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Thursday, November 10, 2011

Anti-Business or Anti-1%

Jennfer Rubin in today's Washington Post had the following to say about Newt Gingrich's performance in last night's GOP debate:

"He shines with the putdowns of the media, chiding them for failing to confront the OWS protestor with the inanity of their own anti-business rhetoric."


Here's the relevant part of the transcript from the debate.

CRAMER: Governor Perry, 30 seconds to you.
Do you think that companies can both be profitable and be able to create jobs? Do you think it's a dichotomy? Do you think they can do it?
PERRY: There better be. And that's the reason the tax plan that I laid out, a 20 percent flat tax on the personal side and a 20 percent corporate tax rate, that will get people working in this country. We need to go out there and stick a big old flag in the middle of America that says "Open for business again."
(APPLAUSE)
CRAMER: Mr. Speaker, how about to you, can corporations do both?
GINGRICH: Sure. Look, obviously, corporations can and should do both. And what is amazing to me is the inability of much of our academic world and much of our news media and most of the people on Occupy Wall Street to have a clue about history.
(APPLAUSE)
GINGRICH: In this town, Henry Ford started as an Edison Electric supervisor who went home at night and built his first car in the garage. Now, was he in the 99 percent or the one percent?
Bill Gates drops out of college to found Microsoft. Is he in the one percent or the 99 percent?
Historically, this is the richest country in the history of the world because corporations succeed in creating both profits and jobs, and it's sad that the news media doesn't report accurately how the economy works.
(APPLAUSE)
BARTIROMO: Mr. Speaker -- I'm sorry, but what is the media reporting inaccurately about the economy?
GINGRICH: What?
BARTIROMO: What is the media reporting inaccurately about the economy?
(LAUGHTER)
GINGRICH: I love humor disguised as a question. That's terrific.
I have yet to hear a single reporter ask a single Occupy Wall Street person a single rational question about the economy that would lead them to say, for example, "Who is going to pay for the park you are occupying if there are no businesses making a profit?"
(APPLAUSE)

Both Rubin and Gingrich are taking the typical GOP line against OWS, which is to equate it with socialism.  As I've said before, if OWS includes anti-capitalistic elements, that's just an artifact of the movement's inclusiveness.  The single unified message I hear from OWS is that there is a problem when 1% of the people are taking home a disproportionate share of the wealth generated by our economy, while the bottom 99% struggle to find jobs, and struggle even more to prepare for their retirements.

Gingrich was a history professor and purports to be schooling OWS on history.  But seriously -- what does the fact that Henry Ford and Bill Gates managed to get rich in the US have to do with the OWS movement?  Let's take that argument apart piece by piece.

First of all, Bill Gates?!  After Henry Ford, the first poster-child for beneficial entrepreneurship is Bill Gates?!  Creator and perpetuator of the Microsoft monopoly on bad, buggy, virus-attracting software?  About Henry Ford, I get it:  he built good cars, and made he them cheap enough -- and paid his workers well enough -- that workers on his innovative assembly line could afford to buy them.

But Microsoft?  Great business strategy, yes.  But DOS was awful compared to Apple's original operating system, which is why Microsoft came up with Windows, which also was awful for many years.  And Word was inferior to WordPerfect for the longest time, until Microsoft was able to leverage its monopoly in its crummy operating system into a virtual monopoly on word processing programs.  Yes, Gates is currently redeeming himself, and that's all to the good.  But it's quite far fetched to assume that Microsoft -- which could be a poster-child for everything WRONG with capitalism -- has been an engine of job growth and economic benefit.  Microsoft is a monopoly; if Microsoft hadn't gotten it, some other corporation would have.  Or perhaps we would all be using an open source operating system, and we'd have more disposable income to pump into the economy for other things.  Bill Gates is smart, and I think even a nice guy, and was at the right place at the right time, but I'd be very interested in hearing a theory on how a US economy without Bill Gates would have been worse than the one with him.

But that's not even the main problem with Gingrich's point.  OWS is not fed up with the Henry Fords of the world.  That's something like at most 0.001 percent of the 1%, probably less.  OWS is fed up with the 99.99% of the 1% that are NOT creating jobs; i.e. the ones that are skimming off a system that in reality does not behave the way Economics 101 tells us a capitalist economy should behave.  These are the people who are taking home several hundred dollars an hour for every hour they "work," when their "work" is at least as likely to harm the economy as to benefit it.  Yes, this group includes some people who figure out ways to bring great products to the market.  But it also includes people who figure out ways to maximize corporate profits at the expense of consumers and labor.  The end result of the dialog OWS has started should be to figure out which of the 99% fall into the former category, and which fall into the latter, and then use the tax system to curb the excesses of the latter.  Only a Randian believes that the market never needs correction from outside; once you admit that the market is imperfect, you can see the tax system as one way to address market failure.  That's not the same as socialism.

Back to Gingrich's question: "I have yet to hear a single reporter ask a single Occupy Wall Street person a single rational question about the economy that would lead them to say, for example, 'Who is going to pay for the park you are occupying if there are no businesses making a profit?'"

One could nitpick here by pointing out that Economics 101 tells us that in perfect competition (for a market in equilibrium), businesses are not supposed to make "profits."  They can only pay their employees and officers competitive wages; if they pay too much, their competitors will undercut them.  But assuming he is speaking more generally about the idea that taxing the 1% will destroy corporations, and thereby cause jobs to be lost, his answer still makes zero sense.

Again, the portion of the 1% that we are concerned about are the people who are skimming money out of the economy, by virtue of the fact that they are in positions where large sums of money (typically from consumer-taxpayers) flow through their hands.  Large corporations handle huge sums of money, so that's where skimmers congregate and thrive.  The skimmers are able to divert some of that huge cash flow into the their own pockets without appreciably affecting the corporation's ability to compete with other corporations, which are in any event doing the same thing.

To be clear, we are not talking about taxing corporations -- we are talking about taxing the money that is siphoned out of corporations -- the incomes of the 1%.  There is no evidence that taxing the 1% more heavily will cause corporations to shut their doors.  The main point is to recapture anti-competitive corporate profits by taxing the income of the people who have been skimming those profits off.  If that means that these skimmers will make less money, so be it.  If the result of the tax is that it won't make sense for corporations to pay their officers more than $300 an hour or so, that's not such a bad thing -- the skimmed money will instead flow back to consumers in the form of reduced prices, or perhaps into research and development.  The corporation's lust for life will cause it to survive regardless:  corporations are just as amoral towards their officers as they are to the rest of us.

And if we more heavily tax the 1%, we will actually get more money to pay for parks.  We could probably even afford some porta-potties.

To be continued . . . .

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