THE BLOG
11/29/2008 05:12 am ET Updated May 25, 2011

"Spreading the Wealth" Allows for Creativity

Joe the Plumber came. Joe the Plumber as symbol served and has now left the building. What remains is the last ditch argument that by mentioning "spreading the wealth" on two occasions, seven years apart, Obama is a socialist. Based on stated policy objectives, the idea that Obama is a socialist is not a well founded argument, it is nothing but innuendo. Oabma is no more a socialist than Teddy Roosevelt who presided over the formal legislation creating the progressive tax. And by making this accusation, as David Sirota has pointed out, McCain makes these final days of the election a referendum on conservatism as a philosophy.

Both McCain and Obama have proposals for fixing what Americans find the central issue of this election at this time, the economy going off script. Both candidates are ideologically driven in diametrically opposed directions. McCain proposes even more tax cuts for the rich to stimulate the economy through investment, 'trickle down'. Obama proposes what is now being called 'trickle up', tax cuts for the middle class at the expense of the rich. As they are perfect juxtapositions, one or the other of these proposals must be dead wrong.

The problem at hand is, over and above the banking/credit crisis, that the public is strapped, broke and getting broker. Their jobs are paying less and less year over year, slowly, relentlessly drained by unacknowledged inflation. It is literally true that most Americans can't afford any more taxes without serious erosion of their standard of living. Of the two proposals to solve the problem most on their minds, their ends meeting, which proposal is better, Obama's or McCain's?

McCain says lowering taxes on capital gains, increasing the dependent deduction and renewing the Bush 43 tax cuts will do the trick. Small business will save the day by creating jobs. The thing that is missing from that equation is whether or not there will be a reason to create those jobs. Any sane businessmen will not hire if there is no evident increase in demand for his product. If he has more orders than he can fill he hires, otherwise not. And that is the flaw. Putting money in the hands of business or investors as a means to stimulate the economy is putting the cart before the horse. It also increases the deficit, increasing the net real tax burden for the public at all income levels in the name of a flawed concept.

Obama's plan is simple and direct, restore taxes to Clinton levels for the wealthy and use that to relieve the Reagan era tax hikes on the middle class and poor. It is revenue neutral, not increasing the deficit, admittedly just treading water on the cost of government. What it does do is increase the buying power of the middle class. The poor will not directly benefit from this plan, only indirectly, but surely. What it will do is increase demand for products and services in the private sector. So the net effect on small business will be more business and they will then be in a position to create jobs.

This seems to be a difficult concept for small businessmen and Joe the Plumber. The math is really simple though. Do you benefit more from paying less tax on your earnings of over $250,000 a year or more from 250 Obama enabled customers buying $1,000 of your product a year? Do you want your business to grow or just hang on to 4% more income above $250,000/year?

That is the meaning of 'spreading the wealth' cowboy. If more people have more money then more business is done and that 4% increase in taxes comes right back to you. If you are in the forefront of innovation, more comes to you. Far from discouraging innovation, 'spreading the wealth' enables the market to reward creativity.

The mechanics of the economy are complex but only in accounting for detail. The tidal forces of an economy are quite simple. Consumers are the heart, body and soul of an economy. Either or both of government or private enterprise are the brain. When the body starves the brain it can't function and when the brain starves the body they both die. Simple as that.

Private enterprise is better at some things and government is better at others. One thing in particular that private enterprise is not good at is recognizing when it is necessary to raise wages or pay taxes in order to keep the customers buying. On his own, a businessman's motive is to keep salaries low to max out profits. This is good for the one business but is bad for other businesses, as his employees can't buy as much from others. It is a circular firing squad of cost cutting pressure that no businessman can be expected to even understand let alone mitigate by raising wages. That is where responsible government must intervene. Only government can mandate wage scales or create conditions favorable to labor collective bargaining and thus break the suicidal tendencies of business to ruin each other through cutting wages.

In general government is better at seeing to the common good, as is mandated by the Constitution, than is business. Business is better at seeing to efficiencies of production and distribution where their profit motive is not at odds with the public interest.

The dread redistribution of wealth is no more onerous than getting an oil change when it is due. In order to keep the economy functioning some money has to end up in the hands of the public. Otherwise there would be no market for anything. The car will break down. As we have seen.

McCain resorting to socialism as a fear tactic puts at risk the very concept that socialism is to be feared. It reframes the election as a question of whether or not conservatism is any more than a idiosyncratic obsession of a few rich people and delusional small business owners. It puts the niggardly ways of the right in stark contrast to the broader picture of a society in which all would prefer to live.

The idea that socialism is a thief of your possessions and that capitalism is not is at issue now. Either economic philosophy relies on the good character of men to function properly. The Constitution charters the common welfare as a primary task of government. There is no charter for business but profit. It is therefore the task of government to see that the profit charter is conducted in compliance to the common good. Is it therefore true that a charter of the Constitution is socialism? Actually it is not applicable. Socialism was not conceived of by the Framers. All they had in mind was oversight of the welfare of the people and the country, and if by 'socializing' the production of airplanes during WWII or mandating wage price controls during the Nixon era oil shocks, the government was socialist, then well they were and it was probably the right thing to do.

McCain and the conservatives will lose this argument of conservatism versus socialism if it is in the public eye, if not next Tuesday, soon and for another three generations. That is why Republicans have not run on it in the past and why they have focused on 'other' issues. McCain may be doing his country one last service, maybe for less honorable reasons this time but perhaps his most valuable service to date.