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July 28, 2011

9

Twelve Progressive Policies That Make the Rich Richer and the Poor Poorer

by rogueoperator

It is a common misunderstanding among progressives that conservatives are “mean-spirited” because they refuse to support government intervention on behalf of the poor. But it is not that conservatives are mean-spirited that causes them to refuse government meddling, it is that they have a better understanding of sustainable economic policy that benefits the greatest number of people and leads to a higher quality of life for those who seek it.

While the mere presence of money and self-interest in an economy is enough for the progressive to scapegoat “capitalism” for all economic ills, capitalism is merely a means to measure and facilitate economic transactions between groups and individuals, and ensure that people get the socially-appraised value out of the economic system that they put into it, while securing the fruits of their labor.

Additionally, progressives often lash out at “capitalism,” when really they mean economic reality – for example, indisputable facts like scarcity and opportunity cost.  Such fundamental misunderstanding of economic reality leads to progressives doing tremendous damage to the economy, all under the misguided notion that they are exacting “social justice.”

With that in mind, I will show how progressive policies, or alternatively, non-free market policies, disproportionately harm the poor through reduced opportunity for work and higher prices for goods and services:

  1. Bailouts – Though the bailout of banks and investment firms began under the progressive Bush, they were carried through under Obama.  TARP cost Americans hundred of billions of dollars, money that was introduced into the economy by The Fed and subsequently inflated prices, as can be seen by the soaring prices of commodities.  Every time The Fed monetizes debt, everyone pays for it.  And due to the poor’s relatively smaller incomes, they are hit harder.  The rich stay rich, and the poor get poorer.
  2. Stimulus – The $789 billion stimulus plan, introduced and passed by The Democrats, was sold as a program that would keep unemployment under 8%, which it has obviously failed to do.  It has recently been discovered that only six percent of the stimulus program went to “shovel ready jobs,” a fact Obama joked about at a press conference. The reason the stimulus didn’t work was not just that, conceptually, it is like picking up a pail of water from a pool and pouring it back in, doing nothing to raise the overall level since none of it is based on savings, but more like it is akin to picking up a pail of water and pouring it into the gutter, only to go down into the sewer of special interests.
  3. Green Jobs – “Green energy” manufacturers like General Electric are cashing in on the taxpayer financing of wasteful green jobs, which have been estimated to cost roughly $135,000 each. What does this mean for the average American? That instead of productive jobs that create actual goods and services efficiently in the market, which lower the prices of those products and makes them cheaper for all to afford, Americans are subsidizing inefficient and cost-ineffective energy while lining the pockets of Washington insiders.  That is, when the money isn’t flat-out going overseas. Indeed, billions of “green” money, 80%  of the $2 billion allocated in the stimulus program, went to foreign countries. This means less money for Americans.
  4. Wars – While it was a perfectly reasonable response to the 9/11 attacks to retaliate against our attackers, it was not reasonable to attempt to nation-build historically backwards people into maintaining civilized nation-states.  Not only is the mission quixotic, but it is fiscally wasteful.  So while the right progressive Bush went to war against the Taliban and Iraq after being authorized by both parties in Congress, the left progressive Obama has continued Bush’s policies, even while limiting the troops’ ability to aggressively bring those wars to a close.  And Obama has truly unilaterally gone to war against Libya, without Congressional authorization, in a mission that now looks to be a losing fight. All these wars, both the new ones and those continued by Obama in violation of his campaign promises, are a waste of billions.
  5. Corporate Welfare – Though the “right” is usually accused by the left of supporting corporate welfare, or money doled out to corporations in the form of government contracts in return for campaign contributions and other favors, it is the Democrat Party that is running away with the corporate bag money.  In the 2008 campaign, Barack Obama took away the title of highest corporate fund-raiser in all economic sectors. Unsurprisingly, showing indeed the capitalists can be sold the rope to hang themselves, Barack Obama is again leading the pack in Wall Street kickbacks.
  6. Subsidies – From ethanol to sugar subsidies, the agriculture lobby garners between $10 billion and $30 billion in subsidies a year.  While it may seem like such programs would help the poor by lowering food prices, in actuality, subsidies paid out for corn allocated for ethanol have drastically increased food prices. Indeed, even evil corporation General Mills has complained about ethanol subsidies, stating that they needlessly make food prices higher! And when a box of cereal is four dollars or more, it strains the budgets of the poor, who rely on such food for basic nutrition. While food stamps are among the least economically harmful welfare programs we have, in terms of negative impact on jobs, the program is overused at 40 million recipients and frequently abused.
  7. Regulations – Although regulations are seen by those paranoid of the market as necessary to restrain big corporations, what they actually do is increase compliance costs for small competitors relative to the size of their company budgets. Many small manufacturers can barely afford the legal fees or the lobbyists needed to compete with “the big boys.” Deregulation actually levels the playing field by making it easier to start up a competitive business. And the market is a much more predictable and sensitive instrument of accountability to the people than bureaucrat regulators, and the self-interested politicians who claim to represent the will of the people.
  8. Unions – While private sector unions are consistent with freedom of association, they also inhibit efficient allocation of resources in exchange for the production of value.  While some see profits as inherently exploitative, and thus labor unions as absolutely necessary to prevent abuse, they are actually indispensable for company reinvestment, amortization, and incentivizing shareholders.  They are a hedge against future uncertainty, such as the possibility of an economic downturn.  But private sector unions are much less harmful thant public sector unions, which routinely sponsor Democrats who kickback taxpayer money to the unions.  While the narrative has it that such unions are needed to prevent exploitation, the numbers show that unions actually lead to workers being overpaid for their skills relative to the labor market. BLS statistics show that the yearly earnings of a union worker vs. non-worker is $47 ,684 vs. $37,284 – or 22% higher.  But neither figure is poverty level, and we can deduce that the unionized business is made less competitive and more likely to fail.  (See the bailout of the UAW-run General Motors.) By extension, the drive to force the unionization of more Americans is a response to the fact that corporations have been offering the benefits often touted by unions, such as healthcare, vision, and dental care coverage, pensions, retirement plans, and so forth.  Corporations have therefore had a  substantial negative impact on unionization by simply remaining attentive to their employees. This in turn is spurring the labor union bosses to ratchet up political pressure in order to continue their rents.  In summary, more labor cartelization and more failed businesses mean less jobs for lower-skilled laborers. Union workers may be relatively better off than non-unionized workers, but fewer people are better off.
  9. Minimum Wage Laws – The effects of the minimum wage are similar to those of union cartelization, as it decreases the ability of workers to sell their labor at a wage lower than their competitors, thus limiting the ability of people to get a start in the labor market and work their way up.  The minimum wage thus limits opportunity.  In addition, jobs are often lost due to the increased expenses of maintaining minimum wage employees. This disproportionately harms the poor and the young looking for work experience.
  10. Education – Universal, state-run education is one of the leading causes of the progressive left, even to the extent that many progressives oppose there being any choice in school attendance at all, purportedly in the name of “equality.” But public run schools have been shown to be an unmitigated failure, non-competitive, overly expensive, and simply inadequate preparation for either the work force or college. Speaking of college, even though more Americans attend college, most students emerge drowning in debt, and with ill-preparation for the work force stemming from their largely  market-irrelevant academic training.
  11. Corporate taxes/ Taxes in general – The United States has the second highest corporate taxes in the world, leading to a business-hostile environment that leads corporations to “exit” the country, or “voice” their preferences (for lower or no taxes) through lobbying government.  That numerous loopholes are granted to large Democrat donors like GE and Goldman Sachs, which paid disproportionately lower taxes or even no taxes in 2010, is no surprise. But what is a surprise is how progressives keep pushing progressive income taxes as a solution to all problems, when they should be pushing policies like the FAIR tax, which has no loopholes and would increase tax transparency and predictability.  More workers would be employed, since company compliance costs would be lower; the IRS overhead would be reduced; lobbying would be dramatically curbed; and politicians would be more responsive to voters instead of understandably tax-dodging companies.  But to summarize, corporate taxes and taxes in general lead to corporations either lobbying government for special favors competitors cannot, do not, or will not offer; or fleeing the country and taking their jobs with them.
  12. Welfare – The sum effect of reallocating market-driven, or alternatively, consumer-responsive resources is to structure an economic system that is dependent on government expropriation and redistribution to political clientele. Structural inefficiency inexorably leads to higher prices, which disproportionately harms poorer people.  Government intervention and overhead leads to a reduction in productivity, through removal of workers from private sector jobs, whose increased productivity lowers prices, and their replacement with public sector jobs, which not only consume goods and services produced by the private sector but often inhibit the private sector!  Government intervention thus leads in many cases to a doubly negative impact on the productive economy.  Second, the payment of welfare to those who cannot or will not find a job has an objectively harmful effect, in that welfare payments consume produced resources without corresponding inputs.  Welfare subsidize idleness, as we can state even without negatively judging the recipients, leading to a loss of productivity and foregone lower prices for goods and services, which would arise at the very least through market competition.  But welfare not only harms the market, but it harms the recipients themselves, for it leads to a sustained lower quality of life.  As Ben Franklin put it:

“I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I travelled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

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9 Comments Post a comment
  1. Jul 28 2011

    First, a slight disagreement. Bush was no progressive. He was no conservative either, but he governed as a centrist, taking pollicy points from both sides. The effect was almost as bad, but at least he had some redeeming policies.

    #1 – Bailouts – you are correct. Allowing the weak to fail is a part of the churning process that causes new ventures to succeed, thus making rich, those that were once poor. Progressives prevented that.

    #2 – Porkulus – you could have gone further. It was simply a re-implementation of the FDR alphabet soup. Once the money ran out, so did the jobs. A true stimulus is seed money to create work (not the creation of work for work sake).

    #3 – Green Jobs – that is the hilarity of the situation. Ask a progressive about how much tax GE paid, and watch them turn red! But ask them about tax breaks for green energy, and watch them turn green! What they do not understand is that is where GE is getting its tax breaks from! (As are many of the Oil companies they now want to vilify).

    #4 – Wars – You forgot Yemen, Syria and Somalia as well. Obama has started twice as many wars as Bush did.

    #5 – Corporate Welfare – I think you misunderstand what the left sees as corporate welfare. They see it as the corporation being able to keep any profits. Their view is that all corporate profits are the property of government, so when a company retains some, that is corporate welfare.

    #6 – Subsidies – that one just boggles my mind. While I fully understand how the left supports them and why, the fact the press does not have the intelligence or the integrity to point out the hypocrasy of that tax on the poor is something I will never get used to. Artificially inflating prices is not a boon to the poor even in Newspeak.

    #7 – Regulations – Kind of like sugar. Some are good and necessary. But too much makes you fat and gives you cavaties. Large corporations, as you note, love them because it does keep new and innovative companies out of the market.

    #8 – Unions – Unions assisted in getting many of the workplace laws we have today passed. In the past, they were beneficial. But like all liberal programs, they outlived their usefulness. When the problem is fixed, why keep fixing it? Unions today are the reason jobs go over seas. They cannot understand that, nor even attempt to. They live like animals – only for the day, and not for the future.

    #9 – Minimum Wage Laws – Before Kennedy managed to resurrect the ghost of increasing Minimum wage laws, virtually no one was being paid them. Competition had virtually eliminated them except in depressed areas. In those areas, it allowed poor to start the climb out of their income hole and into the middle class. Progressives do not see that. They expect a higher minimum wage to create wealth. But all it does is create inflation, and loss of jobs. It is no secret that recessions follow increases in the minimum wage. Companies hire less! While not rocket science, it is beyond the ken of progressives.

    #10 – Education – it is not “public education” per se that is the problem, but most of the issues ennumerated above. When you get a monopoly, prevent competition, and establish tenure for life, you remove all incentive to excel (oh, and add no competency evaluation). But I guess those are the traits of the “public” in public education. It can work – if it is run like private companies, but I do not see that happening.

    #11 – Corporate Taxes – I disagree that corporations are “democrat” or “republican”. They are power leeches and will suck up to whatever holds the reigns of power. Microsoft got burned during the Clinton years because it was apolitical. It is no longer.

    #12 – Welfare – You cannot eliminate that which you have defined as a fixed portion of the population. In other words, there are not really any “poor” in America today. Those “poor” have one or more TVs, cable service, computers, cars, and all the amenities of life. But the government looks at society on a bell curve, so the tail end is the “poor”. It does not matter how much you throw at that end of the bell curve, you cannot eliminate it. That is what the government has been doing for the last 50 years. And that is the falacy of welfare. It is a disincentive, but more insidiously, it is merely throwing money on the tail end of the bell curve, whether it is needed or not. Since the distribution will always be in a bell curve (by government definition), there will always be a tail.

    Reply
    • Jul 28 2011

      Thanks for adding your input. I didn’t mean for the list to be exhaustive, and I also decided to put things in terms a wandering lefty would understand. Of course our poor people aren’t “poor” by world standards! But try explaining that to a lefty. In any event, great points. Best, RO

      One note: I framed things in terms of “progressivism,” but may have shown that I detest Democrats more than Republicans in some parts. This is partly because I think Democrats falsely present themselves as being anti-corporation, while Republicans just don’t say shit about taking money from corporate donors. TC.

      Reply
      • jal
        Aug 16 2011

        On the contrary, lefties recognize that above a basic level of subsistence what matters *most* for a community is the relative distribution of wealth in a society. There are a lot of reasons this matters. For one, massive wealth puts massive political power in the hands of the few while leaving the middle class (and even moderately wealthy, not to mention the poor) feeling disenfranchised, without a stake in the establishment. Instead of making neighborliness, solidarity, and patriotism normative, the reckless and even selfish pursuit of individual wealth is esteemed most. Shoot em in the face, man.

        Democrats are as por-big business as are Republicans, so we agree there. But that is not “progressive” that’s “caputred”. As they say, when I get rich I’m gonna buy me a politician.”

    • Jul 28 2011

      In my view, Phil, Bush was a progressive president in his economic and foreign policies. He instituted social welfare programs like Medicare Part D, and used the state for neo-liberal nation-building abroad. There may be some significant caveats to this interpretation, I concede. Best, RO

      Reply
      • Jul 28 2011

        I do not dispute your examples (you did leave out NCLB, but I guess that is my pet peeve). But he also gave us the tax cut. And while some can argue about Iraq being neo-liberal, Afghanistan was purely self defense, so half and half.

  2. m082844
    Jul 28 2011

    I love your last point phil

    Reply
  3. jal
    Aug 16 2011

    Don’t conflate what Democrats *do* with what *progressives* and *liberals* *want*. Bank bail-outs? No way. Wars? You’ve got to be kidding me. Corporate welfare? Over our dead bodies.

    The rest? Well you either get it wrong, e.g. how the stimulus of the stimulus is supposed to work. Frankly, the stimulus was a) not enough, b) spent in many of the wrong places c)consisted of too many *tax breaks*. It also kept a lot of state workers employed and consuming. We wanted a federal work program, and we got a mishmash. don’t blame the progressives. Green jobs? We have to transition off oil and coal as our principle energy sources. It is imperative. You guys can live in that fantasy world where it is not a choice, but that’s just what it is: fantasy, and dangerous fantasy at that. A lot of green energy is not competitive with oil, but very few new technologies *are* cost competitive until they are mature and widely developed. This kind of problem is well known in many domains: it is the problem of being stuck in a local minimum of a fitness or utility landscape. The history of improvements in green technologies is impressive. Subsidies? We want green subsidies but no subsidies for dirty energy. Sure, some no doubt get riled up that a big oil company got so many green energy tax breaks, but there are ignoramuses on both sides. But you will also find that a lot of progressives want to get rid of farm subsidies, *especially for corn ethanol*, but you don’t bother to ask why. Unions? Its difficult to count how many good things unions have brought us, because they are so many, but they rarely get credit. Sure, many or even most of the bad stuff is history. Well some say, we don’t need them any more. I say, you get rid of unions, you’ll see those good things evaporate. One of them is the minimum wage, which hasn’t been increased in any meaningful way for a long time, certainly not enough to keep up with inflation. Also, unions are not why jobs are fleeing this country. Jobs are fleeing this country because of our free trade agreements, which benefit large international corporations, but not American workers or American small businesses. See: http://www.un.org/esa/desa/papers/2009/wp87_2009.pdf And contrary to the fantasies on the right, progressives and liberals don’t hate business, they hate large corporations. You guys freak out about government power, we freak out about corporate power. But that’s not mom and pops. As for regulations, regulations are necessary, but they can also be burdensome. I think the left needs to recognize this more. A recent California law requires large fast food restaurants to publish calorie servings for their items, but do not require small restaurants to do so. That’s the right balance.

    So in sum, you’ve written a manipulative piece that distorts progressivism in the extreme.

    Reply
    • Aug 16 2011

      Why is it manipulative? You don’t like it? Sorry, there’s plenty to back up my point of view, and it is not based on any agenda except seeking the truth.

      Reply
    • Aug 16 2011

      Jal, I appreciate your calm and reasoned approach to telling us what the left really wants (versus what they do). It was somewhat informative, and goes to the core of what Rogue was getting at. And that is, the views of the left are indeed based in fantasy, and not reality. The Stimulus did not work because the basic premise is flawed. You can not spend your way to prosperity than you can create a total egalitarian society. Both history and nature demonstrate that fact (there is no species in existence where such a society exists, nor in the history of mankind).

      The Piece is not manipulative, it is written from a reality persepective. While the left may very well desire what you write, they do not say so openly (parts they do, parts they just lie about). Rogue was very open and honest in evaluating the shortcomings of both the desires and the realities of the left. I do understand (remember Animal Farm) where the left feels a need to lie about its intent and goals in order to curry favor with a majority of Americans. However, their need to lie indicates their ideas – as you have expressed them – are not popular. In other words, above all else, what most people hate is for others to tell them what is “best for them”. Indeed, since man is a fallible creature, what one man thinks is best, is fallible as well. The friction with the left comes in their audicity to believe they have all the answers, when most realize they may have some, but they surely do not have all.

      Conservatives on the other hand do not pretend they know it all, they only believe they know what is best for themselves. At the core of capitalism is the belief (way back to Adam Smith) that man acting in a selfish nature will benefit society as a whole because to gain his own greater satisfaction, he must satisfy others. And in the history of mankind, that philosophy has been born out to be true more often than any other ideal. For a very simple reason. Man is hardwired for a great deal of compassion. But man is like any other animal in one big respect – self preservation. While the mind may deny the animal instinct roots of man, the simple fact is those basic instincts have enabled man to perservere and thrive. Any animal, with the concept of future would do the same.

      Reply

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