Friday, July 08, 2011

A PROGRESSIVE IMPERATIVE

"Liberal" implies excessive, so "Progressive" has become the next best word, despite its historical baggage. Fine. I still don't know what Progressives mean when they call themselves that. I do know that "Conservatives" have no interest in conservation and religious conservatives have no interest in charity, so what the hell do any of these words really mean anymore? They seem to denote a team, not a game plan. I'm being so picky about the language today because "progressive income tax" is one of the most abused phrases in our enduring fight over taxes. And I'm willing to bet most people support or oppose it out of team loyalty only.

But who, in the name of Roosevelt, is leading the Progressive team?

Republicans cite Laffer and the ghost of Reagan to trumpet high-end tax cuts. Over the last decade you may have noticed that these tax cuts come as the cure-all to bad times … and good times, too! Just when we were starting to pay down the last big deficit in the 90s, we were told that tax cuts were morally necessary in such times of plenty. "Why should the government take in more than it needs?" Clearly the deficit wasn't a good enough reason for them then. Now it's their reason for everything. Now that we face a crisis from an even larger debt, we are told that tax cuts must, again, be the cure because they would solve the slump ... caused by the last tax cut.

Thus the "Tax Cut Imperative" fulfills the sublime goal of any ideology: it delivers its adherents from the contingency of history. Good times: cut taxes. Bad times: cut taxes. This is childish hypocrisy to any outside observer, but to the faithful ideologue, it is an a-historical constant too damn tempting to put down. And it makes sense on its own closed terms: so long as the government takes any of your money, you will always be tempted to fix your problems by taking some of that money back. This will always gain public favor so long as no one asks what caused the problem in the first place.

Where does this blinkered, one-lever philosophy get its strength? Simplicity is part of it, but how has it survived the last thirty years as a credible method to a loud plurality of Americans? It endures because it vents a deeper gripe: radical right-wingers don't just prefer tax cuts for the rich; they despise the larger system of progressive income tax altogether because it "punishes people for their success." Never mind conditions on the ground: so long as this system rules, perpetual tax cuts will remain the only persuasive policy to those who hate the larger system.

To date, self-proclaimed progressives have not made a compelling counter-argument beyond appeals to mere charity. Not to diminish the truth of the charity argument, but there is a stronger counter-argument that actually meets the very terms Republicans use to bash all income taxes. I don't know how to turn this counter-argument into campaign poetry, but Obama's got some clever guys working for him. I'm sure one of them took a lit class.

Here goes:

Like it or not, ours is a consumer-driven economy. When people stop buying shit, the economy breaks down. The poor are constant spenders by definition. When they stop spending, they dent the GDP more than a millionaire who's just lost a tax exemption for his corporate jet. Or who's just seen his top bracket go up one point. Why? Because capital behaves differently when it's pooled in large accounts than when it's being traded for a packet of Ramen. It has nothing to do with the virtue of the bearer; it has to do with the basic way all capital behaves ... in capitalism. I say let's keep our capitalism but fess up to what that word really means.

At a certain level of debt and poverty, interest causes a runaway black hole that keeps the taxpayer (dying star of this story) in a state of perpetual consumption. Similarly, at a certain level of wealth, interest compounds and accretes more wealth simply by being present in large enough magnitudes. Both rich and poor are constant consumers, but only the poor have to keep working to remain so. That is the fundamental class division in America and these classes need not be at war to enrich themselves and keep their essential quality.

For these reasons, progressive income tax places higher rates on cumulatively higher dollar amounts. Occasionally, Obama will point out that this higher rate only applies to the income above the actual bracket, not the whole income of the person who happens to make so much. If you make a million dollars, you’ve crossed the 35% tax bracket, but that doesn’t mean you're paying $350,000 of that million to the government. At the very most, you're paying $328,000 – and that’s before deductions, exemptions and loopholes lower it further.







In any case, the curve of these progressive brackets happens to be steeper at the lower end and gentle at the higher. See the chart above. The wealthy face no sudden, prohibitive rate increase as they get wealthier. But the poor and middle classes see their tax rates change much more dramatically -- just for going from "really poor" to "kind of less poor." If you want to go from making $30,000 to $50,000 one day, your rate jumps by two thirds -- from 15% to 25% -- along the way. But if you go from making $300,000 to $500,000, your rate only jumps by one-twentieth – from 33% to 35%.

So which class really lacks incentive to move up the ladder? The upward mobility of the already-rich is not subject to much friction from the IRS in this system. So what's the catchy rhetorical answer to "punishing the wealthy for their success" and "class warfare"? Calling it "progressive" fools no one and alienates others who may dislike progressivism for legitimate reasons.

A radically progressive income tax system -- all subsidies and exemptions being equal -- would a) have an accurate poverty line and b) not tax anything beneath it while c) making a steeper curve at the top end, not the lower. It would then draw two more bracket lines: one at, say, $250k and one at $1million. From zero to poverty, the rate is zero. The other three brackets would have rates that ascend more sharply in magnitude. Yes, I'm pulling those lines and rates out of my ass, but at least they line up with recognizable class barriers. Or they could ... if we took an honest look at what it means to be poor, wealthy, and everything in between.

But don't the rich and super-rich bless us all with their magnificent spending -- a glut to which we all aspire? Shouldn’t they be empowered to spend more for those reasons? They could so bless us and inspire, but they haven't. Right now, upwards of $2 trillion sits dormant in reserves that would ordinarily be lent, spent, or seeded in new enterprises. Instead, the moneyed classes have devoted their capital to the increasingly abstract and catastrophically volatile financial services sector. This money isn't being used in any real sense; it certainly isn't creating jobs. It's just being recycled among the wealthy where it mutates into the same exotic investment products that caused the whole system to collapse in 2008.

As Milton Friedman emphasized, tax cuts can stimulate because they can be implemented swiftly. But if the deficit is an emergency now, then new revenue must be obtained swiftly. This is why revenue increases need to be a part of any emergency deficit reduction package. Congressional Republicans have used the routine debt ceiling vote to heighten that emergency, but this tactic works against them because it's quicker to raise revenue than dismantle needed programs.

If that emergency must be squared with a sluggish economy, then new revenue must be obtained not just swiftly, but from sources that are least likely to feel the impact. By virtue of being dormant, that $2 trillion cited above would not feel the impact. It's just continuing to mutate like a tumor: if we add more to this mass with greater high-end tax cuts, we will threaten the health of the entire system. Again. This is not about punishing the successful; it's about categorical differences in the way money works in different discrete sums. Even in discrete sums, capital is dynamic and requires dynamic tax policy that reflects this.

We all know tax policy shapes behavior as well as balance sheets. Problem is, we can't ask the middle and lower classes to behave any better than they are right now. For a ghastly, grueling decade, they have continued to punch in more hours and productivity only to see wages stagnate, contract, disappear or emaciate in the form of lost benefits. Cutting Pell grants and clean water protection will not help anyone now, even if you believe the government has no business educating its citizens and protecting its water supply. However, such cuts are guaranteed to increase unemployment, and that likewise matters little if you think the government should not employ anyone but rich people. Why bother when the whole system can be reduced to two levers marked TAX and SPEND?

Of course, it matters still less if your real goal is to sabotage the recovery for future political gain.

At this point, I can expect my fellow progressives and liberals to sneer: "Well that's always been the difference between us and them. They see two binary levers and we are smart enough to see the larger matrix of forces at work, so naturally we should be trusted to run the government." Yeah, that'll learn 'em.

The tragedy of today's Republicans is that they've lost all sense of civic good. Liberals could counter with patriotism of their own, but right now they face a tragedy, too. If Republicans lack a sense of civic good, then Democrats lack a sense of civic leadership. Until our professor-in-chief (and I mean that cum laude) succeeds in teaching us something ... until our community-organizer-in-chief (ditto) actually organizes his national community, he will continue to let crucial battles fall to the worst impulses of a desperate, angry Movement. And he will not win re-election. He may yet luck out on the economy, but both sides now rightly scorn his lack of vision.

I have living relatives who endured far worse with nothing but a fireside chat to keep them going. For a decade now -- my whole adult life outside school -- we have been most generous to the wealthy among us. It’s hardly a slander to say to them now: you alone have the resources to cure this entirely-curable crisis. Nor is it too much to ask "the greatest orator of our generation" to passionately articulate the virtue of a progressive system. Don't just tell me why the right-wing is wrong in this instance -- I have evidence enough of that -- but why the progressive approach is a noble imperative and a worthy challenge, a good thing in itself.


More than wealth, the promise of mobility is what really animates the American Dream. President Obama embodies that promise even better than he embodies racial harmony. So make with the poetry, brother.

2 comments:

pixymagic said...

I would really like your post ,it would really explain each and every point clearly well thanks for sharing.
Chevy Van Turbocharger

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