Why do we have progressive taxes?

The despised Marxist slogan “From each according to his ability, to each according to his need” is frequently used to criticize progressive tax programs. Anything with communist overtones is anathema to many capitalists, who believe the idea behind progressive taxes is to redistribute wealth. This is a staple of anti-government politicos. But, conspiracy theories aside, it seems unlikely that the United States Government has taken inspiration from Karl Marx for it’s tax policy.

In truth, progressive taxes were conceived as a way to support public structures in proportion to how much one benefits from them. Meaning that if you are successful, it is partially due to the environment in which you operate, and so you pay more. Conversely, when you do not thrive, you pay less. Put another way, there is a basic level of public service to which all citizens are entitled. But beyond some threshold of success, one is expected to foot more of the bill.

So Who Needs Government?                                                                 Some people claim they don’t use government services. Coincidentally, many of these same people feel government is bad, and that less government is always better. When asked how many government services one uses, many of us come up with one or two. But when you start to list government services, its clear we use a lot more than we think. For example, if you drive on roads, attend public schools, call the police or the fire department when needed, or get a driver’s license, collect unemployment, walk through TSA screening at the airport, enjoy safe commercial air travel (courtesy of the FAA), or appreciate an environment that is free of terrorists (thanks to the military and Dept. of Homeland Security), then you are utilizing government services. And we haven’t even mentioned programs like social security or socialized healthcare (aka. medicare).

You see, this is what it means to be born in America. We have the greatest society in history in which to raise a family and conduct business. We’ve heard that freedom isn’t free, but neither is the collection of government services which combine to make it so. We have a safe, healthy, educated populace, and a marketplace that is secured by institutions of law protecting property, copyrights, and the rights of private citizens to pursue their own personal vision of happiness. This only happens with a government committed to providing these entitlements. Our government is supported by taxes, and it very effectively (if not always efficiently) creates an environment where someone with ambition, work ethic, and an idea can thrive.

So, what about the self-made man? The one who raised himself by his bootstraps, who exerted great force of will to overcome odds and make his own fortune? Is it fair to ask him to pay more taxes than the rest of us? Yes, it is. If his fortune is made in America then he is not self-made. If he attended a public school, relies on the authorities to enforce laws that make it safe to live and do business, or if he benefits from living in a country with a strong military, protecting his rights in such ways that enable the making or keeping of his fortune, then his tax burden should reflect it. Taken one step further, if in the making of a fortune, one benefits from the inputs of a society of educated workers, who also live in safety and security, and who contribute to the earning of another’s fortune, then the self-made man benefits from this as well. Financial success is rarely a lone endeavor. It tends to resemble a pyramid, where the fellow on top benefits from the contributions of others. And the magnified benefits at the top mirror one’s obligations, since without those contributions, his benefit would be less. There is an additional obligation to support the community for this, too.

Alternatively, one could try being ‘self-made’ elsewhere – where costs would surely be higher in countries that do not provide similar benefits. There, he might have to build the roads to transport his goods, educate his workforce, ensure the safety of transactions for his customers, arrange for the safety of his suppliers, and hire a private army to protect his family and community. Nothing makes a self-made man more pro-government than having to foot these (and many other) costs himself. In fact, throughout the world, aspiring self-making men and women flock to the USA where we citizens such services are taken for granted.

I have to admit, I’m enjoying Herman Cain’s candidacy. If he fails to get the Republican nomination he should get his own reality show. His reality has genuine entertainment value.  Clearly, Herman has touched women everywhere. And, while that’s usually a handy skill for politicians, Herman’s version of the Midas touch has women lining up to tell the world he’s a schmuck. The first game on ‘Herman TV’ could be a betting pool on when the next woman will come forward with a new set of allegations. This kind of entertainment appeals to a broad segment of Americans and may encourage bipartisanship.

Ironically, Herman says he’ll stay in the race as long as his wife is behind him. Given the steady stream of women going public with Herman’s offenses, it appears that spending time with him helps women conclude he should not be president. Apparently, the Mrs. feels differently. At least for now. A few more weeks, a couple more women coming forward, and who knows? Maybe his wife will agree.

Recently, we celebrated our High School Reunion. As part of the planning committee we met regularly throughout last year. Most of our work was reaching out to former classmates to invite them, update contact info, and track how many were coming. It got me thinking about why we attend reunions. Everybody is busy, and most of us aren’t in close contact any more. So, why do we go to high school reunions?

High school is an odd time for everyone. It’s an artificial world that doesn’t exist in nature. No other species collects their young, stratifies them by age, ships them off to factories five days a week and expects them to emerge as functioning adults a dozen years later.

Toward the end of this period, as we stumble toward maturity, we become acutely aware of our social context and spend a lot of energy trying to fit in. At the same time, we try to stand out. Finding a balance between fitting in and standing out turns out to be an important theme in life.

As Americans, we live in a society of individuality. We celebrate the individual and we are taught to stand out – whether making a fashion statement, seeking a promotion, or just trying to get noticed, we’re a culture focused on differentiating ourselves. And in competitive activities we take it to another level. For example, consider the  Vikings/Packers rivalry. Twice a year everyone puts on their team’s colors and taunts the other side. The rivalry is great, but we could swap colors and you wouldn’t be able to tell the sides apart. They are just like us.

When we were in school, our arch-rivals in Farmington were probably the people most like us. If you looked down from thirty thousand feet, you could see that we lived in the same place, shared the same seasons, and prayed to the same God. They were just like us. But, while we saw each other as rivals, we were different.

Congress follows the same lines – there are no political parties on earth that are more similar than Republicans and Democrats. Both swear an oath to uphold the constitution, believe in the rule of law, and consider themselves American patriots. Yet, their focus on differences has created such dysfunction they’re collectively playing the fiddle while Rome burns.

Historically, I think our darkest periods have happened when we focused on what divides us rather than finding common ground. The Civil War, prohibition, the McCarthy era, Vietnam, and today’s political polarization, are all examples of our country unable to manage its differences.

On the flip side, I think we are at our best when we focus on what we have in common. And when you think about our greatest moments– victories in WWI and WWII, the moon landings, the period of national unity following 9/11. These moments have come when we’ve focused on what we have in common.

Now, its ironic that we struggle most with those closest to us, those most like us. Not with people who are obviously different – with them we can see that we’re different. But we knock ourselves out to to differentiate ourselves from our classmates, our neighbors and our siblings – people who are just like us.

When you visit a place where no one speaks English, its amazing how someone who does speak English feels like a friend. That little commonality brings you together right away. While we focus on our differences, a gulf widens. But emphasizing commonality brings us together.

And that’s what the reunion is about. There’s a part of us that belongs. Many years ago we were a group. And whether we were having a good time or not, we knew we were part of this group. We had the same teachers, we got our driver’s licenses, started dating, went to the same dances, played on the same teams, and shared our formative years. In that time, each individual was uniquely the same.

After high school, we went our separate ways, out into the world. We’ve travelled different paths and tried different things, succeeded and failed. But a reunion is an opportunity to revisit people whose lives intersected with ours, in a small-ish town just south of the Twin Cities. To recall what it was like before we knew better, and to see how we’ve turned out.

And whatever tomorrow might bring, the reunion offers this moment – together – when we celebrate what we have in common, catch up with old friends, and renew acquaintances with people who used be just like us.

I want to thank you all  for sharing your lives, then and now.

There’s a popular movement among libertarians – I mean republicans – encouraging us to go back to the constitution as the recipe for fixing government. The idea is that, government should not be involved in anything not specifically outlined in the U.S. Constitution.

While the notion has surface appeal, a little investigation shows it’s one of the dumbest ideas around.

The most vocal proponents of Constitutional Fundamentalism have a habit of stating that anything not explicitly stated in the document is unconstitutional. The problem here, is one would have to presume the framers were capable of forecasting every conceiveble issue that might concern our government. There are speakers touring the country lecturing the locals (presumably too ignorant to read the Constitution themselves)  that agencies like the Food and Drug Administration and Department of Education aren’t mentioned per se, and therefore are unconstitutional.

Following this logic, NASA, the air force, social security, medicare, the National Science Foundation, FBI and many other programs are also unconstitutional. The idea that our forefathers sought to restrict government so severely as to constrain quality of life is ludicrous. These were fairly bright men; they didn’t write in crayon. They wanted a government that could enhance quality of life, not exclude it from doing so.

Another anachronistic notion is that, because God is referenced in the constitution, the framers intended a Christian state. Now, many authors have shared (convincingly) the historical context verifying our forefathers’ preference for separation of church and state, but here’s a different thought. The proponents of this idea must think the framers were idiots, incapable of stating their preferences. Somehow, the framers lost sight of the fact they were writing a document constituting our national framework. They probably wrote some good stuff and went to lunch. When they came back, they were going to say we would have a Christian nation, but they were tired so they just doodled in the margins until the bell rang. Or maybe they forgot Jesus’ name and just wrote ‘God’ next to something so people would think they were serious. Maybe, but I doubt it. I think they did a grand job of stating their ideals and preferences and the absence of a state religion was intentional. Alas, since the did not write there shall be no state religion(s) dominionists, libertarians, conspiracy theorists, and illiterates everywhere will impute the desire for an American theocracy. Interestingly, many theologists suggest our Christian God is the same one the Jews worship, which is also the God of Islam. The divergence stems from identification with Jesus, Moses, or Muhammad. Since none of them are mentioned, any of these religions could be implied by the same logic. Its bad logic in all cases.

The interpretation of the constitution as a limiting document is surprising coming from people with a legal background. Michelle Bachmann, for example, has a law degree. Most attorneys are familiar with the words “including, but not limited to…” which are common to legal documents where the authors want caveats to be binding beyond what they can envision in the moment. It allows a clause to be expansive, covering future circumstances that are not clear today.

And there’s the rub. Either the constitution is a broad document - including but not limited to our experience thus far - with applications beyond the day of writing, or it is not.  Including and limited to what we can conceive of, but no further… is little more than a laundry list – an inventory of what the government can and cannot do, and limited by the experience of those who penned it. And, while a discussion about the role of government is in order, a discussion of the verity of the constitution should not be.

This reductionist approach to the government, rationalized by diminishing the constitution in a fundamentalist way, is the province small minds. Those willing to think for a few moments will surely dismiss it. Those running for office on this platform should be run out of town.

Last night the President outlined proposals for job creation that have historically gained bipartisan support. In this era of polarization, however, a history of bipartisan support does not suggest more of the same. Today the politicking will resume.

And while we expect rigorous debate on the merits of any plan, there is a difference between politics and governance. In politics, you can get away with slinging ideas and theories (especially ideas presented as “facts”). But governing involves the application of these notions, and evaluating them requires walking through the likely impacts to weigh their relative merits. An idea is only as good as it’s application. Right now, economic plans need to be vetted specifically for how they will affect the economy and jobs in the short term in order to gauge their value.

Today, economic growth is the #1 priority, and creating jobs is the holy grail. There are competing theories on how best to do this. The President is proposing a plan emphasizing construction jobs and investments in infrastructure. This approach involves putting people to work so they can spend their wages buying goods and services. The economic benefit hinges on a multiplier effect which circulates money through the economy. This happens when workers spend their paychecks on groceries, haircuts, clothes, or going to the movies. The people they buy from are also getting paid. They, in turn, will spend their income on dining out, school supplies, home improvements, etc.. The effectiveness of this approach hinges on the notion that putting more people to work will enable them to consume. And since consumption is 70% of the economy, it would need to be a broad effort. Walking through the application of this proposal, putting cash into workers pockets is a mixed bag. Many people are not spending, but paying down debt and saving more. But unemployed people getting back to work are a different matter – they do spend more. And with 35% unemployment in the construction industry the benefits of a multiplier effect are real. To the extent we put people back to work, the odds of realizing real benefits are very high. But its not a half measure, the scope of the investment needs to be very broad.

The alternative theory is that cutting taxes (without increasing the deficit means cutting government) will put more capital to work in the private sector. Less government will remove the constraints on job growth. This theory holds great appeal. It attempts to link lower taxes to a stronger economy in a general fashion. As far as job creation  specifically, it relies on the notion that companies paying lower taxes will use those savings to hire more workers. Again, to evaluate the theory we need to walk through its ramifications.

In recent years, cutting corporate taxes has not resulted job growth domestically. Indeed, tax rate and profitability can be correlated, but correlation between tax rates and domestic employment is harder to demonstrate. Today, companies are (wisely) sitting on their profits until increased demand for their goods and services justifies hiring. And when they do hire its not always in the United States. Cutting taxes in general has not created jobs. Entities who (can afford to) pay taxes do benefit, but those lower on the socioeconomic ladder do not. In practical terms, those realizing savings from lower taxes are stashing away the excess and depriving the economy from the benefits of a multiplier effect, and increasing the wealth gap. Further, if lower tax rates equated to a robust economy, our economy would be roaring right now. Taxes are at their lowest rates since the 1950s and we are mired in recession. Countries like Germany and Denmank, on the other hand, have much higher taxes are comparitively strong. While cutting taxes has boosted to the economy in the past, it is not working now – despite the popularity of the message.

One other conflict is that cutting government is cutting jobs. Measurable reduction of government does not come from “reducing waste and inefficiency” but from cutting budgets, departments – and jobs. And, if creating jobs in the near term is crucial to economic growth, someone needs to explain how cutting jobs creates them. This issue is largely absent from the public discussion, but on it’s face is nonsensical. In the long term, we need balanced budgets and smaller deficits. This goes without question as the current trend of overspending is not sustainable. Cutting government to fix the economy holds ‘grand gesture’ appeal – one simple act and the economy will be healed – but has been remarkably ineffective of late.

In governance, an idea is only as good as it’s application. And walking through these approaches suggests pumping money into the economy through direct job creation leads to economic benefit in the short term. At the same time, general cuts in taxes and government do not create clear benefits immediately and will likely harm a recovery. In the short term, job creation trumps debt. And while the recipe for long term success lies in reducing deficits, they will be easier to address if we strenghten the economy through job creation first.

Did you know that Denmark is the only other country with a debt ceiling? I didn’t.

Here is an excellent description of the issue, while admitting we need to get spending under control. But its a shame we’ve decided to shoot ourselves in the foot.

Fareed’s Take: The damage is already done! – Global Public Square – CNN.com Blogs.

With such polarization in the country there’s plenty to complain about. Just for the fun of it, let’s add to the noise.

• If you’re willing to play brinkmanship with the debt ceiling, you’re putting your political interests ahead of the nation’s economic interests

• If you’re not talking about entitlements in a debt deal, you’re not serious

• If Obamacare is socialist, so is medicare

• If you’re against Obamacare and on medicare, you have no integrity

• If a governmental system is based on compromise and one party decides there can be no compromise, the system will stop working

• Corrollary: Parties taking a “no compromise” stance are ill-equipped for political office

• If accepting government support is socialism, then paid politicians are socialists

Who owns America? Hint: It’s not China – Global Public Square – CNN.com Blogs.

An interesting breakdown of where America’s debt is held. And China still owns an extraordinary amount…