Real World Economics 1.0

           We need to clear something up. Conservatives say that the economy can’t thrive without capitalists willing and able to risk money to produce goods, and employ workers. Meanwhile, liberals say that the economy is driven by consumer demand that employs capitalists. The tax implications of each of these apparently opposite belief systems are significant.

One side wants to eliminate taxes on capitalists, eliminate regulations that burden them, and eliminate minimum wages that they say keep them from hiring some people. Further, they want assistance programs ended because they counter- productively support people who would otherwise be energized to accept lower paid work or to accept work that safety net programs make economically unfeasible. The absence of these programs would also energize people to take care of them selves by saving for contingencies. They believe the government can neither afford to support needy people nor make good on its annuity commitments or deposit guarantees, and they want to sell off or privatize government assets.

The other side wants safety net programs protected and expanded by raising taxes on the rich—the oligarchs who they believe just want to further line their pockets at the expense of working people. They believe corporations and the very rich are not paying their share of taxes, and that consumers, not capitalists, make the economy thrive. They hold that government is employer of last resort and Keynesian economic leveler in times of turmoil.

As usual, the truth lies somewhere in between. Capitalists need consumers who can afford to spend, and consumers need employment that allows them to both live decently and save. Congress has screwed things up so badly that the government needs consumers to spend, not save, and it needs capitalists to keep giving Congress money so they can campaign to maintain power.

The rub these days is that very few people earning the national minimum wage can afford to both live and save for contingencies. In reality, minimum wage jobs are mostly home to adults who need to support a family, not mewling and puking babies who just need a foot in the door. If you’re a displaced coal miner, and all you can find is work that pays $7.25 an hour, you can’t keep six kids in doctors, shoes, shelter, school and gruel, and save. The reality is that CEO’s, financiers, and fat legislators who make top incomes every year have no standing to call for elimination of safety nets and scrapping minimum wages. The reality is that people who think the country can provide a wish list full of benefits by just taxing the rich are relying on murky math and childish selfishness, not egalitarian principles.

Around here, we have one magic answer: if you think one side or the other is entirely correct, you are entirely wrong. Congress is the lab-rat experiment that proves “either / or” produces only damaging gridlock and obstruction.