The Eclectic Quill

October 21, 2008

Progressive Taxation, Socialism and Godwin’s Law

Filed under: Politics — Kelly @ 3:26 pm

In case you missed it last night Maddow tied accusations of socialism to Godwin’s Law. Godwin’s Law essentially stipulates that all online discussions are headed towards accusations of "Nazi" or "Hitler" and the first person who by hyperbole, invokes the accusation, essentially loses the argument based on being an idiot. That’s my definition anyway. Maddow suggested that the thought be amended to include the accusations of "socialism" in political campaigns. It appears to this blogger that that is long overdue.

In recklessly tossing around accusations about socialism McCain dates himself and Palin exposes herself. McCain seems to think that we are still in the eighties, perhaps that is why he keeps running a campaign about the issues from then, earmarks, welfare and communism. Palin’s discussion on the issue suggest that everything she needed to know about socialism she learned from Rush Limbaugh. In both cases there is a danger associated with their errors though, and these errors merit discussion.

There are two ways of understanding socialism; the first is what it actually is, the second is how the conservatives present it. What it actually is can be described as the redistribution of wealth through state owned and/or controlled distribution of goods and services. The conservative crowd just likes to equate it with anything that faintly resembles a redistribution of wealth. Ergo you talk about something like universal health care, they say socialism. You talk about equally funded public education, they hear socialism. Most of all to them progressive taxation is tantamount to socialism. All of these underlie their misconception of socialism in that they confuse the goal of socialism with the means of accomplishing it. In actuality socialism is much more about the means than the objective though. In other words unless there is state control of goods, services or means of production there is no socialism.

I point this out for two reasons. First, the candidate making serious overtures in the direction of socialism is the one who is throwing around the "S" word with abandon and disdain. How anyone can advocate buying up 300 billion dollars worth of private mortgages and then complain about socialism is beyond me. On several levels I think the proposition is so patently stupid that it would never get passed anyway, even if McCain were to manage to pull his campaign out of the wood chipper so I’m not really going to discuss that part of it in detail. I just think it merits mention that McCain is actually advocating the more socialist agenda here. The second reason I wanted to point out what socialism actually is is that Obama hasn’t come close to socialism by advocating a progressive tax structure. Explaining how a progressive tax structure is not socialism is like trying to explain why a sperm whale is not a duck even though they both eat fish. Just because they have one thing in common hardly makes them the same thing. A progressive tax structure still operates under the paradigm of capitalism and free enterprise.

(Before moving on I want to address one other argument though, that free enterprise is always better than socialism. I disagree and can more or less sum up my argument in a single word, "Halliburton." Whatever the folks on the right say, free enterprise doesn’t always do everything better. In fact, sometimes they do things a heck of a lot worse. The premise is that free enterprise will always do things better because they are seeking a profit, but that presumes that profit is always the goal; that efficiency can always be measured in dollars. Even in their most mundane of tasks Halliburton failed miserably, offering to our troops what can be generously described as a horrible dining experience, and what may be more accurately described as malnourishment and food poisoning. They may have saved money in the process but they cost our troops considerable morale. The dining experience is the most mundane and least dangerous of the tasks that Halliburton was responsible for. They did a lot more than that, but the effect was the same, less benefit for our national security, more profit for Halliburton. My point here is that "socialism" is not always bad, and in fact sometimes it’s better. The question should not be whether it is a nation’s best interest to be socialist, but to what degree it is to be socialist. It’s not my intent to answer that question here, but I do want to point out, that in the backdrop of all of this conversation, socialism isn’t a dirty word.)

Moving on now though, let’s return to the subject of progressive taxation. I’m not an economist and I don’t really pretend to be, yet I’m a pretty reasonable person and I think I’ve made certain observations in life. One thing I’ve noticed is that money doesn’t flow down, it flows up. When I go to Microcenter and buy this laptop my money goes to Microcenter. Now some of that theoretically went to the salesman who helped me, some went to the manager of the store, some went to the CEO, some went to the shareholders of both corporations. The money I spent went to a lot of people, and they spent the money in turn, and in turn they spent money. Always a little percent of that money ends up working its way up to the top, until eventually almost all of it works its way up to the top. In this little example we can intuit two things about progressive tax cuts. 1) If I have an extra $500 to spend it’s a lot more than $500. The more hands it passes through the more money it is. If you give an extra 500 dollars to a million people it is a lot more than 500 million dollars because each of those little $500 tax cuts are going to go through an exponential number of people, each of which will in turn have more money to spend. That this benefits the economy should be pretty obvious. 2) Money flows up, not down.

The "trickle down" theory of economies is at this point in time another "failed experiment." The underlying problem with it is money doesn’t trickle down, it trickles up. Imagine that the economy is a fountain, and that money is the "water" of that fountain. The idea is to keep the fountain going, to keep the water moving through the fountain. The free market, capitalism, by virtue of the way it works keeps the "water" flowing up. The problem that can occur though is that the top of the fountain can get gummed up, blocking the water from being able to come down. When that happens the water at the base dries up and the entire economy stagnates. What progressive taxes do is clean up the top of the fountain and force the flow of wealth to reach the base of the fountain. When the top of the fountain gums up the whole fountain stops flowing, and the whole fountain suffers.

Now I imagine there are some Chicago-Schoolers, puffed full of theory who are going to be quick to lecture me on the virtues of supply side, and lecture me on how if that money is given to the wealthy then they can have money to invest in generating jobs etcetera. The problem with theory though is that it has to get tested, and tested this theory has been, for the last 30 years, and the final grades have come in, to the tune of a trillion dollar bailout, a 150 billion dollar stimulus package and a 10 trillion dollar plummet in the stock market. I’m no student of economics but I am one of history, and I can tell you that certain things are historically true. When you cut the taxes on the wealthy and shift the primary burden to the middle class you get a wealthier version of wealthy, an increase in those below the poverty level and a smaller middle class. When you increase the taxes on the wealthy and cut the taxes on the poor and middle class the trend is to take more people out of poverty, enlarge the middle class, and incredibly, to also increase the wealth of the wealthy. How can that be? Simple. Money flows up. The economists and theorists can worry about what should happen; I’ll worry about what has happened.

Perhaps the problem with the liberal presentation of this argument is that in the past it has relied too much on the fairness of it. After all there is an argument to be made that if you have a billion dollars and have to spend an extra 100 million in taxes that will have no effect on your standard of living, but with that same 100 million 100,000 families can get health insurance. In such a case, there’s something fundamentally fair about you paying more. That doesn’t need to be the end of the argument though. It can be extended that because those 100,000 families get insured you get your 100 million dollars back, with interest, and with the knowledge that your hundred million dollars actually made the nation a better nation, and a stronger nation, and a better place to live. It’s time for Americans to realize that progressive taxation is better for everyone, and you can’t do away that that by shouting the word "socialist." Godwin’s Law now says so!



  1. Leave Godwin’s Law alone, and call this one Maddow’s Law.

    Comment by Roy Fischer — October 21, 2008 @ 3:41 pm | Reply

  2. we’ve been going down the Socialistic road for years now, in my opinion

    Comment by 3rdStoneFromTheSun — October 21, 2008 @ 4:21 pm | Reply

  3. Perhaps we have been going down the Socialistic road for years now… but the point that Kelly is trying to make is that this might not necessarily be a bad thing.

    If there’s one thing I’ve realized in my study of history, it is that people tend to confuse Socialism with Authoritarianism or Fascism, as in they assume that all Socialist countries impose these systems on their peoples. Well, every single country in Europe – both West and East – has a strong dose of socialism in their society, ranging from health care to education to mass transit. And in the vast majority of cases, these socialist institutions were the result of free democratic elections, meaning the people’s voice was heard on the matter.

    I have long argued that the most Socialist country in the world isn’t Cuba or China or North Korea; it’s Sweden. They have a huge welfare state, a virtual salary cap on maximum earnings, universal health care, and everything else. But nobody in America ever thinks about this country as socialist, not just because they are also a democracy but also because they are our longtime friends and we always want to label people who hate us (or we hate) as socialists.

    Kelly, as someone who believes that this country might benefit greatly from a dose of Socialism (especially in the three areas from above), I thank you for writing this. I’ve never understood how doctors could follow the Hippocratic Oath and still be for-profit. Our education system has long been socialized and virtually the entire world has copied it (and there is zero evidence to show that private education is higher quality). And it’s really time for people to realize that mass transit is one of the keys to keeping our economy going and our environment clean. All these services should be available for everyone, though I agree with my girlfriend in believing that people should still be able to buy private services if they want.

    Sorry, this was your soapbox, but I really enjoyed it.

    Joe the Grad Student

    Comment by Joe — October 21, 2008 @ 8:55 pm | Reply

  4. I’ll take socialism any day over fascism. The recent bailout of the banks is a perfect example.

    Fascism is the merger of big business and goverment. We have had this since 1913 when the Federal Reserve Act was passed.


    Comment by nikolai — October 21, 2008 @ 11:59 pm | Reply

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