we-are-all-socialists-nowIn 2009 Newsweek ran a cover with the headline “We are all Socialists Now”. At the time, tax year 2008 data was out that showed 49% of Americans paid no federal taxes. 2009 tax data was similar in that 47% of Americans paid no federal taxes. Most of these that do not pay taxes receive government payouts, or “transfers”, as economists call it.

In reality, this is the redistribution of wealth, or Socialism.

Now we learn that in 2010 the government paid out more in handouts than it took in tax revenue.

Even if you believe the government programs of Social Security, Medicare, Medicaid, and stimulus are some great altruistic programs, do you really believe it makes sense to run the printing presses at the treasury to support such programs?

The last time the United States government paid out more in handouts than it received in tax revenue, we ended up with a four term President.

I have argued before that politicians are working to create a block of voters who will never vote them or their party out of office. We are nearly there. This country will never had a Socialist revolution. Rather, a majority of Americans will happily choose this path in the voting booth because they were paid to make that choice.


42 Responses to “A majority of us are ‘all Socialists now’”

  1. dagoof says:

    Yeah, cuz that’s such a great idea.

    Lets follow Europe.

  2. Joyce A (East of Eden) says:

    Whew, so late to this party….

    Anyway, the reason why “socalism” can work in this country is because we have the safety net of capatalism. Just like there are people that will always take, there will always be people to work. But as the workers “shrink” we’ll all become more miserable. I expect to see the cement housing blocks and Corecoms go into my neighborhood soon.

    • bob says:

      Maybe this country just happens to work because it is becoming more Socialist. I for one, welcome the change. Just look at western Europe and how great the social safety nets work for them!

  3. Steve Feinstein says:

    Most of the salient points have been covered, so I won’t rehash them. Regular PD readers probably know where my opinions fall.

    The one thing I will say is this: I am quite pleased to see Stephen Meehan’s well-considered and well-presented liberal-leaning points on this site. It lends tremendous credibility to PD to have enthusiastic, informed posters from all points on the political spectrum.

    Nicely done, all.

  4. David Kaiser, Editor says:

    Holy Hannah what a brouhaha we have here!

    And for once, I didn’t start it…

    Great thread of posts though.

    Now back to my 50 page market research paper.

  5. Brian H says:

    Great response-post Meehan. Thanks for taking the fire and sparking a good debate.

  6. Alaina says:

    Stephen – Do you think it’s at all possible that we spend too much and maybe we should fix that?

    • Clearly the only answer is to tax more, despite the mathematical fact that taxing everyone who makes $100,000 or more, or for that matter the top 10% of income earners, at a rate of 100% still would not create enough revenue to cover the federal government’s spending THIS YEAR, let alone that pesky $14 trillion we owe.

    • Stephen Meehan says:

      Absolutely. We have to cut spending. But the idea of raising taxes is off the table on too many budget discussions. I think we need to do both.

      Some budget plans, including the Ryan plan, propose cutting taxes and claim it’s revenue neutral (without an explanation of how that’s possible). Raise taxes in a meaningful way, cut spending in a meaningful way and be honest about the numbers until revenue=expense (with minimum, but some, debt).

  7. Stephen Meehan says:

    It’s misleading because it makes the tax structure look outrageously progressive when it isnt.
    A flat tax would actually work out the same exact way. If a society has 100 people and one person makes 100,000 and all the others make 1,000 and the tax rate is flat at 10% … the soceity collects $19,900. That top guy still pays over 50%, because he makes more than 50% of the income.

    • dw says:

      A flat tax is not much better, IMHO. The FairTax, however, is a much better solution.

      Also, you might find the following stats very interesting…
      http://www.taxfoundation.org/taxdata/show/24955.html and even better, http://www.taxfoundation.org/news/show/250.html … scroll down to table 1 for 2008.

      Bottom line, there are too many people in the USA who are not paying any taxes at all, and are actually receiving payments from the US government. I don’t call that socialism. It’s just plain stupid and economically impossible to support.

      • Then you don’t understand the “fair tax”. It also does not tax a portion of the population due to its “pre-bate” provision. This is why the name “fair tax” is such a misnomer. This tax is still a system that can and would be manipulated.

        A flat tax, applied to all people at the same rate, is fair.

        • dw says:

          Ummm… actually, you apparently don’t understand the FairTax. The prebate is the same for everyone, as it is based on the number of people in a family, not on income. And, it’s a consumption tax, not an income tax. Much better way to generate revenue, IMHO. YMMV, of course :-)

    • The tax structure isn’t outrageously progressive when 47-49% of Americans pay $0 taxes and about 40% actually are given money beyond their earnings from the federal government? What else would you call it? I call that stealing.

      You would not see the same thing in a flat tax with $0 deductions scenario because everyone would pay. Rather, the “leaders” of our country are paying a growing number of Americans every year on tax day.

      Furthermore, as I said before, how are more taxes going to solve anything?

      If you taxed everyone making more than $100,000 at a rate of 100%, you would not cover this year’s budget deficit! The math doesn’t work. This is a spending problem.

  8. Brian H says:

    The Meehans of the world believe that a lack of revenue is the problem. Not only do they fail to realize that lacking of revenue is not the problem, they also fail to realize that over taxation often results in declines of revenue. They fail to realize that corporate taxes are paid by the consumers, not the coporations. They fail to realize that tax dollars can never get distributed throughout the economy more effeciantly then if those same tax dollars had been spent by the producer of that dollar as they see fit. They fail to realize that everywhere their experiments have been attempted they have failed. They fail tor realize that societies that have adopted this absurd economic “theory” are societies where the peasants riot in the streets when the government threatens to reduce their rations.

    • Stephen Meehan says:

      Brian, your first point is about the Laffer curve and I do understand it quite well. The US is nowhere near the apex of the Laffer curve on personal income, even at the highest level.
      I said nothing about corporate taxes, we are talking about personal income tax. All of my data refers to personal income tax only — this makes points about innovation moot, because innovation is almost exclusively funded by corporate money in the form of professional R&D labs or venture capital (whether by PE companies or angel investors with LLCs).
      The data seems to disagree with you on the efficient distribution of dollars. Sweden has the 3rd highest tax rate among Modern Western Democracies at about 53% of GDP and has the lowest Gini coefficient at .23 (where 0 is perfect distribution, i.e. everyon has the same and 1 is perfect concentration, i.e. one person has everything). The US Gini is .45, the highest of any of these countries — so, yes I “fail to realize” that the rich spending money is the best way to distribute income — because I haven’t seen it.
      And as for peasants rioting in the street, I ask for one example of this in Sweden — I haven’t found any. The only riots I know of there are about Muslim discrimination (something we wouldn’t know anything about here in America). Oh and by the way — Volvo, IKEA and Sony don’t appear to be struggling to innovate despite the higher tax rate.

      • Many small businesses, you know those evil rich $250 earners, pay at the individual tax rate. Even so, what makes it right to take money from people just because they have more? Can I take your hair, just because you have more? It would only be right, after all.

        • Stephen Meehan says:

          The small businesses pay at the individual rate because it is lower than the corporate rate and legal to do so. If we were to adjust the corporate and personal income tax structures this would not be the case.

          Income (and other, but we’ll focus on income) taxes serve two purposes in most modern governments.
          First, they pay for things the federal government does. If all works out (and it doesn’t as we know all too well) the government collects taxes equal to the cost of running the government. The people of a country essentially pay for the services the government provides. This is the same as paying for a haircut (to keep with the theme). Sorry, by living in a country you don’t get a choice about whether you want the haircut or not.
          So why don’t we all pay the same? If you and I go to the same barbershop and ask for the same haircut, we pay the same bill at the end. That’s the second purpose taxes serve. We are in a Social Democracy, which includes, like it or not (I happen to, you probably don’t … we disagree, that’s fine) a Welfare componenet. Income taxes serve this welfare purpose. I find this image useful.
          A society with 3 people determines that every person should net at least $50 dollars a year and pay $50 in taxes for the running of the government. Person A makes $60 dollars, person B makes $90, Person C makes $250. They all pay $50, but Person A gets $40 of that back directly (to meet the minimum), Person B pays $50 and gets $10 back directly to meet the minimum and Person C pays $50 and gets nothing. We condense this a bit with progressive tax — Person A pays $10, B pays $40 and C pays $50. Government isn’t taking to take, they’re taking to pay for things — whether or not you like those things. I happen to like them.

      • Brian H says:

        I love it when liberals bust out with Sweden, it never fails.

        Sweden has a population less than 10 Million.

        Contrary to common held liberal belief, size matters.

        • Stephen Meehan says:

          Why does size matter in this context? The economics work the same way whether the data set is 10million or 300million

          • Brian H says:

            I don’t believe it does. WHen you have an economic base the size of the USA a one size fits all policy does not work. I believe the state level is where many of these issues need to be handled.

            • Stephen Meehan says:

              I would actually not have a huge issue with that … I would advocate for the same solutions at the state level that I’m arguing for at the National Level here. In fact, I like smaller communities (which is probably the too many Classical Philosophy seminars in me) … but I feel like I would get the same resistence if I suggested that (absent a federal income tax) the state of North Carolina (roughly the same population as Sweden) institute a 50% income tax and strive for income distribution that is much more egalitarian.

              • Alaina says:

                Yes you would because a 50% income tax is ridiculous

              • And you’d watch the caravans of people departing the state. Just look at the population shifts over the years. The west coast and north east have consistently been stagnant and shrinking in population. The south and inter-mountain west grow considerably from year to year? Why? People don’t want the government to take excess amounts of their money and waste it like the governments from the shrinking states have such a propensity of doing.

  9. Stephen Meehan says:

    You are correct. It is outrageous that we paid out more than we brought in. We must raise taxes. It’s that simple. But the GOP refuses to do it and the Democrats don’t fight very hard against that (God forbid someone catch a soundbyte of “We need to increase tax revenue.”)
    By the way, the word Socialism is a pretty specific Socio-Economic theory about shared or common goods and property, communal labor and near-equal wealth and power relations — it has nothing to do with who is paying taxes and how much — America is no where near Socialism.

    • Alaina says:

      You can only tax people so much. Did you know people who live in NYC give up as much as 60% of their paycheck to federal, state and city taxes? How much more do you expect people to give?

      How about we all take a little responsibility for ourselves and earn our own way in life instead of living off government handouts (i.e. your neighbor)?

    • If you took 100% of everything the top 10% of income earners make (who currently pay 70% of the tax bill), would we have a balanced budget? Not even close. Plus there would be no money left for investment in growth. Raising taxes will not solve the problem and will stifle growth. There is nothing simple or correct about that solution.

      As for Socialism, it is essentially that the government takes the profits of production and redistributes it, with ownership remaining private.

      • Stephen Meehan says:

        I hate those stats about the top 10% footing the tax bill, because they’re so misleading. The top 10% foot 70% of the bill because the top 10% hold 73% of the net worth in America. It doesn’t look so crazy when you look at it dollars to dollars. The 49% you mention in your post hold less than 10% of net worth and make under $50,000 — so no they don’t pay taxes.
        As for Socialism, yes at it’s heart Socialism is about a redistribution of wealth and power. That is not happening in America . . . Despite the top 10% bearing 70% of the tax bill, they remain the top 10%; they would not in a socialist society.

        • Apparently you’re not aware of history. Look at every Socialist or Communist (as Socialism always evolves into) state. There is always a ruling class that holds most of the wealth and a huge number of proletariats. Why does that happen? Because there is no freedom to better yourself. Rather, the masses are jealous of those who have wealth and want to take it away from them. Once they succeed, they do not work hard to increase their wealth. Overall wealth creation slows as entrepreneurship is significantly slowed, because there is no longer incentive to become wealthy. The rich also aren’t investing nearly as much because their capital is being redistributed.

          Everyone is worse off.

        • Furthermore….

          This class warfare argument basically assumes no income mobility, especially with stats that show the top 1% making more of the total percentage. However, when you track actual income mobility (the same people changing income levels) and realize the entire economic pie is growing, rather than stagnant, you may look at the top wage earners a little differently, since they change every year!

          See actual data here.

          • Stephen Meehan says:

            I never argued for Socialism, only for a higher tax rate that I argued wasn’t actually Socialsim. I agree that Socialism fails — I disagree that Social Democracy does.
            I’m not sure where I made a “class warfare” argument, but the data you point to only shows that there is measurable change from generation to generation, but very little in the generation, once they are set. Even between generations, movement is slow and somewhat rare. If you are born in the top 1%, are you just as likely to make $100,000 a year as someone born in the bottom 10%?

            • Alaina says:

              I fail to see why Scott’s point is misleading. Only 49% of American people pay taxes and 70% of the tax revenue comes from the top 10%. I know it’s an inconvenient truth for people who believe that taxes should be raised on the rich, but it’s the truth nonetheless.

              Also, when I made under $50,000, I paid taxes. Why shouldn’t everyone have to contribute?

              It is class warfare when you say someone should pay more because they make more.

    • Rob says:

      This is a silly argument. If taxes were increased, the government would use it as an excuse to increase spending even more. Until our government shows that they have the ability to spend in a reasonable way rather than just increasing spending for everything, they most certainly should not raise taxes.

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