Why you should despise the new tax bill, and the politicians who passed it
The United States does not have an economic problem related to GDP, average wages, productivity, or funding of healthcare. US GDP is healthy and growing about as fast as it can without causing inflation. Unemployment is very low. Average wages are high — not the highest in the world but higher than, say, Canada. US healthcare expenditures are the highest per capita in the world, by a large margin. Worker productivity in the US ranks near the top globally. By many measures the US remains the envy of the world.
The problem in the US is that decades of supply-side policies have distributed the wealth of the US in an unfair, lopsided, and immoral way. The US worker got steadily more productive, producing ever more value from an hour of his or her labor. But almost none of the excess profit from this went to the worker because we have disconnected the notions of “public good,” “social justice,” and even basic morality from economics.
The right wing pundits — Sean Hannity, Stuart Varney, Rush Limbaugh, Mark Levin — wail about the great theft in the US, with a government understood as “them” stealing from “us,” via taxation. But this is not the great theft about which we should be concerned. This “theft” is returned to the workers in the form of roads, law enforcement, and scientific research — the “common good.” The real theft in the US is the stealing of the value of the worker’s labor. This money is taken directly away and given to bosses and stockholders, with no obligation to reward the worker beyond what he or she is legally entitled to.
The result of this decoupling of morality and economic decision-making is growing inequality. Walmart is the most prominent example. Full time workers at Walmart, on full-time salaries, live below the poverty line. Walmart even runs seminars on how to get food stamps for its employees. Approximately 20% of the nation’s budget for food stamps is absorbed by underpaid Walmart employees. Meanwhile Walmart makes billions for the Walton family and the shareholders of Walmart. And yet millions of people who would not consider stealing a dime because it is “wrong” think Walmart’s economic decision-making is morally acceptable.
A few decades of such moral blindness has created a wealth divide that is destroying the social fabric of America. The privileged upper classes now increasingly live in different towns, drive different cars, attend different schools, have different medical care, eat in different restaurants, sit in a different section of the plane. They have different friends — friends like themselves who will hire their children, underwrite their business startups, bail them out of trouble, should it arise. Most of them have no contact with people not like them and their children are more likely marry someone of a different race than from a lower economic class, as Robert Putnam sadly recounts in Our Kids.
Meanwhile those born on the other side of the wealth divide have almost no chance to lift themselves from poverty. America is now the land of shrinking opportunity — once the gap gets too wide, it is close to impossible to cross from poverty to the middle class now — to overcome the challenges of no preschool, troubled public schools, violent neighborhoods without part-time jobs for teenagers, overworked caregivers, unaffordable colleges, a labyrinthine legal system, an extended family with no wealth anywhere. Sociologists, to the great shame of America, have discovered that the greatest guarantor of adult poverty is not laziness or lack of ambition — it is being born into poverty. America is a class society now, a nation — not of “makers and takers” as Paul Ryan would have us believe — but of “haves and have-nots.” Those born “without” remain without. Those born into wealth stay there, in a system where upward mobility has almost disappeared, to be replaced by downward mobility.
So let us not have any expectation whatsoever that the new tax bill will help our nation in any way. It will not. The “problems” it purports to solve — corporate and personal tax rates — are not problems at all. American corporations sit on huge piles of money, more than at any time in history, and making these huge piles larger will not suddenly inspire CEOs to think about the common good, or the plight of their entry-level workers. The stocks of our companies are at all time highs, driving them even higher will introduce no compassion into their decision-making. Some corporations pay their CEO’s more PER HOUR than Walmart pays its full-time employees PER YEAR. Think about this. And it matters not if the company is successful and growing, like Amazon, or floundering, like Chipotle. So let us not hear any nonsense about how CEO pay reflects “ability,” unless we are talking about the ability to exploit an economically unjust system.
Donald Trump and his Merry Band of Pathological Liars have assured us that lowering the corporate tax rate will bring jobs back to America, for the good of everyone. Economists — and people with common sense — are quite united in their belief that this will not happen. Five years from now there will be few jobs in the US that were repatriated by this bill, and this tiny number may well be less than those that were moved offshore to maximize profits. The US does not make all its stuff in China because of corporate tax rates. It makes its stuff in China for two reasons — wages are very low in China and it is cheaper to hire workers there regardless of what the corporate tax rate is. Second, the United States does not have enough “manufacturing engineers” to build plants here. And why don’t we have enough of these engineers? (Steve Jobs told President Obama we need 100,000 additional engineers if we want to start making stuff here.) We don’t have enough engineers to build stuff here because we won’t spend the money on public education. The most damaging of the various right wing myths is the one that generates the faith that “free market capitalism” can solve any problems that arise in the American economy. This is a fantasy. To get more engineers we need to pour money — lots of it — into middle schools right now, and we will start to see a payoff 25 years from now when young people inspired by the challenges of “making stuff” enter the work force prepared to meet that challenge. Can you imagine any company thinking that far ahead?
The CEOs of America have been polled and virtually NONE of them anticipate putting their newfound wealth from this tax bill into the creation of new jobs. They plan to use the money to enrich their already-rich shareholders. I am a long time shareholder in Apple and I will make lots of money when Apple brings its billions from overseas. But the wages of the hard-working people behind the Genius bar will not go up. When morality is decoupled from economics, this is what happens. The CEOs have stated publicly that they will enrich their shareholders with their newfound riches. This is not a “left wing talking point.”
America’s problem is not the size and health of its economy as a whole. It is, rather, the immoral distribution of the wealth generated by that economy, the paralyzing gap between the rich and poor; the tolerance, acceptance, embrace and even celebration of a class society, maintained by the self-serving myth that the classes reflect effort and not the privilege of birth.
The ballyhooed GOP bill now being celebrated makes the most serious problem in America worse, not better. We should lament its passing and pray that the next wave of political change will undo everything in it, and replace it with something entirely opposite.