Trickle or treat

Who's laughing now? Photo credit: Biography

Trickle-down theory is back in the headlines this year with President Donald Trump’s One Big Beautiful Bill that extended the income tax cuts targeting the rich from the 2018 Tax Cuts and Jobs Act. The theory says we can grow the economy by cutting income taxes on the rich, because they save more of their income than the poor. They will invest the tax cut in factories that create jobs and future income. Well, the theory has three problems.

First, if we don’t tax the rich, we must tax the poor. Millionaires would have paid the tax out of savings. But the poor must consume most of their income. To pay the tax, they must spend less. That will slow the economy. Or, if we don’t tax the rich or poor, the government must spend less. But that means paring back Social Security, Medicare and Medicaid. That cut amounts to a tax on the poor. The only other option is to tax economic growth itself. But the whole point of trickle-down theory is to spur growth, not brake it.

Second, it seems unfair to tax most heavily those least able to pay for services that we all enjoy, like national defense and clean air. If anything, the valuation of these services rises with income, so it would be fair to increase the tax rate with income, too.

Third, the theory misses the point. Yes, we must save to grow the economy. We must set aside funds to finance the factory. So why not cut taxes on savers rather than on the rich? You don’t have to be Daddy Warbucks to save. – Leon Taylor, Seymour, Indiana USA tayloralmaty@gmail.com

For what it's worth

The elections of self-described socialist mayors in New York City and Seattle this month have revived the chestnut that economists are monsters who don’t understand that the poor need a hot meal and a roof over their heads. Since food, lodging and healthcare are basic rights, let’s just give them to the poor for free. Economists oppose this because they are apologists for the filthy rich. Or so socialists argue.

In reality, I don’t know of any economist who blames poverty on the poor. Economists know that people lose their jobs because of a business cycle that no one can control, or because their skills suddenly become obsolescent. It was not the fault of the bank tellers that ATMs proved to be more efficient and convenient.

Instead, the economist’s argument against mandating free stuff is that it will hurt the poor themselves. Suppose that we give away healthcare. The hospitals will be overwhelmed by patients demanding cosmetics and repairs of hangnails. They won’t have time for gunshot wounds. The way to ensure that they give priority to threats to life is to set a price on each service that reflects its value as well as its cost. That’s what the market does. If the poor can’t afford this price, then the solution is to tax away the income that is due to good luck and give it to those who are poor because of bad luck. Let the poor decide how to spend the money, since they know their own needs better than anyone else. -– Leon Taylor, Seymour, Indiana USA tayloralmaty@gmail.com

Mamdani, Commies, and Marx

Photo credit: Getty Images, Angela Weiss

Old videos about New York City Mayor-Elect Zohran Mamdani have revived Fears of the Commies reminiscent of the Twenties and Fifties. Fox News reports Mamdani's comments to the 2021 Young Democratic Socialists of America conference: "Right now, if we're talking about the cancellation of student debt, if we're talking about Medicare for all, you know, these are issues which have the groundswell of popular support across this country. But then there are also other issues that we firmly believe in, whether it's BDS or whether it is the end goal of seizing the means of production, where we do not have the same level of support at this very moment."

In July, Fox News played a videotape of Mamdani commenting in an interview: "My platform is that every single person should have housing, and I think faced with these two options, the system has hundreds of thousands of people unhoused, right? For what? If there was any system that could guarantee each person housing, whether you call it the abolition of private property or you call it, you know, just a statewide housing guarantee, it is preferable to what is going on right now. People try and play like gotcha games about these kinds of things, and it's like, look, I care more about whether somebody has a home."

Mamdani has not retracted either statement. But he insists that he is a democratic socialist. The practical difference is that a democratic socialist advocates state ownership of the means of production only via elections -- such as an elected legislature nationalizing the oil industry -- and accepts partial ownership.

As Chapter 2 of “The Communist Manifesto” makes clear, state seizure of the means of production is the central task of communism. The reactions to Mamdani’s statements have fallen along two lines. First, Mamdani is a good man, so he can’t be a Communist. Or: Mamdani is a Communist, so he can’t be a good man. Both ridiculous arguments stem from the peculiarly American terror of reading a book that just might change your mind.

Contrary to popular opinion, the seminal works of Karl Marx and Friedrich Engels are not evil incarnate. Despite its flaws, Marx’s “Das Kapital” is the most penetrating critique of capitalism that I’ve read. “The Communist Manifesto,” by Marx and Engels, is not as bone-headed as some of Mamdani’s supporters and critics, or Mamdani himself. The Manifesto expresses the inescapable consequence of Marx’s remorseless logic. To say that someone is a Communist, as Mamdani appears to be, is to neither criticize nor praise him. It is to describe his adherence to a philosophy that makes better sense than liberals and conservatives do today.

Marx accepted, as most other economists of his age did, that all production value stemmed from labor. The value of a machine depends on the amount of labor spent to create it. Capitalists compete by mechanizing, since this enables them to produce faster than before and dominate their market. But they cannot profit from the machines: They must pay fully for the labor that created them. They can profit only on the back of the worker, who does not have to be paid a fixed amount to survive for another day. As market competition squeezes profits, capitalists respond by squeezing workers to the point of starvation. Workers must revolt to survive. The only solution to this tragic cycle is a workers’ state. They must seize the factories and stores and distribute the surplus value – the difference between the value of production and the workers’ wages – in a fair way. In the dynamic economy envisioned by Marx, rising affluence would free workers to pursue their own interests, to be truly human rather than machines. In chapter 10 of the first volume of Das Kapital, Marx vents his outrage at the 12-hour days worked by children in the mills of England, where Marx had fled from Germany.

To say that Marx was logical is not to say that he was right. His theory predicts a falling rate of profit and a falling wage. Both predictions turned out to be wrong. Wages since Marx’s day have increased many-fold. Workers are far better off today than in the 1840s. Child labor in high-income countries is illegal.

Where did Marx go wrong? I think that it was in assuming that the capitalist adds no value to production. A good manager motivates her workers to produce more in exchange for most of the surplus value. The manager’s own take reflects the value of her organizational abilities. Happier workers produce more. In this approach, the workers will not revolt, and a market economy will prosper.

Marx’s logic was less than watertight in maintaining that a Communist state, in which all share equally in power, was possible. Power is an aphrodisiac. Without checks and balances, someone will seize it. No democratic Communist state has ever made it to the steady state. The Communist economy is also hot-wired for failure, because it fixes prices. In the free market, the price automatically balances the demand for a product with the cost of providing it. Fixing the apartment rent imbalances housing demand and supply. More people will demand apartments in New York City than landlords will provide. Landlords will flee the housing market for more profitable adventures. Housing supply will diminish, creating homelessness.

Two points. First, Mamdani’s advocacy of seizing the means of production is understandable to anyone who has read Marx, although I'm not convinced that Mamdani himself really knows what Marx is talking about. Second, Mamdani is a Marxist. At least he likes the slogans. In fact, his superficiality may explain why he does not seem to have the courage of his convictions. But he does understand that offering people free stuff is great for votes.

In response to the conclusion that Mamdani is at least superficially a Marxist, I hear protests that he would never seize the means of production. Of course not. Not even the mayor of New York City has that power. But one’s beliefs precede, not follow, one’s actions. Do I have to be pregnant to be pro-choice? Few Marxists will ever be able to carry out Marx’s agenda. They are Marxists nonetheless.

Misconceptions are also pervasive among conservatives. A clueless podcaster says Mamdani “went back to his core beliefs in his victory speech basically yelling at Donald Trump and saying we are a communist city. Uh the Red Apple….” That wasn’t the victory speech that I read. Mamdani pitted the poor against the billionaires, but he said nothing about Communism. Possibly Podcaster XX inhabits another planet. Or just maybe Mr. XX is playing on the fears of people who know only that Communism is supposed to be Something Really, Really Bad.

A correspondent quotes Wikipedia to me: Communism is "centered on common ownership of the means of production, distribution, and exchange that allocates products in society based on need. A communist society entails the absence of private property and social classes, and ultimately money and the state." That is correct. The correspondent concludes that since Mamdani does not propose to abolish private property, he is not a Communist. That is not correct. A Communist is anyone who advocates seizing the means of production. Whether he actually does it, is another matter. One’s beliefs do not depend on what one is willing or able to do. Eugene V. Debs was never able to reorganize production. Was he therefore not a socialist?

The debate over Mamdani’s beliefs illustrates the sad state of the popular American intellect. "My God, Mamdani can’t be a Communist! Communism is Monstrous! Fox News says so!" Well, try reading a book rather than goggling Fox or googling Wikipedia. -- Leon Taylor, Seymour, Indiana tayloralmaty@gmail.com