Wednesday, October 22, 2008

Socialism and You

My my, we've heard a lot of people using (or yelling) the word "socialist" lately. It didn't really start with our friend Joe the (unlicensed non-union) Plumber (who owes back taxes, makes around 40k a year, and has no immediate plans or ability to buy a business). Since Mr. Plumber has been in the news, however, the use of some form of the word "socialism" has increased dramatically. But do the people using that word really know what it means? Just for kicks, let's go to our old friend Wikipedia.
Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the means of production and distribution of goods, and the creation of an egalitarian society... Socialists mainly share the belief that capitalism unfairly concentrates power and wealth among a small segment of society that controls capital, and creates an unequal society. All socialists advocate the creation of an egalitarian society, in which wealth and power are distributed more evenly, although there is considerable disagreement among socialists over how, and to what extent this could be achieved.
Okay, so in a nutshell, capitalism creates inequity, and the way to make things more fair is to have government (or co-ops, it should be noted) control industries and ensure the fair distribution of stuff (goods, wealth, etc). (I doubt if many people would argue that capitalism leads to inequity, although many would argue that the have-nots aren't unfairly treated but simply don't work hard enough.) And that word "egalitarian" sounds scary, too. Do they want us to live and work in a pinko commie commune? Well, no. Again, from Wikipedia:

"Egalitarianism is a political doctrine that holds that all people should be treated as equals, and have the same political, economic, social, and civil rights."

Well that actually doesn't sound so scary, even in a capitalist society. In fact, it almost sounds like Catholic teaching on social justice. (Foreshadowing alert: look for posts on just that topic in the coming days.) I think Thomas Jefferson even used some of that in the Declaration of Independence ("We hold these truths to be self-evident, that all men are created equal...").

So on what basis do McCain supporters (and McCain/Palin themselves) make this "socialist" charge? Mainly from Obama's tax plan and from Obama's own remarks to Joe the Plumber about how everyone benefits when we "spread the wealth around." (Note to Sen. Obama: You really didn't have a better response than that? You know full well that your plan doesn't really have any Robin Hood characteristics, but you didn't have a better response ready?)

Let's look at Obama's tax plan. We should all know by now that it does not raise, but cuts taxes on any individual, family, or business making under $250,000 a year. That includes not hiding hikes in income tax, payroll tax, capital gains, investments, and pretty much any other means you might have to make it up to $250k. As far as Americans go, depending on where you get your stats, about 90-95% of us make less than $250k, and that means we'll get some kind of tax cut (or our taxes will be about the same if we make right around $250k). Nothing socialist yet.

So what about the 5-10% of Americans who make more than $250k? Well, their taxes will go up. But as I explained to my 7-year-old, it won't hurt them as much. If you have $10 and I tax you at 20%, you have $8 left. If you have $20 and I tax you at 30%, sure you paid more in taxes, but you still have $14 left. This is called progressive taxation, and despite rich people's distaste of it, it has been part of our country's tax policy for generations. It's a sensible notion that if you make more, you should contribute more. John McCain himself even used to believe in it. Here's what he said when he voted AGAINST Bush's 2001 tax cuts:
I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle-class Americans.
As an aside, Salon has a great tongue-in-cheek article about how Bob the Banker's taxes would increase under the Obama plan. Bob makes $280,000 a year (about as much as Joe said his future plumbing business would make), and under Obama his tax rate would rise from its current rate of 33% to only 35%, resulting in increased yearly taxes of $257. Hardly worth a call to arms. Sure, if you make more you will be taxed more, but since that's always been the case, I don't see why it's a hot button issue this year.

Anyway, back to socialism. With a progressive tax code by itself, I still don't see socialism at all. So what are you going to DO with the money you get when you raise taxes on the rich? Well, much of that will go to running government. I know many people don't like government programs, but it is important to have a military, adequate transportation infrastructure, homeland security, social security, Medicaid/Medicare, etc. (Obviously those social services aren't universally popular, but I don't think they are going anywhere.) That money can't all come from the Chinese buying Treasury securities, so we have to get the rest from taxing our citizens.

Another big chunk of those tax increases on the wealthy will go towards... paying for the tax cuts for the middle class and working poor. The theory here is that wealth doesn't trickle down, but it is created from the bottom up. This, some will argue, is socialism. Especially since some people who don't earn enough to file income taxes may end up receiving government checks. True, our Wikipedia definition above does mention a society "in which wealth and power are distributed more evenly," but there is great disagreement among socialist theories on how to achieve that equality. Actively redistributing wealth is one means, but making the system more fair and letting the redistribution happen on its own is another. So do tax cuts for the working poor equal forced redistribution of wealth? That argument falls flat on a number of levels.

First of all, those people who work but do not earn enough to pay income tax do still pay 7.65% in payroll taxes, so in a very real sense they will be taxpayers receiving a tax cut, not a handout. People who don't work do not file taxes, and therefore they will not receive anything.

Second, McCain's own healthcare plan includes a similar refundable tax credit to all working individuals and families. That means that checks will be mailed to every working individual and family, even if they didn't earn enough to file income taxes for that year. For some the amount of their check will exceed the amount they pay for healthcare. Not for everyone mind you (and certainly not for many in another year or two when healthcare costs rise faster than inflation), but the net effect will be payments from the government to individuals and families. McCain properly calls this a refundable tax credit for his own plan while using the scary - and inaccurate - term "government handout" to describe Obama's version of the refundable credit.

To recap so far, socialism is not defined, strictly speaking, as simply redistributing wealth. Even if you think it is, McCain's policies are just as guilty of doing that as Obama's.

So do we have any pure socialism going on here anywhere? Well, yes we do. That $700 billion bailout/rescue package is one big slice of socialism, as the government is using that money to buy equity in financial institutions. Even before that bill passed the feds bought stakes in Fannie Mae, Freddie Mac, and AIG. All this under a Republican administration, supported by a vote from one Senator McCain. I'm not saying this is a good thing or a bad thing, but it happened, and McCain went right along with Senator Obama in supporting it. McCain has even proposed buying up mortgages with taxpayer money and renegotiating the terms (a provision that is already accounted for in the rescue package, BTW), repeating an FDR program from the New Deal. What would it be called if the Federal government became the nation's largest mortgage lender? Why that might also be called socialism!

So in the end it appears that:

a) McCain and his supporters don't truly understand the definition of socialism
2) They misrepresent Obama's plans and claim they are socialist while proposing different ways to do exactly the same things in their own policies
III) McCain himself voted for arguably the biggest socialist legislation in the nation's history and shortly thereafter proposed yet another mortgage buyout that itself smells kind of socialist

I guess, as with many other McCain tactics, he's pretty comfortable spreading lies and FUD about his opponent. In this case, however, he's also campaigning against his own policies. How presidential.

Here's another way to look at it: not spreading the wealth, but raising the floor.

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