The Moral Wealth of Nations

From C-SPAN January 23, 2015

Edward Kleinbard,  who teaches law and business at the USC Gould school of Law and author of We Are Better Than This How Government Should Spend Our Money, commented that, "...we are under endowed with skeptical members of Congress." He adds, "...government – which is to say, all of us, acting collectively – can make our country healthier, wealthier, and happier, if we put government do useful work..."

He points out that the government should not be competing with private enterprise but complementing it. In other words, the two should work together in a mutually beneficial and cooperative relationship. The situation is not a zero-sum game, with winner take all results. Or at least, it shouldn't be. (This should sound familiar to those who have listened to me in the past.)

As an example of the investment function of the government, he points to a report by David Wessel of the Brookings Institute, "The paper written by some scholars, very careful work, to demonstrate that spending 10% more in public education of kids in  grades K-12...leads to increased wages of about 7.25%. That's a fantastic investment."

He points out that this isn't about taking from the rich to give to the poor. It's about investing in our future. Investment, something every businessman should understand.  In this way the economic pie gets bigger, he continues, not smaller; which benefits all of us.

"It's most remarkable thing. We are by far The biggest bunch of tax whiners in the world today. The United States is not just a low tax country, it is in fact the lowest tax country among the entire club of rich nations in the world.  If you measure our tax burdens, federal, state, and local as a percentage of our national income, our GDP, we are the lowest taxed. At the same time, we have some of the worst poverty data, our poverty rates are substantially higher than virtually every  other country in the OECD, the club of rich countries, and our inequality data is worse, our health statistics are worse. So we are a low tax country that systematically under invests in ourselves, in our own citizens, and that's really a strange place for the richest most successful country in the world…the history of the world."

"What drives me crazy is to discover, when I was researching the book, that the United States is one of four countries of the 34 countries of the OECD Club of rich countries where we systematically do more on the public education of rich kids than poor kids. What a bizarre way to run a country, when we systematically spend more money on rich kids than poor kids 

In terms of educating them!

There are only two places in our budget, two places, where we systematically spend more than other countries. One is the military and the other is in healthcare."

He then goes on to point out that he's not trying to judge how big or powerful the military should be, but he is saying that if we insist on having the largest and most expensive military in the world, then we should  tax ourselves to pay for it ..."we need to have a tax system that is big enough to enable us to be the new Sparta." 

"If you're looking for waste, fraud, and abuse, healthcare is  a nightmare.  We spend close to double what other rich countries spend per capita per person on healthcare."  He points out that we spend huge amounts of public funds on healthcare, and then spend even more out-of-pocket for personal expenses to health insurance companies. The health insurance companies, in effect, are a private  tax we impose on ourselves when we refuse to do the economically efficient thing, have a single-payer system.

When it was suggested that's what's wrong with our country is that 40% of Americans don't pay any income tax, he responded that this is a red herring. First, most of the Americans who don't pay income tax are either children or the elderly on Social Security.  It is doubtful if the viewer would care to start taxing children and the elderly who are on a very limited income. Most of the rest who do not pay income tax, even while paying many other taxes, are too poor to pay taxes. I add that taxing the poor is stupid.  

If we invested more in our infrastructure and in raising many of our citizens out of poverty instead of pressing them down into it, more of them would have the money to pay taxes. Can this be more obvious?

I also must add that many of the wealthiest corporations in the world not only do not pay their share of taxes, they even get refunds from the US government! Every person in America, even those in that 40%, pays taxes.  Even the incredibly wealthy corporations that get free money instead of paying income tax, pay taxes on their employees and raw materials. Still, I doubt any other rich government in the world allows welfare for the wealthy. We, of course, have corporations which heavily depend upon it.

In other nations, the author points out, higher education is free to the individual. Of course it is paid for in taxes, but that money is paid back in the earnings of the highly educated individual who graduates. In other words, it's not only free, it actually makes a profit! So the next time a conservative tells you nothing is free, tell them it sure as hell is! To put it another way, you won't make money when you won't invest money. We, as a people, as a government, make money when we provide a free education. Not lose it. Make it.

And the idea of that taxes will automatically impede growth? Prof. Kleinbard responds, "Taxes went up on January 1, 2013 for the top earning Americans, went up significantly, and yet the world went on.   Bill O'Reilly showed up for work the next day." Note: Bill O'Reilly is famous for, among other things, having declared that if  taxes go up for him and his wealthy friends, it will no longer be worth his while to go to work.  I guess he's working for free now.  The Professor adds that, "Yet the United States has had two great years of growth over the last two years."  Conclusions: Higher taxes do not necessarily cause rich people to stop working. Higher taxes do not necessarily have a negative impact on growth. It seems they may even have a positive impact in both these areas.

Kleinbard goes on to state that not only do relatively moderate changes in our tax structure not impede growth, "On the contrary, raising tax revenue and using that to fund productive complementary investments like... education..." results in an increase in  economic growth.

A caller asked if the author thought it was fair that people that work hard and earned their wealth should be taxed so that people who have not dedicated themselves to earning money should be rewarded. His response, I think, was off target, referring primarily to luck and the inheritance of intelligence. My response is that the vast majority of the wealthy in America inherited their money. They didn't earn a penny of it. It was handed to them.  Meanwhile, a huge amount of work and labor goes into just getting enough money to feed yourself and your family for  many Americans today. The caller was appallingly ignorant of reality. That is not surprising. She called in on the Republican line.

The professor points out that Adam Smith wrote two books. The first was indeed The Wealth of Nations, referring to the benefits of free enterprise system, but the second was The Theory of Moral Sentiments. Republicans love to refer to the first book, while ignoring the moral obligations specified in the second.

This is the problem conservatives continually bump into today. They forget morality, except when it suits them. For them, as for big business in America, morality has become whatever makes a profit. No wonder we're in so much trouble.

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