Socialism for everyone or just a few?

A timeless and frankly tiresome debate in this country opposes a capitalistic individual responsibility to a socialistic common good. Although they would vehemently deny it, the former's proponents have the upper hand. As capitalist competition creates ever richer and more powerful winners, great inequality enables the winners to buy themselves privileges.  Individual responsibility remains only for the have-nots. The real choice, therefore, is between socialism for everyone or socialism for the privileged only. The idea of universal free-market individualism is a fantasy. That the idea fascinates many does not make it any less impractical. 

Some real-life background is instructive. The social contract, such as it is, is being slowly torn. Few workers have union bargaining rights anymore. As seen in the protests and counterprotests about changes to public workers’ benefits, the few who still have collective bargaining rights encounter hostility and resentment more than fraternal sympathy. Politics, the sometime recourse for those shunted aside by economics, is increasingly out of bounds, controlled by the rich few and their corporate associates. Indeed, people are encouraged to avoid and distrust government, leaving the state to help the winners take all the rewards.

 

As ordinary people are increasingly on their own, powerful executives retain the benefits of the corporate form. Attempts by ordinary people to wrest concessions from this boys’ club-like arrangement are dismissed as “socialist”, as though corporatist capitalism is the natural order. The idea of people working through government to achieve some kind of justice in the allocation of opportunities and rewards now seems almost naïve. Public provision of any kind of good or service (except physical security) is now widely seen as perverse, while private markets are treated as near-sacred.

The deteriorating social compact is not simply a move from collectivism to individualism. Those with the benefit of corporate or political connections retain the benefits of collectivism even as ordinary people lose them. Individual responsibility, yes, but only for the rabble. Even if faltering homeowners are not rescued, big banks still will be. Not so much because of hypocrisy, but necessity and convenience: when the bigwigs are in trouble, so is everyone else, so they will always have to be bailed out.

By necessity, any success by conservative-libertarians at making individuals more responsible for their failings is going to leave better-off people and interest groups protected. People will not give up their special privileges for the sake of a coherent right-libertarian ideology. They will retain their privileges while imposing that ideology's punitive component on the weak. This leaves us with the burden of social welfare. If the haves are going to enjoy privileges, so too must the have-nots. Otherwise you have an aristocracy or plutocracy in everything but name. It is not long before social becomes socialist and reasoned discussion, at least for one side of the debate, must cease.

It’s telling that the word socialist is a slur. The negative connotation is not entirely due to the former Soviet Union, now a fairly distant memory for most people. Yet the slur remains potent – so effective because it need not even be explained. If leftish Democrats such as President Obama seek to provide more necessary goods and services in a socialistic manner – that is, through taxes drawn disproportionately from the richest people – it remains to be explained why it is bad to have some goods and services provided socially. Is it so horrible that the naturally or socially well-endowed should support those not so blessed?

This gets more complicated. People ask, How dare we take the fruits of people’s hard labor? Yet this question hides a disputable premise. Note the emphasis on individual virtue: hard work understood not as a gift of God or nature, the gift of an able body and mind inclined toward industry and persistence, but a virtue entitling its possessor to special rewards. Personally, when I look at the (few) achievements I’ve made by working hard and applying myself, I see myself as very lucky. God (or something) gave me to do what I did. It’s nice to profit from it, but it’s too much to say I’m entitled to benefit exclusively. If anything, my good fortune imparts a responsibility for care toward people less fortunate – yes, even if they’re given to sins such as sloth. We all have sins.

Some of us have resources to protect ourselves against accountability for those sins, though, and this is where the problem arises. We might as well confess our common sin, humble ourselves before God and one another, and in the mean time embrace our responsibilities toward one another – yes, even strangers, even – gasp! – Mexican immigrants – despite their sins and ours.

The conservative fear of indulging people’s bad habits is not unfounded. It really can do harm to give someone money they probably will spend on alcohol instead of food, cigarettes instead of clothes for their kids. People really do these things. I suspect this explains much conservative anger about the welfare state. But it also leaves a lot of “Joe the Plumber” style complaint about punishing the virtuous wealthy – and accordingly, the problem of attributing to individual virtue and entitlement, gifts that properly should inspire gratitude and generosity. There remains a sense that some are entitled to special rewards, while others are not even entitled to basic needs.

For all its faults, government deserves some credit for making such needs available to everyone regardless of economic status. This is not meant as a glowing panegyric to statism. Although my experiences with the Department of Motor Vehicles have been mostly quite decent, thank you, I can accept that for many, government has been a huge pain in the backside. But there is still some kind of virtue in being able to get something you need even if you can’t afford it, without having to go begging in the streets. At the very least, critics should be asked to explain why everything, including basic needs such as medical care, should be provided (and paid for) privately, as they clearly prefer.

Of course, there are benefits and costs to providing goods socially, as there are to providing goods individually. But the more dire the consequences of failing to provide something socially/publicly, the stronger the justification required. In the United States, however, the presumption in favor of private provision for all but the poorest people goes largely unquestioned.

If you doubt this, consider public discussion about reforming old-age entitlements. It seems likely that future changes in these programs will cut benefits for better-off people, forcing them to pay for more things out of their own pocket. That is to say, they will lose sweat, blood and tears for forty (or probably more) years to generate wealth and then, instead of receiving a nice share of that largesse to support a reasonably comfortable retirement, be expected to live on whatever they’ve been able to scrounge up from their meager earnings until or unless they become really desperate. 

People are supposed to be on their own, unless of course they are major owners in a big corporation. Then, according to five members of the Supreme Court, you have the right to draw money from that corporation to support elected leaders who will legislate in your favor. It’s a splendid arrangement: socialism for the well-off, free market for everyone else. 

This aggressive self-interest at the expense of social welfare can be seen in media discussions about Medicare and Social Security. Nearly all discussions assume the need to cut the programs rather than find ways to fund them fully and maintain a political economy that is fiercely competitive yet compassionate at the same time. It’s time for people other than just old lefties to stand up and demand that government include them in decisions that will affect them, rather than pretending that we don’t need to be involved in government because we don’t need government. The elites will get theirs no matter what; we'd better get in and get ours.

Union bashers can get their facts straight

Private-sector unions are just about gone; public-sector unions are headed the same way, yet we’re still supposed to be outraged that they have any rights at all

My favorite saying is that of the late Daniel Patrick Moynihan: “People are entitled to their own opinions but not their own facts.” I think of this rule often when I listen to people grinding political axes without the benefit of valid information.

Recent controversy over public-employee benefits provides a good example. Frankly, some people just have it backwards when it comes to the issue of collective bargaining rights in the workplace. For most workers in the United States, collective bargaining isn’t even an issue; they have no collective bargaining. When it comes to negotiating with employers, they’re on their own. If they’re in a position to demand better pay and benefits, they can help themselves. If, like many more, they’re desperate for a paycheck and have no leverage to bargain, they accept whatever terms employers offer. To show for it, we have decades-long wage stagnation for the majority of American workers, while the richest people receive ever-greater portions of the wealth those workers help produce.

Not all workers are in such a funk. Many unionized public employees have relatively favorable contracts in terms of pay, benefits and job security. It’s true that in some cases such employees receive a combination of benefits that could fairly be called generous or even excessive. But surely these excesses can be curbed without abolishing all collective bargaining rights. (And I apologize for calling you Shirley.)  

Yet abolishing collective bargaining rights is exactly what several recently elected Republican governors and legislators seek to do. Where did they get the idea that unions representing government workers are the major obstacle to fiscal prudence? Well, it helps when unions are portrayed as being much more powerful than they are, and when exceptional cases are allowed to obscure the general contradictory truth that unions are less powerful than ever and headed for obsolescence.

One article mentions “tea party leader Ted Lyons, an electronics executive from Troy, Ohio, who said the proposed union changes are long overdue. ‘The labor unions have become so powerful now on a worldwide basis,’ Lyons said.” It may look that way to Mr. Lyons, but to the majority of American working people, union rights aren’t even on the table. Many work unstable hours for low pay and no health insurance or sick leave. The few who still have union benefits are under pressure to make painful concessions.

So why the anger at the few remaining union workers? States are under pressure to cut costs, and one of those costs is pay/benefits for public workers. Some feel angry that their taxes are paying for public employees to get better pay and benefits than they enjoy in their own jobs. Especially when that pay and benefits appears to be contributing to budget shortfalls.

Here is where I get a little Marxist, so bear with me. This kind of resentment among working people is great for the elites. It takes the pressure off them when the main issue is how much to cut workers’ pay instead of, say, how to find ways to collect more tax revenue from wealthier people. Class warfare works best when it happens between members of the same class, presided over by members of the upper class. I say this as a reluctant supporter of (moderately) laissez-faire capitalism, since this appears to be the system that produces the most wealth for everyone. It’s better to have a smaller slice of a larger pie than a larger slice of a smaller pie.

But the size of your slice isn’t the only issue. This is also about democracy itself. People without property should still have a say in how the system’s rewards are distributed. (Distribution – redistribution – hammer and sickle, oh my!) Collective bargaining is one way besides elections that ordinary people can have a say. At the end of the day, the managers and executives will still fare best. It would be nice if ultra-conservatives would realize that and stop hyperventilating about an egalitarian straw man. If they haven’t noticed that the inequality between the richest and poorest people has increased under both “socialist” Democrats and conservative Republicans, now would be a good time to start noticing. And no, President Obama represents no threat to this arrangement.

Justice Scalia: “Persons” does not include women

Justice Scalia, this is not a difficult one. But you still managed to get it wrong.

19^th century men didn’t have women in mind when they wrote that all persons should have equal rights.

Justice Scalia’s comments about the Equal Protection Clause not applying to sex discrimination raises the issue of how literally to read the Constitution. It doesn’t matter to Justice Scalia’s view that the Constitution prohibits states denying “persons” equal legal protection. “Persons” literally would have to include women as well as men. But he still doesn’t think the Equal Protection Clause outlaws sex discrimination – because “nobody ever thought” it did at the time it was written. Here originalism contradicts literalism. The original meaning of the word “persons” in the 14^th Amendment did not include women. But the thing is, the correct meaning of the word “persons” does include women.

I can see the potential for harm in allowing current prevailing opinion to supercede original understanding – where there is room for disagreement over what is correct and incorrect. There presumably we should defer to original understanding. But there is no room for disagreement as to whether or not women are persons. That is, where the original understanding was clearly wrong, we can safely ignore it. 

Literalist and originalist are not the same thing. Justice Scalia is only the latter. For example, the First Amendment does not actually say the government cannot outlaw flag-burning, but an originalist such as he can still believe that the First Amendment was understood as a right of free expression that would indeed preclude such a law, even though the literal language of the amendment does not. Here, of course, a non-literal reading of the Constitution is welcome to liberals and believers in a strong notion of free expression.

In the case of the 14^th Amendment, however, a literal reading of the Constitution would seem to be more suitable for liberals, who are normally associated with a broader and more elastic interpretation of the document. So are liberals being incoherent and opportunistic to interpret the Constitution broadly in one respect but literally in another?

Not necessarily. Perhaps a literal reading is suitable where there can be no reasonable argument about meaning. “Persons” necessarily includes women. So the men who wrote the 14^th Amendment didn’t have women’s rights in mind. So what? They were sexist and wrong. Justice Scalia says outlawing sex discrimination is the kind of thing legislatures exist for. (He says the Constitution neither requires nor prohibits sex discrimination.) But if we are faithful to the meaning of the words in the Constitution, we cannot allow states to have laws that discriminate against women. They are persons and the Constitution requires that laws protect all persons equally. Where the words of the Constitution tell us exactly what we have to do (as opposed to using ambiguous and necessarily subjective language such as “reasonable” and “necessary and proper”) then we can read it literally.

When, on the other hand, the Constitution does not tell us exactly what to do (as in the case of a law prohibiting flag burning, about which nothing is said in the Constitution) then we necessarily have to look at context and original understanding. If we find that the 1^st Amendment was meant to protect free expression generally and not only the written or spoken word, we have to find a law prohibiting flag burning unconstitutional. So Justice Scalia is right about freedom of expression and wrong about equal protection. Liberals are right about both.  

Source  

http://voices.washingtonpost.com/44/2011/01/scalia-constitution-does-not-p.html

Learning to Live with Moral Hazard

Yes, some undeserving will be rewarded, but we can get over that

Summary (in case you don’t want to read the whole thing)

People wanted (and to some extent needed) more things but weren’t making enough money to pay for it; so they made up the difference by borrowing. Many people went too far and ended up bankrupt or at least in serious trouble, affecting the broader economy. The very nature of the capitalist system encouraged them to do so, though. It’s unreasonable to hold it against them when making policy. People aren’t helpless and shouldn’t be entirely absolved, but neither should they be held totally responsible.

Background

At first, people were lucky if they could make just enough goods to stay alive. As they got better at making goods, they became able to produce more than they needed. Then the financial crisis happened.

Okay, actually a lot of stuff happened in between the genesis of economic surplus and the bursting of the debt bubble. But the former thing led pretty much inevitably to the latter.

Producing more than they needed, people began to trade their extra goods for other people’s goods. People realized that it would be more efficient to have one easily-portable thing that could be used to buy anything; i.e., money. Since this new thing could buy anything, it soon became more valuable than actual goods, which in order to trade had to be of some value to a potential buyer. But a buyer didn’t need a special reason to value money, since he could in turn spend the money on whatever. So people went from learning how to make more goods than they needed, to learning how to make more money than they needed. Hence interest, stocks, bonds, and now derivatives and hedge funds. Making money for the purpose of making more money.

Eventually the economy came to be based more on making money than making things that were useful in themselves. But useful things were still produced, and quite abundantly, as the money-makers invested in technologies that made more goods with less time and work, so that people had the time and resources to focus on making more money. But this created a problem as a great disparity opened up between people who had money to invest and those who made just enough to pay for basic needs. The more money wealthy investors had, the easier it was to make more, and accumulate greater wealth (and power over the economy and politics).

This was not the birth of social inequality, of course, which had existed since people began settling down instead of constantly moving around in search of food. But now there was no longer any natural limit on the degree of inequality that could be generated, as more money could always be made, and used as leverage against people with no extra money, to prevent them from being able to negotiate for better pay for the work they did. Some people controlled so much wealth that they didn’t have to negotiate with regular folk at all, as they could easily find someone willing (that is, desperate) to work for them for whatever paltry wage he had no choice but to accept in order to pay the wealthy for the privilege of living on their land. Regular folk very belatedly acquired the right to vote in order to have some say over their governance, but you had to have money to have any real influence, so government ended up being largely a servant for the wealthy. People could really only select a leader from a list decided upon by the wealthy elites. So government became a driver of greater inequality rather than a check on it, a reality only partially mitigated by progressive reforms such as fair labor practices laws and collective bargaining rights, which by making the economic situation more tolerable for the masses, actually secured the capitalist system by protecting it from popular revolt. The concentration of wealth continued to increase, but so did the living standards of even the poorest people, so the system kind of worked for everybody. 

Back to the Present

Thus a highly productive capitalist economy (generating surplus, if also much waste) has meant living standards have risen, even for the poor. But wages, for a quarter-century, have been basically flat, for the vast majority of workers. The last twenty five years of the 20^th century saw the success of an aggressive political movement to roll back many of the progressive policies that gave ordinary people security and bargaining power. Secure full-time union employment has given way to temporary part-time jobs with no benefits or collective bargaining rights. Wealth has become more heavily concentrated among the richest people than since just before the Great Depression.

But the culture has made it harder to settle for just good enough. The American Dream is essentially to be middle class. The material standards that qualify a person to be middle class have increased: two cars rather than one; a large house rather than a small one; a college degree, not just a high-school diploma. Each qualification means more expense. But individuals aren’t making much more money than people in similar positions were 30 years ago, allowing for inflation. Families partly made up the gap by married women working. But largely the increase in living standards has depended on massive borrowing. Which might have seemed fine until recently, though in retrospect such thinking seems positively foolish.

Who’s to Blame and What to Do About It

It is easy to say (as many conservatives tend to) that people didn’t have to buy all those fancy things. They could have lived more modestly, saving extra cash for their future, as past – presumably more sober-minded and responsible – generations did. Settled for smaller houses, fewer toys for the kids (and adults) and such. Which is literally true, if still an unsatisfactory response to the related problems of growing financial insecurity and economic inequality. The problem with their argument is only that it stops there. It’s a valid point, but it also ignores a lot of important facts. There is a tendency to assume that individual virtue alone can protect people from bad economic outcomes, and discount or minimize larger economic and social forces that influence people’s actions.

People surely had better save their money and not borrow what they are unlikely to be able to pay back, but just as surely, people (most, anyway) will spend and borrow to the limits of their ability (i.e. how much a bank will lend them) and get themselves into the kind of trouble that threatens the whole economy, not just their own personal finances. In doing so, people are not being wise or fully responsible. But it’s asking too much to say they ought to be. Even well-meaning people will necessarily make bad decisions and get themselves into trouble. The disagreement is over the question of what to do when this happens and affects the broader economy.

There is not a neat line dividing responsible borrowing from the dangerous kind. There is a spectrum. Along that spectrum lay choices between competing values: we want to save for the future, but we also want a house with enough room in case Mom has to move in with us; we want to save for our retirement, but paying more for a premium college education for little Johnny could pay off in the long-run. And so on and so forth.

To be sure, some people – at the bad end of the spectrum – make pretty obviously irresponsible choices. It seems unfair that others should be required to bail them out when they do. But my claim is that most people are not on that end of the spectrum. Most are somewhere in the middle between saving as much as possible and spending as much as you can borrow. The critical point is that people sit along all points of that spectrum and any policy we make regarding sound economic decision making and problem-solving is inevitably going to be justly accused either of punishing the innocent or of absolving the guilty – because of the absence of that neat line between the two. It’s too difficult to separate everyone. If we decide, for example, to bar foreclosures, we are surely letting some irresponsible people; but we’re also helping deserving people who just had really bad luck. For some, punishing the guilty appears to be more important than protecting the innocent. For others, it’s the other way around. Either way we will necessarily fail to mete out perfect justice.

The point? Let’s quit worrying about the moral hazards of bailouts and focus on promoting general prosperity. Else we’ll face problems more serious than the unwelcome side effects of letting people off the hook.

See, We Should Have Just Done Single Payer

The problems of the health insurance mandate

I do not have a simple response to the recent ruling by a federal judge that the new health care law is unconstitutional. One the one hand, it seems reasonable to require that everyone be insured. People’s decisions in this matter are not purely private; they affect everyone because medical costs are necessarily socialized. On the other hand, the new law’s opponents might have a point that the Constitution does not empower Congress to force people to buy something, even if their decision not to do so negatively affects others.

The “individual mandate” was aimed at those who could afford to buy insurance, but choose not to. Some will wait until they get injured or sick and then purchase insurance, while others who have been paying into the system all along will bear the cost of any emergency care they may need. At issue in this lawsuit was whether this act of omission amounts to a substantial effect on interstate commerce that the government can constitutionally regulate.

Opponents of the mandate contend that Congress cannot regulate against a person’s decision not to purchase something. Even if people’s refusal to buy insurance did affect interstate commerce, to allow the mandate might concede to Congress virtually unlimited power to force to people to buy things the government thinks they had better have.

This does not strike me as a very strong argument. Judge Hudson’s contention that the government could force people to eat asparagus seems not only far-fetched but a logical stretch. Not only is it unlikely that the government would do such a thing, but it would be difficult to argue that such small decisions fall under the authority of the Commerce Clause – compared to the major effect (in the aggregate) of the decision to go uninsured. That is to say, there is a strong case to be made that health insurance really is something everyone needs and there are major consequences to society if people go without it.

The problem is, if the mandate is struck down, the rest of the law may not work. People will be able to wait until they get sick and then apply for insurance coverage that the law guarantees them. This could lead to increased premiums.

The government could have avoided this dilemma by going in another direction – that is, toward universal single-payer health insurance, or Medicare for All. No one would be required to purchase a private health insurance plan; they would be automatically covered and the government, rather than an insurance company or the individual, would be billed for medical services. This is the resolution I would prefer. Of course, it does not have sufficient support right now. In the mean time, I will continue to root for the law’s success as a lesser evil.

Yes, government does (help) create wealth

In the United States, the notion of government as a provider of the resources necessary for wealth creation is met by many on the right with something like an allergic reaction. "Why should government redistribute wealth?" they demand.

To answer their complaint, a false assumption must first be corrected. The false assumption is that the government does not participate in the distribution of wealth in a market economy. But of course, government surely does play a role in distributing wealth in a market economy. A person doesn’t get rich or stay rich without the services provided by government, including its protection of intellectual property. In other words, the heavy concentration of wealth among the very richest people could not happen without government to begin with. So when government redistributes wealth, it is merely correcting a problem it helped create.

This argument does not settle the issue of how much redistribution ought to be done, of course. That has to be decided democratically. But conservatives are wrong to suggest that redistribution is simply arbitrary meddling by the state in a purely voluntary market system. There is no such thing. The state is necessarily implicated in the existing distribution of wealth, whether it be to the advantage of the rich or the poor. To support conservative policies is to endorse the advantage of the rich.

Of course, for conservatives, the heavy concentration of wealth among the rich few is not a problem for the state to address; indeed, it is not a problem at all. It is simply a result of some people being smarter and harder-working than others. But as I argued before, smarts and hard work alone do not get us the degree of inequality we see – government helps. Without it, there would be no way to get your due if someone reneged on their contract or stole your idea and made money off of it that rightly should be yours. To acknowledge the role of government in fostering wealth creation is not to deny the importance of intelligence and work ethic. It is simply to acknowledge that a market economy requires the support of a strong government able to enforce the rules. No one person, however smart or hard-working, can create such favorable social conditions on his or her own.

Contrary to right-wing myth, government does create wealth. That is to say, society collectively enables individuals to prosper by providing a system of laws that protect property rights as well as physical security. When those who prosper most in that system are taxed the most to support it, they are not being penalized. They are paying to support the system that nurtures them.

The Dilemma of Progressive Taxation

The issue of tax is a difficult one because equally important principles pull in different directions. A tax system should be fair and progressive; that is, it should not be more burdensome for poorer people. It should take the most from those who have the most to spare. Yet you also want a tax system that raises sufficient revenue by encouraging (or at least, not discouraging) the productivity that creates the money to be taxed.

Following the fair-tax view means taxing disposable income at a much higher rate than the income that barely covers food and housing. That suggests a steeply progressive income tax, starting at zero for people making less than poverty-level income and rising gradually to something like 40 percent for the richest two percent of people or so. (If the tax cuts passed under President Bush expire, the top marginal rate will be close to 40%.)

But the competing view warns that higher marginal tax rates discourage businesses from making job-creating investments. I’m more likely to make an investment if I get to keep 90 percent of the profits than if I only get to keep 60 percent. In a high-tax environment I might decide it’s not worth it to put that capital at risk. You could complain that this argument caters to people’s greed, but that complaint does no good in practice. If we care about raising enough revenue for a social-welfare-oriented government, we have to make sure we’re not discouraging the very wealth creation that makes such a government possible.

You can believe (as I do) that right-wingers exaggerate higher taxes’ discouraging effect on productivity, and still appreciate that higher marginal tax rates affect incentives. If I get to keep more from making an investment, I am more likely to make that investment. It would seem naïve and wishful-thinking to argue that marginal taxes can be raised toward 100% without reducing wealth-producing incentives.

But this logic creates a problem for the fair-tax view. If higher marginal taxes discourage productivity, resulting in less wealth for everyone, we should perhaps not only enact a flat tax, but a downright regressive tax code, perhaps by taxing earned income (above a poverty threshhold) at a flat rate while taxing capital gains and dividends less or not at all. Encourage people to get richer by making it a tax liability to remain poor. This is the extreme case, of course. It’s very unlikely to happen, although the very conservative people who dominate the Republican Party would gladly move us in that direction.

For example, a state may decide to attract a large company to set up shop there by offering a lower tax rate. If the state fails to do so, the company may take its business – and its jobs – to another state. The logic of this argument leads to the elimination of tax altogether. States can keep competing for business by lowering taxes until there are no taxes left. Indeed, states could even pay companies to come to them.

But since governments still need revenue, they will have to raise it by taxing people who lack the political clout to resist it. It’s harder for a working-class family to move to a lower-tax state. Nor can they very well avoid the sales taxes that conservatives prefer over progressive marginal taxes on income and assets. The advantage of taxing poorer people is that it’s harder for them to avoid the taxes. So even though you’re taxing people who don’t have much money, you’re still taxing enough people to make revenues significant in the aggregate.

If you believe, as many appear to, that our government spends far too much on social welfare programs, you could resolve this dilemma by cutting taxes across the board, leaving just enough revenue for things even the hardest-nosed conservatives agree government must do. If you believe, as I do, that social welfare policy should err on the side of generosity lest we engender a society of fantastic wealth for the few amid grinding poverty for the many, we have to find another kind of balance. In the next post, if I can find the energy, I will explore ways of doing that.