My friend John Perich has a post up which, as with all of his posts, you ought to read. John takes issue with a recent statement of Elizabeth Warren’s, suggesting she’s either misunderstanding our tax system, misunderstanding some economic basics, or ignoring her knowledge for the sake of better political rhetoric.
While John’s logic is good, I think he’s doing the economic equivalent of New Criticism here, reading into the quote a perspective that I don’t think is really there, and which ignores the historical context in which it was said. I don’t think that Warren is proposing tax policy, or even suggesting the type of transactional theory of government that John describes. I don’t think her statement is about economics at all, at least not the economics textbooks cover.
Instead, I think her statement is purely and usefully political (“usefully” being a rare modifier in contemporary Democratic politics), meant to counter a very specific, powerfully-ingrained perspective. Her point isn’t that a business owner who derived 1.2 million dollars of profit owes the government a percentage based on the specific infrastructural projects that supported that profit, as if the federal government is a vendor hired by entrepreneurs, selling road mileage, police manpower, to-order servicing of tariffs on competitors and such.
Her point, as I read it, is to dispel a myth, the myth of the purely self-made millionaire. That myth justifies a lot of other ones. It serves to create heroic, genius characters who we should venerate, ignoring the role luck, public investment in research, military funding, or anything else might have played in the creation of their fortunes. It underwrites the claim that “only the private sector creates jobs,” a myth Republicans–and increasingly, Democrats–use to tip the tax system towards greater inequity.
Its counterpoint is the myth that those who haven’t made fortunes have only themselves to blame, and that state efforts to help them are throwing good money after bad. We’re unraveling the safety net and entrenching multi-generational wealth mostly around financial speculation. And part of the reason we’re doing it is because of this mythology that tells us it’s punishing success to tax the wealthy, to whom we owe whatever fortune we have, rather than vice versa. It’s an old story, and we’re telling it better than we’ve ever told it before. Warren is one of the people trying to remind us that it’s just a story. And that there’s a story that ought to seem truer to us.
I suspect the last sentence of that quote is what irks John:
But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.
Factually, this is, as John says, incorrect. We don’t have an underlying social contract in America that requires this. And honestly, the consequences of requiring it in a rigid way would lead to an outcome as unjust as a world in which nobody who’d been successful “paid it forward.” I’d be shocked if Warren wanted to literally make this “underlying social contract” a “contract,” to implement such a requirement, and I’d be skeptical that anyone in Washington would let her propose taxation more progressive than what we had during the Reagan era, a regime that looks Soviet compared to what current dogma calls for.
John acknowledges this, saying “This is a great theory! I don’t object to it, stated that far and no farther.” So we’re not really far apart. But where John sees a fallacious economic claim, I see only a political one. I’m glad to see somebody arguing it’s time to reverse course on the billionaire conservative dreamquest we’ve been on for 30 years.