The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Everything You Need to Know
About ‘Tax Cuts for the Rich’ . . .

Posted on | December 5, 2010 | 5 Comments

. . . was written more than 200 years ago:

“The characteristic essence of property, formed out of the combined principles of acquisition and conservation, is to be unequal. The great masses therefore which excite envy, and tempt rapacity, must be put out of the possibility of danger. Then they form a natural rampart about the lesser properties in all their gradations. The same quantity of property, which is by the natural course of things divided among many, has not the same operation. Its defensive power is weakened as it is diffused. In this diffusion each man’s portion is less than what, in the eagerness of his desires, he may flatter himself to obtain by dissipating the accumulations of others. The plunder of the few would indeed give but a share inconceivably small in the distribution to the many. But the many are not capable of making this calculation; and those who lead them to rapine never intend this distribution.”
— Edmund Burke, Reflections on the Revolution in France (1790)

There is a world of wisdom in those 150 words, beginning with the blunt statement that inequality of wealth is inherent and inescapable. Nothing government can do will abolish inequalities of wealth (or income), simply because people vary in their abilities of “acquisition and conservation.”

We can therefore discard at the outset of our considerations of political economy any notion that redistributionist policies aimed at achieving “social justice” (which Hayek called a “mirage”) would bring about an egalitarian utopia.

“Inequality” is not a synonym for injustice.

Not until we have grasped that concept, and eschewed the fallacy of thinking we can bring about an ideal condition of “fairness,” can we meaningfully discuss economic policy. Idiots who want to go chasing after egalitarian will-o’-th’-wisps are free to do so, but we must refuse their invitation to join them on The Great Social Justice Snipe Hunt.

It was as true in the 18th century as it is today that the rich — those with “great masses” of wealth — were the objects of envy, and that irresponsible demagogues prey upon the ignorant, to “lead them to rapine,” promising a fairer “distribution” of the wealth of others. 

When our latter-day Jacobins rail on about the need to raise taxes on the “top 2 percent” (“wealthy Americans . . . who take far more from America than they give back,” to quote Frank Rich) they fail to overcome the obvious problem that the “plunder of the few” would do no good for anyone else, who would receive from this thievery “but a share inconceivably small” — if, indeed, they get anything at all out of it.

Burke’s criticism of French radicalism is equally applicable to today’s debates about tax policies, yet his insight is ignored not merely by commentators, but even by those who report the news:

Senate Republicans blocked two Democratic measures Saturday that would have eliminated the Bush-era tax cuts for the wealthy, forcing both parties back to the negotiating table if they want to avert a tax hike next year for all Americans.

It’s like listening to a trained parrot: “Squawk! Tax cuts for the rich! Tax cuts for the rich! Squawk! Blame Bush! Blame Bush! Squawk!”

Let’s see if we can recast that lede, eh?

Senate Republicans blocked two Democratic measures Saturday that would have raised taxes on people with higher incomes, forcing both parties back to the negotiating table if they want to avert a tax hike next year for all Americans.

Regardless of the fact that current tax policy was enacted during the Bush presidency, the discussion in Congress now is over legislative proposals either to continue the current policy — which Republicans propose — or to increase taxes, which is what the Democrats propose (as they always do). What is being debated is a tax increase, not “tax cuts for the wealthy.” Republicans are not proposing further reductions in the taxes paid by the rich. Democrats are proposing a return to the higher tax rates of pre-2001.

It is worth asking: What were the pre-2001 rates for the “rich”? What exactly are the “Bush-era tax cuts” that Democrats propose to repeal?

The 2001 legislation reduced the rate for the top income bracket (which currently applies to households earning $373,651 or more) from 38.6% to 35%, and reduced the rate for the next-highest bracket (which kicks in at $209,251 for a married couple filing jointly) from 36% to 33%.

What is important to note here, then, is that the reductions which Politico‘s Carrie Budoff Brown and Shira Toeplitz tendentiously call the “Bush-era tax cuts for the wealthy” weren’t enormous — a rate reduction of 3.6% for the top bracket and 3% for the next bracket — and yet look how Harry Reid demagogues the issue:

“The majority of the Senate like the majority of the country believes the middle class deserve . . . tax cuts,” Senate Majority Leader Harry Reid (D-Nev.) said. “The minority of the Senate, against all evidence to the contrary that millionaires, billionaires and these big CEOs who ship jobs overseas deserve this giveaway.”

This is but a repetition of the message communicated in tens of millions of dollars’ worth of Democratic Party attack ads, which were employed against Republican candidates everywhere, that the GOP is in favor of tax cuts for companies that “ship jobs overseas.” So wedded were Democrats to this message that they even used it here in my hometown against a Republican candidate for the Maryland state legislature, as if national tax policy were decided in Annapolis.

That message was overwhelmingly rejected by voters on Nov. 2. Not only did my local GOP candidate, Neil Parrott, decisively “rout” his Democrat opponent by a 62%-38% margin, but nationwide Republicans scored their biggest congressional gains since 1938, picking up 63 seats to achieve their largest House majority (242 seats) since 1949.

Given how relentlessly Democrats attacked Republicans on this “tax cuts for the rich” theme during the 2010 campaign, they cannot claim “We Didn’t Get Our Message Out” (which is No. 2 on Jay Haug’s list of “Liberal Excuses for Conservative Victory”). The Democratic message was heard loud and clear, and decisively rejected.

Democrats have lost the argument, and Harry Reid’s attempt to claim that “the majority of the country” supports his party’s position is nothing but a damned lie. Perhaps this is why, as Brian O’Connor notes at Red Dog Report, opposition to the economics of envy seems to be increasingly bipartisan:

Voting nearly identically, the Senate twice failed to meet a 60-vote threshold necessary to move forward on both proposals. Meeting in a rare Saturday session after agreements fell through for a Friday vote, the results were widely expected. They were also somewhat premature, as the White House is still negotiating with congressional leaders on an alternative compromise proposal.
The first proposal by Finance Committee Chairman Max Baucus (D-Mont.) would have extended the cuts only for individuals with incomes of up to $200,000 and families with incomes of up to $250,000. That failed by a vote of 53-36, with all GOP senators in opposition as well as Democrats Russ Feingold (Wis.), Joe Manchin (W.V.), Ben Nelson (Neb.) and Jim Webb (Va.) and Independent Joe Lieberman (Conn.).

Feingold got beat in November, and Manchin won by distancing himself from Democrats. Nelson, Webb and Lieberman all face re-election campaigns in 2012.

Amazingly, it seems Democrats have managed to prove Edmund Burke wrong. Whereas Burke believed that “the many are not capable of making this calculation” — i.e., most people in 1790 didn’t recognize the fallacy of redistributionist policy — in fact, American voters in 2010 overwhelmingly rejected the class-warfare arguments of the Left.

Someone should break this news to Harry Reid, whose economic ignorance is so complete that he can’t figure out why the Democrats’ neo-Keynesian stimulus-and-bailout policies of massive deficit spending couldn’t stop unemployment from rising to 9.8% — or why 1,800 Democratic congressional staffers will soon be unemployed in the worst U.S. job market in 30 years.

Category: Economics, Election, Harry Reid, Taxes

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