Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

02 February 2014

Tax Phobia

How we contracted tax phobia
“Obamacare” is a tax
The big lie: wasteful government

How we contracted tax phobia

Many people think Dubya—George W. Bush—coined the phrase “It’s your money.” But if he ever had an original idea in his life, I can’t find any record of it.

In fact, the chief vector for our three-decade-long national disease of selfishness was Ronald Reagan. He first used the phrase 33 years ago, in 1981.

He got the idea from California’s infamous Proposition 13, a “tax revolt” of real-property owners. Then he generalized it to national income taxes. That bit of demagogic originality was well within his mental capacity.

Ever since, we Yanks have suffered from tax phobia.

The symptoms are legion. Our physical infrastructure is decaying, to the tune of over two trillion dollars. Our primary-education system, once second to none, is in the middle of the pack of developed nations’ and falling behind. Our basic science and space science are lagging, while Europe and China get the glory and the results.

Our cohesive social fabric is fraying. Even conservatives lament the return of economic inequality, low social mobility and suffering not seen since our Gilded Age. While China builds a middle-class consumer society faster than ever in history, ours is falling down, if not apart.

The comfortable and wealthy among us notice this phenomenon briefly as we step over beggars and the homeless on the way to our banks and stock brokers. Those who bank and trade online never notice it at all.

All this is passing strange. Doesn’t the society that styles itself the apostle of capitalism understand that making money requires investment? Why do we apotheosize our small businesses—our neighborhood dry cleaners, auto shops, and diners—and neglect the greatest enterprise of all, our nation? Have we become the logical conclusion of the French Revolution, a dictatorship of the bourgeoisie?

There are signs that we may be convalescing. A bipartisan consensus is forming on investing in our decaying infrastructure. The final farm bill still cut food stamps, but it cut them much less than had been originally proposed. And there is hope that a much-needed extension of long-term unemployment insurance might be a bargaining chip in the debt-ceiling negotiations beginning now. The GOP is slowly realizing that “just say no” is a formula for neither economic nor electoral success.

While a strong phobia holds sway, rational thought is impossible. But as it wanes, victims can begin to think again. In the hope that we Yanks are now passing though that phase, I offer this essay, which explains why “Obamacare” has been so controversial and debunks a key myth about taxes.

“Obamacare” is a tax

Why don’t we Yanks have a single-payer system? Most of our developed-country rivals do. In poll after poll, our people say they would like one too.

Single-payer systems minimize premiums by maximizing the size of the risk pool. They also minimize administrative expense by standardizing computer systems, interfaces, and claim and accounting rules and procedures.

Yet we stick with a system in which 37.5% of the visible employees in my local medical laboratory do nothing productive, at least as far as medicine is concerned. Instead, they verify private insurance and help process the claims on, and account for the private profit of, many different insurers, with differing systems, interfaces, procedures and rules.

As I have pointed out in two essays (1 and 2), the whole enterprise is madness. Its only conceivable advantage is employing a myriad of low-level clerks who otherwise might be unemployable, and none of whom is trained in care giving.

So why do we have it? There are three reasons. First, health-insurance executives’ big bucks depend on not having to compete with an efficient single payer with a much larger risk pool. Second, our broken system provides gainful employment for all those clerks doing nothing in medicine, but helping private insurance firms to process claims and account for their profit.

But the third reason is the crucial one. The tax phobia that Saint Reagan infected us with made clear thinking about single-payer systems impossible.

Whatever you may think of our current President, you have to admire his political instincts. Not only did they get a half-black man twice elected president in a still-racist country. They also beat Hillary Clinton, John McCain and Mitt Romney. And they helped paint the mindless GOP opposition into such an extremist corner that even the dimmest witted of its leaders (including John B.) are beginning to understand that their party’s future as a serious alternative is in jeopardy.

Like Lincoln, Obama may not be able to change things without a lot of struggle and suffering. But also like Lincoln, he knows exactly where we are and where we have to go.

So in early spring 2007, he wrote single payer off. He genuflected to Harry Truman, and he lauded the idea. Then he said, in essence, that it was politically impossible. Long before he even got his party’s nomination, he knew it just wasn’t going to happen during his presidency.

Why? Because a single-payer system could not arise in a nation beset by tax phobia, let alone the over-my-dead-body opposition of insurance companies and their legions of otherwise unemployable insurance clerks.

That’s why Chief Justice Roberts’ opinion upholding the guts of “Obamacare” was so brilliant. He called health-insurance mandates a tax, and therefore within Congress’ constitutional power. In doing so, he reminded us subtly how the rest of the world gets better public-health results than we for less money, and how our tax phobia has kept us laboring under a wildly dysfunctional health-insurance system.

Of course Roberts called it a “tax” just for purposes of constitutional analysis. And we all know that the law, especially constitutional law, speaks its own language.

But in fact “Obamacare’s” mandates bear every earmark of a tax. They cost money. You have to pay a penalty (but bear no criminal liability) if you don’t fulfill them.

And you get some social benefit if you do. Businesses get healthier employees, and individuals get access to health care. And if you think all this sounds more like a user fee, just compare gasoline taxes for those who drive, or excise taxes on alcohol and tobacco for those who drink or smoke.

So “Obamacare” ran headlong into two buzz saws of demagoguery. First, it contained mandates in a country imbued with a “Don’t Tread on Me” culture from its very foundation. No Yank likes to be told what to do. Second, it tried to row upstream against a “Reagan Revolution” of selfishness and tax phobia in full flood.

Whether you saw it as a “mandate” or a “tax,” you ran into one buzz saw or another.

Now “Obamacare” is a fact. As it kicks in, millions who didn’t have health insurance will get it. And those who did will see better terms and lower premiums, or at least not too big increases. And if the next pandemic waits long enough, even the well-off will see “Obamacare’s” primary benefit: not having uninsured servants and contractors bring deadly bacteria or viruses into their offices, kitchens, beds and children’s cribs. President Obama’s end run around tax phobia may have been awkward, but it has reached the end zone.

The big lie: wasteful government

For three decades, the dominant theme of our national political culture has been tax phobia. The motivation, of course, was pure selfishness, especially among the economic elite.

A recent analysis of the flood of campaign contributions that Citizens United foisted on our political systems says so [Search in transcript for “investing in candidates”]. Apparently big donors see their “gifts” not as promoting a better society or philosophy, but as investments in their own businesses.

If their donations result in lower taxes and less regulation, they make more money. It’s that simple. The rest is all smoke and mirrors.

Why else would Sheldon Adelson, who owns casinos in Macao, care so deeply about so-called “conservative” thinking? Is he really so solicitous for the dry-cleaner in Peoria—or for philosophical abstractions—as to give up millions of his own dollars? I don’t think so. More likely, he wants to retain more of the much larger amounts of money Chinese lose in his casinos.

Pure selfishness is not hard to sell, especially to the most individualistic and narcissistic culture in human history. But it doesn’t sound “cool.” And we still have people who recall our once-Calvinist culture and would recoil from a direct appeal to selfishness.

So the rich folk who wanted lower taxes to increase their already high incomes invented two bits of auxiliary demagoguery. Taxes, they said, are not bad just because they take money out of your own pocket. They are also bad because government wastes the money.

Really???!!! And business doesn’t? As The Economist recently reported [subscription required], NRG Energy, a big Texas utility, wasted $331 million in 2011 before figuring out that two new nuclear reactors would be uneconomic. Blackberry appears to be going under, and taking many enterprise, individual and government users with it, for failure to keep pace with progress in mobile devices.

And what about our finance sector? The economic waste from its orgy of liars’ loans and their security and derivative packages brought down the whole global economy, to the tune of several trillion dollars. Next to that, alleged Medicare fraud is so small as to be invisible.

The GOP loves to blame the government for lax regulation. But who were most responsible: the elite professional bankers who created the whole cockamamie scheme for their own profit, massively violating their own credit standards, or the feds who failed to stop them in time? (And please don’t tell me government wasted money in the bailouts. Every expert in either party agrees they were necessary, at least in retrospect, and arch-Republican and once-private-banker Hank Paulson started them.)

You would have to wait several decades, maybe a century, to see an economic waste by government anywhere near that big, let alone that disastrous. So when tax phobics talk about government waste to get you to lower their taxes so they can get richer, you really have to take their demagoguery with a grain of salt.

So much for the substance, the words. The music is a second bit of auxiliary demagoguery that the rich find useful when sheer selfishness doesn’t work. Ever since Nixon’s disgraceful “Southern Strategy,” tax phobics have tried to advance their cause by setting one ethnic group against another.

The gist of their lie was simple and powerful: minority freeloaders are taking your tax money (and sometimes your job) and living high, giving nothing back. First it was African-Americans. Now, with an African-American in the White House (and elected fairly and decisively, twice!), it’s more about undocumented Hispanic immigrants.

The demagogues aren’t really racists. They just want lower taxes so much that they’ll steamroller anything that gets in their way, including racial and ethnic harmony. Now that tactic is coming home to roost, as they seek to pass immigration reform over the dead bodies of their “Deport them all!” crowd, in a probably vain a quest for Hispanic votes.

Anyway, the message is always the same. Undeserving freeloaders are taking your tax money and wasting it. They can even take your job.

What bunk! If it’s poor people the demagogues have in mind, any money they get doesn’t stay in their hands long. It goes right back into the economy, for food, clothing, housing, and transportation. Since poor people don’t get about much beyond their own neighborhoods, their money goes right back into the small, local businesses that (according to GOP dogma) are the acme of capitalism.

Cut their food stamps, and you cut the income of grocery stores, drugstores, and five-and-dimes directly, almost dollar for dollar.


There’s a reason why I will probably not vote for a Republican for anything as long as I live. It’s as simple as GOP propaganda. I like to solve problems. But unlike most problem solvers, the GOP starts with a canned answer and then poses the question.

The canned answer always starts with lower taxes and less regulation, because that’s what the big donors want most. Whatever the problem. Slow economy? Cut taxes and regulation and throw government workers out of jobs. Crumbling infrastructure? Cut taxes and sell our roads, bridges and airports to private firms that will take care of them. Poor education? Cut taxes and privatize our schools. Expensive military? Cut taxes and privatize it, or at least its supply chain.

The question is never how best to solve the problem as such. It’s always how to reach the primary goal: cutting taxes and regulation. Usually, the analysis becomes: “how can our PR geniuses get voters to go for lower taxes and less regulation, whether or not they are in their own natural economic interest?”

Republicans are nothing if not masters of image making. But sometimes the image gets so far away from reality that no one can help but notice. That’s what happening to Hispanic immigrants who’ve been here, working hard, for years or decades, but who still feel like surfs and hide in the shadows when a government car drives by.

To a lesser extent, the same thing is happening to the rest of us. We’re beginning to recognize that cutting taxes won’t rebuild our collapsing bridges, improve our secondary education system (the vast majority of which is public), help our struggling state universities and colleges, protect us from industrial accidents (like the recent chemical spill in West Virginia), ride herd on rogue bankers who still resist meaningful restraint, reduce pollution, bring basic scientific research back from Europe and China, integrate our many newcomers effectively into our melting pot, or protect us from increasingly frequent unprecedented hurricanes, droughts, and storms, which may be partly of our own making.

There are cycles in human affairs. Tax phobia is one. It probably reached its apex under Dubya’s catastrophic rule. Now it appears to be waning.

It won’t go away overnight. There are still many vocal and aggressive true believers, and the self-interest of the unenlightened rich is as strong as ever. (Sheldon Adelson and the Koch Brothers come to mind.)

But an increasing number of voters recognizes that we could banish our big deficits in mere years, not decades, if we just raised federal tax rates a few percent, just for a few years. And we could do all the other things that we must do to stem our national decline, too.

I expect that recognition to reach a critical mass, and to cure our tax phobia, within the next decade. Youth maturing in an era of underemployment and massive student debt will help.

Footnote: I write “probably” because politics has been so bizarre, even just in my lifetime, that I can’t exclude any possibility. There are circumstances under which I might vote for Republican Jon Huntsman, Jr. for president. In my view he is the only GOP candidate since the Senior Bush actually qualified by experience and temperament to hold that office. (McCain had the experience but not the temperament.) Like Saint Reagan, Chris Chistie is just a good actor, with woefully inadequate experience for the job. And now his much-touted temperament is going down in flames.



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