congress, a filibuster-proof Senate, and, to quote Senator Obama again, “a righteous wind at our backs.”

That a man so clear in his understanding of the Constitution, and so opposed to the basic tenets it provides against tyranny and the abuse of power, can run for president of the United States is shameful enough.

We’re just getting started.

You can listen to the entire interview here, in RealPlayer. As an Obama supporter, all I can say is: please listen. (The interview was conducted on the late, lamented WBEZ program Odyssey, hosted by the redoubtable Gretchen Helfrich. Other Obama appearances here.) The response of any non-crazy person to that interview would be “Hmm, he sounds like a thoughtful guy. It sure would be nice to have someone as President who understood some of the nuances of separation of powers and the role of the Supreme Court in the federal government.”

Because that’s all the interview is about. Obama is talking about the role of the Warren Court in the civil rights movement. He makes a simple and true point, one that conservatives should love to hear: policy-making should not be done through the courts. The Warren Court, he says, was not very radical, even if it was painted as such at the time; it was essentially reactive, and that’s always going to be a feature of the appellate court system. If you actually want to enact substantive changes that have a chance of sticking, the right mechanism is political action and the passage of legislation, not relying on the courts to fix things.

You know, I’m not optimistic about bringing about major redistributive change through the courts. The institution just isn’t structured that way. [snip] You start getting into all sorts of separation of powers issues, you know, in terms of the court monitoring or engaging in a process that essentially is administrative and takes a lot of time. You know, the court is just not very good at it, and politically, it’s just very hard to legitimize opinions from the court in that regard.

Communist! Oh wait, sorry, that didn’t seem very communist at all. The above quote is in response to a question from a caller, who wants to know whether the Court is “the appropriate place for reparative economic work to change place.” And Obama’s response is: no. Hardly very dramatic, really. As David Berstein at the Volokh Conspiracy, usually a reliably conservative voice, puts it:

The whole interview is worth listening to for another reason: Obama gives a very impressive performance as a constitutional scholar. Even though he was holding down other jobs while teaching at Chicago, he clearly had thought a lot about constitutional history, and how social change is or is not brought about through the courts…

What I don’t understand is why this is surprising, or interesting enough to be headlining Drudge [UPDATE: Beyond the fact that Drudge’s headline suggests, wrongly, that Obama states that the Supreme Court should have ordered the redistribution of income; as Orin says, his views on the subject, beyond that it was an error to promote this agenda in historical context, are unclear.]. At least since the passage of the first peacetime federal income tax law about 120 years ago, redistribution of wealth has been a (maybe the) primary item on the left populist/progressive/liberal agenda, and has been implicitly accepted to some extent by all but the most libertarian Republicans as well. Barack Obama is undoubtedly liberal, and his background is in political community organizing in poor communities. Is it supposed to be a great revelation that Obama would like to see wealth more “fairly” distributed than it is currently?

It’s true that most Americans, when asked by pollsters, think that it’s emphatically not the government’s job to redistribute wealth. But are people so stupid as to not recognize that when politicians talk about a “right to health care,” or “equalizing educational opportunities,” or “making the rich pay a fair share of taxes,” or “ensuring that all Americans have the means to go to college,” and so forth and so on, that they are advocating the redistribution of wealth? Is it okay for a politician to talk about the redistribution of wealth only so long as you don’t actually use phrases such as “redistribution” or “spreading the wealth,” in which case he suddenly becomes “socialist”? If so, then American political discourse, which I never thought to be especially elevated, is in even a worse state than I thought.

It is in a worse state, Prof. Bernstein! You have every right to be concerned about that. The generous reading of the spectacle of right-wing pundits leaping on the word “redistribute” is that it serves as a litmus test — to most people, it’s straightforwardly descriptive, but to a certain segment of the punditocracy that has long been convinced that Obama is a closet radical, it’s a rare glimpse at the socialist core of this man’s being. The less-generous reading (depending on one’s preferred mode of generosity) is that they know exactly what they are doing, and they understand perfectly well that Obama is not any more socialist than any other mainstream Democrat, but they are desperate to sling poop around and hope that something sticks, because the electoral college prognostications are not good.

If those prognostications hold true, and Obama wins on November 4, the conservative movement is going to have to do some serious soul-searching. Do they want to engage politically with the other side and discuss different policy options on the merits, or do they prefer the screeching-monkey approach? Do thoughtful economic free-marketers want to continue to tie their hopes for success at the ballot box to goggle-eyed know-nothing social conservatives, or do they want to try to construct a winning coalition among intellectually respectable lines? Politics is cyclical, and there is no question that conservatives will bounce back. But it’s not clear how quickly it will happen, or what form the resurgence will take; that’s up to them.

59 Comments

59 thoughts on “Redistribute This”

  1. Joe the Doubter, you are falling into the error of assuming a given previous tax plan has a sort of “tenure” for benchmarking against newer tax plans (like one that will leave someone with 10% less than before.)

    In any case, differential rates (some would even say, differential amounts paid) are redistributing income (not “wealth”) regardless of the exact details, so it is highly phony for anyone to pretend that their rates being flatter would make them not to be “redistributive” – it’s just a matter of degree. But even the Republicans’ premise that they are more against redistribution is flawed. An interesting irony in their “spread the wealth angst” complaints: having a cap gains rate lower than for earned income as conservatives like, spreads wealth in effect from wage earners to CG traders. The latter don’t even do useful work after the original capitalization. Sure, indexing to inflation is a game issue, but for recent turnover the lower rate can’t be justified since most trading is not the valuable initial capitalization.

    Also, it is contradictory for them to say on the one hand that tax rates should be flat for fairness and to keep the government from deciding whose money is “better spent” when retained, but on the other to say (and wrongly!) that people buying and selling ownership rights etc. deserve the better cut since their retention of more money is more useful to the economy.

  2. @cmplamer:
    Instead, there is a very strong Horatio Alger type individualist ideal among many conservatives that thinks that hard work and dedication is always rewarded and, by contrast, laziness and apathy should be punished.

    Two corollaries go along with that idea. 1) The primary cause of poverty is laziness and apathy. 2) “Assistance” should be by individuals and charitable groups, but if it must be made by the government, it should be restricted to the ‘unfortunate’ who can be demonstrated to be impoverished by no fault of their own.

  3. It was a stupid thing for Obama to say and he knows it. If Obama had to do it again he would NEVER had told Joe the Plumber that he wants to spread the wealth
    It was a moment of stupid honesty just like Biden had the other day at a fundraiser warning us of the disaster that will be obama.

    my problem with sean’s post is that it would not be written if mccain had the said something similar. i doubt sean would write a post acknowledging mccain is right about this.
    i want obama to lose for the right reasons. but ill be happy even if he loses for the wrong reasons.
    no way no how nobama

  4. Sorry, David, but if you’re looking for fair and balanced political news, you’re in the wrong place. What would possibly make you think that this (physics) blog is obligated to take an impartial stance on the election? Tell it to the New York Times.

    I’m also sorry (not really) that despite your very clever catchphrase, Barack Obama will be the next president.

  5. For the life of me, I can’t understand why people don’t want to pay a few bucks in taxes to treat other peoples heart conditions. If I have to pay for a fire truck because some stupid libertarian plugged too much crap into his outlet, he should have to pay some for my neighbors chest pains. I think my neighbors chest is more valuable than insured household items. Everyone that hates the idea of taking wealth from other people should refuse to call a fire truck if their house starts burning down.

  6. For #23, quickest example I can think of off the top of my head, from his commencement speech at Wesleyan this past spring (they were showing it on CSPAN), Obama at one point said “our individual salvation depends on our collective salvation.” Mum said the same thing in Hungarian; I asked why and she said it was a pretty common slogan when she grew up in the sixties. Was even written on the piece of paper acknowledging the handover of some land the family owned back then.

    Link for his talk: http://www.politico.com/pdf/PPM42_remarks_of_obama.pdf
    (No link for the deed obviously as it’s sitting in a drawer at her house as a historic artifact, but it’d be in Hungarian even then. So dare I do the impossible on the Internet and ask you to trust me for now, and if you REALLY care I can scan it in whenever I visit?)

    As for the socialist vs communist comment I made earlier and probably should have clarified: every Eastern Bloc country was never officially even “socialist” according to the government, but rather working towards pure socialism (the exception being Russia itself, which was deemed socialist and moving towards communism). Sort of like how no, the United States is not really a democracy, and most would call Stalin a communist but he obviously wasn’t redistributing wealth in the way communism (or even socialism) said you should. So my point is it’s kind of silly to get into the whole “he’s a socialist” “no he’s not, because a socialist is defined by…” argument since no politician ever will fit the mold.

  7. The fundamental rule of taxation is that you tax activities you wish to discourage. It makes no sense to return taxes to people who never paid them on the thought that by doing so you will encourage them to create jobs or whatever else it is you need to have done to fix the economy. As Churchill clearly pointed out – Taxing your self into prosperity is like trying to lift your self up by the handle while standing in the bucket.

    Heck- Saudi Arabia and Russia have more than their share of the world’s oil, let’s go get it. Oh, that kind of redistribution doesn’t make sense? Well neither does Barack’s. If he wants my money, he needs to go out and earn it. If he wants to give money to those less fortunate, he needs to use his checkbook, not mine. I can give mine away without a $90K government bureaucrat in the middle for a rake-off.

  8. I keep hearing Palin and McCain say that they are “doing fine” and that “God will intervene on election day” when asked about how they are down in the polls. Do they know something that we don’t? Is this election already rigged? I seriously believe so. The Republicans are rigging the elections in every county in the country and we need to do something about it.

    I have an idea to make sure it all goes the way it should in Florida…

  9. what really strikes me (as an outsider) in this debate is the republican line of reasoning. currenty, Bush the republican is on a never before seen (well, since the great depression times at least) tour de force of interventionalism. the gouvernment has just decided to buy up to $700 billion of private economy partily against the will of the owners. at the same time they paint democrats as comunists. also, the current republican government has set an amazing record in unbalancing the budget and redistributing wealth into the military-industrial sector. yet they dare to raise this topic to scare voters off the democrats. and this list can be continued. bush enourmously expanded the government, cut on individuals liberties etc. yet the republicans dare to say with a straight face, that all these are things that the democrats would do and this is bad.

    i really don’t understand

  10. If you are in fact in the higher tax bracket, yes, feel free to be pissed and not vote for Obama. But since there have been similar sentiments expressed on this thread by people who are clearly not, I want to say the following.

    If you are middle class or below, and are getting all twitchy because you feel that the tax-plan is “unjust”, and feel the need to defend folks who are much better prepared to protect themselves, then you are being taken for a ride by people who you owe nothing to. Real capitalism is where you watch out for YOUR interests.

    The hope that you will one day be able to join their legions, and so you have to watch out for their interests is just a bait for emotional manipulation. The point is not that you aren’t going to realize the American dream. You might. But it still is a bad idea to base your decisions on it, for the immediate future. It is amazing to watch people being fooled by what are essentially abstract irrelevancies as far as they are considered. The point is that the immediate future of the vast majority of Americans looks better under the Obama tax-plan. If you have a real argument why the overall economy would suffer if he taxes big companies, then there would be more merit to your arguments. But imagined unfairness to a minority in the population simply is not an argument.

    The tax plan is not something written in stone – if there comes a time when the national interest is more in alignement to the interests of the wealthy, it can be changed.

    It is a powerful strategy of people who own wealth and power, to sell their interests as patriotism and fairness to the vast majority who don’t have wealth or power. National interests are often identified with the interests of a handful. It is simply NOT unpatriotic to tax corporations, period. It might or might not be bad economic policy depending on the state of the country. Right now, the US needs to stand on its feet before trying to fly.

    Blacklisting certain words (like “income redistribution”) is merely a strategy. There is nothing black and white about any word or phrase, all depends on what it is used for. Lets hope for that day when the gullible sector of the population learns to avoid swallowing it hook, line and sinker.

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  12. Hey kevin, what makes you so sure you deserved all the money you got in the first place? If employed, what logical technique does your employer use to determine your “marginal value” (how much more money the company earns with you than without you”) considering that employees are sort of like organs in the body: they work together so we can’t explicitly ID just how much “value” the spleen provides, or the heart versus lungs (couldn’t live missing either one) etc. So how do we know you deserved that much, compared to someone working at 7-11? Can you prove that you do? Do you really think the CEOs making hundreds times more than most of us really produce that much ‘real value’ into the economy, or do you realize they are paid by insider Boards more to (the irony!) redistribute customer spending from other companies to theirs – yeah, important to *their own* interests but worthless *to me* in terms of “total net utility” value for the society/economy as a whole!

    If you make money from investing, you know that the “funny money” operation of the Fed monetizes debt and so inflates the money supply based on credit expansion – you get more than you possibly could in a true, hard-currency to goods free trading market. And finally, if you don’t like “redistribution” by tax rates, than are you going to prove your honesty by opposing a cap gains rate (in advance of inflation indexing, which I support – I mean, the base CG tax rate before any “time” adjustments) which is lower than the tax on people who, ironically, actually did work hard to produce new value and earn the money directly? I don’t want my earned income to be redistributed to worthless traders/traitors, got that?

    thanks

  13. Aaron, please tell us where you saw “God will intervene” comments, etc – I want to check it out, and yes we should worry about Diebold and such creepy stuff. Look at these links:

    http://www.rollingstone.com/news/story/10432334/was_the_2004_election_stolen/

    http://www.gregpalast.com/rolling-stone-its-already-stolen/

    http://www.blackboxvoting.org/

    Heh, I enjoy the schadenfreude since this time, the SoS of OH is Democrat Jennifer Brunner who is getting the same vote-suppression complaints from Republicans as the creepy Republican Kenneth Blackwell did in 2004!

  14. [Needed update – in CV thread “Going Out on a Limb” below, the “God will intervene” remark comes from Sarah Palin – but I think she’s just expression a common fundie attitude that theological God (not political machinations) puts a “thumb” on the scales on behalf of certain forces and nations in history. She’s hoping for that to get them through, and that’s great because maybe they won’t try as hard in real life.]

  15. Neil, re: your comments in #37, you make as much money as your employer thinks you are worth. Capitalism is pretty clear on that- you don’t get $20/hour working at 7-11 because the labor you provide is not valued as worth that much.

    A CEO, on the other hand, has his salary decided by the board of a company. If they think he’s worth $250k a year then fine, it’s their company and if that’s the sort of money they think they need to pay it is literally their business. IRC, Ben and Jerry’s ran into a problem in the 1980s where they had salaries capped at 5x whatever the lowest salary was for an employee in the company; they ended up changing that rule when the ~$80,000 for a CEO wasn’t enough to entice an outsider.

  16. Neil B @37
    Are you saying that you know how to measure “total net utility” of each of us to the economy/society as a whole?

  17. Yvette, Roman:

    That’s it, you get what your employer “thinks” you’re worth, which proves nothing about “how hard you work” etc. Is there anything objective in that? How can we know the actual magnitude of work, it isn’t like mass or charge. No Yvette and Roman, I’m not saying I do know how to measure net utility; I’m saying that nobody really does, including employers and economists they might hire to get “objectivity” in the equation. So, how can they possibly pay people according to objectively “how hard they work”? That’s the point.

    Hence psychology, class sentiments, etc. are mostly behind what people get paid. Therefore, it’s hard to argue, it’s wrong to tax soandso who “earns” (is paid, according to someone/s’ mere opinion in most cases) 10x of me at a higher rate than me – because we don’t have a way to prove that other person really contributed 10X worth of output, productivity, whatever you want to call it – to the economy.

    Actually, consider that employers can offer higher gross pay to offset taxes anyway. If net pay is the actual “sale” of the labor from being the “observed quantity” – that likely means that higher-earners aren’t even losing out in relative terms compared to without the taxation. Few appreciate this issue.

    Haven’t you wondered, how companies can complain about “worker salaries” making them uncompetitive for export, but still paying so much to CEOs? The pressure to do so derives from corporate Boards not really paying for value in a free market. In a true market economy, purchasers must allocate (as money, a zero-sum game at a point in time) from their own scarce buying power. If I spend my own money, I won’t pay $400 for a haircut unless it is damn good for me, because I’d have $400 less to buy other things. But the Board members don’t use their own personal money! They use control to allocate company funds – if they decide to pay the CEO 10 M instead of 5M, no skin off their personal backs. They still have whatever they earn as members regardless. Hence there is no responsible pressure for thrift as there is for a genuine market buyer.

    As for B&J’s: Their main problem was, they couldn’t compete with other companies that used the system above. If employees had to be paid in such a way that the allocator had that much less remaining for his own use, that would be like a single proprietor or direct shareholder control. There would be little incentive to pay huge salaries. If all companies were organized differently or faced tax disincentives to pay a wide gap, the ones that wanted a smaller gap could compete.

    Well, does “capitalism” require letting companies do as they please? No, it doesn’t. Regardless of how much “natural freedom” individuals may have to buy and sell including of labor, corporations are artificial entities given rights, from the government, of limited liability and limited (and not by enough) legal personhood. Groups like that, versus individuals, do not have such rights by natural law or whatever source you think offers them to individuals. Hence government/society has the right to demand conduct according to some permitted rules and charter for corporations, including how much to pay, etc. I can’t prove that individuals (like tree-trimmers asking householders for work) are subject to such a quid pro quo, but corporations certainly are.

    Note of course that nothing in the argument “of principle” over taxation and regulation rights proves that high rates or many regulations etc. are good. It only shows that taxation and regulation have a right and foundation for their very existence.

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  19. Some conservatives (and this is probably a very small minority) aren’t just attacking the idea of “income redistribution”, but the repeated claim that Sen. Obama will lower the income taxes on 95% of Americans. Given that a significant percentage of Americans do not pay any income taxes at all, this figure sounds dubious until you realize that the tax credits he is proposing would create a negative tax burden on the lower income tax paying population – in other words, it would result in “refunds” when there was no money payed in to refund.

    But this argument ignores the fact that Americans who don’t pay income taxes still pay payroll taxes. The factcheck.org article on this says:

  20. Sorry, accidentally clicked “submit” before pasting the quote from factcheck.org, which was:

    The fact is, a worker can be a “taxpayer” whether or not they owe any income tax. Just about every worker is subject to federal Social Security and Medicare taxes totaling 7.65 percent on every dollar of earnings, up to $102,000 per year. (For earnings over $102,000, only the 1.45 percent Medicare tax applies.) Low-income workers, and retired and jobless persons as well, also pay federal excise taxes whenever they buy gasoline or pay a telephone bill, for example. Obama and other Democrats argue that for low-income workers, refundable tax credits are not “welfare” but, in effect, a reduction in their overall federal tax burden, counting payroll taxes.

    Congressional Budget Office figures show that even those in the lowest-earning fifth of households pay an effective federal tax rate, on average, of 4.3 percent of their income, despite benefiting from existing federal refundable tax credits to a major degree. This group had average income of $15,900 in 2005, the most recent year for which CBO has done the calculations. But despite receiving “a federal check” through the income tax system that boosted income by an average of 6.5 percent (this shows up as a negative tax rate in the CBO tables), they still paid an average of $600 in federal taxes. That’s true even after subtracting the effects of refundable tax credit “welfare.”

  21. Using tax revenue to build roads or museums isn’t redistributing wealth, its using funds for the common good. Redistributing wealth is taxing wealthy people and handing out the money to lower income people, whether through welfare or government controlled/sponsored health care. For the record I voted for Obama, but this is one area where I disagree with policies that are inline with the democratic party. In my opinion the best tax system would be a flat tax rate of say 17%. There should be no deductions for anything. Remember a lot of wealthy people minimize their taxes with lots of deductions.

    The fact is high rates of taxation do constrain the economy by limiting disposable income. My income has increased dramatically over the past 5 years, but when it went through the ranges of what might be considered upper middle income my taxes also jacked up so much that my take home pay barely increased. So as the Republicans point out, where is the incentive to innovate? The best thing is the flat tax so you aren’t punished for going up the ladder. If everyone is taxed at the same rate wealthy people are still paying much higher taxes.

  22. A lower tax rate for lower incomes lowers the burden on companies who hire low skilled low income workers, because the net income has to be above some minumum level.

    People who make a lot of money tend to spend a larger fraction of their money on goods and services that benefit foreign countries. E.g. they tend to travel more abroad. So, by taxing the rich more and spending the tax money on projects at home (and not on Iraq), you benefit the economy.

    If you make increase the costs of companies to hire low skilled workers, then the production involving cheap labor goes abroad, e.g. to China. This is why the US has a trade deficit with China.

    The net amount of taxes the governement collects should also go up a lot. This will allow the government to start big projects like building bases on the Moon and on Mars, developing nuclear fusion. The money needed to fund these projects are not that big compared to the net output of the US economy. By engaging in these difficult projects, a lot of new technologies will be developed that will benefit everyone.

    Currently, a lot of the output of the economy goes to waste in the form of things like the production of beer, lipstift, Big Macs etc. etc.

    What’s wrong with increasing taxes which may lead people to buy a little less Big Macs and leading to some job losses at McDonald’s and Fatburger, if you get more jobs for highly skilled people at NASA and if we get nuclear fusion a few decades earlier?

  23. I couldn’t agree more with this post. I am glad to see Sean applying his considerable analytical skills to the question of what constitutes fair tax policy and economic justice.

    The monetary view states that there needs to be enough money in an economy to meet the demand for the efficient exchange of goods and services. Excess money is necessarily and naturally devalued (inflation). Hoarding money creates false demand. If you save more than you will ever actually need in your life that excess will eventually dilute the value of all money in circulation (inflation). The wealthy person’s demand for ever more money and the creation of false demand through financial speculation is more destructively inflationary than a tight labor market or the wage demands of unions. The current bailout plan is an attempt to prevent the evaporation of a huge amount of artificially created wealth (created through the false demand of speculative derivatives) while preventing the inflationary effects of injecting hundreds of billions into the general economy. The only way to do that is to take it back through taxes. The only fair (and least disruptive) way to do that is to tax the wealthy individuals and institutions who are primarily benefiting from the bailout.

    Jane Goodall tells what happened when a large pile of bananas is presented to a troop of chimps. The alpha male sat on top of it and wouldn’t let any other chimp near. He sat there and ate what he wanted while most of the fruit rotted away. Humans are social animals that are supposed to be smarter than chimps. We shouldn’t be fooled by promises that in a capitalist economy anybody who wants can become as wealthy as they want. Soon the dollar would be worth exactly one rotten banana. Progressive taxes can moderate inflation and protect the reasonable levels of savings that reasonable people aspire to.

  24. for every extra dollar someone earns above $40k, they only make 60 cents. This provides a disincentive for people to work harder.

    I think that the idea that people work ‘harder’ to earn more money is largely false. I don’t think a big oil executive making $50,000,000 a year is working 1,000 times harder than a construction worker making $50,000 a year.

    You can increase your income somewhat by working harder, but only up to the point where you’re working ‘very hard’. Beyond that you have to improve your income by working at things that are higher value, generally by gaining experience and skill, or applying skills in different markets (say, managing a plumbing company instead of doing skilled plumbing work)

    So to say that a progressive tax rate is a disincentive for people to work harder is, I think, completely wrong. It might be disappointing to find that one has to pay more taxes as one’s income increases, but because that advancement isn’t linear with an increase in the exhaustiveness of the work, it doesn’t provide a disincentive to increase one’s income.

  25. The great expansion of the American economy in the 30’s, 40’s, and 50’s took place when the highest marginal rates were astronomically high by current standards. Instead of preventing growth, they probably furthered it. In the absence of redistribution through progressive taxation, the best off would probably gambled on speculative financial investments rather than putting money into plant, personnel, and research to increase the productive capacity of the economy–anyhow that’s been the basic pattern in the U.S. since the 70’s.

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