Debating the liberal view of economics…

Theleftanchor.com posted an article Denouncing McCain’s economic plan (http://www.theleftanchor.com/2008/08/mccain-bad-for.html). I am certainly no McCain apologist, but I defend conservatism whenever I get a chance.

I opened the conversation with this post:

I always tense up when Americans begrudge prosperity. When I hear phrases like “income gap” and “unfair” and people suggesting that government should even out the inequalities I begin to wonder if I should bury my money in the backyard. During periods of economic increase wealthy Americans proper the most. Great! Conversely, when GDP flattens or even declines the wealthy stand to lose the most and the gap narrows. According to the IRS (http://www.irs.gov/taxstats/indtaxstats/article/0,,id=129270,00.html) under Bush’s reign of terror the top one percent of Americans accounted for 21.2% of adjusted gross income and 39.4% of federal tax revenue. You describe this as “greedily enjoy the benefits of a Bush presidency”. Its almost like they paid their “fair share” and part of yours and mine too. For you to side with Karl Marx and suggest the government graduate the tax scale even more aggressively sounds “unfair” and maybe even unamerican. What is the logical conclusion of Obama’s economic plan? Tip the tax scales so much that no body is allowed to be wealthy by order of the government? Extracting even more tax dollars from those who employs the most, consume(spend) the most, invest the most, and generate the most would put a blight on the economy and cap on GDP growth like you can’t imagine. No poor guy has ever signed the front of my paycheck and I sure don’t want a dime from the government. So maybe take it easy on those Americans who embraced the very heart and soul of free enterprise and just be satisfied with the extent to which they are being punished for their success. The more successful, wealthy, rich, etc… an American becomes the vulnerable his earnings are to seizure by the goverment. When enough anger and envy is stirred among the populace people begin to cheer on the goverment in appropriating wealth from the richest. Is there a more terrifying scenario for Americans who putting in the efforts to achieve great success in the USA?

Posted by: Michael Paul | August 09, 2008 at 10:41 AM

Hey Michael, you make an interesting argument but one that conservatives/republicans usually make when liberals like myself talk about a more evenly distributed income system. Your first response is usually that the wealthy already pay more and that any sort of tax is going to stifle success, I am currently away from my home state in Europe and let me tell you, the higher tax rates do nothing to stifle the success of people in the U.K and Ireland (Living in Ireland at the moment).

The second response is always to associate a more even tax system with Karl Marx, absolute capitalism is wrong as is the same with absolute socialism. The mix is where a country truly blossoms. The logical conclusion of the Obama tax plan is to give the middle class a bigger tax break while forcing to the top 1% aka Bill Gates, Buffet etc.. to pay on average $738,000 more. Do you think that is going to force Bill Gates to resign his citizenship and flee to Guatemala where the tax rate is lower? I don’t think so.

Posted by: Crian | August 09, 2008 at 12:02 PM

Michael,

First of all, nothing in Crian’s post suggests that people shouldn’t be allowed to be wealthy. Further, the wealthiest Americans now pay less of a percentage of their income in taxes than they ever have, and the — yes, get ready for it — the income disparity between the rich and the poor is as high as its been since Hoover.

The government has a vested interest in ensuring as large and healthy a middle class as possible, and that idea doesn’t come from Karl Marx, it comes from Aristotle. Having a middle class that is just scraping by puts the economy at enormous risk. We need a middle class that can afford to buy all the things this economy is creating. No matter how wealthy the top one percent is, they will never be able to do that, because there are simply not enough of them, and they are far more likely to invest than to consume. Nothing wrong with investments, but if people aren’t building new houses, buying cars, etc., then investment won’t do much to spur growth. It’s why I’ve never understood tax cuts that are massively slanted to the wealthiest Americans. It’s also why those tax cuts almost always fail to work.

Also, you act as if the richest Americans are entitled to everything they earn. As if the roads, water systems, electrical grid, banking systems, international monetary systems just magically created themselves. We make the wealthy pay more, because they’ve benefited more. Not to mention that when we cut taxes on income or capital gains, that money has to be gotten from somewhere — usually in the form of higher cigarette taxes, or sales tax, or another one of the massively regressive taxes the government chooses to levy. This only squeezes the middle and lower classes even more, meaning they can buy even less, meaning the economy will worsen.

Posted by: Big Blue | August 09, 2008 at 12:49 PM

We need to be very careful not adopt a distorted view of the government, at least as the founders intended it. Threats, internal and external, were the general scope of the government. Attempting create fairness or equality was never the intention of our limited government. The government has no interest in the success of any class of people. Again, government exsists to maintain the rule of law for the people. People or classes don’t exsist for the goverment to invest in. The concept of two distinct economic classes to justify government intervention to any degree was the foundation of Marxism and, of his ten steps to move to a capitalist society into communism, “A heavy progresive or graduated income tax” was number two on the list. That is direct quote from Marx himself. In response to Big Blue, I actually act as if they are entitled to keep the same PERCENTAGE of what they earn that we do. Clearly they will contribute far more dollars that the average Joe. Big Blue, you are correct, nothing in Crian’s post suggested people shouldn’t be wealthy, but carrying the idea to it’s logical conclusion unfortunately points to something close to that. Gang, let’s be careful to not miss the general idea that some in America believe the government has license to appropriate wealth in name of charity or equality or fairness and spread it to people who have offered no product or service in return. Money is meanlingless paper, worthless I-owe-yous, that represents actual goods and services. There are no limits in America to you or me producing goods and services for other people if we want their money. That is capitalism. When our country was founded it was PURE capitalism. There was no government redistribution and America became, as a result, the most successful experiment in freedom and free enterprise, ever. Let’s be careful how much control we allot the goverment.

Posted by: Michael Paul | August 09, 2008 at 01:31 PM

Michael are you then saying that the economies of Europe with their graduated income tax scale are heading towards communism? I hardly think that is possible. The Government was originally created as you state Michael but to continue to operate in such a way ignores the current facts of our times. The role of Government needs to mold to fit the current society. I know this depends on whether you interpret the Constitution as a “living” document or the “original intent” of the founders. Let’s discard that for the moment?

Tell me Michael, how are we as a free society supposed to prevent the growing income disparity, increasing poor etc….? The status quo is not going to help that so unless the Republicans have a plan, it is time to change the way America works to actually help people.

I truly believe that America will not fall apart if it drifts from pure Capitalism. It will actually be better for it.

Posted by: Crian | August 10, 2008 at 12:27 PM

I gotta agree with Crian. Talking about the purpose of government as it existed 230 years ago is pretty disingenuous. The purpose of government has evolved during that time.

And again, the government does have a very compelling interest in maintaining a strong middle class. It creates a stable economy and a stable government, and frankly, redistributing wealth from the very wealthiest to the working class has proven to be a very effective method of creating both a robust economy and a healthy middle class.

I have also made the point on this blog time and again that I do not now, nor will I ever be swayed by slippery slope arguments. That if we have a progressive income tax we’re destined to fall to communism is just plain silly.

Also, ever since we’ve had income taxes, they have been progressive. And the wealthiest Americans used to have to pay far more percentage-wise than they do now. Exactly what is their complaint. They benefit more from what little economic growth we’ve had over the last eight years, while paying less than they ever have in taxes. Meanwhile working class Americans are barely scraping by due to sky rocketing gas costs, health costs, and college tuition, meaning they have less to spend, which is bad for the economy.

I have absolutely no objection to a graduated income tax that increases as income rises. And I would feel the exact same way if I were a millionaire.

Posted by: Big Blue | August 10, 2008 at 12:44 PM

The phrase “income disparity” seems to suggest our economy is a zero-sum game or that there is a finite quantity of money/wealth. If that were the case then wealth accumulation would be nothing more than a contest of speed. The victor grabs to largest sum of the whole and it is crumbs and begging for the rest. The income disparity represents nothing more than a number for others to point at and gnash their teeth. In reality, there are NO LIMITS to the amount of products or services that Americans can produce. Money is a mere representation of those goods and services. To imply that the steps and efforts that America’s wealthiest have exorcised will work for them alone is absolute denial! If I want to get my hands on a share of another’s bank account I only need to provide a product or service in exchange. It is stunning to watch someone size up America’s economic situation and proclaim a portion of Americans have reached a point where self-reliance should be exchanged for government dependence. The transfer of meaningless pieces of paper, or i-owe-yous, to benefit anyone with no product or service to back it up is a CATALYST for inflation. The middle class derives far more suffering from that alone than any ultra-rich man’s bank account total. I can assure you if social programs were exchanged for private sector jobs and something of actual value was exchanged for cash there would be no middle-class crunch. As far as the slippery slope argument, take it up with Karl Marx. He had a goal and a ten step plan to achieve it. When self-reliant citizens can, with clarity, see those steps being implemented, and when a large contingent of the left openly defends Marxism (revleft.com among others) I do tend to get a bit nervous.

Posted by: Michael Paul | August 10, 2008 at 10:21 PM

As far as Europe’s future is concerned, who knows? With a declining population (http://en.wikipedia.org/wiki/World_population, http://www.iiasa.ac.at/Research/LUC/ChinaFood/data/pop/pop_6.htm), a death-bed demography (http://www.iiasa.ac.at/Research/ERD/DB/data/hum/dem/dem_2.htm), lavish social programs, and not nearly enough replacement laborers (http://www.medicalnewstoday.com/articles/51329.php, http://www.rand.org/pubs/research_briefs/RB9126/index1.html)to support those dependent on the government, their economy won’t exist long enough to find out.

Posted by: Michael Paul | August 10, 2008 at 10:24 PM

MP,

You’ve left the reservation. No one in this post has advocated Marxism. I advocate a strong, healthy middle class existing within a predominantly capitalist economy, but the need for a middle class was laid forth by Aristotle, not Marx.

And now you’re equating recognizing an objective income disparity — which has nothing to do with believing wealth is finite, but rather suggests that there is a “disparity” (the condition of being unequal) between the wealthiest and the middle class that is far in excess of what is economically sustainable — with mercantilism, which actually is the economic belief that there is a finite amount of wealth in the world (and which went out of fashion a couple of centuries ago).

This is a straw man. You take an argument, call it something that it’s not, and it makes it very easy for you to argue against the idea that no one has proposed. I don’t propose that the government should control all aspects of the economy, or that all property should be owned in common. I merely propose a tax plan designed to put more money in the hands of working Americans. It’s not just about what America can produce, it’s about what America can consume. And when what little economic growth there is goes almost entirely to the wealthiest one percent, that’s bad for everyone.

Posted by: Big Blue | August 11, 2008 at 02:04 AM

Hey MP, BB has said what I wanted to say in a more concise manner so I won’t repeat what he said. On the subject of Europe, what has been the overall change in GDP in countries like France, Germany etc… with their social programs. Strong positive growth has occurred and will continue to occur in these challenging global times. For example where I currently live for the moment: “The latest economic analysis from PricewaterhouseCoopers estimates that the Irish economy is headed for a sharp slowdown in 2008 and has little scope for any significant recovery in 2009. Growth in Ireland is expected to slip to 2% in 2008 and remain fairly subdued in 2009, as the economy suffers from subdued domestic and foreign demand during both years.”

The EU and its member countries have done something right with a fair tax system not to mention healthcare, its about time America catches on to this trend.

Posted by: Crian | August 11, 2008 at 11:05 AM

To come to the conclusion that wealth is not finite is an exciting first step. However, we may need to follow that line of reasoning just a bit further, at least to help with my point. You are right: The phrase “income disparity” does not suggest that wealth is in limited supply. For you to suggest that income disparity is a real problem that needs to addressed, however, does suggest that wealth is finite. Calling a significant difference in income levels a real concern implies one of three things. Either the majority of wealth has been gobbled up by the most aggressive and there is nothing left over for the rest of us poor saps (finite wealth) or wealth is limitless, but the middle class have nothing of value to offer in exchange for wealth and, without relying on the government, will never get a share of the loot. The third possible implication arising from someone making an issue out of income disparity is that they simply prefer the government be that ultimate authority concerning accumulation of capital. There appears to be agreement in saying that wealth is not finite, and I don’t believe your preference is that government be the final arbiter of wealth. As for the ability of middle class to be self-reliant, to provide marketable skills and products to the free market and receive compensation, we certainly can do it ourselves without the crutch of government. If I happen upon some rich guy sitting on a mountain of cash we have a match made in Heaven. This wealthy chap has the power to consume and I have the ability to produce. The government need not apply. I pose that if the government extracted its tentacles from the free market, as opposed to artificially tipping the scales towards the underdog, incomes would climb across the board.

On a different note, let me remove a little confusion. An aggressively graduated income tax is not Marxism. Because you subscribe to that idea does not make you a Marxist. A heavy progressive tax was simply one tool out of ten that Marx suggested we utilize to achieve communism where capitalism once was. I can only assume that your reasons for employing that tool are much more benign.

Posted by: Michael Paul | August 11, 2008 at 04:51 PM

I think what I’ll do is address the thrust of this argument in a future post. This conversation has somewhat outgrown a comments thread, so just look for a post maybe sometime in the next week, and we can take this up again then. To get into all the details of what we’re talking about here deserves more than the somewhat limited back-and-forth comments allow. This is rich subject matter, and I might like to take 1,500 words to address it (which would still be a limited discussion to be sure, but is probably the best you can do in a blog format).

To be continued,
BB

Posted by: Big Blue | August 11, 2008 at 06:31 PM

Tags: conservatism, disparity, free market, graduated income tax, income, income disparity, liberal, marxism, redistribute, redistribution, socialism, wealth