I’m back in Oakland after a 6 week exile in Los Angeles. During my time away I watched as the US congress failed to take decisive action to restore balance to our economy. It’s good to be back, but the reality of our government’s failure to act in the interest of all it’s citizens is brought into relief by what I encountered when I got home. The school where I work will have fewer employees this coming year. Those who lost their jobs are victims of government policies that ignore the value of American workers. Our congress is currently obsessed with serving the interests of the super rich, refusing to raise taxes on multimillionaires so that people who work to educate our children can keep their jobs.
Capitalism works as long as there’s a balance between the interests of capital and labor. The dire situation in our schools is a canary in the coal mine for a nascent economic disaster. Economist Nouriel Roubini reminds us about what Karl Marx observed in the epic “Das Kapital”:
“Karl Marx got it right, at some point capitalism can destroy itself,” said Mr. Roubini, in an interview with the Wall Street Journal. “We thought markets worked. They’re not working.”
What kept capitalism alive for so long in America, and what will eventually save us from a complete revolutionary disruption, is high taxes on capital gains. The self centered and greedy argue that there should be no such taxes because they are an obstacle to wealth creation and an unfair redistribution of wealth. They are unwilling to acknowledge that capitalism depends on a redistribution of wealth through the exploitation of labor. Taxes merely serve as a balancing factor, preserving the value of labor so that the mass of society (laborers) continue to have some effective purchasing power and remain viable.
Warren Buffet argues in favor of higher taxes in his August 15 New York Times editorial, Stop Coddling the Super Rich. He may not be channeling Karl Marx, but his point, that Congress should attach higher taxes to money made in capitalist endeavor, acknowledges what Marx posited about capitalism. Buffet, I assume, hopes to continue to make good money through his investments. But he knows he won’t be able to if our economy crumbles.
I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation. — NY Times, August 15, 2011
Economies require balance between capital and labor. Buffet recognizes that our economy will collapse if we don’t use taxes to bring capital and labor back into balance. Franklin Roosevelt figured this out, too. His Works Progress Administration increased the power (and value) of the American worker by making the government a big purchaser of labor. By redistributing wealth through the WPA, FDR was balancing our economy to the benefit of both capital and labor. Not every capitalist is as smart as Warren Buffet. Many of them are blinded by their greed and don’t see the risk of continuing to push for lower capital gains taxes.
Some members of congress are not smart enough to see the risks, either. By stubbornly and ignorantly refusing to raise Buffet’s taxes they are risking the viability of our whole economic system. These bureaucrats are responding to the basest aspect of human nature: greed. But government shouldn’t exist to preserve the imbalance of our economic system. It should exist to create balance.