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Bankers for Bernie

There was an article in Politico last week titled “Bankers for Bernie“, about bankers and financiers who support Bernie Sanders. Frankly, there should be many more of them.

After all, if you know anything at all about finance and economics, you should know that they are not a zero-sum game. As they say, a rising tide raises all boats. It was the rising middle class in America that led to our most prosperous times and economic prosperity. And numerous studies have proven that in places where there is too large a gap between the rich and the poor, everyone – including the rich – suffers. Not just financially, but also their life expectancy goes down, as well as the quality of their life. These are facts.

But even if they weren’t true, even if you are competing for a prize of fixed size, how can you feel good about yourself if you have to tilt the playing field in your favor? Is it worth winning if you have to knee-cap your competition? Do you really want to live in a world where the only way to get ahead is corruption and cheating? What kind of world is that? You don’t have to speculate, because there are plenty of places in the world where corruption and graft is the norm, and they are not pretty places. What’s the point of being rich if you can’t even walk down the street without surrounding yourself with bodyguards? Or where your children suffer because of pollution and crime?

And we’ve seen what happens when Wall Street gets free reign to do whatever they want. Bubbles, more bubbles, recession, or worse. Followed by a complete vilification of bankers and investors (which they mostly deserve, although to me it doesn’t help to blame the bankers when the system is really to blame), and then by the pendulum swinging toward socialism. Are the bankers so stupid that they can’t see this coming? Can they see no further than this quarter’s profits?

To me, the solution is not unbridled capitalism, which in its purest form is no better than robber barons and warlords. I do believe in free markets, although that term means something slightly different than what many corporate CEOs think it means. But neither is it unbridled socialism, which has produced problems just as bad.

It means equal opportunity. Everyone should have an equal chance to succeed, which means that everyone will also have an equal chance to fail. But failure should not be terminal. There needs to be a comprehensive social safety net. I’m not asking for much, just the same degree of safety net that we always seem to be able to afford to bail out the too-big-to-fail banks and other industries.

Equal opportunity means that everyone has equal access to health care, and an equal chance to get a good education. It means that we need to expand the meaning of capital to include not just money, but also “social capital“.

It means that we have to eliminate, as much as possible “externalities” by taxing them at their full cost. Business that pollute should pay for mitigating that pollution completely. Businesses that use up finite resources (rare materials, clean water, and even biodiversity) should be taxed to completely cover those costs. Sustainability should be encouraged by taxing businesses that are not sustainable (like fossil fuels, overfishing, etc.). Corporate law should be changed to reduce the fixation on short-term profits at the expense of, well, everything else.

And finally, the playing field must be as level as possible. Monopolies should (once again) be prohibited by law, and even inheritance should be heavily taxed. If you have done your job as a parent, there is no need to give your children an overly unfair monetary advantage. They have the opportunity to succeed on their own. Don’t give them the fish, teach them how to fish.

On the other hand, with all these new taxes on pollution and destruction of resources or species, we should be able to greatly reduce many conventional taxes. We should mainly tax things we want to reduce. Currently, we stupidly tax things that we should be encouraging. We have sales taxes, when we depend on consumers to buy things to keep the economy going. We tax income, when we need people to earn money. Let them keep more of the money they earn. But if they can’t take it with them when they die, and can’t just pass it down completely to their children, there will be less incentive for people to be overly greedy. That, in turn, will reduce economic bubbles, because the rich will spend less time searching for safe places to invest their money.

Property should still be taxed, because it is a finite resource. I’m fine with taxing things like drugs, but we should make drug use legal, and then use the taxes we raise on them to pay for any health or other problems that arise from excessive drug use, instead of paying to throw drug users in jail, which does nobody any good.

That’s my solution. It isn’t socialism (not even “democratic socialism”, which does share some of the same goals), and it isn’t what we currently think of as business-friendly capitalism (although I’m sure we will find that it is actually far more friendly to business). I’m not sure what to call it, although one could invent terms like “social capitalism”.



  1. ThatGuy wrote:

    Unfortunately, while the above is spot-on as far as my opinion goes, I’m certain it would be derided as socialistic. As we’ve seen, something doesn’t have to be socialism to be called socialism. The bar is basically “more government than I want.”

    Wednesday, April 20, 2016 at 6:59 am | Permalink
  2. Arthanyel wrote:

    What you describe is substantively the same as “democratic socialism”. We have a candidate for that *grins*

    Wednesday, April 20, 2016 at 7:08 am | Permalink
  3. Iron Knee wrote:

    Except that I’m actually talking about less government, or at least no more government than we already have. Like, instead of the government funding the protection of the environment, we would motivate companies and citizens to fund it. Sort of like how we currently fund religion by providing huge tax breaks.

    I really am a capitalist (as are you, Arthanyel), and there are lots of things that Sanders is proposing that I don’t agree with. But it is true that we do have much in common, and while I agree with many of his goals, we definitely have a huge difference in strategy and tactics.

    But I’m sorry the comments on this post became partisan. I started the post by praising Sanders (even though after yesterday’s primary he has virtually no chance of becoming the nominee). I want us to keep up the fight, and we must avoid being divided by partisan bickering. Let’s spend our energy figuring out how to make this happen.

    Thatguy, I don’t care what people call it. After all, I’ve heard people call Obama a socialist and a fascist in the same sentence, when he is not even close to either. And some of the most socialist institutions in our country include the military, the police, and highways, which people love.

    I care about the actual policies and getting them implemented, including figuring out how to get them implemented, and ironing out the details. I’m a pragmatist, not an ideologue.

    Wednesday, April 20, 2016 at 9:27 am | Permalink
  4. Carter Shmeckle wrote:

    “It means that we have to eliminate, as much as possible “externalities” by taxing them … Business that pollute should pay …Businesses that use up finite resources … should be taxed to completely cover those costs. ”

    How ’bout, “people who breathe should be taxed for air”? Lot of potential revenue there.

    Wednesday, April 20, 2016 at 10:34 am | Permalink
  5. Yudith wrote:

    If you don’t tax incomes, you suppress a huge tool of income redistribution. See, sales taxes, property taxes and the like cost more in percentage of revenue for the poor people than for the rich people; for example, a 2$ tax hurts more if you earn $20.000 a year than if you earn $200.000 a year. On the other hand, income taxes cost more to rich people than to poor people, especially if the income tax percentage is higher for the high income bracket. This doesn’t remove all of the income difference, far from it, so it does not discourage people to aim for high paying jobs as you seem to suggest. What it does is have the services that the State provides paid by the people who actually can afford it, to be available to people who really need them.

    Wednesday, April 20, 2016 at 10:52 am | Permalink
  6. David Freeman wrote:

    I mostly agree and I would love to live in the world you describe. However, Democratic Socialism exists now and has proven itself in Scandinavian countries which consistently lead the world in happiness and in the health of their democracies as reported by the Economist:
    Let’s try something proven then tweak it.

    Wednesday, April 20, 2016 at 11:31 am | Permalink
  7. ThatGuy wrote:

    “Except that I’m actually talking about less government, or at least no more government than we already have. Like, instead of the government funding the protection of the environment, we would motivate companies and citizens to fund it. Sort of like how we currently fund religion by providing huge tax breaks.”

    I’d see the motivation of good stewardship, inasmuch as it’s directed by tax incentives, to be the purview of government. Setting up any sort of new system based on how businesses and private citizens use resources would necessitate a whole lot of folks to monitor, regulate, and adjust to new realities as time goes on. I certainly do not trust the individual or businesses to do this on their own because we have too many examples where short term gain is deemed more important than sustainability or the welfare of neighbors.

    But while you mention it, I’d love if religions lost tax-exempt status.

    Wednesday, April 20, 2016 at 11:45 am | Permalink
  8. Michael wrote:

    If you’re really hung up on names and terminology, it generally sounds like Libertarian paternalism.

    I agree with a lot of the main ideas, but the devil’s in the details. For instance, what do you do about the people retiring right now. They’ve been paying income taxes their whole lives, saving what they can. Are you going to then just pile on a 75% estate tax while those now entering the workforce do so with no income tax? Yes, we should shift the tax burden away from income and sales and toward wealth accumulation. But how? And how do you make sure you’re not encouraging perverse incentives? For instance, you don’t want to encourage everyone to be profligate, living from paycheck to paycheck, just so they can avoid wealth accumulation taxes.

    The one comment that I really question, though, is “the rich will spend less time searching for safe places to invest their money.” I would say it’s the opposite. If you have no income tax and an absurdly high estate tax, the wealthy are going to spend even more time than they do now setting up off-shore accounts. What would be better than living your whole life tax-free, then passing on everything tax-free to your kids?

    Wednesday, April 20, 2016 at 2:45 pm | Permalink
  9. Iron Knee wrote:

    Carter, I know you are being sarcastic, but I did say that we want to tax things only if we want to discourage them. I don’t think we are at the point where we want to discourage people from breathing. Besides, air is not a finite resource, and there is a balance between plants and animals, so it is sustainable.

    Yudith, you want progressive taxes. So do I. Income taxes aren’t the only progressive taxes. Property taxes can be (and should be) progressive by ramping them up. After all, land is a finite resource. There are also “luxury taxes”.

    David, do you know of any successful “democratic socialist” countries outside of Scandinavia? England tried it and then had a backlash and elected Thatcher. Don’t get me wrong, we have a lot to learn from Scandinavia, but just because something works there doesn’t always mean it will work here. They are very homogeneous (in many ways), small, and never had major class divisions. Also even if we have similar goals, doesn’t mean we have to achieve those goals in the same way.

    The goal of socialism is to replace (some or all of) private ownership with public ownership. I don’t want to get rid of private property, entrepreneurship, or individualism, I want to increase them by making it so that everyone can succeed.

    Thatguy, of course government will need to make sure everyone plays by the rules and that markets are level-playing fields. And I agree with your last point.

    Michael, I never said I wanted to tax wealth. In fact, I think I said the opposite. I don’t want to discourage people from getting rich. Just that everyone would start from a level playing field. And tax things that we want to discourage (for example, using finite resources). And there are easy ways to make off-shore accounts whose purpose is to avoid taxes illegal.

    Wednesday, April 20, 2016 at 3:47 pm | Permalink
  10. Carter Shmeckle wrote:


    1. Technically, the amount of air in the world is finite.
    2. Me sarcastic?
    3. My larger point being that, while I agree with some of what you write (e.g., making polluters pay for remediation), I think your system, or any system that tries to fine tune outcomes to the nth degree, will ultimately fail. Human affairs are just too complicated. There will be unintended consequences. Then you’ll need to fine tune those, ad infinitum.
    Moreover, your proposal will not alleviate the corruption that results from various interests trying to influence the system for their private benefit.
    A simpler system would just eliminate all deductions to personal and business income taxes, and lower rates accordingly. No more special treatment for capital gains either. Plus, I would tax businesses on their gross income, not net. Would eliminate a lot of shenanigans.

    BTW, a reasonable level of income taxation does not discourage people from earning money.

    Wednesday, April 20, 2016 at 6:07 pm | Permalink
  11. Iron Knee wrote:

    1. If something is continually recycled and replenished, then the supply of it is not finite. The roads in the world are finite, but I can drive (or walk) on them forever.
    2. duh.
    3. That’s why you need a government. Nothing interesting is ever solved forever.
    4. Fine, keep the income taxes if you want. The point was to give people a carrot big enough that they would accept the stick, which is high inheritance taxes, carbon taxes, and similar things.

    Think big!

    Wednesday, April 20, 2016 at 10:41 pm | Permalink
  12. Michael wrote:

    To be more precise, I meant a shift to taxing hereditary accumulated wealth. And you have to do that in order to create a level playing field. Otherwise, the whole thing is a sham. Without an extreme change to the legal/tax/family structure, there is absolutely nothing that can be done to create a level playing field between my kids and Mitt Romney’s or Donald Drumpf’s kids. I simply do not have tens of millions of dollars to give them to get started in life.

    My larger question remains. What evidence is there to suggest that taxing just or mostly just activities we want to discourage will provide a sufficient level of revenue? They have a built-in self-defeating cycle. Once you tax them, people respond by using less, which lowers tax revenues. So you have to tax them more, which leads to less consumption, which leads to lower revenues again. Theoretically, this would gravitate toward a fixed point of stability. However, this has the side-effect of inducing illegal activity where people try to use the resources but without paying taxes. As a case in point, see the Eric Garner case. People in NY sell illegal loose cigarettes to avoid the state’s high tax rate.

    All taxation induces side effects and perverse incentives, regardless of whether you’re taxing income, hereditary wealth, or “bad” activities. What evidence is there to show that taxing “bad” activities has fewer side effects than taxing income? What evidence is there to show that we can agree on what is “bad” and should be taxed? What evidence is there to suggest that corrupt special interests will game the system to manipulate what is considered “bad?” What evidence is there to show that we can achieve a stable revenue stream that is sufficient to pay for the “good” stuff we want (social safety net, education, scientific research funding, military, roads, law enforcement, foreign aid, industry oversight, technology roll-outs, etc.)?

    Thursday, April 21, 2016 at 10:00 am | Permalink
  13. Michael wrote:

    Oh my, I think I was just agreeing with Carter. 🙂

    Thursday, April 21, 2016 at 10:01 am | Permalink