Friday, September 19, 2008

Reds

One of the certainties of being a tax policy scholar who is not opposed to all taxes is that I am called names on a regular basis. The most common epithets are the standby favorites of the Cold War era: commie, pinko, commie-pinko, socialist, red, Marxist, Marxist/socialist . . . you get the idea. It pretty much does not matter what one says -- again, unless one says that all taxes are theft -- but the most surefire way to become subject to this kind of name-calling is to advocate any kind of income redistribution. Thus, while giving a talk last year, someone asked me if my argument might suggest that we should increase the estate tax. When I said yes, another academic (!) in the room said, "Oh, I see, so you believe in 'from those who have the ability to those who have the need,' right?"

I bring this up now because of the recent increase in the frequency of the attacks on Sen. Barack Obama as a "socialist" because of his tax positions. As should be well known by now, Obama has proposed a tax plan that would cut taxes for couples with income under $250,000 per year (and singles under $200,000) and raise taxes on those with higher incomes, especially those with the highest 0.1% of taxable incomes. Sen. John McCain's tax plan would lower taxes for everyone, but the cuts for lower-income people are small while the cuts for the highest income people would be enormous. (For a nice chart, see here. See also the nonpartisan Tax Policy Center's analysis here, which criticizes both Obama's and McCain's plans not on distributional grounds but because of concerns about future deficits, finding that Obama's plan increases the total debt by less than McCain's over ten years.) The choice on distributional grounds couldn't be more stark.

Is Obama's plan socialism? Of course not. There is no nationalizing of key industries or any of the other hallmarks that distinguish socialist economies from mixed capitalist economies. His plan is, however, an attempt to redistribute the tax burden. If someone wants to claim that the tax burden is already skewed too much toward the rich, they're free to do so. I have argued otherwise elsewhere. The charge of socialism, however, just doesn't fit. Sharing a common goal (reducing income disparities) doesn't make a non-socialist a socialist any more than wanting peace on earth makes a Christian a Buddhist.

This will not stop the name-calling, of course. Those who have a comic-book version of capitalism in their minds, in which there is either no government or only a government "so small that it can be drowned in a bathtub" (in one anti-taxer's famous phrase), will always feel free to describe any deviation from their pure system as a movement in the direction of a state takeover of the economy. The charge of socialism thus really means "having at least one thing in common with a socialist system that I disapprove of."

In any case, this has been a rather bad week for pure free marketeers. Even Europeans (those socialists!) have reportedly been "stunned" by the Bush administration's participation in bailouts in the financial sector. Calling Obama a commie because he wants to increase tax progressivity looks pretty weak next to Republican-led government takeovers of financial companies that are not being allowed to fail. One scholar asked in apparent horror, "Do we live in a market economy or not?" in response to one of the recent federal rescue efforts.

I have argued recently that these efforts are necessary, because the alternative is worse. The bailouts, however, are necessary not to undermine capitalism but to save it. Full-scale crises are the playground of extremists, and no time in American history saw a larger or more energized domestic movement of genuine Communists than the Great Depression. The Republican neo-socialists of 2008, therefore, are welcome on my red bandwagon. I like mixed capitalism, and I want to see it continue in an improved form. As far as I can tell, so does Sen. Obama. Pure free markets are not even possible in practice (as I'll argue in a future post), but if any deviation from the results of absolutely unregulated market outcomes is socialism, we are all socialists now. In fact, we have been for quite a long time.

[Note: During September, I am cross-posting my Dorf on Law posts on the Concurring Opinions blog.]

-- Posted by Neil H. Buchanan