In the last month or so, protesters representing the ‘Occupy Wall Street‘ movement have been descending on city centers to protest against corporations and the political cronyism that often benefits them. Many of their complaints and concerns have some validity. Most of us should be able to agree that large, profitable corporations like General Electric shouldn’t be able to get away with paying no taxes (as they did in 2010). Most of us should be able to agree that the government bailouts under Presidents George W. Bush (R) and Barack Obama (D) were ill-advised, anti-capitalist, and motivated by cronyism. Most of us should be able to agree that if the government is going to be bailing anybody out, it ought to be bailing out the taxpaying public in a fair, equitable way . . . rather than bailing out Wall Street bankers and failed car companies alone.
On these subjects you will get little objection from me against the ‘occupiers,’ though I do object to some of the forms the protests have taken—e.g., attempting to storm the Air and Space Museum in Washington, trashing public parks, obstructing traffic flow, etc. Thankfully the protests here have been much more docile than their European counterparts, especially in Italy, but they still have a distinctly more raucous tenor than, say, the ‘tea party‘ protests of 2008 and 2009 tended to have. Regardless, I do think the protesters are misguided in a few key ways.
Blame for Bailouts
Imagine, for a moment, that you are teetering on bankruptcy. You had a sudden unexpected expense, or you were laid off from your job, and now you don’t know where next month’s rent is going to come from. Maybe you are to blame, maybe you aren’t. That’s not important. What’s important is that you are in trouble. You and the people who depend on you are at risk. So, imagine now that a man from the government knocks on your door and tells you that, “Look, you messed up, but it’s important that you be able to provide for yourself and your family . . . so here’s ten-thousand dollars.”
Would you refuse the offer? Even if you, like me, don’t think this kind of thing is the government’s job, would you really turn it down if it were offered to you? I like to think that I would, at least if I knew that the handout was being taken from people who owed me nothing, but I can’t really fault somebody who would ‘take the money and run’ in this case. Nobody has the right to blame you for taking what was offered to you. Heck, nobody would even have the right to blame you if you had asked for it first! If you really don’t think the government should be handing out ten-thousand dollar checks to people teetering on bankruptcy in this hypothetical situation, then you need to take up your complaint with the government.
But this is exactly what happened during the Bush/Obama Bailout Bonanza, except that the handouts were much bigger and were given to corporations (as opposed to individuals) teetering on bankruptcy. Change the hypothetical situation around, and imagine that you are the CEO of a corporation teetering on bankruptcy. The Treasury Secretary knocks on your door and says, “Look, you messed up, but it’s important that you stay in business and keep your employees working . . . so here’s ten billion.” Would you have refused the offer?
Most wouldn’t. And if we object to that hypothetical ten billion dollar transaction, we need to take it up with the government that offered it, not the corporation that received it. Corporations and their leaders are supposed to be looking out for what’s best for the corporation; in fact, in the case of a publicly traded corporation, a company’s leaders are legally obligated to look out for the shareholders’ best interests and nobody else’s. They were just doing their job when they requested taxpayer assistance, and when they accepted it. I don’t like it any more than anybody else. I opposed every single one of the socialist Bush/Obama bailouts vehemently on this site, but I opposed them by engaging with my elected representatives and encouraging others to do the same. The ones to blame are the presidents and congressmen who wrote the checks, not the corporations that cashed them.
I do consider it dishonorable, in a certain sense, for a company to have accepted the ill-gotten gains of the bailouts. As such, I make a point of not doing business with them—at least not until the government has divested itself of its ownership stake in those companies. But that’s capitalism; if I don’t like what a business does, I don’t have to buy from it. I’m not going to label them evil, picket outside their offices, or blame them for others’ misfortune. The person who receives stolen goods has committed a much, much lesser crime—if they have even committed a crime at all—than the person who stole the goods in the first place.
Corporations vs. People
Many of the ‘occupiers’ seem to be motivated by a poisonous ‘us vs. them’ complex with the corporate world. This is a false dichotomy that I have discussed before (in the context of the First Amendment).
When Republican presidential candidate former-Governor Mitt Romney (R-MA) said back in August that “corporations are people,” many on the left (including many ‘occupiers’) seized on it as proof that Republicans buy into an overly broad idea of corporate personhood. Corporations are legal entities that are granted a subset of legal rights granted to natural persons (you and me); for example, corporations can sue and be sued, and have free speech and free press rights, and have a right to property and protection from unreasonable search and seizure. They do not, however, have the right to vote or to stand for public office. This construct of a corporation as a kind of ‘legal person’ is a necessary feature of our systems of government and commerce.
If we got rid of ‘corporate personhood,’ we could then limit corporations’ involvement in political campaigns . . . which is maybe a good thing. But in return, we would have eliminated our ability to sue them when they commit wrongs against us. Yes, we could still sue individual corporate officers, but this is less likely to fly in court unless we can clearly link the specific wrong directly to a specific person. We would also call into question individuals’ free speech and privacy rights. How so? Consider that the vast majority of what we do today is passed-over and stored-on corporate-owned systems (e.g., Facebook and Gmail). If Google doesn’t have a Fourth Amendment right to be free from unreasonable search and seizure, well, then you don’t have any Fourth Amendment rights over your emails stored on Google’s servers either, do you? They are in Google’s possession, and it is Google’s legal rights that generally protect them from being seized or monitored by the government.
So what was Romney getting at when he said that “corporations are people” anyway? He wasn’t talking about ‘corporate personhood,’ but about the fundamental nature of what a corporation is. At the event in August, Romney said that one way to pay for our burgeoning entitlement programs would be to raise taxes on people (which is not the policy he supports). A heckler interrupted him and yelled, “Corporations!” apparently because he thought entitlements should be funded by an increase in corporate taxes.
“Corporations are people, my friend,” said Romney.
“No, they’re not!” responded the hecklers.
Romney then responded, “Of course they are. Everything corporations earn ultimately goes to people. Where do you think it goes?”
Indeed, where do you think it goes? Corporate profits go to the leaders, shareholders, and employees of those corporations—all of whom are people. Every increase in the corporate tax rate means a smaller bonus payout, or one less new hire, or one more layoff. You think those things don’t affect people? The financial health of my employer directly affects my financial health. Oh sure, you could double or triple the corporate tax and cover all those unnecessary federal entitlements in no time . . . but at what cost to me? At what cost to the millions and millions of other private-sector employees who make up over ninety percent of the American workforce? At what cost to the unemployed, who will then be that much less likely to be able to find a job?
So, say you’re part of the less-than-ten-percent of the workforce that works in federal, state, and local government jobs . . . or, for that matter, one of the unemployed. Well, you might think that at least you might benefit from the higher corporate taxes that will be hurting everybody else. But look around and consider what you own that was produced by a corporation. Look at your clothes, your television, your computer, your phone, your furniture, your car, your bicycle. Look at your Wii, your wallet, your purse, your utensils, your toothbrush. Look at the roof over your head, because the place you live—whether you rent, own, or live in your parents’ basement—was almost certainly built by a corporation too. Even public infrastructure like post offices, highways, bridges, government offices, school buses, and fighter jets are practically all built by corporations under government contract.
Some companies will deal with increased taxation by engaging in layoffs and cost-cutting. Others will deal with them by increasing the prices every imaginable product and service. That’s not good for you either, even if you don’t rely directly on a corporation to pay your paycheck.
The 99 percent vs. the 1 percent
Another constant theme among many ‘occupiers’ is the argument that they represent the ninety-nine percent of the population in opposition to the richest one percent, who make a lot more than the rest of us. According to many of the protesters, that one-percent of wage earners need to have their taxes increased so they pay their ‘fair share’ (i.e., a higher tax rate than everybody else). There’s a word for a desire to take for yourself something that rightfully belongs to another: Envy. It is usually considered to be a vice, not a virtue.
Our system of taxation is already ‘progressive,’ meaning that those who make a higher income pay taxes at a higher rate. Because of this, the bottom fifty-one percent of Americans pay no federal income tax whatsoever while the richest one percent (who make about nineteen percent of the total national income) pay over thirty-seven percent of the national tax burden. Oh, yes, you can point to individual examples of people in the top one percent who do not pay their ‘fair share,’ but on the whole the ‘rich’ go above-and-beyond in supporting everybody else. Those who need the least from our government are expected to give up more of their income to support its operations, while those who need the most from it are expected to get it for free. And we call that ‘fair?’
Let’s consider what would really be ‘fair.’ If our tax system were ‘fair,’ everybody would be expected to give up the same percentage of their total income (or percentage of total purchases, if we switched to a sales tax system). To ask one person to give up thirty-five percent of their income and ask another to give nothing is the very definition of ‘unfair’ (and, for that matter, a violation of the Fourteenth Amendment’s guarantee of equal protection under the law). Our system of taxation is called a ‘progressive’ system, but it is in-fact regressive—meaning backward-looking, misguided, punitive, harmful. It is an expression of a failed ‘us vs. them’ philosophy where the successful have to be punished for others’ failures.
So what’s the solution? I have long supported a flat-tax reform, where every dollar earned above the poverty line would be taxed at a flat percentage rate with no deductions, no credits, and no loopholes. The poor would still be taxed at zero percent or some other very low rate, as most or all of their income would fall below the defined poverty line. Everybody else, meanwhile, would share the same burden proportional to their income. We also avoid the Fourteenth Amendment violation by discriminating between dollars (first so many dollars at zero percent, all following dollars at a higher rate) instead of discriminating between people (one wage-earner at zero percent, another at thirty).
And let’s not forget that fifteen percent of fifty thousand dollars is still a lot less than fifteen percent of fifty million dollars, so the rich would still pay ‘more,’ but it would be calculated in a fair, equitable way. Another possible solution would be a flat sales tax (replacing the income tax entirely). In a sales tax scenario, I would exempt food, utilities, housing (rent or buy), medicine, and other necessities from the tax. The poor would again pay little or no tax, as most of their expenditures would fall in the necessities category, while the rich who spend their money mostly on luxuries would pay a comparatively high rate. I am also open to plans like presidential candidate Herman Cain’s (R) 9-9-9 plan, which combines elements of these two approaches.
But we don’t help anybody by demonizing the top one percent of wage earners. Consider what they have built for us. Consider all the benefits we get from our vibrant still-mostly-capitalist system. Oh I have no doubt that some of those ‘one-percenters’ don’t really deserve what they have, having gotten it through inheritance, luck, or less-than-ethical activities . . . but for every one of them there are ten more like Steve Jobs. Most of the ‘one percent’ are where they are because of their own vision and dedication, and we should be thanking them rather than punishing them. We are surrounded by the fruits of the ‘one percent’ and the businesses they have built every day. We have gotten our due reward from them in the form of the products and services they have made possible.
What we ought to be doing is telling their stories, because a significant portion of that ‘one percent’ wasn’t born into it. Jobs was born out-of-wedlock, put up for adoption, and taken in by Paul and Clara Jobs—a lower-middle-class couple without a college education. Bill Gates was a little better off, the upper-middle-class son of a lawyer and a businesswoman. Warren Buffett is the son of a little-known Nebraska businessman and Congressman, and spent part of his youth working in his grandfather’s grocery store. Meg Whitman started off from a middle-class family in Long Island and worked her way up the corporate ladder to become CEO of eBay and, now, Hewlett-Packard.
These people shouldn’t be demonized; they represent some (though admittedly not all) of America’s highest ideals. Everybody has the opportunity here to do better than those who came before, provided they are willing to put in the hard work and effort. In almost every American family, the story is the same—or at least had the potential to be. An ancestor came here with nothing, and within a generation or two they were producing doctors, lawyers, businessmen, politicians, engineers, and CEO’s. This country has one of the finest traditions of upward mobility in the world; it is one of our greatest assets. We should be teaching our children to aspire to greatness, not to resent it in others.
Choice vs. Compulsion
One of my favorite films, though it is quite violent, is Stanley Kubrick’s A Clockwork Orange. It is based on a novella by Anthony Burgess which I have not yet read, so you’ll have to forgive me for referring only to the film version. In it, the anti-hero Alex, a downright awful guy who commits terrible acts of ‘ultra-violence,’ is subjected to an experimental treatment that will ‘cure’ him of his desire to engage in violent acts. The prison chaplain opposes the treatment, saying, “Goodness is something to be chosen. When a man cannot choose he ceases to be a man.”
The core question raised by the film (and presumably by the novella) is one relating to self-determination: Is it better to force people to be good against their will, or to let them choose their path even when they will often choose wrongly?
Whenever I consider government social welfare programs, or punitive taxation on the rich, this film comes to mind. We can all agree that those with financial means should give of their excess to support the public good. We can all agree that the hungry should be fed, the naked should be clothed, and so on. These are among the core Christian religious doctrines, and have thus been embedded into the very social structure of the ‘western’ world. But if you compel a rich man to give of his riches, have you really accomplished anything virtuous? Do the ends justify the means?
My biggest objection to the welfare state, and the so-called ‘progressive’ taxation system that supports it, is that we are doing an objectively good thing (feeding the hungry, for example) but we are supporting it with dollars taken forcibly from others against their will. When Warren Buffett comes out saying that he and his fellow ‘one-percenters’ ought to be paying more in taxes, my question in return is, ‘Okay, then why don’t you?’ In addition to the taxes we are required to pay, we always have the option to make an additional gift to the United States Government—and publicize it if we want to. Buffett can give the government as much of his wealth as he wants, and he can employ social and public-relations pressure to encourage his brethren to do the same. Some will. Some won’t. But this way it would be up to them as individuals to choose.
Bill Gates is widely respected for his charitable giving to support healthcare and education in the United States and abroad through the Bill & Melinda Gates Foundation. Would we feel the same way about his giving if he was doing it because he had to? Of course not. Charity is only a virtue if you have chosen it. If we really want to eliminate hunger and poverty in America, it won’t happen by stealing from the rich to give to the poor; Robin Hood romanticism doesn’t work in the real world. No, we need to encourage voluntary charitable giving—from the lowest classes to the highest—to the religious and secular non-profits like DC Central Kitchen, Catholic Charities, and many others that are effectively fighting these problems in ways that the government simply hasn’t shown itself to be capable of doing.
We need to regain a sense of social brotherhood, rather than fomenting class warfare. The rich should feel a kind of social obligation to help the less fortunate, but we are not encouraging that feeling by demonizing them or by forcing them to ‘give.’ We are not going to get the ‘one percent’ to invest heavily in effective, non-government charitable giving if we treat them like the enemy and declare that we’re going to take their money no matter what. We’re also not going to encourage them to keep pouring their vision and dedication into their businesses—creating wealth, jobs, products, and services—if we tell them they have no right to the spoils of their own efforts.
Will some of the ‘one percent’ choose to try and keep everything for themselves? Of course. But I would rather live in a country where they have that choice than in one that subscribes to the dogma of compulsory redistribution. If people don’t have the opportunity to choose right or wrong, success or failure, virtue or vice . . . well, then the people really have no liberty at all. As the prison chaplain in A Clockwork Orange said of the boy who was forced to be good, “He ceases to be a wrongdoer. He ceases also to be a creature capable of moral choice.”