Conservative Class Warfare

Before we raise taxes on the rich, let's first stop the flood of tax money that's subsidizing their lifestyle.

Ross Douthat has an interesting take on recent reports about fat cats getting fatter while most are falling further behind during this recession.  In a column titled “The Class War We Need,” he observes,

The left-wing instinct, when faced with high-rolling irresponsibility, is usually to call for tax increases on the rich. But the problem, here and elsewhere, isn’t exactly that we tax high rollers’ incomes too lightly. It’s that we subsidize their irresponsibility too heavily — underwriting their bad bets and bailing out their follies. The class warfare we need is a conservative class warfare, which would force the million-dollar defaulters to pay their own way from here on out.

He notes that the federal government provides all manner of subsidies for the well off:

Intended to boost middle-class homebuyers, [the mortgage-interest tax] deduction has gradually turned into a huge tax break for the affluent, with most of the benefits flowing to homeowners with cash income over $100,000. In much of the country, it’s a McMansion subsidy, whose costs to the federal Treasury are covered by the tax dollars of Americans who either rent or own more modest homes.

This policy is typical of the way the federal government does business. In case after case, Washington’s web of subsidies and tax breaks effectively takes money from the middle class and hands it out to speculators and have-mores. We subsidize drug companies, oil companies, agribusinesses disguised as “family farms” and “clean energy” firms that aren’t energy-efficient at all. We give tax breaks to immensely profitable corporations that don’t need the money and boondoggles that wouldn’t exist without government favoritism.

And we do more of it every day. Take Barack Obama’s initiative to double U.S. exports in the next five years. As The Washington Examiner’s Tim Carney points out, it involves the purest sort of corporate welfare: We’re lending money to foreign governments or companies so that they’ll buy from Boeing and Pfizer and Archer Daniels Midland. That’s good news for those companies’ stockholders and C.E.O.’s. But the money to pay for it ultimately comes out of middle-class pocketbooks.

This isn’t just a corporate welfare problem. The same pattern is at work in our entitlement system, which is lurching toward bankruptcy in part because of how much Medicare and Social Security pay to seniors who could get along without assistance. Instead of a safety net that protects the elderly from poverty, we have a system in which the American taxpayer is effectively underwriting cruises and tee times.

He’s right, of course.  None of these policies make sense when looked at in terms of societal cost-benefit analysis.

Of course, that’s not how these things get into the tax code.  They’re either sops to lobbyists who simply care more about the issue than those who pay for the subsidies or, in many cases, an unintended consequence of buying the votes of the middle class with tax dollars only to see the benefits going to those who don’t need them.

FILED UNDER: General, ,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. john personna says:
  2. john personna says:

    More seriously, you’d probably like the “Misallocating resources” section of this:

    http://www.hussmanfunds.com/wmc/wmc100712.htm

  3. Brummagem Joe says:

    To quote the estimable Warren Buffett “Of course there’s a class war going on and my class is winning.” The problem of course is that Douhat grossly oversimplifies everything by grouping together a myriad of different issues affecting personal and corporate taxation. Some of these tax breaks might have broad societal benefits others demonstrably have not. Without looking at each case individually it’s impossible to make a definitive judgement. And of course it’s never going to happen except around the margins. So at the end of the day this is like motherhood and apple pie. We’re all in favor of them in the abstract but in reality nothing much is going to change. It’s much easier to raise tax thresholds and increase the take that way since it’s at fifty year lows as a % GDP.

  4. john personna says:

    Ah, evidence for my assertion that when faced with a lack of customers, some Republicans would like to blame Obama:

    http://www.ritholtz.com/blog/2010/07/corporate-americas-pile-o-cash/

    To paraphrase the old catch-phrase, “it’s the customers, stupid.”

  5. sam says:

    Got a question, James…How come some of the posts allow for comments, like this one, and others, like to one on brains and democracy, don’t?

  6. James Joyner says:

    How come some of the posts allow for comments, like this one, and others, like to one on brains and democracy, don’t?

    Comments are open by default for 14 days. Not sure why some of the posts have to be changed manually to authorize them. I’ll open up that one.

  7. PD Shaw says:

    “in many cases, an unintended consequence of buying the votes of the middle class with tax dollars only to see the benefits going to those who don’t need them.”

    I think that’s clearly the case with the home mortgage deduction. As tax cuts have reduced the number of tax payors (47% didn’t pay federal income tax in 2009), the home mortgage deduction only becomes relevant to the top quintile.

  8. Juneau: says:

    Intended to boost middle-class homebuyers, [the mortgage-interest tax] deduction has gradually turned into a huge tax break for the affluent, with most of the benefits flowing to homeowners with cash income over $100,000.

    What a sad commentary that $100,000 in cash income a year now is categorized as “affluent.” So anything that “subsidizes” the behavior of people making more than $100,000 a year, now needs to be examined and taken away by the proper application of “left-wing instinct?”

    The left wing is a sick joke, becoming ever more sick on a daily basis.

  9. James Joyner says:

    What a sad commentary that $100,000 in cash income a year now is categorized as “affluent.” So anything that “subsidizes” the behavior of people making more than $100,000 a year, now needs to be examined and taken away by the proper application of “left-wing instinct?”

    In most of the country, a $100,000 income is quite handsome. And, even in high cost of living areas, it’s decidedly upper middle class.

    Further, it’s odd to criticize as “left-wing” the notion that using the tax code to transfer wealth is problematic.

  10. Juneau: says:

    The same pattern is at work in our entitlement system, which is lurching toward bankruptcy in part because of how much Medicare and Social Security pay to seniors who could get along without assistance. Instead of a safety net that protects the elderly from poverty, we have a system in which the American taxpayer is effectively underwriting cruises and tee times.

    I’m sorry, but this kind of mentality is just flat wrong, in so many ways. I don’t even know where to begin.

    Foremost, either government is honest or it’s not. To require seniors to pay into “their” safety net system all of their working lives (including the self-employed), and then say essentially, “Thank you very much, but you did too well for yourself for us to give some of your money back to you” , is just a sanctioned con game. You’re going to take money from them for SS every step of the way, then judge whether they deserve to get any of it back based upon their success? Talk about using the citizens as milk cows and treating them as mere “productive units” …

    It still amazes me that no one wants to stand up and identify that spending and sanctioned theft through debt spending by the government is the root cause of our problems today. It’s much easier to identify those members of society that need to “give their fair share.” To extend this mentality to senior citizens that have managed to get ahead despite the government, is just wrong.

  11. john personna says:

    It still amazes me that no one wants to stand up and identify that spending and sanctioned theft through debt spending by the government is the root cause of our problems today. It’s much easier to identify those members of society that need to “give their fair share.” To extend this mentality to senior citizens that have managed to get ahead despite the government, is just wrong.

    Because it’s not. It is a real future problem, but our current problems are all about the mountain of past debt – both consumer and federal.

  12. steve says:

    “To extend this mentality to senior citizens that have managed to get ahead despite the government, is just wrong.”

    Re-read the post. Many managed to get ahead BECAUSE of government.

    Steve

  13. Brummagem Joe says:

    “The same pattern is at work in our entitlement system, which is lurching toward bankruptcy in part because of how much Medicare and Social Security pay to seniors who could get along without assistance.”

    Leaving aside the fact that those seniors made a lifetime of payments on the assumption that they would receive SS payments the number of seniors that could get along without assistance is actually quite small. During the privatisation debate in 2007 it became apparent that 80% of seniors relied on SS payments for over 50% of their income. As for Medicare, if seniors were required to pay all their medical expenses at precisely the time when their usage of medical care escalates it would soon bankrupt them all.

  14. Brummagem Joe says:

    “Because it’s not. It is a real future problem, but our current problems are all about the mountain of past debt – both consumer and federal.”

    As Doug Mataconis points out in another post, the Bush administration in eight short years succeeded in adding more to the federal debt than had been created in the entire previous 220 years of the Republic

  15. john personna says:

    As Doug Mataconis points out in another post, the Bush administration in eight short years succeeded in adding more to the federal debt than had been created in the entire previous 220 years of the Republic

    I am no fan of Bush budget gaps, but I dislike claims which are not inflation (or gdp) adjusted.

    This is the graphic I prefer:

    http://www.ritholtz.com/blog/2010/05/national-debt-by-president/

  16. tom p says:

    ****The same pattern is at work in our entitlement system, which is lurching toward bankruptcy in part because of how much Medicare and Social Security pay to seniors who could get along without assistance. Instead of a safety net that protects the elderly from poverty, we have a system in which the American taxpayer is effectively underwriting cruises and tee times.****

    I hate to point this out James, but SS is NOT a “safety net”. (or an “entitlement”) Yes it is promoted as such, but in reality, one is supposed to get what you put in. Die early? Tuff sh*t. Live longer? Good for you!!! This is why we get a statement every year from the SS Admin telling us what we contributed in the past year and what we will get out of it. (like I get from my union pension)

    It is more like a very badly funded pension system gauranteed by the gov’t. (just like my union pension… except my union pension has to meet certain criterion or it is declared insolvent)(unlike SS)

    Don’t like it? Fine. But it is what it is.

    PS: I could not agree more with the last part of your quote. Unfortunately, I repeat, that is not the way SS is set up.

  17. Brummagem Joe says:

    “except my union pension has to meet certain criterion or it is declared insolvent)(unlike SS)”

    SS hasn’t been declared insolvent. There are projections that it could become insolvent in several decades time based on certain conservative GDP growth assumptions and assuming nothing changes. Two big assumptions.

  18. […] James Joyner on Douthat: He’s right, of course.  None of these policies make sense when looked at in terms of societal cost-benefit analysis. […]