Basing Victory on Failure

It is one of the interesting contradictions of politics that political factions sometimes rely on the problems they seek to eliminate for their existence. For instance, it has been widely noted that while it is generally part of the Democratic set of ideals to reduce economic disparity, while Republicans tend to be accepting of it, Democrats are most successfully elected in areas with high economic disparity and Republicans are most successfully elected in areas with economic homogeneity. One might imagine that this is because those who actually experience inequality see the folly of their actions and switch to become Democratic voters, and perhaps there’s some level of truth to this, but still it seems odd that the Democratic hold on a region strengthens as its inequality increases. In other words, they do better if their goal of creating a more egalitarian economy fails.

I was reminded of this reading an article this morning about a group of newly elected Democrats in the House who are from some of the nation’s wealthiest congressional districts. (Democrats now control 14 out of the 25 richest congressional districts in the country.) These congressmen are worried about a provision in the pending health care legislation which would fund much of the new spending with a tax increase of 1-5.4% on income groups making $350k/yr or more.

I don’t have an objection in principle to taxes that hit the rich harder than the poor. As was observed about the reasonableness of robbing banks (if one is going to be a robber): That’s where the money is.

However, this approach (which was central to Obama’s campaign promises) of providing benefits to everyone based on taxes which only touch the top few percent of the population presents two practical problems:

In the short term, the richest people tend to have some of the most variable incomes. While it will almost surely hit headlines when the CEO of a company which is awash in red ink is given a bonus of tens of millions of dollars, the rich tend to get a lot of their income from capital gains, business profits, and incentive-based or otherwise variable compensation. Thus, they see a much bigger change in income when the economy hits the skids. This has been hitting some states that rely heavily on income tax very hard this year. For instance, California, which gains a significant portion of its annual income tax returns from a few hundred incredibly wealthy tax payers, has seen its income tax returns shrink 33% this year. So funding national health care through a 1% tax on those making over 350k and a 5.4% tax on those making over 1mil is setting yourself up for a lot of budgeting turbulence.

In the longer term, it simply seems contradictory for a party which pledges itself to reducing income inequality to stake a major portion of the funding for their signature piece of legislation on taxing people making over a million a year. After all, if they’re successful far fewer people will be making over a million a year. Why build a program on an income base you’re intend on destroying?

As I see it, there are two pretty clear possibilities that would explain this course of action:

1) There is actually no expectation in the Obama administration of reducing income inequality. They simply want to siphon off some money from the rich to keep the poor more contented with their lot.

2) The tactic of taxing only the rich to pay for an expensive new program is considered a good way of getting an expensive program in the door without people asking many questions, and there is the full expectation of making significant middle class tax increases later in order to make up for the “unexpected shortfall”.

My personal suspicion would be that the former is the explanation.

26 Responses to Basing Victory on Failure

  • “but still it seems odd that the Democratic hold on a region strengthens as its inequality increases. In other words, they do better if their goal of creating a more egalitarian economy fails.”

    About as odd, from another perspective, of doctors doing better when an epidemic breaks out.

  • It’s like the Republicans’ popularity rising whenever the U.S. gets struck by terrorism…even under the former’s watch.

  • My personal suspicion would be that the former is the explanation.

    Both.

  • But if the more doctors you got, the worse the epidemic became, might you after a while start to think that perhaps the doctors weren’t doing any good?

  • [I]t seems odd that the Democratic hold on a region strengthens as its inequality increases. In other words, they do better if their goal of creating a more egalitarian economy fails.

    I would tend to agree with Joe in not finding this quite so odd. MM pointed out a while back that Republicans tend to do better in states with higher rates of divorce, teen births, etc. I think you have the same phenomenon in both cases. Democrats say “elect me, and I’ll do something about the problem of economic inequality.” That’s likely to be an effective appeal if inequality seems like a problem to voters than if it doesn’t. Likewise, Republicans say “elect me, and I’ll do something about the decline in family values.” That appeal is more likely to resonate with voters if they think there has been such a decline and view it as a problem.

  • It’s like the Republicans’ popularity rising whenever the U.S. gets struck by terrorism…even under the former’s watch.

    Whenever? That would seem like a very small number of events to draw a trend from. Did Republicans gain support after the first World Trade Center bombing during the Clinton administration, or after the OKC bombing?

  • I’d certainly concede that to an extent, Joe & Blackadder. Though it seems to me that if one votes in Democratic local governments and representatives, and yet things still keep getting more and more unequal, one would have to start wondering after a while if the Democrats were actually good at reducing inequality or just good at appealing to both the rich and poor at the same time.

    It doesn’t seem like 30+ years of Democratic policies are able to help much in places like DC, Chicago, Detroit or New Orleans, but then, it may be that large cities in those regions are in bad shape for some unrelated reason.

    If it would help, I’ll consent to retract that side remark, since my main point was that funding all of Obama’s initiatives soley via taxes on the rich suggests both an intermittant revenue source and also a certain lack of faith on their part on the likelihood of their actually achieving greater income equality.

  • “Though it seems to me that if one votes in Democratic local governments and representatives, and yet things still keep getting more and more unequal, one would have to start wondering after a while if the Democrats were actually good at reducing inequality or just good at appealing to both the rich and poor at the same time.”

    Well, I am sympathetic to this point of view – Democrats have been, at least from the perspective of many leftists, been ‘moving to the right’ on economic issues for 30 years. The Bill Clinton years ushered in a “new” Democratic Party under the Democratic Leadership Council, and that is when much of this shift took place.

    Of course from a right-wing perspective, Democrats are still either socialists or close enough to. I think that’s a ridiculous assessment, having once belonged to a socialist organization myself – one that, like most other socialist groups, do nothing but complain about the Democrats (much in the same way, I might imagine, that people in the capital L Libertarian Party or Constitution Party complain about Republicans).

    “It doesn’t seem like 30+ years of Democratic policies are able to help much in places like DC, Chicago, Detroit or New Orleans, but then, it may be that large cities in those regions are in bad shape for some unrelated reason.”

    What did Democratic policies have to do without outsourcing, downsizing, ‘restructuring’ and all of the other processes that ushered in the disintegration of America’s manufacturing base that served as the economic backbone of these areas?

    Since I brought up socialism, I’ll paraphrase something Trotsky said about the Soviet economy – even good policies can’t turn manure into gold.

    “If it would help, I’ll consent to retract that side remark, since my main point was that funding all of Obama’s initiatives soley via taxes on the rich suggests both an intermittant revenue source and also a certain lack of faith on their part on the likelihood of their actually achieving greater income equality.”

    I also think this is a stretch, because few people narrow their vision of social equality to “income equality”. Wealth inequality or unequal living standards/conditions could be equalized – as they were in the past – by a transfer of wealth from the top to the bottom in the form of social programs without increasing anyone’s income.

    That said, I agree with you in substance – taxing the rich only isn’t a fair policy. Everyone needs to contribute to the common good. Those who have more, should contribute more and not complain about it. But even those who have less are obliged to contribute.

  • It doesn’t seem like 30+ years of Democratic policies are able to help much in places like DC, Chicago, Detroit or New Orleans,

    You can eliminate the “seem” when talking about New Orleans.

  • Oh, and there was not a complete collapse of our manufacturing base in those areas during this time…

  • “Democrats have been, at least from the perspective of many leftists, been ‘moving to the right’ on economic issues for 30 years.”

    That movement began to turn around with Howard Dean. With the ascent of Barack Obama, the far left of the party has the reigns.

    “What did Democratic policies have to do without outsourcing, downsizing, ‘restructuring’ and all of the other processes that ushered in the disintegration of America’s manufacturing base that served as the economic backbone of these areas?”

    These areas (DC, Chicago, Detroit, New Orleans) were in rough shape before outsourcing etc. The recessions in the 70’s were brought on by a lack of competitiveness (as well as some oil shocks) from which certain economic sectors (automotive, to name one) still suffer. The policies you cite were reactions corporations took to deal with the situation, and which exacerbated the local economic impact. Perhaps the question should have been “what did unions and corporations have to do with the disintegration of the U.S. manufacturing base?”

    “Wealth inequality or unequal living standards/conditions could be equalized – as they were in the past – by a transfer of wealth from the top to the bottom in the form of social programs without increasing anyone’s income.”

    As the IRS will tell you, the receipt of goods or services in kind is an increase in income. (They get rather testy if you do not report such things.) If you are talking about public libraries, parks, etc. it is another matter.

    Re the topic of the post, it may be helpful to view the “greed” map at http://minoroutside.blogspot.com/2009/05/bible-belt-or-swath-of-sin.html and compare it to a electoral map (such as http://elections.nytimes.com/2008/results/president/map.html)

  • people go into business to make money not to take care of the so called “poor.” you take a large enough percentage of money from the rich business man and he will try to move his business elsewhere where he can make more money. you tie up his business so he can’t move it, he leaves it accepts the loss and takes whats left of his wealth elsewhere.

    and you’re suprised…

  • Oh, and there was not a complete collapse of our manufacturing base in those areas during this time…

    In some cases. I’m not sure DC every had much of a manufacturing base, did it?

    At the same time, one might ask: What exactly was it that caused those manufacturing base cities to double down on unionized manufacturing repeatedly, allowing cities further south like Atlanta, Nashville, and Houston to grab so much of the more diversified economic opportunities coming available?

    people go into business to make money not to take care of the so called “poor.” you take a large enough percentage of money from the rich business man and he will try to move his business elsewhere where he can make more money.

    I’m not sure if this is part of what you have in mind, but one of the things that will tend to drive people’s profit motive harder in a highly heterogeneous society is that people do not necessarily trust the political arbiters of the common good to dispose of their money as well as they would themselves. Someone who wants to hold onto his earnings is not necessarily planning to blow it all on lighting his Cuban cigars with $1000 bills. He may be wanting to use that money to start an additional business (which will provide jobs) or to fund some charitable cause, etc. A desire to control what happens with the money one earns is not necessarily “greed”.

  • “people go into business to make money not to take care of the so called “poor.””

    And people avoid libertarianism like the plague when those who identify with it speak this way. The “so-called poor” – as if they didn’t exist. “To make money” – as if that in itself were a worthy goal.

    Catholic social teaching may not presume to insist upon what economic policies must be in place, but it certainly can insist upon the values that are to guide individual behavior and attitudes.

    Yours are in need of a serious adjustment.

    For Darwin,

    “Someone who wants to hold onto his earnings is not necessarily planning to blow it all on lighting his Cuban cigars with $1000 bills.”

    No one said it is necessary. That it is even possible, however, while people are suffering is a sufficient reason for the community and for society, through its legitimate democratic institutions, to have some say over what happens to the wealth of society. No one’s “earnings” are entirely their own anyway – the production of all wealth is a social process, and in the final equation, all things belong to God.

  • That it is even possible, however, while people are suffering is a sufficient reason for the community and for society, through its legitimate democratic institutions, to have some say over what happens to the wealth of society.

    I’d agree that this is why it’s appropriate for the state to provide a certain minimum level of safety net. There are those out there who, left the opportunity to use their wealth for good, will do nothing. (On the bright side, when they go out and blow it on a $500k sports car instead, at least they end up providing employment to a bunch of people, though certainly not from the goodness of their hearts.)

    In this sense, I certainly wouldn’t support absolutism libertarianism. At the same time, though, I lean towards wanting to leave people as much room to do the right thing as possible. So I certainly wouldn’t support a leveling approach to taxation where one intentionally tries to take all the “extra” above a certain amount.

    For an analogy: Many parents do not perform their duties very well. I think it’s appropriate that the community have a means of stepping in which bad parenting hits catastrophic levels. But I don’t think it’s a good idea when the wider community tries to relieve parents of most of their responsibilities in order to assure that no bad parenting takes place.

    Now, I’d say that the right to private property is of lesser priority than the right of a parents to rear their own children, so I think there’s more latitude, but I do think that there’s a very big element of charity and humanity which is lost when people rely on the polis as the primary means of assuring that people help each other and refuse to leave anything to the true solidarity of human persons. Indeed, I worry that an excessive reliance on the state’s “safety net” can end up feeding into the cycle of individualism which weakens community ties.

  • “On the bright side, when they go out and blow it on a $500k sports car instead, at least they end up providing employment to a bunch of people”

    I don’t mean to be snotty with you, but I really dislike this point when it is made in the context of trying to justify freedom to the point of license (that isn’t what you did here but the logic is similar).

    Pimps provide jobs. Drug dealers provide jobs. The abortion industry employs thousands of people. So does the abortion lobby. Excessive consumption and a squandering of one’s personal wealth on obscene luxury items might be a degree below these evils, but only a degree. It is certainly not closer to the morally acceptable end of the spectrum.

    A lot of people who would draw the line at prostitution and drugs, or at abortion, wouldn’t draw it at the squandering of vast amounts of money on the production or purchase of goods and services that serve only the purpose of personal aggrandizement.

    That they would draw the line at all, however, means that they admit that not all job-creating activity is valid, that some of it is harmful to society, to the common good. If you accept it in one case, I don’t see why it can’t be accepted in another.

    I believe social harm is done when time, effort, natural resources and other vital commodities are used up in the pursuit not of happiness, but gluttony. It is an injustice to the people of the Earth who are struggling to get by, it makes a mockery of God through idolatry, it tramples over the Church’s understanding of the universal destination of goods.

    It weakens the bonds of solidarity, it creates envy in the lower classes and a sick desire to emulate greed and perversion at the lower levels of society, some of it understandable and all of it undesirable. That people wish to produce something, and others wish to buy it, cannot in themselves serve as justifications for the existence of certain goods and services. And everything the Church teaches about consumerism, the evils of excess and global imbalances, and the preferential option for the poor proclaims as much.

  • I don’t mean to be snotty with you, but I really dislike this point when it is made in the context of trying to justify freedom to the point of license (that isn’t what you did here but the logic is similar).

    Pimps provide jobs. Drug dealers provide jobs. The abortion industry employs thousands of people.

    While I don’t deny that greed and conspicuous consumption can be sins, I have a really hard time with the idea that simply producing a very high quality good, of the sort that could command a very high price, would be sinful.

    Is producing a Baldwin moral but doing so with a Steinway immoral? Is it moral to work for GM or Kia but immoral to work for Masarati or Bentley?

    The idea that it’s moral to do something like build a car, but immoral to do it really, really well just seems odd to me. And I suppose that I can’t necessarily see how it’s moral for GM workers to work on a couple dozen vehicles a day, but immoral for Lamborghini workers to spend months working on one vehicle. Does the world suffer for there being fewer vehicle that are well made instead of many cheap ones?

    Which is not to say that I’d ever feel right about spending $500k on a car. But it seems oddly utilitarian to condemn a mechanic or engineer to want to build the very best car possible, a true work of art. Heck, at that point would the Church’s critics be right to condemn it for having spent so much money on patronizing the arts over the centuries?

  • I think we’re getting some wires crossed here.

    There is no reason a worker can’t do the best job in the world on an affordable car.

    And I suppose it is true that a car can be a work of art.

    What makes today’s situation different than the era during which the Church heavily patronized the arts, however, is that we can, at least technically, come within striking distance of solving some of the worlds problems related to scarcity of necessities.

    In those days, it wouldn’t have been possible in spite of the best of intentions. And the Church had her priorities straight – she was, for over a thousand years, the chief support of the poor and the sick. Patronization of the arts never came at the expense of those social duties.

  • “It doesn’t seem like 30+ years of Democratic policies are able to help much in places like DC, Chicago, Detroit or New Orleans, but then, it may be that large cities in those regions are in bad shape for some unrelated reason.”

    What did Democratic policies have to do without outsourcing, downsizing, ‘restructuring’ and all of the other processes that ushered in the disintegration of America’s manufacturing base that served as the economic backbone of these areas?

    Speaking as a Louisiana Guy little of this had to do with the downfall of New Orleans that has been under Democratic rule since Reconstruction

  • “Why build a program on an income base you’re intent on destroying?”

    Politics. Democrats realize that imposing taxes on the middle class, as they used to do regularly prior to Reagan, would be political suicide. The problem with their current approach from a Democrat perspective is two fold however. First, a tax the rich strategy only simply doesn’t raise enough revenue from the uber rich. Second, more than a few of the uber rich are Democrats. Many of them are screaming mad now when they suddenly realize that Obama is targeting them. Nothing like a better than 50% effective tax rate to convert limousine liberals to taxophobic conservatives, or at least to ticked off liberals who aren’t going to dole out donations to the Democrats the next election cycle.

    The Washington Post has always been a faithful mirror of what most prosperous Democrats are thinking. This recent editorial describes their discontent well:

    “But there is no case to be made for the House Democratic majority’s proposal to fund health-care legislation through an ad hoc income tax surcharge for top-earning households. The new surtax would hit individual households earning $350,000 and above. It would start at 1 percent, bumping up to 1.5 percent at $500,000 in income and to 5.4 percent at $1 million. The new levy would begin in 2011 and is supposed to raise $540 billion over 10 years, about half the projected cost of health-care reform. The rest of the money would come from reduced spending on Medicare and Medicaid — though the surtax for the lower two categories would jump by a percentage point each in 2013 unless the Office of Management and Budget determines that the rest of the bill has saved more than $150 billion.

    The traditional argument against sharp increases in the marginal tax rates of a very narrow band of Americans is that it could distort their economic behavior — most likely by encouraging them to put more of their money into tax shelters as opposed to productive investments. This effect could be greatest in certain states, such as New York, where a higher federal rate would add to already substantial state income taxes. The deeper issue, though, is whether it is wise to pay for a far-reaching new federal social program by tapping a revenue source that would surely need to be tapped if and when Congress and the Obama administration get serious about the long-term federal deficit.

    That moment may be approaching faster than they would like. Even if Congress pulls off a budget-neutral expansion of health care, the gap between federal revenue and expenditures will reach 7 percent of gross domestic product in 2020, according to the Congressional Budget Office. And that’s assuming that the economy returns to full employment between now and then. The long-term deficit is driven by the aging of the population as well as by growing health-care costs, both contributing to Social Security and Medicare expenses. There is simply no way to close the gap by taxing a handful of high earners. The House actions echo President Obama’s unrealistic campaign promise that he can build a larger, more progressive government while raising taxes on only the wealthiest.”

    Translation from Post Speak: “Hey Obama, tax those blue collars and hicks in fly over country and leave us wealthly liberals alone!” Obama’s election and the Democrats’ complete control of Congress are going to shatter quite a few illusions on the Left in this country, and the old tax the rich mantra is merely one of many.

  • Donald: I find it amazing that Obama told people before the election that he would raise taxes on the rich and now the rich Democrats who voted for him are dismayed because – he intends to raise taxes on the rich. As Glenn Reynolds says, “Who are the rubes?”

    More Americans will join the chorus of dismay as the Dems continue to redefine the meaning of the word “rich.”

  • Lots of socially liberal people voted for Obama without paying much attention to his economic agenda. Now they are and the howls will only increase as the economy sinks and taxes increase. Your quote from Instapundit is dead on Donna.

  • “Lots of socially liberal people voted for Obama without paying much attention to his economic agenda.”

    This is true.

    But the right didn’t pay much attention either, since they were constantly referring to it as “socialism”.

  • Well, Joe, it’s things like this that make me suspect our President is a bit further to the left than he let on during the campaign. He has named Van Jones as his “Green Czar.” And who is Van Jones? A LAPD officer posting at NRO online lets us know:

    “Jones was a co-founder of the Ella Baker Center for Human Rights, a San Francisco–area organization that once focused exclusively on so-called social-justice issues but now sees the pot of gold at the end of the green-jobs rainbow. In a 2007 entry on the Huffington Post, Jones marked the 15th anniversary of the riots that followed the acquittal of the four LAPD officers accused of beating Rodney King. Attached to the post is an essay he wrote in those heady days of 1992, which includes this account of the genesis of his revolutionary ardor:

    Our rallying cry was for justice; our demand was that the System be changed!

    Yes, the Great Revolutionary Moment had at long last come. And the time, clearly, was ours!

    So we stole stuff.

    Y’know, stole stuff. Radios, tennis shoes. Well, not everybody, of course.

    The vast majority (me included) just marched around and chanted slogans. But some set trash cans on fire. And smashed in car windows. And some kids stoned a few passing cars pretty good.

    And stole stuff, like I said.”

    Well, Abbie Hoffman did say “Property is theft,” a guy who sees nothing with stealing stuff will now be heading a government organization. At least, unlike most pols, he’ll be upfront about his thievery.

  • The “tax the rich to feed the poor” mantra is terribly defective from a pragmatic point of view.

    I know that many who post here prefer to speak from a philosophical or religious point of view, but it sometimes seems as though there is a disconnect between those points and the pragmatic. There simply MUST be a practical application to great thoughts or such sentiments, however valid, are impotent.

    The President says that we should levy taxes against the rich in order to force them to contribute to the greater good. However, America has tried to lean its social programs on the “rich” before and it has failed each time because wealth allows a person to “sit this one out.”

    Those of us earning more than the poverty guidelines and less than, to choose a number, $200,000/year are fully and directly engaged in the economy. We derive an income that leaves little left over after paying bills. We are on a treadmill and we cannot get off. Don’s point above gets to this reality – that we are “stable” tax payers because we will continue to earn and pay at a predictable rate.

    Those earning less than the poverty guidelines are far less “engaged” in the economy in the sense that their earnings often fluctuate wildly from year to year and are almost always entirely exempt direct taxation. Even if one WANTED to levy taxes on the poor, the only way to reach them is through taxes on the goods and services that they use. Joe’s point about “taxing those who have the money” fits their situation nicely.

    However, those earning over a certain amount – and it may well be $350,000 – enjoy a flexibility that the others do not. As has been noted above, they can manipulate their income and assets to avoid significant taxation. They NEED little that they purchase or use. Their interests more easily transcend borders.

    It is a mistake to think that one can tax the income of the wealthy and end up with anything close to the amount the government forecasts because, once one reaches the point of earning that much or acquiring that much in assets, tax avoidance becomes the consuming task rather than growing wealth. This means that they will, as they did on a large scale in the 1930s and the 1980s in the United States, shield their wealth while waiting out the Progressives.

    It is a simple calculation: If I am going to be taxed on income earned through investment, I will not invest. I don’t have to. They can’t reach my assets as easily as my income so I will “wait them out.” They will eventually be crying for me to invest again and will free me from those constraints.

    And so we have; each and every time.

    Simply stated, whether or not it is right or just to tax the high earners in order to provide social programs for the low earners is less significant a debate than the effect of doing so. It is THIS discussion that neither the Administration, nor the Legislature, is engaged in.

    How one can write legislation of so far reaching a consequence without analyzing its effects is beyond me.

  • “How one can write legislation of so far reaching a consequence without analyzing its effects is beyond me.”

    Because most politicians are far better at speaking than thinking, and once one removes the “tax the rich” panacea, hard and unpopular choices must be made by the same glib politicians.

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