Tax Cuts and Employee Compensation

Author’s Note: Two posts ago I said that the next two posts would be about FDR. I have already deferred those posts once. Please excuse another deferment because of the relative urgency of this post. Discussion about the tax bill on Facebook and elsewhere is ablaze and is jammed with misunderstandings. Discussion of the tax bill is urgently in need of some sorting out. I’ll get back to FDR soon.

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The following is a prime example of what is being questioned about tax cuts and employee compensation on Facebook right now:

“American businesses are making record high profits. If corporations making more money equals more jobs and higher wages, why are we not seeing it and what makes you think that they will suddenly raise wages and hire more people if their taxes are lowered?”

This question reveals a misunderstanding of how employee compensation is set. I’ve commented on aspects of this issue in earlier posts.[i] This post will sort out some of the interplays between taxes and compensation.[ii]

Contrary to what is implied in the question, employers do not set employee compensation levels. If a firm sets its employee compensation higher than the market price for the labor, the firm cannot make as much profit as its competitors and will eventually, if no really soon, lose business to competitors.[iii] If it sets compensation too low, it will not be able to retain or attract the laborers it needs to effectively run the business.

When it comes to purchasing things, people and corporations have an important thing in common (which shouldn’t be surprising given that corporations are run by people). Neither people nor corporations generally pay a higher price for things than they must in order to purchase what they want. This is true no matter how rich or poor the purchaser is. Consequently, corporations do not pay any more for employees (labor) than they must in order to entice laborers to work for them and otherwise meet corporate objectives. So the fact that corporations, with a few notorious exceptions[iv], are not raising compensation immediately after the tax bill was passed is to be expected.

Unless the government gets involved,[v] like the price of everything else, supply and demand for employees set employee compensation. When there are more people wanting jobs than the number of jobs available (jobs are exceptionally scarce), there is little, if any, need for companies to raise nominal compensation. So they don’t. On the other hand, as the number of jobs increases relative to the number of people wanting to fill those jobs (labor is exceptionally scarce), companies must increase compensation to attract new employees and to prevent competitors from hiring away their existing employees. All other things being equal, as the number of jobs rises, the more employee compensation will rise.

So a key to wage increases is to increase the number of jobs. In general, as the economic climate for growing businesses improves, the more businesses will grow and the more jobs will be created. There are two big factors to a good business climate: 1) The potential profits from risking capital, and devoting time and effort to grow a business is large enough to make it worthwhile to attempt to grow a business, and 2) Doing business is not so constrained by regulations that growing business is too hard, too expensive, and/or takes too long to grow businesses quickly and efficiently. (For this purpose, “regulations” includes the published rules imposed by governments, but also includes government corruption in the form of unpublished quid pro quo requirements of bureaucrats that must be met in order to get a permit, actual or implied threats of differential enforcement of rules, and favoritism in the form of subsidies for certain companies or industries (all of whom compete with every other company for funds, employees, and the purchase and sales of goods and services).

Each of those two factors can cancel out the other. The extremes reveal the certainty of this assertion: 1) Even if business income tax rates were zero, business would not start or grow if regulations prevent there being a high enough probability of making a good profit within a reasonable amount of time to justify the risk and effort, and 2) Even if there were no regulations, businesses would not start or grow if income tax rates were 100%. The reasonableness or modesty of regulations that constrain starting or growing new businesses is irrelevant if they make the possibility of good profit within a reasonable amount of time too remote to risk giving a new business a go. Similarly, if too much of any potential profit will be taxed away, then cutting regulations is less likely to kick-start new businesses.

So increasing either income taxes or regulations will cause there to be fewer jobs than there would otherwise be. Also note that increasing one and holding the other constant increases the negative effect on jobs of the one held constant, thereby compounding the negative jobs effect of increasing either.

The reverse is even more important. Improving the business climate with reductions in both taxes and regulations multiply the positive effects on jobs of each factor. To its credit, Trump’s administration appears to be working on both factors. Doing a static analysis of any tax cut (as the CBO did) is not very helpful in predicting the effects of a tax cut (or increase). Not including in the analysis the multiplying effect of simultaneous reductions in regulations and taxes in a static analysis was particularly unenlightening and unhelpful.[vi]

Although John Maynard Keynes was wrong about much, his observation about the economy being moved by “animal spirits” (confidence and expectations are important factors in determining the future behavior of businesspeople and other economic agents) was largely correct (though usually incorrectly applied). In general, if the animal spirit, fear (of a worsening business climate in the future), dominates the thinking of most businesspeople, they will be less likely to risk starting new businesses. If hope (of a better business climate) dominates the thinking of most businesspeople, they are more likely to risk starting a new business. Increases in the rate of new business starts tend to validate “everyone” else’s confidence that the business climate is improving (or at least not likely to worsen), which causes there to be more hope, more investment, and more jobs. As a larger percentage of the population with jobs grows, business and payroll taxes will increase. As important, the percentage of people on “welfare” will shrink, thereby reducing government outlays to that purpose. With two major deficit factors improving, the government’s finances, and more hope that the business climate improvements will not be repealed will generate additional pro-growth animal spirits.

If all of these factors come into alignment, we can reasonably expect there to be many more jobs (demand for labor to increase), and the supply of workers to become more scarce. Companies will have no choice but to raise employee compensation. In light of the above, we could be on the verge of a wonderful virtuous cycle of prosperity.

There are headwinds that must be overcome in order to create a greater scarcity of labor. The country’s population increased by 2.3 million in 2017. Many able-bodied people are choosing not to work for the wages currently available to them in the job market. As wages rise, some of those unemployed people (but not in the “unemployment figures” because they are not looking for a job at current wages) will compete for the new, higher paying jobs, making labor more plentiful. Because tax revenues will likely fall until a more robust economy is generated, a rising deficit and debt will put upward pressure on interest rates, which impedes growth. The economy must overcome all of these headwinds to create enough jobs to create greater job scarcity. Doing so will require a very much more robust economy than the one extant when Trump took office.

The jury is, of course, out as to whether or how much of the above possibilities will come to pass. What can be said with a reasonable degree of confidence is that had we stayed with the policies that resulted in more and more onerous regulations, too few jobs, puny growth, stagnant compensation for middle and lower income people, and rising deficits, debt, unfunded liabilities, then continued lower and stagnant middle-income compensation would have persisted. Sadly, Trump’s “fair trade” policies (corporate welfare), inability to repeal Obamacare, and unbalanced budgets portend the retention of too many of the bad policies of the past. On the other hand, with the aggressive undoing of many of the Obama era regulations and the new tax bill, there is a reason for hope things will get better.

Consider again the opening question: “American businesses are making record high profits. If corporations making more money equals more jobs and higher compensation, why are we not seeing it and what makes you think that they will suddenly raise compensation and hire more people if their taxes are lowered?” The answer is that there has not been enough job growth to create significant labor scarcity which is the only thing that will put upward pressure on employee compensation. There is now a chance that will change.


[i]Investment Income and Universal Basic Income Are Not ‘Basically The Same’,” “Income Inequality Is More Than It’s Cracked Up To Be”, and “You will always have the poor among you. . . .”

[ii] While the relationship between taxes and employee compensation discussed in this post are the most salient to the question addressed being addressed, many other things that affect employee compensation will not be explored here. In particular, we will not discuss here: 1) how minimum wage laws affect the compensation of low skilled workers, and 2) the role of employee productivity on employee compensation and how employee productivity is improved.

[iii] It is no different than what would happen if a gas station were to set the price of its gasoline noticeably higher or lower than its competitors. Set the price too high and drivers will drive on by. Set the price too low and the company will be on the road to bankruptcy.

[iv] I don’t know the extent to which the reasons AT&T and other companies that boosted bonuses and wages after the tax cut bill passed were 1) to improve employee morale, 2) get out ahead of their competition (who will as a result of the tax bill have more money to hire away AT&Ts employees), 3) to improve public relations, 4) to gain favor with the administration, or 5) to gain some other business advantage. The apparently gratuitous payment was surely done to meet a corporate objective other than keeping and attracting employees unless they were addressing a preexisting employee hiring or retention problem, i.e., it was no more likely to have been motivated by the goodness of the executives’ hearts any more than you are to offer to pay more than the sticker price of a car because you believe the owner of a dealership deserves more for the car.

[v] An example is when government imposes minimum wages. Fortunately, minimum wage earners constitute less than one percent of U.S. employees. While the effects of minimum wages ripple up a few levels in an organization, the compensation of at least 70% of all employees is unaffected by minimum wages. Because very few of the people affected by minimum wage laws pay income taxes, they can be safely ignored for the purposes of this discussion of income taxes and compensation.

[vi] If you believe the multiplier effects may be insignificant, take a look at some climate change research. The catastrophic projections are typically the result of piling multiple compounding effects on top of each other (usually ignoring any mitigating factors, much less their multiplying effects).

UPDATE: An excellent article that corroborates much of what is said in this posts (and in other posts), “‘Economists Say’ a Lot of Things. Many of Them Are Wrong” By David Harsanyi, was published after this post was published.

A Goldberg Article Too Good and Timely Not To Share Here

I said in my last post that my next two post would be about FDR. The next day the tax bill was passed and my Facebook feed was flooded with nonsense about the bill. In research for a blog post to sort some of that nonsense out I came across “America and the ‘Original Position” by Jonah Goldberg. It is too insightful, timely, and well written not to share it with you immediately. Enjoy!

A comment about it: Goldberg says, “Human ingenuity is the engine of wealth creation, and there is no other.” I complete subscribe to that claim. My faithful readers, however, may recall that in “Income Inequality Is More Than It’s Cracked Up To Be,” I said, “… that income inequality is the engine of wealth creation (prosperity). In fact, the greater the income inequality, the higher the engine’s horsepower, i.e., the more rapidly prosperity accelerates. (The extreme importance of the pace of wealth creation is also discussed in my blog on Wealth. In a nutshell, improvements in standard of living increase exponentially as the pace of wealth creation increases linearly.)” Rather than codger and impose on you another analogy to rationalize the two “engines” of wealth creation (income inequality is the gasoline?), suffice it to say that both working together are what enables massive rapid wealth creation.

FDR – PART I: Is FDR Still a Big Deal?

Author’s Note: This series of posts is inspired and informed by last week’s wonderful EconTalk podcast, “John Cogan on Entitlements and the High Cost of Good Intentions.” I highly recommend it (and all EconTalk episodes for that matter). Mr. Cogan is the author of “The High Cost of Good Intentions: A History of U.S. Federal Entitlement Programs” (September 26, 2017).

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I suspect some of you cannot believe I’m going to write multiple posts about a president who was born in 1882 and died over 70 years ago—on top of the many of my earlier posts[i] that discussed Franklin Delano Roosevelt. Here’s the good news: I am not going to reel off a long series of back-to-back posts on FDR—just this one and two other short ones for now.

Why FDR? The idolized FDR (idolized primarily with myths that support the left’s narrative) continues to have a huge impact on what is going on today in America, and the world.  All movements need compelling stories/narratives. Superheroes cause stories to be compelling. FDR is the superhero in the leftist narrative, i.e., stories they use to proselytize their faith. FDR is a big deal.

Given how long ago he lived, you might wonder if FDR is really as big a deal as I’m making him out to be. If you don’t believe me, consider this: The second endnote[ii] contains a list of 90 books about FDR that were published over the last ten years. Seventeen of those 90 were published in 2017. In addition many books that focused exclusively or significantly on FDR’s administration were published during that period. Ones I found particularly interesting were: “Unprecedented Power: Jesse Jones, Capitalism, and the Common Good,” “The Forgotten Man: A New History of the Great Depression,” and Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Change. (I’m looking forward to readying Mr. Cogan’s book cited above.)

Articles that include references to FDR seem to be produced every hour.[iii] I just did a Google search for “Franklin Roosevelt” and Google reported 64.5 million results. Herbert Hoover and Calvin Coolidge, his two predecessors got 17.7 million and 0.7 million results respectively. Harry Truman and Dwight Eisenhower, his two successors got 35.7 million and 19.3 million results respectively. Eisenhower is the most recent of the group, and, unlike FDR, a war hero and a president, and a general who warned the country about the Military Industrial Complex. Yet Eisenhower is the only president in that era whose results were fairly high, at only 55% of FDR’s.

Also note that most informed people today would know to whom I was referring when they saw “FDR” in the title of this post. I dare say that the same would not have been true had the initials been: “JCC,” “HCH,” “HST,” “DDE,” “RMN,” “JC,” “RWR,” “GHWB,” or “WJC?”

Though this post is inspired by the podcast mentioned above, it was spurred on by listening on December 18, 2017 to a Sirius XM POTUS channel (a left leaning talk channel) longer than normal interview of the author of the new book, “The Last 100 Days: FDR at War and at Peace.” That lengthy, fawning ode to FDR confirmed my belief that over the last 90 years or so FDR has been and still is a really big deal. Just this morning (December 21, 2017) I listened to a “this day in political history segment” on that same channel. About seven presidents were mentioned. By far the longest portion of that segment was the replaying of a “fireside chat” FDR broadcast in the 1930s.

Why all this fuss about FDR? It is because, according to the left, what FDR did and the resulting positive results validate what leftists want America to do more of today. Convincing Americans that FDR was a superhero helps leftists make their case. For leftists, maintaining, if not elevating, FDR’s superhero status is worth the time, cost, and effort of constant maintenance of that myth.

Maintaining the FDR superhero narrative is worth it because the narrative has been highly successful at gaining true believers over the last several decades. Winning the hearts and minds of ever larger percentages of Americans provides comfort and encouragement to the far leftists who are dead set on imposing on all Americans the policy prescriptions derived from that narrative—by violence if necessary. The growing activity of Antifa is one manifestations of the success of the narrative.

During the Obama administration great strides were made by the left toward a tipping point of no return from the horrors of the collectivist path I discussed in “Two Paths for America” and “More On Two Paths for America.” As my dear readers know, avoiding the leftist path for America is a primary focus of this blog.

Demythologizing and correcting the FDR narrative might be a way to slow or stop the successes of the left. Fortunately the army engaged in the fight against the leftist narrative appear to be growing. Much of the backlash against leftists was spurred on by the progress of the Obama administration toward the collectivist path triggered. Through the efforts of libertarians and limited government conservatives (and their research, news, and information organs) push back against government overreach is on the rise. That somewhat effective competition in the arena of ideas is most unwelcome by those who hold dear the FDR as superhero narrative. A redoubling of efforts to reenergize the FDR myths was to be expected. The fact there were at least 17 new books about FDR in 2017 alone is a sign that the reactionary left is mobilizing.

The election of Trump could be interpreted as the backlash against the left’s successes. While it is possible that the backlash is strong enough to grow and turn the country back from the collectivist path it has been on for decades, it is at least as likely that Trump’s election was a consequence of the flaws of Trump’s competitors.

If we, our children, and our children’s children… (and everyone in the world for that matter) are to avoid the horrors of the collectivist path, it is important to turn as many hearts and minds as possible away from the siren song of the leftist narrative. Because so many of the leftist myths about FDR are so fanciful or fabricated, it is important to highlight its weaknesses and fallacies. Consequently my future posts will be sprinkled with discussions of FDR from time to time. I’m hoping that sorting out the flawed leftist FDR narrative will get us on a better path.

[i]Obamacare – Repeal, or Repeal and Replace? PART II,” “’Progressives’ and the Constitution,” “Non Sequiturs on Parade – PART VII,” “More On Two Paths for America,” “Non Sequiturs on Parade – PART VIII,” and “Non Sequiturs on Parade – CONCLUSION.”

[ii]

1 The Last 100 Days: FDR at War and at Peace 12/12/17
2 Kings and Presidents: Saudi Arabia and the United States since FDR 11/21/17
3 A Matter of Honor: Pearl Harbor: Betrayal, Blame, and a Family’s Quest for Justice 11/14/17
4 Franklin D. Roosevelt: A Political Life 11/07/17
5 Eleanor Roosevelt, Volume 3: The War Years and After, 1939-1962 11/07/17
6 His Final Battle: The Last Months of Franklin Roosevelt 10/31/17
7 The Simple Faith of Franklin Delano Roosevelt: Religion’s Role in the FDR Presidency 10/10/17
8 Eleanor Roosevelt: In Her Words: On Women, Politics, Leadership, and Lessons from Life 09/05/17
9 Uncle Joe, FDR and the DEEP STATE 08/18/17
10 Franklin D. Roosevelt: A Life From Beginning to End 08/14/17
11 The Roosevelts and Their Descendants: Portrait of an American Family 07/28/17
12 Franklin Roosevelt: A Captivating Guide to the Life of FDR 07/20/17
13 Upstairs at the Roosevelts’: Growing Up with Franklin and Eleanor 07/01/17
14 The Gatekeeper: Missy LeHand, FDR, and the Untold Story of the Partnership That Defined a Presidency 06/06/17
15 FDR and The Great Depression: 1933-1939 05/18/17
16 The US President Who Served Longer Than Any Other President – Biography of Franklin Roosevelt 04/15/17
17 Churchill, Roosevelt & Company: Studies in Character and Statecraft 01/30/17
18 The Wars of the Roosevelts: The Ruthless Rise of America’s Greatest Political Family 12/06/16
19 Captain McCrea’s War: The World War II Memoir of Franklin D. Roosevelt’s Naval Aide and USS Iowa’s First Commanding Officer 11/15/16
20 His Final Battle: The Last Months of Franklin Roosevelt 09/06/16
21 1932: The Rise of Hitler and FDR―Two Tales of Politics, Betrayal, and Unlikely Destiny 09/01/16
22 The Presidents and UFOs: A Secret History from FDR to Obama 08/02/16
23 FDR and the American Crisis 07/12/16
24 A Boy Named FDR: How Franklin D. Roosevelt Grew Up to Change America 01/12/16
25 Franklin D. Roosevelt: The War Years, 1939-1945 03/22/16
26 Rightful Heritage: Franklin D. Roosevelt and the Land of America 03/15/16
27 The Train to Crystal City: FDR’s Secret Prisoner Exchange Program and America’s Only Family Internment Camp During World War II 01/05/16
28 Off the Record with FDR: 1942-1945 03/22/16
29 Rightful Heritage: Franklin D. Roosevelt and the Land of America 03/15/16
30 Commander in Chief: FDR’s Battle with Churchill, 1943 (FDR at War) 06/07/16
31 Dog Diaries #8: Fala 01/05/16
32 The Four Freedoms: Franklin D. Roosevelt and the Evolution of an American Idea 12/21/15
33 Eleanor Roosevelt: Wife of President Franklin D. Roosevelt 10/31/15
34 1944: FDR and the Year That Changed History 09/22/15
35 Franklin D. Roosevelt: Road to the New Deal, 1882-1939 09/08/15
36 The Mantle of Command: FDR at War, 1941–1942 05/19/15
37 No End Save Victory: How FDR Led the Nation into War 04/28/15
38 The Speeches of President Franklin Delano Roosevelt 01/28/15
39 Jay Winik: 1944 : FDR and the Year That Changed History  01/01/15
40 Before the Trumpet: Young Franklin Roosevelt, 1882-1905 09/09/14
41 The Sphinx: Franklin Roosevelt, the Isolationists, and the Road to World War II 11/10/14
42 A First-Class Temperament: The Emergence of Franklin Roosevelt, 1905-1928 09/09/14
43 Eleanor and Franklin 08/20/14
44 1940: FDR, Willkie, Lindbergh, Hitler―the Election amid the Storm 06/06/14
45 Hunting the President: Threats, Plots and Assassination Attempts–From FDR to Obama 04/14/14
46 The Fight for the Four Freedoms: What Made FDR and the Greatest Generation Truly Great 04/08/14
47 Wall Street and FDR 01/01/14
48 The Man He Became: How FDR Defied Polio to Win the Presidency 11/12/13
49 On Dupont Circle: Franklin and Eleanor Roosevelt and the Progressives Who Shaped Our World 07/16/13
50 Rendezvous with Destiny: How Franklin D. Roosevelt and Five Extraordinary Men Took America into the War a nd into the World 07/03/13
51 FDR: A Life in Pictures 06/14/13
52 Those Angry Days: Roosevelt, Lindbergh, and America’s Fight Over World War II, 1939-1941 03/26/13
53 FDR and the Jews 03/19/13
54 Their Fair Share: Taxing the Rich in the Age of FDR 01/29/13
55 FDR’s Ambassadors and the Diplomacy of Crisis: From the Rise of Hitler to the End of World War II 01/07/13
56 FDR and the Holocaust: A Breach of Faith 01/01/13
57 Dogs of War: The Stories of FDR’s Fala, Patton’s Willie, and Ike’s Telek 11/06/12
58 FDR and the End of Empire: The Origins of American Power in the Middle East 10/16/12
59 FDR and Chief Justice Hughes: The President, the Supreme Court, and the Epic Battle Over the New Deal 02/07/12
60 The Plots Against the President: FDR, A Nation in Crisis, and the Rise of the American Right 01/03/12
61 Pearl Harbor: FDR Leads the Nation Into War 10/25/11
62 FDR Goes to War: How Expanded Executive Power, Spiraling National Debt, and Restricted Civil Liberties Shaped Wartime America 10/11/11
63 Scorpions: The Battles and Triumphs of FDR’s Great Supreme Court Justices 10/03/11
64 FDR’s Funeral Train: A Betrayed Widow, a Soviet Spy, and a Presidency in the Balance 06/21/11
65 America’s Dictator: FDR the Red 06/17/11
66 Supreme Power: Franklin Roosevelt vs. the Supreme Court 03/14/11
67 Forged in War: Roosevelt, Churchill, And The Second World War 02/08/11
68 The Fireside Conversations: America Responds to FDR during the Great Depression 09/07/10
69 FDR and the New Deal For Beginners 07/20/10
70 FDR v. The Constitution: The Court-Packing Fight and the Triumph of Democracy 04/27/10
71 Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America 01/26/10
72 FDR’s Alphabet Soup: New Deal America 1932-1939 01/12/10
73 Who Was Franklin Roosevelt 01/07/10
74 FDR: Selected Speeches of President Franklin D Roosevelt 06/03/10
75 Franklin Delano Roosevelt: Champion of Freedom 05/11/10
76 Quotations of Franklin D. Roosevelt 04/20/10
77 Franklin Delano Roosevelt 12/30/09
78 Franklin and Lucy: Mrs. Rutherfurd and the Other Remarkable Women in Roosevelt’s Life 05/12/09
79 In the Shadow of FDR: From Harry Truman to Barack Obama 12/04/09
80 New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America 11/17/09
81 Together We Cannot Fail 11/01/09
82 Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt 09/08/09
83 Franklin D. Roosevelt and the New Deal: 1932-1940 02/24/09
84 Closest Companion: The Unknown Story of the Intimate Friendship Between Franklin Roosevelt and Margaret Suckley 07/21/09
85 The Fireside Chats of Franklin Delano Roosevelt 02/13/09
86 FDR The First Hundred Days 07/31/09
87 Franklin D. Roosevelt and the New Deal: 1932-1940 02/24/09
88 My Dear Mr. Stalin: The Complete Correspondence of Franklin D. Roosevelt and Joseph V. Stalin 01/22/08
89 Franklin D. Roosevelt: Our Thirty-Second President 08/01/08
90 FDR 05/13/08

[iii] The Steve Roth article I examined in the series of posts that ended with “Non Sequiturs on Parade – CONCLUSION” is a prime example.

“He’s a Hater!”

“He’s a hater!,” she contemptuously and scornfully accused someone with whom she disagreed. The accusation “hater” is as popular in social media these days as it is ridiculous. By making the accusation (whether true or false) the accuser reveals that she (usually for some unexplained reason) believes that hating is bad. As we shall see, it can be either good or bad. More important, the person who makes such an accusation is almost certainly as guilty of the alleged evil (hating) as the accused allegedly is.

Of course an accuser might attempt to redeem herself by claiming that her heart harbors no hatred. She does not hate, she merely dislikes the accused. Absent clairvoyance, however, there would be no way for the accuser to finely gauge whether the accused’s heart has gone beyond the same benign “dislike” which supposedly redeems her heart. On the other hand, if she blithely assumes the worst about others, such uninformed projection of evil on others (demonization) surely reveals evil in her own heart.

Whether or not one considers herself to be religious, the teaching “Love the sinner; hate the sin” is a good one. If someone is making a calm and reasoned argument for a claim with which one disagrees, the civil thing to do is to presume the person is well intended but insufficiently informed or mistaken—unless one knows (firsthand and for sure) the claim was made with malevolent intent. Unless one has spent a reasonable amount of time hearing out the accused’s positions, declaring “He’s a hater!” reveals both incivility and a lack of intellectual curiosity.

More important, if the accusation is made after the accused has been heard out, then a more instructive, constructive, compelling, and useful thing to do is to explain what is wrong about what he said. If one can prove the other guy’s assertion is wrong, the other guy loses, and you and society win whether he is actually evil or not.

“He’s a hater” is also vacuous on several grounds. First and foremost, it does nothing to refute what the accused said. Ad hominem attacks do not lay a glove on his argument. It also violates a basic rule of logic, i.e., it’s illogical. Alarm bells for ignorance or stupidity go off in the heads of critical thinkers when they hear such nonsense. If for political advantage you enjoy making dumb people more confused with ad hominems, have at it. Just know that it is not becoming. Worse, attacking the sinner instead of the sin may (as is often the case for Trump) stir up sympathy for the victim of the illogical attack—as it diminishes the credibility of the accuser.

Perhaps even more important, hating hateful things is a good thing. If everyone in society loves, adores, favors, approves, is nonplused by, disapproves, disfavors, holds in contempt and hates the same things, then society is apt to be more harmonious, unified, hopeful, and cheerful. Members of society cannot get their thinking in alignment with what their society considers to be good and evil (do their part to facilitate a harmonious, unified, hopeful, and cheerful society) if they are not aware of what the society considers to be good and bad. Getting on board with what the people of a society love/like and dislike/hate is made possible only by that information being routinely part of public discourse. So, if a person expresses hate for something society considers to be hateful, that expression of hate is not only not a bad thing, it is actually a good thing—is improves the society.

Societies, of course, constantly debate and evolve with respect to what is considered good and bad. That process can be a good thing. For example, prior to 1700 the vast majority of societies deemed slavery to be not a bad thing or a good thing. Back then it was considered to be natural (much like it is pointless to consider lions catching and eating antelope as either good or bad.) Thankfully Anglo Saxon societies evolved to an adverse view of slavery, and had the land and sea power to impose over time their views on much of the world. Once the new idea caught on, many more societies evolved to the view that slavery was a bad idea. It is because of such battles of ideas (usually coupled with the success that comes from adopting good ideas) that better ideas tend to replace worse ideas over time. (Sadly it is not a foolproof process.[i] Many blind alleys have been explored. Some, like socialism, repeatedly.) Over the long haul the discord from the battle of ideas has resulted in far better ideas taking root, and a more prosperous world than would otherwise have been the case. In the process of rejecting bad ideas, the good ideas become both more refined and stronger through the validation of having won the debate.

Why do people make the “hater” accusation?  As best I can tell, it is used in two ways: 1) When directed at the alleged hater, it is an attempt to stop the debate, or 2) When declared in the public square it is used to convey the idea that the “hater” and his ideas should be shunned because he is evil (despite the illogic of the premise that nothing an evil person might say could possibly be true). The first usage is rarely more than an attempt to get the speaker to shut up (that is much easier than devising a coherent refutation). The second reason is an attempt to get others not to pay any attention to him (because they are afraid he might convince listeners of something antithetical to the accuser’s beliefs). Or, they are just too consumed with their hatred of the guy to form a cogent argument. Both techniques are illogical rhetorical devices used to shut down debate. This is especially true when one realizes that they need to stop the debate in order not to lose it. These techniques throw sand into the gears that allow societies to grind out and adopt better ideas.

I can think of no good reasons to ever say, “He’s a hater!” unless the speaker has the clairvoyance to actually see into the heart of an evil person. It is good to call out evil and evil doers. If someone has that kind of clairvoyance, however, she ought also to have the intelligence to make a coherent case for her claim. As I said, that would do a lot more good than simply calling out evil people.

Ironically, if the person who declares, “He’s a hater!” does not hate hateful things, she is doing evil whether or not she has evil in her heart.


[i] See the 20th century history of Russia, Germany, Italy, China, North Korea, Vietnam, Cuba, Venezuela, and Greece—all of whom could not stop their slide into socialism/communism. Notice also the rebounds of those countries that made progress retreating from socialism, e.g., China, Germany, Sweden, and Russia.

Non Sequiturs on Parade – CONCLUSION

Let’s sum up and conclude this examination of Steve Roth’s handy compilation of leftist bromides, non sequiturs, self-congratulations, and just plain ol’ errors, “Why Welfare and Redistribution Saves Capitalism from Itself.”[i] The issue that this series of blogs addresses is: Did Mr. Roth’s article explain why welfare and redistribution saves capitalism from itself? (See PART I, PART II, PART III, PART IV, PART V, PART VI, PART VII, and PART VIII.) In this final post on Mr. Roth’s article, let’s sort out the broader reason why I spent so much time deconstructing it.

First, let’s briefly review what has been covered in PARTS I – VIII.

PART I. Roth’s claim, “No country has ever joined the modern, high-productivity, rich-country club without massive doses of redistribution. . . .” is patently false. Countries in that club started massive redistribution only after they became rich enough to do so.

PART II. Roth declares massively redistributive states to be successful without specifying a standard for success, but declares all other countries to be unsuccessful because they have not “emerged as thriving, prosperous utopias of liberty.” He supports his claim with half-truths.[ii]

PART III. Roth’s claim that “Market capitalism . . . inevitably concentrates wealth and income into fewer and fewer hands. It’s just the nature of the beast” is easily falsified. For example, there were 3.6 million millionaires in 1996, and 10.8 million in 2016.

PART IV. Roth’s acknowledgement that market capitalism creates “immense, world-changing, manifest benefits” is commendable, but, having made the false argument that massive redistribution improves the economy, policies based on the claims in the article would suppress the otherwise immense benefits of capitalism.

PART V. Roth’s idea that we need to be saved from capitalism is nonsense. On the contrary, we need to be saved from negative human reactions to income inequality and to continue to enjoy the innovation and productivity that can only be obtained with income inequality.[iii]

PART VI. Roth’s claim that “. . . . the richest countries all devote fifteen to thirty percent of GDP to social spending. As Bruce Bartlett pointed out recently, Germany — a darned ‘conservative’ country that is thriving today, and which rode out our recent economic Great Whatever better than almost any other country. . . .” is anecdotal and proves nothing about whether, how, or why massive redistribution saves capitalism from itself.[iv]

PART VII. Roth took a fact (that poor people are more apt to spend cash on hand than rich people are) and minced it into nonsense. I discussed the many important insights and conclusions that can be drawn from that fact, all of which contradict Roth’s misapplication of it.

PART VIII. Roth’s last ditch effort to support his claim that massive redistribution saves capitalism from itself is based on a populist, biased, and highly controverted interpretation of the history of the Great Depression. At a minimum, Roth’s claim is only supported, if at all, by myths about FDR and the Great Depression.

In this final post on Roth’s article, let’s sort out why I spent so much time on it. The reason is that Roth’s article is so typical of the “economics” promulgated by leftists these days, and such articles and analyses are siren songs that bewitch too many Americans to sail the country toward its doom. For the most part, the people lured by the siren song are well-intended, intelligent, and otherwise “good people.” This includes people who write articles like Roth’s (I do not know whether Roth is nefarious or sincere, but I would hope he is the latter). They know a great deal about a great many things (and much of what they know is actually true); however, they do not know of the destruction to which the siren songs lead. Even the people who create or knowingly support agendas that would be rejected if they were openly and completely disclosed are not necessarily evil. They believe that their prescriptions for mankind will make the world a better place. They know, however, that they must deceive people in order to achieve the utopias they envision. More important, they are, in my opinion, gravely mistaken. A primary object of this blog is to sort out why I have that opinion about the far leftists.

In the messaging to achieve their far leftist goals, truth, validity, and comprehensiveness (the opposite of which are “half-truths”) are dispensable. Their intermediate goal is to get ever larger swaths of “the People” more reliant, if not fully dependent, on government for their sustenance. Whether Mr. Roth or other like-minded authors know it or not (and which is not particularly important with respect to its effects on society), articles like his are doing great damage to humans today and will greatly affect their progeny because they cause well-meaning, duped people to support suppression of the “immense, world-changing, manifest benefits” that more robust capitalism would otherwise bring to the world. As I discussed in “Wealth Creation – It’s For The Children, and their children, and their children. . . .,” wealth creation delayed is wealth creation denied. Leftist “economics” are as dangerous as they are popular.

There are multiple far leftist visions of the proper role of government and many proposed justifications for and paths to that role. The goals of extreme leftists vary considerably. Among these are leftists who believe: 1) that “. . . humans are threatening their own existence and that of other species by using up the world’s resources. . . .the only way to save the planet from famine and species extinction is to limit human population growth;”[v] 2) in the Marxian maxim that the idea that all persons are inherently free and equal is idealist or utopian nonsense (a problem for which only communism is the solution);[vi] 3) that humans are loathsome “Speciesists” who should “work toward the goal of a kinder world for all, regardless of species”; and 4) that government should play an ever larger role in the workings of society ( which is the destructive common denominator of all of the above). Some go so far as to believe that the only way to keep humans from nuclear or other annihilation of life on Earth is to have one world government with plenary power over all peoples and their use of power. As Mao, Stalin, Hitler, Castro, and others who favor overwhelming control of society by government have shown, people who support ever more government are deadly serious (in the 20th century alone, well over 100 million lives were snuffed out by such people).[vii]

Anti-capitalist and/or anti-industrialist[viii] leftists (“far leftists”) have correctly determined that publically announcing plans for great leaps away from the ideas of equal protection, E Pluribus Unum, due process, limited government, and the rule of law would be rejected by the American people. So, as Jonah Goldberg so entertainingly explored in “Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Change,” the far left has used calming bromides to get Americans to accept medicines that are antithetical to the concepts that enabled America to quickly transform from a backwater collection of 13 insignificant colonies to the most significant country the world has ever known. Rather than a frontal assault on American ideals, they speak of multiculturalism, open borders, one world government, reducing the powers of superpowers, environmentalism, banning gun ownership, and global redistribution of wealth. They couple these bromides with apocalyptic visions of the future if Americans continue to dance with the ideals that brung ‘em to the current party and constant sorties bombing the legitimacy and foundations of the Constitution.[ix]

The number of far leftists, however, has been growing. More alarmingly, the number of Americans who are responding to their siren songs is also growing. Most run-of-the-mill Democrats, for example, do not share the destructive goals of the far leftists and do not believe that their support of leftist policies will lead to the tyranny that will surely accompany the far leftists’ objectives. Growing numbers of people (who are ineptly[x] referred to by the far leftists as “Useful Idiots”), however, help the far leftists achieve their objectives. Because of the support of people who are not fully aware of the destructive goals of the far left and who are susceptible to their propaganda,[xi] far leftists have made great, but hopefully not irreversible, gains in winning the hearts and minds of many Americans.[xii]

A good society requires some government involvement in or control of aspects of society and the economy. Too much involvement and control is extremely counterproductive and dangerous. Ideally, a society would (1) find the optimal amount and kind of government involvement and control of society and the economy, and (2) keep government from going beyond that amount. Creating a perfect society is far beyond human capabilities. Consequently, the optimal society will have many problems for which uniformed people will clamor for solutions from government. In such cases, perfection is the enemy of the good because too much government will always lead to massive corruption, tyranny, and poverty. Complicating the issue is the fact that politicians are experts at causing uninformed people to believe that there is no downside to extending more powers to government than is optimal. Hopefully, this nine part deconstruction of typical leftist screeds that are filled with bromides, non sequiturs, self-congratulations, and just plain ol’ errors will cause people to read leftists screeds with more critical thinking and credulity.

 


 

 

[i] If you haven’t already done so, please read the article, but please also suspend any belief that it makes a lick of sense until you’ve read my several posts about the article.

[ii] See “The Truth Is Hard For The New York Times” (The truth is also hard for Mr. Roth.)

[iii] See “Income Inequality — the Gap Is Not as Large as You May Think” and “Income Inequality Is More Than It’s Cracked Up To Be.

[iv] It is also telling that Roth did not acknowledge that it was Germany’s major curtailing of its liberal labor policies (reducing the amount of its redistribution) that ushered in Germany’s rise from being the economic “sick man of Europe” to performing as well as it did through the Great Recession. See “Wunderreform,” The Economist’s description of what happened.

[v] See also “Degrowth.”

[vi] See “Antihumanism

[vii] Non-combatant killings of citizens by Mao (Mao envisioned 50 million would be killed with the initial land reforms, but actually killed fewer at that time, but later killed at least 45 million in The Great Leap Forward), Stalin (15 – 61 million), and Hitler (12 – 14 million).

[viii] An example of their beliefs: “We are not interested in the utility of a particular species or free-flowing river, or ecosystem, to mankind. They have intrinsic value, more value — to me — than another human body, or a billion of them.

[ix]Relic: How Our Constitution Undermines Effective Government

[x] “Useful Idiots” is inept because many of the people who are duped by the far leftists’ siren songs are intelligent or very intelligent, but are unaware or unwary of the inevitable unintended consequences of the policies they support.

[xi] An example of the thinking behind their propaganda: “. . . To do this, we need to get some broad-based support, to capture the public’s imagination. That, of course, entails getting loads of media coverage. So we have to offer up scary scenarios, make simplified, dramatic statements, and make little mention of any doubts we may have. This ‘double ethical bind’ we frequently find ourselves in cannot be solved by any formula. Each of us has to decide what the right balance is between being effective and being honest.”

[xii] See “The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy” and “A Conflict of Visions: Ideological Origins of Political Struggles.”