Give it back?

GIVING THE PEOPLE BACK THEIR OWN MONEY

By Edward S. Herman



One of today's most favored rightwing
justifications of a massive tax reduction is the
idea that taxes are a form of government theft,
which take from individuals the fruits of their
labor or rightful ownership, and without
reasonable cause. As President Bush put it, the
surplus "is not the government's money, it's your
money;" New York Republican congressman Thomas
Reynolds's version is, "America, this is your
money and you know how to spend it best."
Exceptions are made for taxes to pay for the
police and courts--that is, law and order and the
protection of property--national defense, which is
protection of domestic property from foreign
threats, and the maintenance of global law and
order--and to a degree, public works and
education. As rightwing ideology has spread more
widely and deeply, there has been growing debate
over whether the market can't handle public works
and schools as well or better than government, at
least to the extent of contracting out the work
and school operations.



The idea that the government has a responsibility
toward people in distress, which peaked during the
Great Depression and its World War II aftermath,
has also come into increasing disrepute with the
growing power of the market. The concept of a
"welfare state" was always anathema to business
and the rightwing, and with their steady advance
over the past several decades it has been under
increasing attack. The welfare state took a heavy
hit in the Reagan era, and has been in further
decline since. The weakening labor movement,
globalization, and the fall of the Soviet Union
have all contributed to the continuing erosion
process. The Bush II call for a new "war on
poverty"--by the private sector--while allocating
minimal resources from the budget surplus toward
that end (even cutting back numerous programs like
the "Gear Up" mentoring program for poor kids, and
funds for community health centers, job training,
and low income housing) is only a step in an
ongoing trend. (It is in a direct line from
Clinton's post-Personal Responsibility Act
"Summit" calling for a new voluntarism to replace
federal support, and his well-publicized "poverty
tour" in which he expressed much sympathy with
"their pain" but again called for a private sector
response.)



The intellectual--not to mention moral--base of
the new tax reduction rationale is not strong.
Contrary to business and rightwing ideology, a
good case can be made that government should be
increasingly important as a participant and
provider of services in the modern economy. This
can be argued on the basis of at least three major
considerations. One is that a large government
role in spending and taxation helps stabilize the
economy; a small and weak government and very
large and poorly regulated private sector make for
instability (and a small and weak government does
not regulate well). A second reason is that with
increases in income the public's demand shifts
more and more to a desire for security, and as
illustrated by the effective Social Security and
Medicare-Medicaid system (and superior
government-managed medical payment systems in
Canada and Europe), a dominant government role is
essential for the effective organization and
provision of such services for the general
population. A third consideration is that
externalities become increasingly important in an
interdependent, densely populated, technologically
advanced and chemicalized world. And by definition
the market fails to deal with externalities, so
that government production or effective regulation
is called for in those cases on basic economic
reasoning.



Business does not recognize these reasons as
legitimate, however, because its members think
short-term, their own bottom-line interests come
first and virtually exclusively, and they like to
externalize their costs. And rightwing
intellectual rationales follow in the wake of
business interest. This includes the course of
development of economic thought, with the
prominent Chicago School and its branches managing
even to put up a "theoretical" case for the market
being able to cope with externalities. But "taxes
as excessive impositions" is part of the language
of economics more generally (see David George,
"The Rhetoric of Economics Texts," Journal of
Economic Issues, 1990.)



Business and its rightwing supporters ignore the
fact that every business depends on educated
workers, an efficient transportation network, and
a well developed and properly regulated market and
financial system, all of which depend heavily on
efficient government service. Furthermore, over
the years the government and general taxpaying
public have paid enormous sums in corporate
welfare: subsidies to businesses of all
sorts--from farmers to drug and pharmaceutical
firms to computer manufacturers and software
providers--underwriting their research bills,
absorbing their risks, bailing them out, and
helping them sell goods at home and abroad. And if
the beneficiaries of this government and taxpayer
largesse make large salaries and stock market
gains as a result, maybe the public has some claim
to those parts of "the people's income."



More broadly, the idea that it is the "people's
own money" that the government is taking away
fails to recognize the societal base of earning
power, which is why an ordinary citizen in this
country earns much more than one in Mexico: there
is a different level of accumulation of capital,
of infrastructure, of technical knowledge, of
education and other institutional conditions, that
have a long history--and a difference in average
output follows that is independent of individual
effort and talent. If the society contributes
heavily to an individual's productivity and
ability to make money, it has an important basis
for claiming a share of income as payment for that
contribution.



There is also a vast difference between income
that is the fruit of work and that from property
ownership. The value of property is often very
much a function of societal facts and trends, like
the growth of cities that causes land values to
skyrocket. Henry George's economics and proposal
of the "single tax" was rooted in the belief that
these increments to wealth were based solely on
strategic position, were unearned, and were
therefore eminently taxable. Huge incomes from
"work" itself are very often correlated with
strategic position (e.g., control of a corporation
and ability to fix your own salary and options) or
anti-social activity (stock market speculation,
currency trading, organizing and funding takeovers
and buyouts a la Michael Milken).



Milton Friedman once claimed that income
inequality was a function of chance: who happens
to work real hard, gets the breaks, makes the
right decisions, etc. But this rests on a
misleading usage of "chance," as it implies an
equal chance for each newborn baby, when in fact
societal factors like property holdings,
connections and position of parents, and race,
make for an unlevel playing field on a systematic
and structural basis. Progressive taxes and
spending oriented to serving those who don't do
well would partially compensate for these
inequalities of opportunity.



Another line of rightwing argument for tax
reduction has been that taxes fund activities that
the taxpayer might not agree with, so why should
they have to pay for them? The rightwing never
allows that this might apply to their own favorite
forms of government expenditure, like "defense,"
although it is a notable fact that except in times
of war and international crisis (often
artificially stirred up by war managers), most of
the public wants less "defense" and more education
and other public services (see Steven Kull,
"Americans on Defense Spending," School of Public
Affairs, University of Maryland, 1996). So the use
of tax money to help fund family planning is
illegitimate because the rightwing disapproves,
but taxes for more police and a fatter and very
wasteful military establishment are fine because
its members find such spending legitimate. But, in
effect, they deny the right of a democratically
elected government to spend money for services
desired by a majority of the populace. This is
covered up by an argument that they apply
selectively and that the "liberal media" fail to
laugh into oblivion.



One last problem with the "giving people back
their money" is that "the people" don't want it
back. Polls have regularly shown that the general
public does not give tax reduction primacy in its
priority schedule on handling the supposed future
budget surplus. (In a May 2001 Gallup poll, only 4
percent of the respondents put "taxes" at the top
of their economic concerns; a March 2001
ABC/Washington Post poll found that only 22
percent rate tax cuts as more important than
spending on health care, education and other
civilian programs.) But just as there are worthy
and unworthy victims, there are worthy and
unworthy citizens and opinions on the budget. In a
plutocracy such as we live in, the general
public's opinions are unworthy, the opinions of
Kenneth Lay of Enron and other major funders and
friends of the Bush campaign are worthy and flow
into the media and political decision-making
process. (This was dramatically evident in the
NAFTA debates of 1993 where the public was against
the agreement, the elite minority for it, so it
became law.)



Clinton and Gore gave heavy weight to worthy
opinions in guiding their "moderate" business
party, which served business very well but did not
give it everything it wanted right away. The
"extremist" business party now in power is more
inclined to give business everything it wants
right now, as far as this can be done without
completely discrediting the party as a
straightforward agent of business, or actually
causing the corporate capitalist ship to founder.
For this gang, the short-term perspective of
business, grab-and-run, becomes the order of the
day. The important people want their own money
back, along with anybody else's they can get their
hands on, and this business party is trying to
help them get it.