Tuesday, September 21, 2010

Who Owns Your Money? Paul Krugman Does

In Sunday's New York Times editorial section Paul Krugman ponders the "white-hot rage" sweeping America. Not that of Tea Partiers, he notes, that of "the rich."

If you want to find real political rage - - the kind of rage that makes people compare President Obama to Hitler . . . [y]ou'll find it among the very privileged, people who don't have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the though of paying modestly higher taxes.


I have a steady job, and I work hard at it. I don't worry too much about losing my job, my home, or my health insurance, though I suppose any or all of those are possibilities. And I'm not anyone who will benefit from the extension of the Bush tax breaks.

But I can tell you that I am indeed outraged. Outraged that progressives like Krugman feel as if they have the ability to judge how much income is "too much" for any one person.

Krugman cites Oliver Wendell Holmes for the prospect that "Taxes are what we pay for civilized society." Holmes did indeed say that, in a case called Compania General De Tabacos De Filipinas v. Collector of the Internal Revenue (275 US 87 (1927)). "But that was a long time ago," says Krugman, as if to suggest that those disgusted by contemporary taxation are merely boorish descendants from an earlier, more genteel and clearly more elightened era.

Indeed 1927 was a long time ago. In Holmes' lifetime, for example, income tax was held by the Supreme Court to be unconstitutional. (Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895)). An amendment was required to clarify Congress' power.

In 1913, the tax rate paid by the top income earners was a whopping 7%. To merit paying that much in taxes it was necessary to earn more than $500,000 in 1913 dollars - - more than $10 million today.

Holmes' statement also pre-dated Social Security, which came along in the '30s and results in an additional subtraction from your income before you even touch it. And it predated Medicare and Medicaid, which came along in the '60s, with similar result.

Of the "undeniably rich," Krugman observes that "a belligerent sense of entitlement has taken hold: it's their money, and they have the right to keep it." In Krugman's eyes, the belief that one's income is one's own is audacious and unjustifiable. There comes a point of being "too rich," he thinks, therefore any income above a certain level belongs not to the individual but to the people to spend, through Congress, as they see fit.

Krugman's position makes a fallacy of the word "earn." My high school dictionary suggests that to "earn" means "to gain or deserve for one's service, labor, or performance." Krugman eviscerates this sense of the word, and would rather have us think of earned income - - at least above certain amounts - - as merely "temporarily borrowed," certainly not "deserved." How anyone, who has had the assiduity, intelligence, or just enough blind dumb luck to make more than what Krugman thinks is "appropriate", dare to the belligerent prospect that he has "earned" his income and is "entitled" to keep it.

Well, I do. I dare, even though my hope of ever earning enough to be truly "outraged" by top margin taxes is a dim one. I dare, because if you let Congress believe that all of a rich man's income is a public good, there is nothing to prevent it from believing that all of an ordinary man's income is public good as well. And all of a poor man's income - - such as it is - - for that matter as well. The idea that all income belongs to the people is a communist notion. It is a foreign notion - - foreign to the capitalist principles that - - for better or worse - - this country is founded upon.

There is another striking difference between the world that Holmes lived in when he wrote "Taxes are what we pay for civilized society," and it is this: Holmes figured that if the state can demand, through draft and war, the life of its citizens, then it could also demand sacrifices far less than that, such as state-ordered involuntary sterilization:

We have seen more than once that the public welfare may call upon the best citizens for their lives. It would be strange if it could not call upon those who already sap the strength of the State for these lesser sacrifices, often not felt to be such by those concerned, in order to prevent our being swamped with incompetence. It is better for all the world, if instead of waiting to execute degenerate offspring for crime, or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind. The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes. ... three generations of imbeciles are enough. (Buck v. Bell, 274 US 200 (1927).)

Read that carefully. I underlined the best part. I should think a Nobel laureate economist such as Krugman should think twice before alluding to the "happier times" of the Holmes-ian era. One might suspect he is in favor of cutting the marginal tax rate to 7% and involuntarily sterilizing the poor.

Of course Krugman is probably not in favor of sterilizing the poor (although who knows, economists think some nutty things sometimes), but here is what distinguishes thinking of "then" versus thinking of "now": Holmes recognized the obligation of the "haves" to pay for a civilized society, and he also recognized an obligation of society to prune itself of the "have-nots." Since Holmes' time, the latter obligation is no longer recognized, while the former has continuously expanded - - by several orders of magnitude.

Krugman believes that the wards of the state have an entitlement to the income of the rich, while the rich themselves have no entitlement to their own income. Needless to say, that makes them angry.

I'd be too.