Welcome to Behind the Lines, a weekly conversation between Salt Lake Tribune cartoonist Pat Bagley and BYU economist Val Lambson:
Bagley: The Tuesday cartoon contrasts Oliver Wendell Holmes ("I like to pay taxes") with anti-tax activist Grover Norquist. Holmes was an abolitionist and decorated Union Civil War veteran who was wounded on several occasions. Appointed by Teddy Roosevelt in 1902, he spent 30 years on the Supreme Court and was one the nation's most influential defenders of the First Amendment.
Grover Norquist is a lobbyist. His claim to fame is getting 98 percent of GOP legislators to sign a "pledge" not to raise taxes. Ever. His special talent is consigning legislators who cross him to political perdition. He is perhaps the most influential defender of entrenched privilege. Ever.
Just my opinion.
Lambson: It isn't just a question of paying taxes or not paying taxes. It is a question of how much and what for. Let's take these one at a time. Federal, state and local governments have been spending a third of GDP (that is, a third of the total value of goods and services) in the United States. What percentage of economic activity do you think should be directly controlled by government?
Bagley: The share of GDP claimed by the federal government is the lowest it's been in 60 years. Currently about 15 percent.
Lambson: True, but largely irrelevant. You are focusing on current taxes. Whether government spending is funded by current taxation or by future taxation (borrowing), it has to be funded, so government spending rather than taxation is probably the best measure of government intervention in the economy. That has been about a third of GDP quite steadily for some time. The question remains: What percentage of economic activity do you think should be directly controlled by government?
Bagley: Would you be happy if it was the lowest in the developed world? Okay, Korea's is a bit lower:
Lambson: Would I be happy? I'm a naturally happy guy. So I am happy to point out that, (1) you are talking about current taxes again even though government spending is a more relevant measure of long-term tax burdens, (2) you are only counting the federal government instead of government at all levels, (3) currently low tax receipts are temporary measures induced by a crisis, (4) government spending is on the rise, and (5) there is no reason to conclude that our government is too limited just because it is less interventionist than governments in other developed countries.
And I would still like to know what percentage of economic activity you think should be directly controlled by government.
Bagley: You make retirees cashing their Social Security checks and going to the doctor sound so Orwellian. You are correct that government spending is increasing; almost entirely from growing Social Security and Medicare outlays. Retirees don't think of themselves as "directly controlled by government," but they are the biggest reason for the growing U.S. deficits. On the other hand, if by "government" you mean the number of bureaucratic butts filling government chairs, it's about as big (or small) as it was in 1960: two million butts.
Getting back to taxes . . . when was the last time the federal government actually raised them?
Lambson: Calling the forced transfer of wealth from workers to retirees "Social Security" is indeed rather Orwellian, now that you mention it. Security? The government takes a large chunk of workers' incomes and promises to repay it when they retire by taking it from future workers. The current recipients may not feel controlled, but the current payers might prefer to invest that money themselves rather than to count on the ability and will of future governments. They don't have that choice. Now I suspect you are in favor of giving the government control of those funds, and honest people can disagree about that, but please recognize that those funds are collected and disbursed or, in other words, controlled by government.
With definitions thus clarified, what percentage of economic activity do you think should be directly controlled by government?
Bagley: I'd say somewhere north of Somalia, where taxes are pretty much zero percent of GDP, and government services and interference in the free market are also pretty much zero. Maybe closer to Germany (39 percent of GDP), which is doing just fine. Besides being the world's second largest manufacturing economy (China is first), Germany has a social compact that balances the interests of its corporations with those of employees. German CEOs don't grab the same share of profits as their American counterparts, but good-paying German jobs were saved from being shipped overseas.
The answer to when the federal government last raised taxes is 1993. Since then, it's been nothing but tax cuts-a-go-go, with the lion's share of the Bush tax cuts a shameless giveaway to the richest. Despite the 2008 financial collapse, and repeated experience that "trickle down" economics is a fraud (the latest version is to call trust fund babies "job creators"), every single Republican candidate for president says the way to put Americans back to work is to give the richest even more tax cuts. It hasn't worked before. It won't work now.
Here's something that should keep you awake at night: Fifty percent of capital gains in the U.S. are realized by the wealthiest 0.1 percent. (Note the decimal point). Under the current Bush taxes, capital gains are taxed at a paltry 15 percent. Last time I checked, my effective tax rate was around 25 percent. As a direct result of the tax structure, more and more of the wealth of this country is being concentrated in fewer and fewer hands.
Lambson: Taxes will have to be raised if spending is not reined in. You needn't worry about that. And they will be raised on the wealthy, because that is where the money is. The real issues here are more fundamental.
We agree that we shouldn't aspire to be Somalia. As much as I love Europe and I do we disagree on whether we should aspire to replicate their governmental institutions. In particular, I find that allowing government to control around two-fifths (and in some countries much more) of economic activity is excessive. That is a lot of power, and we agree (I think) that power corrupts. Your ''Occupy Congress" cartoon last week brilliantly conveyed this. But that is another cartoon.
The quality of comments is increasing and I found it difficult to choose a best one. I finally decided on SuperEllipsoid's comment concerning coverage of Ron Paul:
"He has a website. His supporters have websites. He's getting his message out. Nobody owes him publicity."
True. As you said, Pat, the future of the Republic depends on a critically thinking electorate. The tools are there and I am optimistic. You, I, and Jefferson agree that we can allow the expression of all error as long as Reason is free to combat it In so doing, we needn't prejudge what should be allowed and we should definitely not force the media to cater to anybody,