Hey all. Quick hit diary, because I don't have much time to write too much in detail. Basically, the context: I was on Google+, which I use as just another news aggregate by following the streams of various sources. On a thread about the search interest about former President Bill Clinton during his DNC speech, someone posted this:
"I am a proponent, however, of the idea that people who CAN pay more SHOULD pay more. Like it or not, we're all in this together."
Do the people who pay more get any more benefit?
In actuallity, they get less benefit, both in absolute and proportional terms.
Further, when you tax something, you reduce how much it happens. When you subsidize something, it happens more.
So why is taxing sucessful business a good idea for growing the economy?
Why is subsidizing being poor going to help people in the long run?
Now, I came in a little late, so he was responding to an earlier comment. Anyway, below the curly was my response, his response, and my final rebuttal. Credit where credit is due, others were offering very solid critiques of this person as well. Enjoy.
Me:
"Do the people who pay more get more benefit?"
Yes. If they derive their wealth from their own business, the availability of an educated labor force to help run their business and generate the output from which they profit benefits them to a greater proportion than those who earn just enough income to survive but pay the same proportion of their income in taxes. The very income on which they are taxed is reflective of the proportionately larger benefit they have derived from being an American.
"When you tax something, you reduce how much it happens."
Only the case in very specific instances and when applied to goods for which consumption is optional. For instance, a gas tax in areas in which multiple modes of transit are available will significantly alter decisions to drive. Income, however, is not only something that is not optional, it is a resource that provides for the ability to acquire goods. More will always be better, so income is not very sensitive to taxation. Indeed, median income increased dramatically through the 60's and 70's under marginal income tax rates more than double than what they are today. People don't say, "No, I don't want that $30,000 raise because $11,000 of it will go to federal income taxes." There is a term for those that do: stupid.
"Why is subsidizing being poor helping in the long run?"
Providing basic human needs to people in our society that, for whatever reason, do not have the means to provide them for themselves is not "subsidizing poverty." Given the option, there is not a person alive who would choose the meager subsistence living provided by our deeply diminished safety-net over earning a decent wage at a job with benefits. To say something like this is to imagine, contrary to all evidence, that people receiving public assistance are living large. They are not. Visit your nearest public housing development, ask somebody who cannot afford to feed their children on their own how much they get a month in food stamps, and look at the conditions in which they live, and then tell me we are "subsidizing poverty" (read: encouraging people to be poor).
Him (partly responding to others as well):
Sure it does - because each of those million employees pays taxes, and does business that creates other jobs.
Alternatively, those million people could be sitting home,drawing unemployment for 99 weeks -- which pretty much depletes the funding for building or maintaining bridges.
Taxation does not grow anything. It's been pretty well shown that taxation slows growth.
The only way out of the economic mess we're in is to grow out of it. We need to get to where jobs are being created and people are working and money is coming in. Right now, we're taxing the rich and handing it back out in either social programs or infrastructure building that does not create new jobs.
If the gov't says "build a bridge", then it's a single project, and when it's done, people are back out of work. The bridge doesn't generate new funds for the gov't - even it it's a toll bridge, all that does is eventually break even, and there's a long time lag there.
Trying to tax the rich to support the poor is like trying to fill a swimming pool by pumping water from the deep end to the shallow end. You can be really proud about a 5 gallon per minute pump, but even if you up it to 50 gallons a minute, the water level in the pool won't rise... and the bigger the pump, the more electric it eats up while achieving nothing.
We need to turn that pump around, and pump from outside the pool - run a hose to a nearby lake or something. That means expanding business and increasing the size of our economy. Taxation does not do that.
The question is do you want people to have jobs and be in control of their own lives - which an expanding economy makes happen -- or do you want the government to grow and expand, and 'care for' the people on the bottom?
Is it more important to you to see that the people on the bottom have a job and a shot at moving up the ladder, or to see that "the rich" are paying the amount you think is their fair share, regardless of the impact that has on the economy as a whole?
Do you want Juan the Waiter to save up his tips and open a cafe of his own, or do you want him on unemployment because Richy Rich doesn't come down and buy expensive dinners any more?
Me:
Ugh....alright, last quick contribution, and I'm done with this thread.
"It's been pretty well shown that taxation slows growth."
No, it hasn't. Give me a few citations that does not contain opinions from a right-wing think tank. Seriously, give me some well-credentialed citations from economists. And I do mean a few, because quantitative economic modeling has a lot of noise and specification bias, so you need a few to prove that it's not an outlier finding. I know, if pressed, I can present data and analysis from well-regarded economists that show income taxation does not reduce annual growth in income. In fact, there have been many studies that show which forms of taxation are appropriate for which desired outcomes, including those geared towards a goal of more economic growth.
"If the gov't says "build a bridge", then it's a single project, and when it's done, people are back out of work."
Nice oversimplification of a complex public financing system. Here's a better, more dynamic, and more accurate way of examining how the public sector works in our economy: The gov. invests in research and development for engineering techniques and materials that run buildings with little or no energy or water consumption (providing long-term research jobs to scientists, engineers, etc.). The research yields break-throughs on new technologies that produces new products. Businesses use these technological break-throughs to develop new materials to sell (long-term private sector and manufacturing employment). Governments at all levels fund the retrofitting of public buildings into more modern, efficient buildings using these materials (again, more long-term jobs for contractors, construction, and sales to the producers). Government saves money on powering itself. Government builds new materials as a standard in new developments and offers subsidies to large companies to retrofit buildings, offices, etc. to the new standards (again, private sector jobs from contract work, sales, etc.). Discretionary income from all of this new contract work and the jobs in the new industry creates demand for all other goods in economy (more jobs).
On your strange pump anecdote:
First, you lost me at a silly anecdote. That may work in certain circles where simplicity is okay, but to me, if you want to discuss something, discuss it. If you want to talk about how to leverage public sector and private sector tools to generate economic output, then talk about about the specific ways in which you believe this can be done. Don't tell me a stupid, oversimplified story about a water pump. I don't live in a world of water pumps. I live in a world of complex problems that require sophisticated understanding of the options available, how they can be used, and what their anticipated effects will be (based on data and citations, of course).
Second, you do nothing to expand on what that external lake or pool or bubbling brook or whatever the hell you were talking about was. Could it be increased demand from new discretionary income not previously available? Could it be investments from other nations? Maybe the magic market fairy? Who knows? You didn't say.
On the rest:
You finish by offering a bunch of false choices and non-sequiters. Obviously more jobs and expanding the economy is everyone's goal, but you offer no solutions. Government expansion is not anathema to growth, so the "or" part of your question is really just a conjunction combining to completely unrelated questions, neither of which really means anything. We've had larger GDP growth in the past when the government represented a much larger percentage of GDP than it currently does. I know, I know, your grand idea is "more tax cuts." Been there, done that. Record deficits, monthly job loss, economic recession.
Growth requires a sizable enough proportion of the population to have enough discretionary income to demand the products we produce. When more and more people cannot cover their bills, their demand for products beyond the bare necessities of survival is exactly zero, and so sales decline, jobs are lost, wages decline, etc. The whole purpose of the "safety-net" is as much economic as it is moral. When discretionary income takes a hit, either on a small or large scale, things like food stamps, Medicaid, and unemployment insurance ensures that the demand for our produce does not decline dramatically and create a death spiral. When a person loses their job, if they can receive public food subsidies while they look for another job, they still have some income to cover their bills and continue to consume products, providing a floor to how deep the drop in demand will go in the economy overall.
Anyway, feel free to pull snipets from this exchange and repeat them every time you are engaged on a public forum by a conservative. Have a good day all, and enjoy the last night of the convention tonight!