Here is how a recent Wall Street Journal article begins (The Partisan Tax Policy Center):
For centuries discussions of tax policy centered on the collection of government revenues. As Louis XIV’s finance minister, Jean-Baptiste Colbert, famously wrote: “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the smallest possible amount of hissing.” This was the received wisdom until Adam Smith pointed out in 1776 that the wealth of nations—not the wealth of governments—is what really matters. The debate about the proper ends and means of taxes has raged ever since.
The authors, Marc Sumerlin and Noah Williams, invoke Adam Smith. They are relying upon the ignorance of their readership in not knowing what he actually wrote.
Smith was a strong critic of economic inequality. He didn’t think a free market and a free society was possible when inequality was allowed to grow. It corrupts the moral sentiments and destroys the social fabric, as he explained in great detail.
For this reason, Smith thought the upper classes should be taxed at a higher rate than the lower classes (i.e., progressive taxation). He also supported other progressive ideas such as public education to counter the negative consequences of industrial labor, and of course that public education would be paid for with progressive taxation.
It is either ignorant or dishonest of the authors to not mention any of this. I understand it’s an opinion piece, but that is not an excuse for disinforming the public. It is the job of journalists to know what they’re talking about. These two writers are acting as experts about the topic, and so they should hold themselves to a higher standard.
They then go on with stating that,
This year’s presidential election is no different. High marginal personal income-tax rates provide a disincentive for work, and the tax system heavily penalizes saving. American corporations face the highest statutory tax rate in the developed world. The disincentives to invest lead to slower growth, fewer jobs, lower wages and a less vibrant economy; and the fundamental purpose of tax reform should be to achieve broad prosperity.
This is further dishonesty. I’m not even going to pretend it might be mere ignorance at this point.
No one could honestly say that US corporations have the highest actual tax rate in the developed world. They are being misleading in what they say. There are so many loopholes and offshore accounts that many corporations avoid a lot of taxes.
Plus, corporate profits are higher than they’ve ever been, even after taxation. If there is a lack of investment, it isn’t because of a lack of money to invest. Part of the problem is some corporations spend more money on advertising, lobbying, astroturf, etc than they do in research and development.
What creates disincentive for work is the fact that there are more people than jobs. Also, there are more people who would like to start a business than can afford to start a business or can get a loan to do so. There is a reason the black market is one of the biggest sectors of the economy. People are willing to work, but when they can’t find legal work they look for illegal work. This has the sad side effect of landing many people in prison, which then further economically devastates these communities of high unemployment. Between offshoring and mechanization, the old good jobs are unlikely to come back.
These authors attack the Tax Policy Center. They do so not because they actually believe the data is wrong. It just doesn’t fit their ideological agenda and political narrative. They see it as an extension of the Democratic Party, as if the TPC simply speaks for the campaigns, which isn’t even accurate considering Sanders’ criticisms. Their attack on the TPC is simply a partisan tactic—the authors just dismiss the political left:
Democrats Hillary Clinton and Bernie Sanders are more focused on redistribution of income and have proposed higher taxes on capital gains and on high-income earners.
That goes back to my point about Smith. Redistribution has been a part of capitalism from its beginning. It was considered a necessary part of creating and maintaining a free market.
Neither Clinton nor Sanders is against capitalism. Clinton is a full on capitalist, to the point of being a globalist, corporatist neoliberal. As for Sanders, I just heard him make a strong defense of corporations in a debate, when discussing gun manufacturers. His ‘socialism’ is of an extremely capitalist-friendly variety… some might not even call it socialism. Sanders’s view is basically a moderate form of New Deal politics.
Many older conservatives who fear Sanders have themselves benefited earlier in their lives from redistributionist programs and funding, from cheap housing to cheap education. The older generations grew up at a time of the highest rate in US history for taxes on the rich and corporations. That was what paid for all the opportunities they had and helped so many of them get into the middle class. So, now they want to pull up the ladder behind them, really?
Like Smith, Sanders points to inequality as a central concern (and then Clinton parrots Sanders rhetoric). It turns out that Smith was right about inequality, and hence so is Sanders. I’ve previously pointed to a ton of data that shows that many social problems are directly correlated to inequality, and that for this reason decreasing inequality ends up benefiting the poor as well as the rich. Free markets function better to the degree inequality is decreased, as that guarantees economic mobility, grows the middle class, and incentivizes hard work—all of which most American conservatives and libertarians claim to value.
If one hates redistribution, then one should really hate inequality. In Redistribution, Inequality, and Growth, an interesting point was made by the authors (Ostry, Berg, & Tsangarides). After looking at a cross-country dataset, they concluded with three points:
First, more unequal societies tend to redistribute more. It is thus important in understanding the growth-inequality relationship to distinguish between market and net inequality.
Second, lower net inequality is robustly correlated with faster and more durable growth, for a given level of redistribution. These results are highly supportive of our earlier work.
And third, redistribution appears generally benign in terms of its impact on growth; only in extreme cases is there some evidence that it may have direct negative effects on growth. Thus the combined direct and indirect effects of redistribution—including the growth effects of the resulting lower inequality—are on average pro-growth.
The first point is most important. It is in an unequal society that redistribution is the most needed. This is why the US states with the highest inequality are the same states that receive more federal funding than they give in federal taxes. Partly, this is because these are the states with the highest per capita of welfare recipients. But also inequality exacerbates all of the related problems of poverty, such as health conditions which also need government funding to deal with. The US states with lower inequality tend to better solve their own problems in the first place and so are less dependent on federal redistribution.
Another paper titled The China Syndrome by Autor, Dorn and Hanson has related findings:
“Rising imports cause higher unemployment, lower labor force participation, and reduced wages in local labor markets, … [and] contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets. … Reductions in both employment and wage levels lead to a steep drop in the average earnings of households. These changes contribute to rising transfer payments through multiple federal and state programs, revealing an important margin of adjustment to trade that the literature has largely overlooked. … The largest transfer increases are for federal disability, retirement and in-kind medical payments. Unemployment insurance and income assistance play a significant but secondary role.”
About inequality, there is another WSJ article by Lawrence B. Lindsey, How Progressives Drive Income Inequality. It’s more the same:
Hillary Clinton and Bernie Sanders are promising all types of programs to make America a more equal country. That’s no surprise. But when you look at performance and not rhetoric, the administrations of political progressives have made the distribution of income more unequal than their adversaries, who supposedly favor the wealthy.
It’s endless ignorance and ideological rhetoric. Timothy Noah, in an MSNBC article (Has income inequality lessened under Obama?), points out that,
The Tax Policy Center data show that the top 1% would get 6.5% more in income if Bush administration tax policies were still in place, while the bottom 20% would get 1.2% less. Relative to an imaginary Republican president, Obama has reduced income inequality. That’s something to be grateful for.
Only a complete ignoramus would blame Obama for inheriting the greatest economic problems since the Great Depression. It takes years for a presidents’ policies to take effect. If you want to know what the real impact is of Obama’s presidency, you’d want to look in the first few years of the next presidency who will likewise inherit the results of the prior administration. I’m no fan of Obama, but let’s do an honest appraisal.
It really pisses me off that these kinds of asshole conservatives even pretend to give a fuck about inequality. They’ve endlessly denied that it even matters. Now they have the audacity to say it matters after all, constantly backpedaling (just like with their denialist climate change arguments). They go so far as to say that inequality grew faster under Clinton than Reagan, when it was Reagan who created the permanent debt that all following presidents were forced to deal with. Can’t these people be honest for even moment?
Inequality, like the permanent debt, just keeps growing exponentially. The more it grows the faster it grows, worse leading to worse still. It’s a problem that has immense momentum for it isn’t just inequality of wealth but also of real world opportunities and political power. It just goes on and on, until something is done to stop the original cause and undo the harm done. But it is relevant that this growth slows down under Democratic administrations, as the data shows.
It is true that this slowing down doesn’t stop it, though—a valid point. Still, only a worthless piece of shit would try to blame this on ‘progressives’. The main blame recent Democrats must accept is that of embracing neoliberal voodoo economics. Clinton took up the policies of Reagan: welfare reform, deregulation, tough on crime, etc. Clinton may not have been a crazy right-winger like George W. Bush, but he certainly wasn’t much of a progressive, if we are to be honest. Both parties are corporatist at this point. Even so, the data shows there is a difference (see the work of James Gilligan, as quoted below).
I don’t get the point of these ideological games. Let me repeat one thing. I despise the two party system. They are part of the same problem. Nonetheless, the two parties aren’t exactly the same. We should acknowledge this simple fact, if we want to make any headway with these problems. It might be useful to know why rates of inequality, unemployment, homicides, suicides, etc get better or at least get less worse when Democrats win the presidency. It’s such a consistent pattern over more than a century.
Just imagine if we had an actual left-wing party, rather than just a slightly more moderate form of corporatism. If progressivism supposedly fails, then why do so many progressive countries and US states do so well? Why do Nordic social democrats do so well? Or how about social democracy in Canada, a country that by some measures has even greater diversity than the US? And what about one of the most successful local governments in US history, the Milwaukee sewer socialists?
Conservative response: *crickets chirping*
* * *
Why Some Politicians Are More Dangerous Than Others
By James Gilligan
Kindle Locations 801-830
Why has unemployment increased and then lasted longer, and why have recessions occurred so much more frequently and then lasted longer, during Republican administrations than during Democratic ones? And why have declines in unemployment and growth of the economy been so much greater when there was a Democratic president rather than a Republican in the White House? Is this simply a matter of bad luck for the Republicans and good luck for the Democrats? Is it a function of the “business cycle” that operates independently of human political choices, like a force of nature or an act of God that just happens to coincide with times when Republicans are presidents? A misfortune , to be sure, but not their fault?
As opposed to that supposition , many experts on the relationship between the political parties and the functioning of the economy have concluded that the latter is very much a function of the difference between the economic policies of the two parties. This has been shown, for example, with respect to why economic inequality increases under Republicans and decreases under Democrats. Writing in 2007, the Princeton political economist Larry Bartels 8 concluded that:
“The most important single influence on the changing US income distribution over the past half-century [has been] the contrasting policy choices of Democratic and Republican presidents. Under Republican administrations, real income growth for the lower- and middle-income classes has consistently lagged well behind the income growth rate for the rich – and well behind the income growth rate for the lower and middle classes themselves under Democratic administrations.”
Furthermore, Bartels observes that “these substantial partisan disparities in income growth … are quite unlikely to have occurred by chance.… Rather, they reflect consistent differences in policies and priorities between Democratic and Republican administrations.”
Bartels also points out that one measure of inequality, “the 80/ 20 income ratio, increased under each of the six Republican presidents in this [post-World War II] period.… In contrast, four of five Democratic presidents – all except Jimmy Carter – presided over declines in income inequality. If this is a coincidence, it is a very powerful one .” 9 He then goes on to show reasons why it “seems hard to attribute this to a mere coincidence in the timing of Democratic and Republican administrations.”
To extend the argument, the political economist Douglas Hibbs 10 points out that “Democratic adminis-trations are more likely than Republican ones to run the risk of higher inflation rates in order to pursue expansive policies designed to yield lower unemployment and extra growth.” Hibbs notes that “six of the seven recessions experienced since  … occurred during Republican administrations. Every one of these contractions was either intentionally created or passively accepted … in order to fight inflation.” The cruelest irony of all, in this regard, is that from 1948 through 2005 the inflation rate during Republican administrations has been virtually indistinguishable from that achieved under Democratic ones (3.76 percent vs. 3.97 percent), while the degree of overall prosperity (real per capita GNP growth per year) has been 70 percent higher under Democrats than under Republicans (2.78 percent vs. 1.64 percent), as Bartels 11 has documented. So, while the Republicans have pursued economic policies that have increased unemployment, recessions, and inequality, all ostensibly in order to prevent inflation, they have not in fact succeeded in preventing inflation noticeably better than the Democrats have.”
Kindle Locations 850-853
Referring to a more recent period, Daniel Hojman and Felipe Kast14 have shown that during the 1990s (the decade when Clinton was president), significantly fewer people entered poverty and more escaped it than during the 1980s, the Reagan– Bush years.
Kindle Locations 927-95
The greatest increases in the concentration of wealth in the twentieth century occurred during the Republican administrations of the 1920s, which led to the Great Depression, and during those from the late 1960s into the 1990s (especially during the 1980s, the Reagan years). The polarization of wealth attained by the Republicans during the “Roaring Twenties” was reversed by the New Deal Consensus from 1933 to the late 1960s. This was accomplished by introducing income supplements for the needy (social security, unemployment benefits, etc.) that had not existed before, reducing unemployment, and creating not only a “minimum wage” but also what was in principle a “maximum wage,” by raising the highest marginal income tax rates above 90 percent. The result of these and other policies was what some economic historians have called the “Great Compression” in incomes and wealth that occurred during the most prosperous – and also the most economically equal, and the most non-violent – period in American history (at least with respect to domestic or intranational violence), from roughly 1940 to 1970. Once the Republicans returned to power in 1969, however, that period ended, and inequalities in wealth and income once again reached the same – or nearly the same – levels under Reagan as they had in the 1920s (as did the rates of lethal violence). The rate at which inequality was growing slowed down during the Clinton administration in the 1990s to only about a third of the rate at which it had been growing under his Republican predecessors. This may have been because he succeeded in reducing both the rate and the duration of unemployment, and increasing the highest marginal income tax rates, the Earned Income Tax Credit (the negative income tax which gives money to those who are poor despite having a job), the median and minimum wages, and applying other policies whose effect was to redistribute at least a bit of the national collective income and wealth from the rich to the poor. However, the momentum of the forces producing inequity was still so strong that by 1998 the wealthiest 1 percent of US citizens still owned 38 percent of the total household wealth of the country and 47 percent of the total financial wealth. In other words, the richest 1 percent owned nearly 40 percent of the country’s real estate and almost half of its money and other liquid assets (stocks, bonds, etc.).
Although we do not have comparable data yet for rates of lethal violence during the last year of the second Bush administration or the first two years of Obama’s presidency, we do know something about their economic policies, and their results. First of all, the current “Great Recession”—as it has been called, in acknowledgment of the fact that it is the worst economic failure the US (and perhaps the world has suffered since the “Great Depression” of the 1930s (a description that would also describe recessions that occurred during the prior Republican administrations of Nixon, Ford, Reagan, and Bush Sr., although this one is even worse)—occurred right on schedule—after one of the most conservative Republican presidents in US history had been in office for seven years. we also know that when Obama cut a deal with Congressional Republicans to extend unemployment benefits for the long-term unemployed, and to renew ax cuts for middle-class and poor families, he spoke of those groups as being taken hostage by the Republicans, who would not agree to help the unemployed and the two lower classes unless the Democrats would agree to continue the comparatively enormous income tax cuts that the Bush administration had given to the extremely rich, and to give an even larger cuts in the inheritance taxes that would primarily be of benefit only to the wealthiest 1 to 1/10 of 1 percent of the American population.
Kindle Locations 2130-2139
But even when looking only at domestic actions, I have to admit that, yes, it is true that Democrats often do the will of their corporate masters—how else could they persuade them to donate to the campaign funds without which they could not win any elections? For example, under Clinton, economic inequality continued to increase, which it had been doing since – and only since – the Republicans ended the 37– year period of Democratic hegemony that had lasted from 1933 until Nixon took office in 1969. But this inequality was increasing only about a third as fast under Clinton as it had been under Reagan and Bush Sr. 4 And there were many other indices of economic equality, which I have mentioned before, that did improve during Clinton’s terms in office. But most importantly, for the purposes of this book, lethal violence rates during Democratic administrations going back to the beginning of the twentieth century had fallen, not risen (as they had done under the Republicans). In that respect, the two parties were not merely different, they were opposite to each other! The same applies to the rates and duration of unemployment, both of which have, like the rates of suicide and homicide, also increased during Republican [administrations]
* * *
Conservatism, Murders & Suicides
Republicans: Party of Despair
Rate And Duration of Despair
Poor & Rich Better Off With Democrats
Unequal Democracy, Parties, and Class
‘Capitalist’ US vs ‘Socialist’ Germany
‘Capitalist’ US vs ‘Socialist’ Finland
Problems of Income Inequality
Immobility Of Economic Mobility; Or Running To Stay In Place
Not Funny At All
Mean Bosses & Inequality
The United States of Inequality
Economic Inequality: A Book List