Free Markets, Free People
Corporations, unions, taxes and libertarian ideas
Kevin Drum has a blog post up at MoJo in which he supports a claim by Tim Lee that American Liberalism “has incorporated libertarian critiques at a striking rate over the past few decades”. The claim is that is true especially in the area of economic policy. For instance:
Income tax rates are way down. Numerous industries have been deregulated. Most price controls have been abandoned. Competitive labor markets have steadily displaced top-down collective bargaining. Trade has been steadily liberalized.
I guess that can all be categorized as “it depends on your perspective”. While personal income taxes are down in comparison with where liberals would prefer them to be – especially for the rich – corporate taxes remain the highest in the free world. And, speaking of economics and libertarians, we at least understand who ends up paying corporate taxes – and it ain’t corporations.
This is major blind spot of the liberal side of the house. If they admit that corporate taxes are passed along to consumers, then their basis for taxing in such a regressive manner would be questioned. So they continue to pretend that by demanding higher and higher corporate taxes, they’re somehow calling for equity in income distribution – assuming government will take the money collected from corporations as taxes and parcel it out to those who need it most. And further assuming that’s a function of government.
Of course what they end up doing is having corporations take money from those who must have their products but can least afford the cost of the increase driven by the taxation. “Benevolent government” then takes the money, after it takes its cut, and passes it back to the “most deserving”, or the “most in need”. Corporations then, are a tax collection entity, not a tax paying entity.
What happens when corporate taxes are raised is it has an adverse effect on the corporation’s consumer base. If they get high enough, that base begins looking for less costly alternatives or quits buying altogether.
All that to set up this next Drum statement:
The problem is that a system that generates enormous income inequality also generates enormous power inequality — and if corporations and the rich are allowed to amass huge amounts of economic power, they’ll always use that power to keep their own tax rates low. It’s nearly impossible to create a high-tax/high-service state if your starting point is a near oligarchy where the rich control the levers of political power.
You could most likely spend all day on those two sentences. Completely left out, of course, is who is paying income taxes. What we all know is somewhere around 50% of us aren’t. So when we see discussions about taxes we have to keep that in mind. More importantly – and after all the talk of having much in common with libertarianism – check out what Drum’s ideal is: “a high-tax/high-service state”.
Obviously the libertarian camp would find nothing to agree with there.
Essentially Drum’s argument is that we, as a nation, have the right to demand such a state. But while the “corporations and rich” own the “levers of political power” we’ll never achieve it. Solution? Implied: take those levers away from them. Method? Well all of this has been a prelude to the real reason for the post:
I am, fundamentally, old fashioned about this stuff: I think of the world as largely a set of competing power centers. Economics matters, but power matters at least as much, and I think that students of political economy these days spend way too much time on the economy This explains, for example, why I regret the demise of private sector labor unions. It’s not because I don’t recognize their many pathologies, or even the fact that sometimes they stand in the way of economic efficiency. I’m all in favor of trying to regulate the worst aspects of this. But large corporations have their pathologies too, and those pathologies are far worse because there’s no longer any effective countervailing power to fight them. Unions used to provide that power. Today nobody does.
This is the common cry of the liberal today. The need for a “countervailing power” to fight the power of corporations – real or imagined. Weapon of choice? Unions. But the power that unions fight against has nothing to do with the supposed problem with corporations that Drum has outlined. Taxes. Name a single union that has, in any time in the past, rallied and protested to get their corporation’s taxes raised? They understand what such an increase could mean to labor. As for power, unions are more concerned with the internal power of a corporation as it relates to wages and benefits. It is only recently, with the addition of union PACs, that the union movement has begun to address corporate political power.
And if I had to guess, that’s what Drum secretly laments. As private sector unions decline, so does any “countervailing” political power he thinks unions could wield. Of course, it doesn’t help when they act like this . Unions are and have been the liberal left’s power center in their war against corporations for centuries. If you don’t believe that, you just need to review recent elections and their pattern of donations:
The UAW has considerable clout in the Democratic party. In the 2010 election cycle, the union spent $10.1 million through its political action committee, according to the Center for Responsive Politics. That was down from $13.1 million in the 2008 election.
The center said that 100 percent of the union’s 2010 federal donations — $1.4 million — went to Democrats. The funds come from voluntary contributions by members and retirees.
That’s the real impact of the “demise of private unions”. It is also why those like Drum support any effort that makes organizing easier for unions today.
So when Tim Lee writes that "Competitive labor markets have steadily displaced top-down collective bargaining," I just have to shake my head. Competitive for whom? For the upper middle class, labor markets are fairly competitive, but then, they always have been. They never needed collective bargaining to begin with. For everyone else, though, employers have been steadily gaining at their expense for decades. Your average middle class worker has very little real bargaining power anymore, and this isn’t due to chance or to fundamental changes in the economy. (You can organize the service sector just as effectively as the manufacturing sector as long as the law gives you the power to organize effectively in the first place.) Rather, it’s due to a long series of deliberate policy choices that we’ve made over the past 40 years.
But here’s the bottom line: if there were indeed a crying need for unionization felt by the “average middle class worker”, the ability to join a union (or form one) still exists. The problem is, it’s mostly fair and thus doesn’t favor the union as previous organizing laws did. However, if the organizing drive meets the criteria outlined in labor law,bingo, a union is born and members are able to cash in on the supposed benefits of such a relationship.
The problem, however, is fewer and fewer people apparently see any advantage in such a relationship anymore, if declining membership is any indication. Like anything else in the world, the consumer of a product has to convince themselves that the product’s benefit justifies its price. It seems that is no longer the case when it comes to private unions. Drum prefers to blame the demise on “policy”. I see it as the consumer saying, “no thanks” after the price/benefit comparison is made. The fact is policy or law doesn’t prohibit the formation of unions. Only votes do. And for quite some time, the votes – of those they would unionize – haven’t favored private union organizers.
It’s worth noting, by the way, that corporations and the rich know this perfectly well, even if lots of liberals have forgotten it. They know exactly what the biggest threat to their wealth is, and it’s not high tax rates. This is why the steady erosion of labor rights has been, by far, their single biggest obsession since the end of World War II. Not taxes, unions. If, right now, you were to offer corporations and the rich a choice between (a) passage of EFCA or (b) a return to Clinton-era tax rates on high incomes, they wouldn’t even blink. If you put a gun to their head and they had to choose between one or the other, they’d pay the higher taxes without a peep. That’s because, on the level of raw power, they know how the world works.
Of course he’s right, but not necessarily for the reasons he believes. Unions have grown into an impediment. A costly impediment to competitiveness. Whether anyone likes to admit it or not, labor is a commodity. Despite the emotional arguments of the left concerning labor and “real people”, people who want to work aren’t owed a job or a certain level of compensation. They have to be worth it to earn it.
So yes, corporations are more concerned about unions than taxes, at least to the point that passing along increased taxes starts costing them customers. Then they pay more attention to taxes. And if taxes do start to cost them customers? Where is the easiest commodity for a corporation to cut in order to maintain a competitive price as it collects the increased taxes? Yes – labor.
Without apparently realizing, the liberal left’s call for increasing corporate taxes dramatically for their “high tax/high services” state is a call for more unemployment. Unions would attempt thwart the ability for corporations to adjust headcount to remain competitive. Result? The US steel industry redux.
Is that really what the liberal left wants? I can pretty much guarantee it isn’t what any libertarian would want. But perhaps it is the fact they don’t even realize how it all works (and what they’re really wishing for) that’s the most dangerous aspect of all of this.