Lately, I’ve been hearing a lot of criticism from the conservative camp about Obama’s tax policy. After it became clear that Obama doesn’t want to raise your taxes, at least not unless you’re in the top 20% of earners in the United States, conservatives moved onto a new argument: the evils of wealth redistribution.
I’m not really sure what conservatives are trying to imply when they spit out the words “redistributing wealth” with as much disgust and disdain as is usually reserved for environmentalists. They drag out the name of Robin Hood, as if he had been the villain and the Sheriff of Nottingham the hero, and forgetting that Robin Hood like them was fighting against unjust taxation. They say it as if they themselves are not invested in wealth redistribution, as if universal prosperity were not part of their mission as well.
Believe it or not, conservatives really do believe in wealth redistribution. It’s a shocking assertion, but quite true.
I present to you Reaganomics[1], also known as trickle down economics or voodoo economics[2]. The theory behind Reaganomics is this: if you deregulate business, give large corporate tax cuts, and generally give companies free reign over their practices, companies will be more profitable, and this profit will trickle down to everybody else. This would be reflected in a rise in jobs, pay, and benefits for employees, and better products and services for consumers. It’s a self-perpetuating cycle of economic growth that, in theory, works out very well for all involved. Thus, wealth is redistributed, only it is done so by the companies themselves. We have a theory that is both Capitalist in its belief that business should not be controlled by government and Robin Hoodian in its belief that profits, growth, and wealth should be shared by all.
Now that we agree we have a common goal and purpose, let’s look at the differences between how conservatives view wealth redistribution and how liberals view wealth redistribution. The only real difference here is who is redistributing the wealth. For conservatives, wealth is redistributed by companies, via profits. What is not returned to the masses directly (to employees in the form of pay and benefits) is passed on to the consumer in terms of goods and services (both products and charity work that many corporations participate in.) For liberals, wealth is redistributed by the government, via taxes. What is not returned to the masses directly (rebate checks, for instance) are returned in services (usually infrastructure.)
The difference between the two, apart from one being seen as “Capitalist” and the other being seen as “socialist” — a view I would argue is inaccurate, but I’ll save that argument for another time — is primarily the issue of accountability. With taxes, there is a certain degree of transparency and accountability when it comes to where the money goes. If Congress suddenly decided to give themselves a multi-million dollar raise rather than distributing money for roads or schools, there would be public outrage, letters would be written to Congressman, and it is highly doubtful that such a raise would stand. With corporate profits, however, there is no accountability. There are no laws regulating how profits are distributed by companies, only suggestions, and therefore even when there is outrage about large executive salaries, there is little that can be done to change it. When Congressmen do bad jobs, they get voted out. When corporate executives do bad jobs, they continue to draw massive paychecks until public outrage forces them to resign (with large severance packages) or until the company goes under (Enron.)
The problem with Reaganomics is not the theory behind it or the fact that it was the brainchild of conservatives. The problem is that there is no accountability built into it. There was never any plan for what to do when corporations abused the privileges bestowed upon them (reduced taxation, deregulation of industry, less government oversight) by the government. There was never any plan for what to do when economic growth began to be distributed in patterns that looked like this.
We are at a period where corporate executives are bringing home record profits while their companies flounder, while their employees lose their jobs and pensions, while the consumers who rely upon them get unceremoniously screwed over. When the vast majority of economic growth is going to 1% of the population, the middle class stagnates and begins to disappear while poverty grows. Reaganomics isn’t working NOT because the ideas aren’t bad, but because there’s no way to insure that businesses actually follow through with the policies set forward by politicians.
Either there needs to be greater accountability for corporations if we continue following the Reaganomics model, or someone else needs to intervene in order to make sure that large profits and economic growth are being returned to the rest of the population. Higher taxes on corporations with rebates to the American people is the most immediate solution, although it isn’t necessarily the best one, and I wouldn’t argue that this needs to be the long-term solution. The American economy can not be sustained by this kind of top-heavy wealth, especially when that wealth has been built largely upon unethical, dangerous and ruinous business policies that are destroying some of America’s oldest and strongest financial institutions.
In theory, laissez faire is a great idea. The problem is that human nature often gets in the way of a Capitalist utopia. At some point, if we do not do something to stop rampant corporate greed, we will fall in the same way that many, many nations before us have fallen due to the unchecked greed and power-hungry desires of only a handful of people. Self-righteous impugning on behalf of conservatives that they do not hold with “wealth redistribution” is for one, incorrect, and for another, dangerous. By saying as much, they ignore the best and most fundamental part of Reaganomics — the part where wealth trickles down — and give a pass to corporate greed, recklessness, and irresponsibility.
[1] For simplicity’s sake, we will call this Reaganomics, even though I know the theories go back long before Reagan. Reagan’s is the sainted face that the Republican party has made emblematic of this set of theories, and an in-depth description is unnecessary as I feel most people have a general idea of what it is. If you don’t, you’re welcome to google it.
[2] Reaganomics is referred to as such, not because of the magic it could work for the economy, but rather for the serious voodoo you’d have to do to get corporate executives to give up their multi-million dollar salaries and benefits packages and pass along profits to lower level employees and consumers.
“Hope and bipartisanship are not things that Obama naively believes are present and possible — they are a tactic, a method of subverting and breaking the unified conservative power structure.” — “The ‘Theory of Change’ Primary” from The American Prospect, an older article from December that still represents the most intriguing analysis of the Obama campaign that I’ve heard this entire election. It’s worth reading the whole thing.
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