The most intelligent economic proposal that Barack Obama has ever made is that we raise taxes, specifically on the rich.
Post-crash depressions and recessions—the kind we’re in now—end after tax hikes. Tax cuts created the bubble and crash, a distorted society, and a bad economy without jobs. The continuation of the Bush tax cuts will continue to stop job creation as they have done since they were instituted back in 2001.
Then Obama framed it in the stupidest way possible. He called for “shared sacrifice.” Sacrifice? Do I want to sacrifice? Go and kill my favorite sheep on the lawn? Then share it? With whom? Glenn Beck? Sarah Palin? Not on your life. The Beckettes and the Palinophiles don’t want to share their sacrifice with shiftless welfare recipients, illegal aliens dropping anchor babies, gays, atheists, dope smokers, abortion-seeking sluts, hippies, intellectual elitists, and Al Gore. Which is exactly where they think all their tax money actually goes.
Nobody likes sacrifices. Not even Abraham. (“God said to Abraham ‘Kill me a son’ / Abe said ‘Man, you must be puttin’ me on.’” The Bible according to Bob Dylan, “Highway 61 Revisited.”)
How about we call it an “investment.” That sounds a whole lot better. I’m willing to invest in America. Happy to invest in America. Eager to invest
in America. Because America is probably the best investment I can make. It’s better than Lehman Brothers, better than Bernie Madoff, better than General Motors.
Paying taxes is the way we invest in America. To make it and keep it the best place in the world to do business.
When your salary includes pension benefits, you are investing in your retirement. Unless the treasurer embezzles the funds (as happened to a friend of mine), or the fund gets looted in a corporate takeover, or the company declares bankruptcy to get out of their obligations, or actually goes bankrupt after having spent the pension fund.
But social security—which you’ve invested in—will pay. It’s a great investment. The most solid, reliable, retirement fund in the world. You want a really good health care plan for your old age? Invest—as you already do—in Medicare.* Do not call Social Security and Medicare entitlements
. Spoiled rich kids from the TV version of Beverly Hills feel entitled
to things. Things you receive because you have a title are unearned. Social Security and Medicare are things we work for and pay for. They are our insurance.
Government has several major roles in the economy.
The first is to build a society in which effective economic activity can take place.
It is an Ayn Randian fantasy that noble entrepreneurs march into the wilderness and build money-making empires that drag civilization along after them. Even such hard-working, innovative, and independent geniuses as Steve Jobs and Bill Gates required a society of literacy, industry, technology, and education to build their businesses in. You can’t sell a lot of computers or software to illiterates with no access to a power grid.
Whether a people “earned” their way to riches, or got them the old-fashioned way, through inheritance, their wealth has been born out of the whole fabric of society—its laws, culture, education, labor force, security. As they continue to collect money, they continue to use more of what that society supplies—roads and bridges, airspace and airports, police and the legal system, the education of its workers and its consumers—than the fireman, the carpenter, and the janitor. Which is why it is moral and fair for the rich to pay a higher tax rate than those who make less money.
There is a more important reason for the rich to pay higher and higher rates as their incomes ascend. It’s healthier for us and even for them. If too much money accumulates in the hands of a very few people, especially in modern capitalist states (as opposed to old monarchies and feudal societies), the more unstable the economy gets.
The basic impulse of “money” people—investors, the rich, their advisors, and parasites—is to make as much money as fast as possible. If too few of them have too much money, they run out of sound places to invest. The excess starts going into passive areas, like real estate and speculative financial instruments. As more and more money flows into such places they become bubbles. The real economy gets neglected. The bubble pops. There’s a crash.
Free market theologians tell us that entrepreneurs are best left alone to create wealth, that government action can only interfere.
In 1941, America went to war. There was unlimited spending, taxes over 90 percent, and unlimited deficits. There was massive public employment. When it was all over, the US was the only modern industrial power left standing. American finance, manufacturing, and even agriculture had won a dominant market share of everything.
American businesses are still riding on that government-run accomplishment of all members of American society. Its entrepreneurs didn’t fight for Iwo Jima or storm Iowa Beach.
After the war, the Japanese government joined forces with its banks, businesses, and even its unions to target certain sectors for development. It instituted a variety of protectionist policies while its new enterprises grew. Now we have Toyota, Nissan, Honda, Sony, and Panasonic.
Meantime, in the United States, Dwight Eisenhower built a national highway system. Kennedy led us into the Space Race, which put satellites into orbit. Modern telecommunications would be inconceivable without the satellites that the government has pioneered. We have funded basic research and military research from airlines to the Internet. Modern commerce would not be what it is without government efforts.
The job of government is to do what businesses cannot or will not do. Right now, our businesses are not creating jobs. So government should. Right now, our businesses can’t figure out what should be manufactured in America. Largely because in a free trade world, they have no reason to. Businesses have no patriotism. But we do, so it is up to us to tell our government to figure out what we can manufacture that can’t be outsourced overseas.
Right now, though the banks get virtually free money from the Treasury, corporations are making record profits, and the world is awash with cash. That money is not going to start up businesses. It’s not going to business expansion. It’s not doing anything useful for society.
That means it is up to the government to take some of that money—taxes—and redirect in useful ways—job creation, building physical and social infrastructure, making sound business loans—in order to create conditions in which an economy can thrive.
There is a time and a place for free markets to work their magic. But when magic fails, it’s time to try thought and planning. This is that time. * Social Security and Medicare are great investments unless the Republicans manage to destroy them. As they’ve been trying to do since each was started.