Something That’s Been Bothering Me For a Few Years Now…

Christine O’Donnell went on TV with her usual claptrap about how Obama is a Marxist and Soledad O’Brien (who is on a huge streak of calling Republicans out in exasperation lately) rolled her eyes. In the clip, we don’t see the subject get pressed too much further, but this has been annoying me for a long time.

These nostalgic Reagan-worshippers just can’t seem to let go of the last time they thought America was in control of the world again. As Reagan joins the assembly of conservative saints along with Ayn Rand and Mother Theresa, all that he opposed is bad, all that he stands for is good. (Besides arming mujahideen in Afghanistan, but you’re not allowed to talk about that any more. Let’s just all agree that Obama is a Muslim, OK?)

Socialism! That’s what my generation remembers as the bogeyman from that show on TV where what sounded like an aging Bullwinkle would get up in a president mask and intone against the Evil Empire and so on.

The Tea Party loves to talk about socialism. To wit, quoth Ms. O’Donnell:

“We’re a free-market economy that’s supposed to empower the individual, let each person use their gifts, use their rewards to create a better life for themselves, instead of what Barack Obama is posing, one that punishes hard work. A tax code that reduces everybody to exactly the same…”

No one else has the intestinal fortitude to say this, but what O’Donnell is describing is closer to socialism than capitalism. The key phrase here is ‘hard work.’

To begin with, no Republican politician seems to know what socialism or even Marxism is, so they assume nobody else does. As far as I can tell, socialism covers anything that is less friendly to rich people than Reaganomics. For the right, socialism has no definitions, no credoes, no theories, no working examples, and is lurking in the dark–waiting to eat your children at night.

That’s why when pressed, Republicans regularly fail to explain what it is that they oppose, other than Obama or “liberals” or “progressives” and other devil-worshippers. This isn’t an economic argument, but a series of ad hominems.

Let’s be very, very clear. Socialism does have a credo:

“From each according to ability, to each according to work.”

Note that this is a little different than the Communist credo, “from each according to ability, to each according to need.” Socialism is more concerned with the people owning the means of production than necessarily ensuring an equality of outcomes. It does try to limit the development of gross inequalities, though. “Redistribution of wealth” from rich to poor–during peacetime, anyway–is something that really only works on a capitalist society that has embraced some measure of ‘social democracy,’ which is a mixed economy with government services supported by progressive taxation.

With all this in mind, we can clearly see that ours is neither a purely capitalist nor in any way socialist economy; we have a social democracy whose social benefits are being threatened by the tremendous tax cuts pushed through in the years before and after the turn of the millennium. Wealth can also be redistributed from the commonwealth to private hands. It usually doesn’t turn out well.

Here’s the sticking point: our tax system actually does penalize (hard) work. But that’s not an Obama-instituted change; that happened most recently and shamelessly when capital gains taxes were slashed almost in half–between 1998 and 2003, that rate went from 28% to 15%. This is how a millionaire like Mitt Romney gets away with paying less than 15% in federal income tax while middle-class families might end up paying over 15%. Wages–money you make from actually working–are taxed on a totally different schedule that includes a top marginal rate of 35%. Reagan, by the way, hacked and slashed the top marginal rate on income from 70% all the way down to to 28%, culminating just after Black Monday happened on Wall Street; Bush’s slashing of capital gains preceded the collapse of 2008.

To quote the New York Times,

There was, in fact, only one time that capital gains were taxed at the same rates that were paid by people who earned their money by working. That was during the years 1988 to 1990, as a result of the Tax Reform Act of 1986 — a law championed by President Ronald Reagan.

To be sure, he changed his mind about unearned income in 1988. After Vice President George H. W. Bush, then campaigning to succeed Mr. Reagan, endorsed lowering capital gains taxes, the president allowed that might be a good idea. Mr. Bush and the Congress did lower them after he was elected.

In fact, someone who actually works for a living (regardless of how ‘hard’ they work) is being penalized for not investing instead of working a regular job. And investing is a totally passive way to make money; in fact, it’s such an easy job that it seemed not to make much difference whether Mitt Romney was actually ‘working’ at Bain Capital for three years as CEO. On the other hand, if the cleaning staff went on strike, people would notice. Mitt made $21.6 million in 2010; the average custodial worker in Boston makes about $29,000 a year.

If income was commensurate with work in this country, that would mean Mitt worked about 745 times harder literally doing nothing (passive income, remember?) than the guy who cleans his toilets. Even if we were to assume that executives work, let’s say, twelve-hour-days, Mitt would have made his janitor’s salary in a single day with 20 minutes to spare.

Even within the world of executives, anyone who has ever started a business can tell you that you can work extremely hard at an enterprise only to have it fail (leaving debt instead of income).

In a capitalist system, you are compensated for how hard your money works, not how hard you do. There are plenty of working-class people with more than one job who, for some reason, have yet to become millionaires despite the hard work and long hours. Not to mention the fact that small investors (and many large ones) who poured capital into the stock market in hopes of gaming the tax system have lost huge since gambling with securities (note the ironic name) became government-subsidized. Bubbles need cash influxes from small, less savvy investors, otherwise they don’t happen!

If O’Donnell, Obama, or any other politician wanted to actually reform the tax code to reward hard work (and not, say, try to make everyone ‘the same’ in some other way than “protected by the law”), they could achieve that goal very simply. End the corporate and capital gains taxes and have all income be taxed under the same schedule. Federally mandate sick and paid family leave to American workers, who work longer hours for lower benefits than any other industrialized country–and take the fewest vacations. Raise the Federal minimum wage, because nobody works harder than the people at the bottom of the corporate ladders. And if you want to get down to the nitty gritty, offer immigrant workers (who work harder than everybody else) a path to citizenship.

Stay tuned for more of my Summer Of Long-Standing Grievances.


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