Monday, November 21, 2005

Class Warfare and Social Mobility

This interesting piece today summed up very well the class warfare arguments of the left. Basically:
  • We admit grudgingly that the poor are better off now than they ever have been,
  • But the gap between rich and poor matters, no matter how well the poor are doing.
  • When you die, your wealth should be given to someone else. It's immoral to want to spend your money on your own children - you should spend it on someone else's instead with the government as the executor.
  • The gap and inter-generational wealth = lack of social mobility, making the American Dream that used to exist a joke.
  • Government should DO something to lessen the gap (i.e., wealth transfer).
  • Other industrialized countries don't have the gap, and we should follow their lead.

These are all interesting thoughts unburdened by fact or experience. We don't need to guess what more governmental interference and regulation with personal wealth will do - we have dozens of examples all over the world. Our economy is growing faster than any other industrialized nation (not counting China and India), our unemployment rate is about 2.5 times lower than that of Western Europe (the heart of socialism), and our policies don't have the effect of preventing social mobility through over-regulation, creating a permanent underclass the likes of which is now rioting in France.

I hate the "gap" argument. I personally don't care if someone else is twice as rich as me, 50 times richer, or a million times richer. Because I hope to someday be in their shoes, why should I advocate a policy that would take away my opportunity to get there? The left has switched to that argument because they can no longer say that the poor are getting poorer with any accuracy. When I see someone who's really rich in this country, all that tells me is that I can get there, too.

The author states that social mobility is also on the decline. I would argue that this might have something to do with the fact that our middle class has grown dramatically over the last few decades, and people often stay middle class. I personally don't see that as a crisis.

In this country, the poor people are fat. Plumbers can go on Caribbean Cruises. According to US census figures, 46% of people officially bellow the poverty line own their own homes. Some 75% own a car. And how many do you think have color TV's, DVD players, stereos, etc., not to mention clean, potable running water, reliable sewage and sanitation services, and can afford cigarettes (still)? And even better, most of those people are young, and are in a state of transition. Think how many college students are "below the poverty line" - does anyone seriously think that's permanent? The left responds to these stats with eye-rolling hyperbole and non-statistical anecdotes.

In this country, you have two options. You can whine about other people getting stuff, or you can go out and get it yourself. Leftist economic policies, as evidenced in Europe, make it harder to go out and get it yourself, leaving you with the single option of whining about other people. Well, that and burning Peugots.

When I graduated from high school, I lived in a small trailer house in South Dakota. It was a particularly crappy one, and some "activist" trying to "help me out" would probably have considered my poverty "abject." But I was lucky enough to live in a place where such "activists" aren't given a lot of credibility, and where personal responsibility is still expected, and now, quite obviously, I no longer live in the trailer. Thank God I live in this country, where the government isn't "doing" anything about the "wealth gap," so that unlike poor Western Europeans, I had (and continue to have) the opportunity to close that gap all on my own.

If you aren't free to fail, you simply aren't free.


PubliusRex said...

Orrin - If you want peace, work for justice.

In all're correct. The left throws around the terms "justice" and "equality" as if those terms require that everyone in society get equal results.

That's not my concept of justice. Meritocracy is justice. The ideal system is where everyone has an equal opportunity.

While our country has not captured the ideal, it's far closer than any other country.

Not only is there zero social mobility in Western Europe, the people are on average poorer.

The competitive spirit of America fights on despite the enticing song of the left-wing sirens to the tunes of entitlement and victimhood.

SirWhoopass said...

I have to disagree with Orrin on the estate tax issue.

I believe that destruction of the estate tax will erode the meritocracy over time, and that the proposed cuts should be reversed. I do not claim that such an erosion has already occured, the cuts are recent and ongoing.

The estate tax, I contend, has helped to build the meritocracy. It prevents a easy limitless growth of wealth within a few small groups, by nature of making each generation work hard to repeat the success.

I fully admit that we are restricting the freedoms of wealthy individuals in doing so. I believe, however, that the current rate has a happy balance. Currently, $1.5 million may be passed on without being subject to the estate tax. This is hardly stripping away an ability to provide security for one's heirs. It provides exemptions for family farms and businesses, allowing these to be passed on to the next generation with certain restrictions (namely, that the next generation must continute to own and operate it, they cannot sell for a decade without incurring the tax).

The real effect of the estate tax is not that the government absorbs large estates and redistributes them . Only about 2% of all estates get hit with the tax. Instead, it causes large estates to be carefully planned, often breaking up assets and encouraging charitable giving. In essense, letting that wealthy individual put the money back into society via a method of his own choosing (although it did compel him to chose a method).

Cato said...

Well said, Orrin. The only countries with greater social mobility are countries with greater economic freedom.

Orrin Johnson said...

I disagree somewhat that the estate tax hampers meritocracy, because the arguments for it assume that the wealth pool is limited. Even though I don't lose a ton of sleep over it, I think it is unnecessary and leads to a conception that "that rich guy has MY money." I think it also discourages people from producing and thus adding to the economy later in their life. Without question it encourages foreign investment and shelters, meaning it becomes lost to this country any way.

Every tax of that sort can be individually justified in a similar way. Those justifications can even be persuasive to me, especially knowing how carefully you look at those issues. But as you correctly note, to make it fair, you have to build a metric bajillion exceptions into the law, and that only favors people who can afford good lawyers. And then it goes to the government, which will without question use that money less wisely than the most obnoxiously rich Paris Hilton-esque heir.

Complicated tax codes are the perfect example of the road to hell paved with good intentions. Populist taxes have negative consequences. To ameliorate them, exception upon exception is created. Creative lawyers for the rich take advantage of the exceptions. To prevent the rich from using exceptions "not meant for them," MORE amendments are created to the code. And the cycle continues.

The ones who suffer most are the small family businesses which have been quite successful, but haven't yet reached the point where the owners sit in their opulent libraries drinking brandy and contemplate which MLB players to recruit as ringers for the company softball teams. They can't afford the army of tax lawyers and accountants to hide all their money.

I think the better overall policy is LESS exceptions, and lower overall rates. That keeps the playing field more even. I won't go so far as to advocate a full on flat tax, or no exceptions at all that are currently in place to encourage the personal risk of getting things started. But I do think less is more.

PubliusRex said...

In agreement with SirWhoopAss, I have to say that of all the taxes to target for repealing, the estate tax is not high on my list.

Orrin Johnson said...

I agree that it's not high on the list of outrages. But two things need to be pointed out - first, according to the lawyer I live with, the estate tax limits go away in 2008, which means that ANY inheritance is subject to the tax. (Although the exception will likely be renewed.) Second, the author of the piece I was commenting on wanted MORE estate tax to lessen the gap, which I DO find objectionable.

SirWhoopass said...

Not quite Orrin. The EGTRRA adjusts exemption rates and top tax brackets until it expires in 2011.

The exemption limits continute to rise to 2010. This year, only estates over $1.5 million are taxed. That rises to $2 million in 2006, $3.5 million in 2009, and no estates are taxed at all in 2010 (although gift tax still applied).

In 2011, the whole thing disappears and reverts to the situation as it was in 2001 ($675,000 exemption).

One might question the caliber of law school attended by your co-habitating lawyer, but that would be unprofessional.

Orrin Johnson said...

Hmmm... Maybe she did say 2011. (She also agreed with you, by the way.) Regardless, $675,000 isn't a ton of money, and if it drops back to that, I have no doubt small family businesses would be the hardest hit.

Like I said, I don't lose tons of sleep over it. But I still think it's not the best way to garner government income. I think instead, inheritance should be subject to an income tax by the reciever, taxed like any other income. More fair, fewer loopholes, easier to understand.

SirWhoopass said...

I retract any insinuations about the quality of your counsel's education.

I do suggest that it is unwise to admit, in writing no less, that you don't really listen to what she is saying.

Orrin Johnson said...

How dare you. Clearly you're a socialist commie-nazi who can be likened most closely to Hitler.