Blumneconomics IX: election version

St. Petersburg Times editorial columnist Robyn "Blumñata" Blumner is back again this week peddling socialist Blumneconomics.

The cluelessness oozes out right away.

The young woman who cuts my hair, a wonderfully smart and self-possessed 20-something who chose hair styling over a Ph.D. she once pursued, told me recently that she had to enter an experimental clinical trial to get the chemotherapy she needs. There is no social safety net for people like her.

"I feel like my government doesn't care about my life," she said.

That's right. It doesn't.

And every time you hear Sen. John McCain or Gov. Sarah Palin talk sneeringly about Sen. Barack Obama wanting to be "Redistributionist-in-Chief," know that what they are really saying is that government shouldn't care.

Blumner just doesn't get it, and she may well admit as much if asked.

A government that cares would want the best result from health care in terms of the overall society. Let's say that "Anna" needs a treatment that costs $200 trilion. Unless "Anna" has some special value to society beyond that of other persons, the government would be completely irresponsible to pay for her health care requirement. Society would be better off not paying for "Anna" to have her expensive medical care. Yes, of course the cost is unrealistic, but I chose the amount to drive home the point. The same type of value disparities exist in any system.

And here is the important point: Conservatives prefer for individuals to make the determination as to whether individuals get medical care. The government can only care if individuals care, since the government is made up of individuals. Moreover, the Constitution does not enumerate a role for the federal government in drawing from the pockets of some to pay for the medical care of others. Our society has a history of addressing such issues through private charity, whether by individuals or groups. Conservatives believe that this system serves the society better. Those with no argument against the good of society will tend to cast conservatives as favoring an uncaring government--a fallacious emotional appeal.

The "spreading the wealth" drumbeat is McCain's last-ditch effort to win the presidency. The boo-line is supposed to suggest that Obama's plan to tax America's wealthiest citizens at pre-Bush-tax-cut rates is socialistic and confiscatory.

Is it accurate or not? Barack Obama explicitly wants to focus taxation on the top 5 percent of wage earners, in addition to promising corporate tax increases. Many wage earners will receive a bigger tax refund than they pay in taxes, via the Earned Income Credit.

McCain is counting on the American people not being smart enough to make the next deductive step in reasoning, which is that a government that refuses to tax substantial wealth has three choices: It can tax the nonwealthy to make up the difference. It can slash spending and abandon promises made to citizens, such as providing national security, maintaining programs like Medicare and veterans benefits, keeping the national parks open, etc. Or it can borrow the money it needs from other countries and rack up debts until our nation starts looking like a bad long-term investment to the rest of the world — this would be the George W. Bush model.

Blumner's false trilemma (providing three solutions as though they exhaust the possibilities when in reality they do not) stems either from overt dishonesty or something along the lines of economic ignorance.

First, the government under McCain would not refuse to tax substantial wealth. It would simply attempt to keep taxes on wealth (such as capital gains taxes) from hindering the struggling economy. Investment stimulates economic growth, and free market investment has a far better record of real-world success than investment planned by the government.

Second, taxing the non-wealthy probably can't make up the difference. The wealthiest five percent already pay about 60 percent of federal income tax revenues. That number probably wouldn't change much under McCain. But it would probably grow substantially under Obama, to the detriment of the economy. Obama tacitly admits it.

Third, slashing spending does not necessitate breaking promises unless one stretches the definition of a promise to the point of finding a duty for the government to bankrupt itself. The government cannot endure the projected growth of entitlement spending (Social Security, Medicare). If the growth of such spending is not slowed then the economy must pay the price. And that is the true dilemma. If taxes go up, the economy suffers. When taxes go down, the economy improves. Taxation can be described in basic form as a brake on the economy.

But McCain claims that he will eliminate the nation's soaring budget deficits by the end of his first term, and that he won't raise taxes on the middle class beyond taxing the value of their health insurance, which means gutting government is his only course.

Cutting government spending is necessary regardless, because the economy can't keep up with government spending as things stand. Closing down on the brake (increasing taxes) will result in less economic activity (such as job loss) and accordingly decrease revenue to the government. With less revenue, the government will feel more pressure to increase taxation, which can turn into a death spiral. Bankruptcy. Growing the economy increases revenue to the government since economic activity triggers existing taxes such as sales and income taxes (whether or not a net increase takes place with a tax cut should remain an open question).

It is a good question as to how McCain would balance the budget in four years. Some promises of the government, such as ethanol subsidies, probably cause a net harm and as such should be eliminated. Obama, of course, suffers the same budget problem--only worse. His policy promises to both increase spending and shrink the economy. That is, more promises, and a bigger share of the GDP required to meet them.

McCain promises to be the next Social Darwinist-in-Chief. He would manacle government, ensuring that it does not have the revenues to make the lives of my hair stylist, the local waitress and yes, even most plumbers, better and more secure. McCain's plan is to put an exclamation point on the "Ownership Society" a.k.a. the "You're On Your Own Society" launched by Bush and his neoconservative backers, where your life is valued by the size of your bank account.

I don't know whether Robyn Blumner has engaged in significant self-sacrifice to help others less fortunate. I know I have, and as such I know that conservatives like me value preserving the freedom for individuals and groups of individuals to choose those who will benefit from their charity and good will. The "You're On Your Own Society" is Blumner's scare tactic. You're on your own if you don't have either money or a supporting social network of some kind. Making the supporting social network universal in a given nation encourages the free rider problem and as such is bad for society. Our government should encourage a healthy society by discouraging the free rider problem.

For what it's worth, I can't find any instance online of Robyn Blumner acknowledging a free rider problem.

McCain's demonization of Obama's comments to "spread the wealth around" also says that he would rather win than lead. It attempts to deceive people into thinking that government can run on pixie dust.

"(D)emonization"? At least Blumner knows hyperbole. McCain knows that the American people do not like socialism. Thus it makes good sense to point out those policies from Obama that run against the grain for Americans. That's what makes it an election issue. It is hardly "demonization." Obama, in fact, is the one disingenuously playing up populism. He promises big things to the 95 percent at the expense of the 5 percent (who are already paying 60 percent of federal income taxes). And though Obama has admitted that soaking the rich will take a toll on the economy, he has downplayed that drawback of his economic plan while promising lower taxes on the middle class and a better economy. That plan runs on a considerable supply of pixie dust.

Redistributing wealth is what all nations do to one degree or another. In fact, there is no other way to describe the recent $700-billion rescue of the nation's financial sector. Here, with McCain's support, we have redistributed wealth upwards from average Americans to the institutions that employ a big chunk of the nation's multimillionaires.

Again, Blumner's writing seems to present us with a dilemma. Is she that ignorant, or is she lying?

You can call a trip to the 7-Eleven to buy a Slurpee and a hot dog a case of redistributing wealth, if you like. But obviously, until Blumner attempts the sidetrack, we were talking about government efforts designed specifically to average out incomes and prosperity. Progressive taxation is one facet of aim. Government largesse (as with Welfare and the EIC) is another.

The government's support of credit markets benefits all, for the consumers at the bottom of the economic ladder suffer the ill effects of nonexistent credit as much as anyone. Doing the bailout at the bottom of the ladder would not fix the credit market. Funds at that level would be too widely dispersed to allow for bulk lending.

It sounds nice to want to give money to families in foreclosure, but it would not fix the financial market problem that affects the economy of the entire world. And, as already noted, it was already the rich who paid most of the taxes that are being used (supposedly) to bail out the rich. Blumner creates the impression that the lower 95 percent somehow subsidize government benefits received by the top five percent. It's a bit like me complaining that my $x paid to the local government went to help fix a culvert near the rich man's property. It might as well have gone to replace a traffic light along the route I drive to work--but of course government funds don't work like that. It's all more or less in one big indistiguishable pot, and the rich guy probably paid far more in taxes than I did. He paid for the culvert and then some.

I'm not saying that the bailout wasn't necessary, just that if McCain wants to rail against redistribution, this is a much more appealing target. Obama wants to spread the wealth by retiring those Bush tax cuts that benefited the wealthy in order to pay for reforms to the nation's pockmarked health insurance system.

Can Blumner be that uninformed? Obama wants to do far more than that. He need not act to retire the Bush tax cuts. They have a sunset provision. Obama specifically wants to increase the capital gains tax to levels not seen since the early Reagan administration (held over from previous administrations) and start applying the payroll tax to income over $250,000. And his spending plans carry a gigantic price tag. They are not merely a set of health care reforms, as Blumner appears to suggest.

So let's see, which is more deserving of McCain's puffed-up fury: saving the jobs of investment bankers who brought ruin upon themselves due to unbridled greed, or protecting the health of America's uninsured children?

Blumner appears to favor false dilemmas. She already admits that she is not opposed to the "bailout" (hopefully because she recognizes the broad benefits). Why are uninsured children the other side of the coin? Who knows? The private sector has the ability to tend to uninsured children who experience health problems.

Which smacks more of the "evils" of socialized government: taking part ownership in a raft of banks, essentially partially nationalizing the banking sector, or creating an affordable public health insurance program as an alternative for Americans who don't get health coverage at work?

The latter, since buying a share in a bank does not require any government regulation or redistribution of wealth. If the shares do well, then nobody in particular loses. The creation of "an affordable public health insurance program" means that somebody is being forced to share the risk of others, creating a climate for "free rider" abuse by preventing control of costs by controlling risk.

Apparently Blumner doesn't see it that way. I wonder why? Too bad she offers no cogent argument, for that might have explained things.

There was a time when McCain cared about responsible government. In 2001, speaking on the Bush tax cuts, McCain said: "I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us." But that was when he was a redistributionist. Now he's just a desperate candidate in search of a winning strategy. Let's hope he hasn't found one.

On the contrary, let's hope he has found a winning strategy. McCain reversed on the Bush tax cuts because of the state of the economy. Obama's policies figure to make the economy worse (perhaps much worse) while McCain's should help.