Tuesday, November 1, 2011

What Comes Out of Your Paycheck

Elizabeth’s Warren’s recent comment about corporate taxation and society was an excellent example of the kind of strong, principled argument that the rest of the Left should be making:

“There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you!
But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea — God bless. Keep a big hunk of it.
But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
In contrast to conservative or libertarian arguments that taxation is theft, Warren’s statement is morally superior, for it accurately takes into account the fact that, as part of the same society, we are all interconnected and interdependent, and the money made by a single person can never be solely attributed to individual effort alone. The statement is also concise, to the point, firm, and persuasive, avoiding wonkish jargon and centrist waffling. It provoked agitated responses from commentators on the Right, who were forced to argue on Warren’s agenda-setting terms, and, like George Will, could only counter with either/or, straw-man arguments. It is a powerful argument, the kind that the Left should be making all the time, and I think it is an exemplar of how to argue with political fortitude and backbone. It makes me wish Warren would challenge Obama in the primaries, just to redirect the public debate. 
I want to try to make another argument for left-wing principles along those same lines. What follows is an argument that I think the Left should be making all the time, and if they did, and followed it up with the right actions, it could so change people’s mindsets that significant political and economic change would follow. 
Here’s the set-up: I have a friend, a blue collar guy I grew up with, also a veteran like me, who is pretty open-minded and non-partisan about politics but who leans to the Right; like many people, he is for responsible government in that he wouldn’t mind paying taxes if he didn’t think they were all wasted, but instead did some good for society. He’s been convinced otherwise, however, by years of conservative claims that government is inherently bad and inefficient. I told him that I understood being frustrated about taxes, because some of it does get wasted, yet nothing is perfect and there is waste in any process. I then pointed out many of the good things his tax dollars do - paying for FAA airport towers, paying soldiers, paying at least something to inspect the food, paying to make sure nuclear plants don't blow up, etc. Then I made the following argument (this is an edited version):
What about profits? They come out of your check also. See, people go to work and create a certain amount of monetary value on the job, whether someone makes trucks or fries burgers or does accounting or whatever. Out of the value added by the worker comes 1) overhead to pay for the company's investments/depreciation in machines, buildings, the power and phone bill, administrative costs, etc. 2) Then we pay taxes. What then? Out of the value you create then comes 3) your pay and benefits, and then 4) the salaries for the executives and the profits for shareholders. But why should they get a huge chunk? They didn't do the real work: a CEO is just an administrator, basically, and there's no CEO in America who personally creates enough value to justify a salary in the tens or hundreds of millions. If you promoted people from within the company and paid them modest salaries to act as executives they could easily do the job, and not at the cost of millions; so the workers could keep all those millions and divide them amongst themselves, making life better for them and their families. Some might say, "Well, investors paid to invest in the company so it could have equipment and facilities," but we've already covered those costs in 1). So the top people are just skimming off the value that the working people create. And then they call themselves "job creators!" But it robs you of more of your potential income than taxes do.
Any basic economic textbook will point out that most of the value created in a production process is a product of the cooperation of people working together, rather than of individual effort: where one person can make ten happy meals in an hour, two people can make 25 - more than simply doubling the individual gains. Three people could make 40, and five people 70, and so on (until you reach a point of diminishing returns when the kitchen is too crowded). This is due to the division of labor and the gains of cooperation: people can divide up tasks and focus on them exclusively, learning how to do something well and working out efficient chains of production. The same holds for nearly all human activities, with the exception of some creative processes like philosophy and art - but even these rely on the wider social division of labor. Here’s the key point for liberals and progressives: because you can’t attribute the extra surplus to any individual, but only to the fact that they’ve cooperated, the only rational way to divide it, the only just and fair way, is by equal shares for everyone.  But in our current system, CEOs have rigged the game through the control of stockholder boards, through networking, and by successfully lobbying to reduce or eliminate government oversight. Then they skim most of that surplus and keep it for themselves, while doing very little of the real work that created it. It’s like the shift manager at the burger hut bullying, intimidating, and propagandizing the other workers so that he can keep the social surplus. It’s not fair, and when it comes to society’s rightful wealth, it causes untold misery, threatens democracy, and is destroying the natural environment.
This is, I believe, a potentially persuasive idea among the hard-working 99%, and my friend was very impressed with the argument and felt validated that I had actually took the time and effort to make it to him. He said that he understood my rationale better for being on the Left. If liberals and progressives started making this argument regularly it would ring true with a lot of the people they are trying to win over. And consider how it could shift the debate on taxes: people are keenly aware of what the government deducts in taxes from their paychecks to pay for social services, because they see it on their paystubs on a regular basis. What if we passed a law that required companies to list the value that a worker creates (including their equal share of the cooperative surplus), then their pay, then what is deducted as profit for executives and shareholders, and then taxes? Would that not be a way to make people very highly aware of class difference, exploitation, the basic unfairness of inequality, and what’s being constantly taken from them? Imagine the consequences of such a simple accounting change. The companies wouldn't like it and would oppose it full fore, but even the public debate that would arise over the proposal would be eye-opening for most.

(Edited for typos and to add the link to Geaorge Will's column, 9:35 EST November 1, 2011)

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