Wednesday, February 28, 2018

Do Americans REALLY Want Big Government? If So, Are They Willing To Pay With Higher Taxes?

In the last week three WSJ pieces commanded my attention, motivating me to combine them in a blog post. The first ('Government Spending Discourages Work')was an op-ed column (Feb. 27, p. A15)  by Edward Lazear - a professor at Stanford University's Graduate School of Business - and more importantly, a "Hoover Institution Fellow". To remind readers - one and all - it was under the illustrious  President Herbert Hoover that the infamous stock market crash of 1929 occurred - in large part because of Hoover's policies vis-a-vis Wall Street. That crash incepted the Great Depression.

No surprise that Lazear as a fellow of the Hoover Institution recycles much of their claptrap. Among which we see (ibid.):

"..Over time high spending necessitates high taxes and high taxes reduce work and restrains growth. Economic trends in developed nations show that low taxes and hard work are linked to robust growth.."


"Tax and spending rates correlate highly across the 35 OECD countries. Higher spending goes hand in hand with higher taxes, higher deficits, fewer worked hours and less growth."

But then there is another piece that pretty well refutes that bollocks.  'Germany, Awash In Money, Shies Away From Tax Cut'' (WSJ,  Feb. 21, p. A11) . focused on Germany posting a projected, consolidated budget surplus of 50 million euro ($62 billion) between now and 2021, The writer adding in typical sardonic WSJ fashion:

"The German government never had so much money or so many ideas of how to spend it,  The one thing that isn't discussed is giving it back to the taxpayers".

Which, of course, is a flat out incorrect interpretation, but let's admit the earlier cited Edward Lazear would be content with that take,. But let me clarify that for Germans that money   IS given back, but as extended unemployment insurance, paid family leave and free child care, higher education (free) and medical care. Not to mention generous pensions.

This was again made clear to us when we saw our German friends Reinhardt and Elli in Garmisch-Partenkirchen, in May 2013, e.g.

Image may contain: 5 people, people standing, mountain, sky, tree, outdoor and nature

At the time we discussed with Reinhardt -in one of many conversations -  the relative merits of the German and American work forces. I mentioned promotion specifically and he'd been emphatic that the idea that promotions were "worth more" in the USA was nonsense. "Workers have just as great an incentive here in Germany", he said, because seniority is based on the quality of one's work and "that same seniority determines one's pension."  When I pressed him further he agreed that Germans aren't ruled 'by the buck' (or euro), "Jawohl, it is true that we do not consider the money to be the main determinant of our lives. We treasure time to be with family also to travel and see the world later on."

He did agree also that higher taxes are part of it and enable benefits like higher pensions, more widely distributed social insurance and child care provisions  as well as a less profit oriented healthcare system. He acknowledged that taxes in the U.S. are substantially lower than in Europe but made it clear that translated into more social benefits for Europeans. 

"You will not see a European go bankrupt or become homeless from a medical problem." he averred.

This is where the WSJ piece on Germany's  surplus is misleading because it interprets and frames that surplus in terms of individualistic American nonsense that it must be  "given back" as tax cuts. Yeah, right, and WHO gets most of those cuts? Three guesses but the first two don't count.  This is also something Lazear glosses over in his claims that "government spending discourages work." I defy you to blab that to any red-blooded German, who are amongst the hardest working and most productive citizens in the world. And who - because of that hard work - expect and demand their government use any extra money for taxes on social services. 

As Green Party member Sven Giegold, quoted in the piece put it:

"You need high taxes in order to be civilized. We are very far away from the government having too much money."

And Reinhardt would totally concur because without that gov't support he'd not have been able to retire at age 55 from his auto engineering job and spend the last twenty years  touring various places, including the U.S. and Canada (Whistler, B.C.)  As he put it when we spoke on these issues:

"It is interesting" he said, "but if Americans were willing to pay higher taxes they might have more time for family and travel as well as paying less in healthcare costs because they could have a system more like ours, less based on profits!"

Of course, he is correct, but to the typical  shortsighted, American tax cut money grubber this is somehow  twisted and unnatural. This despite the fact Germany has rarely been in deficit mode because it firmly believes in husbanding resources rather than trickle down BS that gives tax cuts to the rich. As the article notes:

"Germany has among the highest taxes in the world and a habit of heavy state spending."

This prompted former U.S. ambassador to Germany, John Kornblum, to opine in the piece:

"It's sort of a through the looking glass world. Traditionally Germans have been in favor of hoarding resources rather than lowering government expenditures."

Yet the proof is in the pudding! Despite those expenditures it's not running a deficit like the U.S. - a hard fact that Edward Lazear totally ignores in his specious brief for "aggressive cuts in federal spending."  Seems to me (and it would Reinhardt) Germany has some lessons to teach the U.S.- not that a hack like Lazear would take note.

Finally,  we come to:   'Americans Want Big Government',  by William Galston - one of a handful of center left columnists at the Journal.   Galston cited a Pew research poll from last April that showed - for the first time in eight years- "Americans favored a larger government offering more services over a smaller government providing fewer services."   This was bolstered by an NBC/ Wall Street Journal poll last month which showed 58 percent of Americans ("the highest share ever recorded") agreed that "the government should do more to solve problems and help meet the needs of people"-this compared to only 38 percent who felt "the government is doing too many things better left to businesses and individuals."

Moreover, "Americans favoring a more active government included majorities of all age groups, ethnicities, and education levels"  (Those favoring less gov't included 63 % of Republicans, 65 % of Trump voters and 51 % of white men. In other words, the usual suspects.)

How does this demand for government help break down?

- 50 percent of Americans want the gov't to increase spending for Social Security

- This is vs. 5 percent who want cuts

 - For Medicare the comparable figures were 45 percent and 7 percent.

- For Medicaid, 38 percent vs. 12 percent

In a separate Kaiser survey, 40 % want more defense spending, 19 percent want less.

Similarly, 70 percent want more spent on education and 7 percent want less.

Based on these polls, Galston concluded "Americans want Big Government"

Americans, for their part, may want a big government a la German style but ARE they willing to pay for it?  Let's make it clear you can't have both tax cuts and government extension of services and programs. The way so many grabbed at that fake GOP -Trump tax cut just passed, I doubt it. So I guess they'd rather continue with no paid family leave, no sick days to speak of from work, no government supported pensions like Reinhardt enjoys, and excessively expensive health care with too many dubious outcomes.

When I see Americans vote in their millions against tax cut pols then I might believe the zeitgeist and supply side brainwashing has given way to a new "German" normal. But not until.

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