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    Michael Maiello's picture

    The Phony Equivalence of Shared Sacrifice

    Decided to torture myself with Meet The Press this morning. Former HP CEO Carly Fiorina was a guest.  She admitted that taxes would have to rise on millionaires and billionaires.  Then she made the familiar argument that families of four who live in high cost areas don't feel like millionaires when they make a quarter million dollars a year.  Nobody challenged her on that.  But, they never do.  I'm used to it.  And I'll bet you that Carly has probably had hard working executive assistants who she's paid in excess of $200k a year.  It's not uncommon in big public companies and they're often worth every penny.

    Point is, if you live in Fiorina's orbit, you can make orders of magnitude more money than most of your fellow citizens and still feel like you're struggling.  The distortion is caused by the existence of Fiorina.  It may be unavoidable.  But let's be honest about what it is.

    On the panel, Al Sharpton had made a very direct and, I thought, fair point in response to frequent calls for "shared sacrifice" to solve U.S. budget issues. He wanted to know why there should be shared sacrifice when there wasn't shared prosperity.  Nobody answered him, and I didn't expect them too.  Fiorina came closest to addressing his point.  Public sector unions have generous pension and pay packages that are bankrupting America's cities and states.

    I knew it.  It's those no good fat cat sanitation workers picking up my garbage in their tricked out Humvee limos and then helicoptering out to Fire Island for long summer weekends.  Thanks, Carly.  I had no idea.  Nobody objected to her saying this.

    The defenders of the wealthy are going to push a shared sacrifice argument as if it stands for some sort of moral good.  We're all in it together so rah rah rah!

    But, we aren't.  I think we have to be a little less polite and start telling the truth.  The point behind progressive taxation isn't just that the rich can afford to pay more, it's that they disproportionately benefit from government services.  For example:

    A public sector unionized worker with a pension vs. Carly Fiorina.  Who gets more out of the efficient functioning of financial markets?  Yes, the pensioners money is invested.  But, it's also invested in some of the very same assets that have made Fiorina fabulously wealthy.  Those pensioners actually inflate the prices of Fiorina's securities.  When she sells, who do you think buys?

    It's pretty simple but, the more you have the more you can do with what generations of Americans have built.  Effectively regulated airways for shipping and travel are good for everyone.  But Fiorina, who can afford to go where she wants, when she wants, it's a far more direct benefit.

    To my mind, Sharpton got it exactly right.  We have already had shared sacrifice in this economy.  It's been going on for years.

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    Comments

    I almost watched Meet the Press this morning, despite my loathing of David Gregory and the  show's determination to always over-book the panel with Conservatives and then let a moderate speak for everyone not on the extreme right.   The other reason I seldom watch is the show's tendency to book senile old John McCain every other week, but never mind that.

    As I said, I started to watch, but then noticed Carly Fiorini on the panel, (Another MTP favorite), and I immediately lost my desire to watch.  She is an arrogant, certifiable idiot, and my stomach turns just from the way she forms sentences. I decided not to torture myself and went and ate breakfast instead. 

    On the other hand, I like Al Sharpton.  For all the scorn he receives about his advocacy and his past, he is actually a good political analyst, who can often get right to the heart of an issue and express the progressive viewpoint better than most other pundits. 

    I think in this case, you and Al are right.  It is through this false equivalency that the middle class always gets snookered.  Think about it; we have been beaten down so much that our most outrageous demand for ourselves is not for a lot more 'stuff' or for greater freedoms, it's for ... 'fairness' (please make everyone else play by the rules we have to follow), that and 'please don't take away what we've already got' ... That's pretty pathetic.  

    Its as if we have been conditioned to believe that we don't really deserve what we have now, and it would be ungrateful to want and ask for more.  How dare we desire more from society, when we've already gotten way too much and so much more than 'our betters' feel we deserve.  This is hard times, don't ya know, and we must all sacrifice ... but the fact is, giving up a single potato means more to a starving homeless man than it does to Carly Fiorini.

     

     

     


    Excellent, correct and... Well... This.


    "This"--did you mean to insert a link, Michael?


    This is exactly what the problem is in this country.  As Mr. Smith so eloquently wrote, we've been made to believe we shouldn't expect too much.  If we can't pull ourselves up by our bootstraps (how 19th century is that?) we don't deserve anything more than what we already have.  We don't work hard enough, pray hard enough, think hard enough.  We don't know how to do it, but there are people who do and we should be grateful for their cleverness.

    We celebrate greed in everybody and everything except in our own lives.  We reject it because we've been conditioned to reject it.  The expectation of high wages is pure greed--not something the average worker should be striving for, since higher wages means less company profit and company profit is supposed to help everyone.

    We celebrate volunteerism and expect that people who are passionate about a cause should be willing to work for nothing to keep it going.  We should be willing to support it monetarily, even though the heads of certain organizations (read Red Cross) are paid salaries in the six figures.

    Ordinary people buy into this to an astonishing degree, even preferring now to give up the safety and solidarity of a union because they've been led to believe that all unions are greedy and corrupt and bad for free-thinking workers.

    They've willingly played into the hands of the capitalists, who have been waiting for this since the very idea of capitalism began.  In some ways, the American success story has been fulfilled.  Just not by us.  We have now become the peons, the serfs, the servants, and the capitalists are getting the society they've poured their hearts, souls and money into owning.

    I suspect we've given up too much, too easily.  They want more from us and fully expect to get it.  Even something like a Romney defeat hasn't slowed them down.  If anything, it only makes them fight harder.

    The fact that something as ludicrous as "shared sacrifice" is making the rounds without being laughed out of existence says something about how inured we are to their takeover methods.

    The thought of how easily this has been accomplished is terrifying.  Even with the recent election, with hints that the populist movement might have come through, nothing can really change until and unless workers understand the need to become masters of their own fate.

    I don't see any signs of that happening.

     


    Likewise, I struggle what to make of the apparently widespread belief in our country that very wealthy individuals who employ people are somehow performing an act of altruism for their employees, for which they should presumably be given a parade and one day placed in the Job-Creator Hall of Fame.  
     
    Implicit in such a view is that most employees should be grateful for whatever compensation the employer chooses to give them, as an act of generosity. 
     
    Whereas I had thought that the fact that business owners and managers hire people to work for them is actually an acknowledgement that they are unable, by themselves, to develop, produce, and market the product or service they wish to sell.  Making them, therefore, actually interdependent--dependent upon the services of their employees to enable their operation to function, as the employees are dependent upon the managers and owners to finance, organize, and oversee the operations of the enterprise on a day-to-day basis.

    The GOP is trying to complete the biggest bait and switch in history. Hopefully the Democrats won't abide.

    Reagan/Greenspan raised SS payroll taxes on workers wages, and cut taxes on the wealthy and investors. The bait was 'let's save SS' with a SS surplus, the Trust Fund, which conveniently helped fund the deficit from the upper end tax cuts. The switch is they now deny the $2 1/2 trillion Trust Fund exists, ergo, Social Security has to be cut......they won't raise income taxes at the upper end to monetize the Trust Fund.


    Carly pisses me off every time I see her; she represents everything that is evil about the upper corporate caste in this country.

    Carly's company failed miserably under her reign but she walked away with millions upon millions of dollars.

    People were fired while she fought against unemployment insurance updates throughout the depths of the recession.

    She ran for office on a bag of beans; but she did lose that election.

    The message is this for all repubs:

    STAY IN YOUR PLACE.

    PRODUCE, PRODUCE, PRODUCE

    AND STAY SILENT

    This Wall Mart rebellion may be the start of a new leftist uprising!

    THE PEASANTS MAY FINALLY BE REVOLTING.

    However revolting that may be to the sensibilities of Carly and her crew!

     


    Face facts, Obama is going to sell us out. I'm just waiting to see how much.

    I voted for Obama because of the Supreme Court and because the democrats will screw us a little slower and a little less then the republicans. But in the end the democrats will sell us out too. Let's see if I'm wrong.


    The point behind progressive taxation isn't just that the rich can afford to pay more, it's that they disproportionately benefit from government services.

    Well, the truth is that that's a relatively new argument. When Theodore Roosevelt first proposed progressive taxation, he offered it as a way to reduce "swollen fortunes."

    But leaving that I aside, I'm not sure the who-benefits argument is very persuasive. No doubt the rich benefit much more from efficient financial markets, but how much of the government's spending is dedicated to managing the financial markets? You could argue that the rich benefit disproportionately more from national security, but that seems hollow to me. They certainly don't benefit disproportionately more from other high cost programs like Medicare and Medicaid.

    To put it another way, very few conservatives want to eliminate the federal government. They just want to radically reduce its services to those that are important to them. That proscription is indeed intolerable but not because the rich are hypocrites who demand services they're unwilling to pay for.


    Then wouldn't turn about be fair play?  Why not insist that the government cut the rich out of programs they don't need, like Medicare, Medicaid and Social Security?  Why should people worth millions still feel entitled to programs designed as safety nets for the poor? Oh wait, I know ... they're stuff-wanters.


    Because Social Security isn't an entitlement, it's a mandatory insurance program.

    One of the beauties of the program is you just pay a specific flat % on your first $X, and you get $Y out per month when you hit retirement age.

    Take out either end of mandatory, and it becomes an even bigger target for the culture wars, how to shrink it until you can drown it in a bathtub.

    I wonder how badly Social Security's gotten hurt with the 2 year partial holiday - not a good idea from Obama to make its revenue optional.


      I think most millionaires wouldn't mind being cut out of Medicare, Medicaid, and Social Security. As you said, they don't need it. But they would probably demand that they not be taxed for it.


    As a mandatory insurance, you could justify that no one can opt out, just as no one can opt out of having no-fault insurance or health insurance or nursing care insurance, even if you never get in wreck and stay healthy. It's an old age poverty or base living-standard insurance.

    And frankly, having the upper end means-tested makes a lot more sense than raising the retirement age again from 67. Sure, we can put retirement age at 80 and the system will be on sound financial footing.... and almost completely useless.

    (yeah, I realize I just contradicted what I said above)


    "...very few conservatives want to eliminate the federal government. They just want to radically reduce its services to those that are important to them..."

    What is 'important to them' is control of the money and the political power.

    To today's 'conservative' Republicans the purpose of government expenditures is to provide ample built in opportunity for skimming, profiteering and patronage.

    Is there any doubt that the rich backers of the GOP would applaud a loosely regulated privatization plan, turning over all control of Social Security and Medicare revenues, undiminished and perhaps even rising to the stratosphere, to Wall Street?


    Although even Gates, Jr. has come around to having his bracket's rates go up, the prejudice, which from my observation and very limited direct experience seems widespread in our day, is that super wealthy people, through foundations and other charitable activities, can do more good with their money than the government can-- because they have a strong incentive to watch it closely and control just how it is spent. 

    In their wonderful book The Wise Men, Walter Isaacson and Evan Thomas wrote of how during World War II, members of the US financial establishment took $1 a year salaried jobs working for the federal government to help administer the war effort.  There is no suggestion they used their government influence to favor current or prospective clients.  Rather, they are portrayed as having done what they did in a spirit of serving their country at a time of great need.  

    Can you imagine in our day a highly respected Wall Street insider, someone who isn't just a figurehead but really understands the ins and outs of how the industry works, taking a $1 a year job with a federal agency to try to keep the megabank lobbies from completely gutting implementation of Dodd-Frank?  Or help devise federal legislation to cap megabank size in a sensible and workable way? 

    That type of disinterested service--in the form of essentially donating one's expertise, commitment and time to our federal government, not as a career, but for a short period of time to meet a specific, high-priority public interest need--seems all but non-existent in our day.


    The objective is aggrandizement and perpetuation of piles of money. The governments of sovereign nations are there to be bought, bribed, blackmailed, gamed, invaded, influenced, looted, bamboozled or swindled. If all hell breaks loose, you cash in, move on, and let others deal with the consequences.


    Ever read "All My Sons", about a war profiteer? Steve Jobs, Mark Zuckerberg, Eric Schmidt, Larry Page, Sergey Brin all make (made) $1/year. Sure, maybe there were some benevolent souls during wartime, but certainly there was a lot of speculation and ripoffs.

    General Electric's electric facilities in Germany weren't bombed during WWII. Fancy that. Wall Street investors helped Hitler's rise to power. Ford & GM/Opel built Hitler's trucks, Alfred Sloan being impressed by the profits he was making after the invasion of Czechoslovakia. Ford even gave Hitler a 35,000 DM birthday present in 1939. In 1940 after the invasion of Poland, GM helped convert the Opel plant to producing Junker plane engines, but refused to do the same in Detroit (e.g. for Rolls Royce engines)

    Smedley Butler gives his views from the 1930's - hard to think it changed much 8 years later, whoever the enemy.

     

     

     

     


    I'm not sure from your comment if you thought I was, but I wasn't meaning to suggest that there was no profiteering, exploitation, etc. during World War II.  Just offering an existence proof of sorts for short-term service to country at financial cost to oneself among those already relatively wealthy and with valuable or even essential expertise to offer in order to address through government a matter of pressing public concern.  The idea being that there is some precedent for that ideal, in addition to it of course being possible in principle, including in contexts other than wartime.       


    Understand, thanks for clarification.


    I think that I may have clouded my point because people seem to be taking it the wrong way. I wasn't trying to make a point about what the rich really want. I was just suggesting that the who-benefits argument is a weak rationale for a progressive tax.


    Not sure if you're saying that Teddy came up with progressive taxation, but that's not correct.  America already had progressive taxation laws as early as the 1860s under Lincoln.  Also, Thomas Paine drew up progressive tax tables in his day.  Even before that, there are some examples of progressive taxation from earlier still in Great Britain.

    As far as the who benefits argument goes, you'd have to take a better crack at making it before dismissing it as unpersuasive.  The wealthy benefit far more from police, corrections, jurisprudence, etc., not just national security.  Even our education system benefits the wealthy by providing subsidized educations to workers who will make their companies more productive and more profitable, but will not likely see any share of that increase.  How about that subsidized healthcare?  You know, what Walmart hands out brochures for to new hires since they've made sure they won't have to absorb those costs directly.  Point being: if you want to do an honest accounting, you have try a lot harder than shrugging off national security and calling it a day.

    What about the arithmetic argument?  We have an economy that's 70% consumer spending. Tax the middle class more and you shrink that 70%, thereby shrinking the entire economy - unless you want to engage in more deficit spending.  Taxing the wealthy doesn't affect their marginal propensity to consume, whereas it strongly impacts the middle class.  You tax the rich because that's where the money is.

    But I think the real problem is that this argument is too much Willie Sutton to stomach.  There's an idea, a myth really, in our culture that every single dollar that, say, Donald Trump earned is his in a deeply moral sense.  Bootstraps and all that.  You can't simply say tax the rich because the math works, even though that gets you to a workable system.  The response is moral outrage.  We cannot rob Peter to pay Paul, etc.

    To this end, I think it is highly relevant to consider the kind of argument MM is making.


    TR didn't come up with progressive taxation. I believe that he was the first president to propose it, but I could be wrong.

    Police yes, but that's not federal spending. Federal judges and agents, sure, but thats not a lot off cash relatively speaking. As for the economic argument, it's a good rationale for progressive taxation on its own, but to argue that progressive taxes benefit the economy which disproportionately benefits the rich--that's getting pretty indirect. Once you've gone that far, forget about fairness and just focus on the economic benefits. 


    Jefferson was big on the idea of progressive taxes. He thought it was crucial if a just and workable society was to be maintained. I believe his reasons were more in line with yours.


    Thomas Jefferson was big on the idea of no internal taxes:

    Jefferson recommend no internal taxes on the citizens of the United States:

    there is reasonable ground of confidence that we may now safely dispense with all the internal taxes.

    and Wiki:

    Jefferson believed that the federal government was able to operate exclusively on customs revenue and need no direct taxation. While initially successful, this policy would later prove disastrous when trade to the United States was interrupted by the Napoleonic Wars between Great Britain and France.

    To rant on about Jefferson.....

    Theodore Roosevelt deplored the Jeffersonian ideal of a weak Presidency and federal government, and thought Jeffersonian doctrines led to the Civil War. Jefferson was elected on the strength of the 3/5ths compromise of 1787 where the count of slaves increased the power of slave states like Virginia.

    The Louisiana Purchase fell into Jefferson's lap thanks to the malaria/yellow fever decimation of a 50,000 man army Napolean had sent to subdue a rebellion in Haiti, and Napolean's need for money to fight in Europe. Jefferson also had the idea that (Wiki) "citizen soldiers would arise to defend the country in case of attack" which didn't work out too well when a small British force marched into and burned the city of Washington DC in the War of 1812.

    Smithsonian recently has a piece on Jefferson called 'The Dark Side of Thomas Jefferson' which said that research of original documents has shown that Jefferson hired men who whipped 10-11 year old child slaves who were employed making nails for sale, to fund the Monticello plantation which was run with 'carefully calculated brutality'. Jefferson sold slaves off as punishment, used them as collateral for loans, and when asked to accept a huge bequest in a will from a rich Polish nobleman and friend intended to buy the freedom for the slaves of Monticello Jefferson refused, he didn't want to give them their freedom, and he made careful calculations of slave fertility and the profits inherent from it. He never did free his slaves, even after his death, as George Washington did.

    The Smithsonian article concludes:

    ...After Jefferson’s death in 1826, the families of Jefferson’s most devoted servants were split apart. Onto the auction block went Caroline Hughes, the 9-year-old daughter of Jefferson’s gardener Wormley Hughes. One family was divided up among eight different buyers, another family among seven buyers....


    Ouch, liberal demi-God takes a bruising.


    I was going by memory from listening to Clay Jenkins', "The Jefferson Hour". I don't have a direct link to the particular episode where it was discussed.

    "Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise." (Thomas Jefferson to James Madison, 1785)

     

     


    Sheesh.  If there are any publications that should emphasis the better side of ourselves, you would think The Smithsonian would be among them.  Instead they are now featuring dreck like this from someone fixated on the sin of slavery of our founding fathers.  But not just them either.  Apparently, Tesla was a [gasp] eugenicist [/gasp] -- just like many other leading scientists before Hitler demonstrated how nasty that might turn out to be.

    If I recall correctly, Jefferson inherited most of his slaves and the debt incurred in acquiring them from his father-in-law (women then had no property rights), something  from which he never really managed to free himself.  And he had a prickly, self-absorbed personality, owned slaves and was not always nice to them.  These are things that anyone can learn about from a decent biography..   He did not elevate himself to demi-god; his admirers did.  Why do you think any of this negates his better ideas and deeds?  Why should it? 

    If there is a lesson to be learned from the hypocrisy of slave owners promoting liberty, fraternity and equality, it is that finances can compromise even the noblest among us.

     


    Jefferson's hypocrisy with his 'all men are created equal' and his later writing of letters to George Washington among others, on the 4% return he was getting rearing slave babies, while also allowing the whipping 10 year olds relegated to the grueling task of making thousands of nails, all to fund his expensive lifestyle, reminds me of contemporary hypocritical politicians like Newt talking about the sanctity of marriage.

    Apparently some of the new revelations on Jefferson were due to the recent book, 'Master of the Mountain'. The author found, among other things, that sections of Jefferson writings and journals had been deleted from major compendiums, to avoid damage to his image.

    I also think he jumped to the 'suicide' conclusion in the death of Meriwether Lewis, with little or no evidence but his own subjective speculation, unjustly clouding the man's reputation. See Wiki for details.


       At least Jefferson knew slavery was immoral.


    For your interest, the Revenue Act of 1862.  It established progressive federal tax rates on income, the Commissioner of Internal Revenue and federal withholdings on income.  Also, if you want to find a prior President who advocated progressive taxation, or "graduated" taxation as it seems to have been referred to at the time, Thomas Jefferson will fit the bill.  Adam Smith also discusses it in WoN, but it's less clear to me that he's advocating it above other options that are also discussed therein.

    As far as a discussion of who benefits, I don't see how the state/federal distinction is relevant.  It's entirely artificial.  The tax scolds I know see no distinction in terms of the recipient of the funds - whether it's federal, state or local.  The Supremacy Clause and Commerce clause effectively render the states to franchise status anyhow.  Also, I'm not sure how you mean "indirect."  There are costs and benefits.  Some are more or less visible by way of being easily accounted for, but those factors that are difficult to account for are not proportionally less important.  Look at how crucial the presence of institutions is in the modern literature on economic development.  Those that own - whether it be real property, rights to resources or access to government contracts - always benefit first and foremost above those who do not.

    Regardless, the most prudent principle is to tax the ever-loving shit out of economic rents.  Doing so has none of the effects that supply-siders complain about, like depressing production, distorting markets or crowding out investments.  The only argument against it is the wealthy would rather keep that money.  It's astonishing how potent that argument apparently is.


    As far as a discussion of who benefits, I don't see how the state/federal distinction is relevant. 

    Because we're talking about "shared sacrifice" to reduce the federal deficit.

    Also, I'm not sure how you mean "indirect."

    Every additional inference increases the uncertainty. To argue that the rich benefit disproportionately from the economic benefits of progressive taxation, you need to establish:

    1) Taxing the rich to pay for federal services increases the prosperity of the middle and/or lower classes.

    2) Increasing the prosperity of the middle and/or lower classes at the expense of the upper class, ultimately increases the prosperity of the upper class (disproportionately to the lower classes).

    I suspect that these premises are true, but I don't know enough to prove the point, and I expect that they're pretty difficult to establish conclusively in any specific way.

    But regardless of whether these premises are actually true, they are certainly controversial. If your intent is to convince people that the progressive tax is fair because it disproportionately benefits the rich, you have a lot of persuading to do. That's why I call it a weak argument (even if it's correct).

    Moreover, it's unnecessary. If you can persuade people of 2), then who cares about fairness? Any rich person who accepts the premises would more than happy to support progressive taxation b/c it would make him even richer.

    Regardless, the most prudent principle is to tax the ever-loving shit out of economic rents.

    I've been intrigued by this proposal ever since you first offered it. Are there are real-world examples of economic rents on the scale that you're proposing?


    Was just listening to a caller on Tom Sullivan's show who raised stagnant middle incomes with Tom.  His response was, "Oh, I know!"  That was pretty much it.

    Sharpton's response sounds completely on point.  Americans workers keep getting more productive without getting a raise.  Until that changes, that is their sacrifice.

    In the meantime, Obama needs to ride off the fiscal curb.  Let all the cuts expire, pass cuts for the middle class in the Senate and give the ball to the House.  The wealthy elites in this country have succeeded in constraining our response to this economic depression by way of breathless debt demagoguery.  Time to pay up.


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