Features » December 18, 2006
We Are All Waiters Now
Why higher taxes would make Americans happier, and why, despite this, we still won’t raise them
Now that the Democrats run Congress, the question becomes, “What should they do?” Yes, raise the minimum wage. And yes, fix the Medicare drug program. But will this bind a new majority to the party?
We’re often told, “Democrats have no ideas.” But that’s a silly thing to say. Washington, D.C., is crawling with foundation-types bubbling with new ideas, and if anything, the Democrats are awash with new ideas. Many of these new ideas may make their way into law. And we need not have the cynicism of Mario Cuomo, who once said, “In America, a new idea is a cereal that grows hair.”
But what the Democrats don’t have is a serious commitment–the political nerve–to make people happier in the only way they can: by raising people’s taxes. How happy more of us would be if only we could pay higher taxes! More of us at last could joyfully retire.
In May 2005, the Paris-based Organization for Economic Cooperation and Development (OECD) put out a sort of Michelin Guide to the pensions of the world’s 30 wealthiest nations: the United States, Ireland and their ilk. While the United States is rich, comparatively it’s a beggar at the bottom, with a Burger King-type pension, paying on average 39 percent of after-tax income at retirement. Others pay about 70 percent on average. Germany, Sweden: pick a country. Some pay even more.
Yet the right says we can’t do even 39 percent.
For Democrats, this ought to be the real Social Security crisis: Why aren’t we at 70 percent? The OECD economists think that’s what our debate should be. We have the money. We’re the richest per capita–even if, “per capita,” most of us get no capital. Why aren’t we at least talking about 60 percent?
It’s not Bush’s fault. It’s the Democrats’. They fail to grasp that in a rich country, if we spend them on ourselves, taxes make us happier. That’s the point of a new book, Happiness, by a British economist Richard Layard. You can find much of the same thing in John Kenneth Galbraith’s The Affluent Society. Consumers can’t buy happiness–only taxpayers can.
Our New Democrats? They don’t get it. Kerry or Gore or Clinton will propose a tax increase, but only to be “responsible.” It’s a Boston Puritan kind of thing, like castor oil. We do it for the sake of rectitude. We do it because policy wonks at Harvard and Yale think we’ll be the better for it. God forbid it give us any pleasure. No wonder we keep losing: If we have to raise taxes, why make it so joyless?
We propose to rob Peter, in the top 1 percent, without ever getting any fun out of paying Paul. I say: Let’s give it to Paul, just to give him joy. Here’s how we have to sell a tax increase: Not to be fiscally responsible, but to be a little happier. Be like the Europeans. Have a little fun.
Let’s indulge in this higher GDP per capita. In richer countries, a strange thing happens: the higher the tax, the nicer it is to live there. And the more interesting life is. As the Nobelist Amartya Sen might say, the whole purpose of GDP per capita is to let us live at a higher level. When we spend our GDP on ourselves (as we do with pensions), higher taxes increase our higher powers.
Without higher taxes, then, for all our wealth we end up starving, wasting away like anorexics, refusing to let ourselves enjoy a cornucopia. We run down our public universities. We destroy our mass transit. (Sitting in traffic, do we enjoy making ourselves mentally ill?) But the worst of it is that we cheat ourselves of the taxes we could spend on ourselves.
Our collective failure is that we have chosen not to flourish: We have denied ourselves what Aristotle calls eudaimon, because the Greeks didn’t have a word for “fun.” There is only one question to ask: Will a tax like this make us happier? “Oh Americans don’t think that way.” Don’t they? As a labor lawyer, I meet men my age, in their 50s, who murmur, “My God, if only I’d started saving.”
They’d be glad now if a higher Social Security tax had cut into net pay as the old private pensions, which unions negotiated into contracts, once used to do. With the collapse of labor, we got rid of the union-contract pension. At the same time, we didn’t raise Social Security to do what a labor movement used to do: namely, force people to save. Now we get, well, 39 percent, instead of the 50 or 60 percent we would have gotten if we had kept our labor movement or raised our taxes.
Oh no, we’re told, people are happier going out and buying an extra pair of white socks at Wal-Mart. Trust me: as a labor lawyer, I represent a lot of people who shop at Wal-Mart. They aren’t as stupid as most economists think. They’d be happy to pay more in taxes if they could spend it on themselves.
But surely that must be mad: People want their money. They don’t think of their future, or the lives they’ll lead 20, 30 years from now. But why are Americans different from Austrians, Canadians, Swedes or anyone else? From what I see of Teamsters and nurses, I think Americans especially want someone to plan for them. It’s a little like alcoholics who want someone to stop them from drinking. “Stop me from moving thirty miles away.”
“Stop me from buying another SUV.”
The Democrats should have done, or now should do, what the labor movement used to do with union pensions: step in, raise their taxes, so people can be happy and spend it on themselves.
Even Bush and the Republicans know that we should get pleasure out of taxes: That’s why, even when they cut taxes for the rich, they keep on running deficits. Besides, at a certain level of GDP per capita, people acquire a taste for more government. Even Republicans have a taste for more government. That’s why Bush and his billionaires are at war with their base. But the crack-up that’s coming is not just in the Republican Party. It’s really in the country.
Like idiots, we have furiously denied it. Let’s stop denying it so furiously. People don’t want taxes raised because they don’t trust that our nation’s leaders will give them value for their money.
Before there were New Democrats, we used to know this. Even the OECD’s joyless number crunchers tell us, “Why not raise the kind of taxes where you spend it on yourselves?” Remember, these are free market, center-right types, and even they think we’re making ourselves miserable.
Why we should step up to the plate
A few years ago the Republicans were taunting us: “Why don’t you Democrats step up to the plate and tell us how you would fix Social Security?” They’d love us to stand up on behalf of this public pension that pays so much less than that of other countries: a pitiful 39 percent of working income. It would be okay if 39 percent let us live happily ever after. But it’s not enough for that purpose.
And when Bush’s Social Security plan went down, people on the left high-fived each other. “Hey, the Republicans have finally lost one!” But alas, it was the opposite: the Republicans have won.
They’ve won in three ways:
First, they’ve defined the issue. It’s burned into people’s brains: We can’t raise the public pension any higher; we really can’t afford it at 39 percent. So the GOP has won. We aren’t going to raise it. We’re going to stay stuck in the public pension cellar.
Second, they’ve already put the benefit cuts in place. They cut the Cost of Living index in a way that simply doesn’t reflect the real costs–housing, nursing care, etc.–that pensioners really face.
Third, they’re free to keep on wrecking what’s left of the private pension system, at least for the middle class. The old union-contract pension, which was a defined benefit pension, is mostly gone, of course. That’s left us just with the defined-contribution or “401(k)” accounts. But by slashing taxes on business and the super rich, Bush took away the tax incentives that employers had for setting up these private 401(k) accounts. Bush claims to be the champion of “private accounts.” The truth is, by cutting taxes, Bush took a big whack out of the remnant of the private pension system.
So already, thanks to the Democrats staying mum, the Republicans have won the Social Security debate. Maybe in all of America I’m the only Democrat supporter who would like to see the Democrats come up with a plan to “save” Social Security. But the plan I would offer is not to “save” it but to raise it. I would simply say: Don’t Save It. Raise It. Higher.
Call it: The Democrats’ 50 Percent Solution. Call it that because we raise the payout up from 39 to 50 percent of working income. We promise America: If you work for a living, you get back half when you retire. It’s a 50 Percent Solution in another way, for 50 Percent would close only some of the gap between us and our “average” rival. If we pay only 50, we are still far, far short of what Italy, Austria and others pay.
Yes, but how do we pay for half? I wouldn’t tell people how. I’d put that one off, or use the old stand-by: “We’ll appoint a bipartisan commission to decide.”
We could even set a time limit. Say, by the year 2045, we will be paying half. In other words, tell the kids of the country, the 20-somethings, who don’t vote: Vote for us now, to get half when you retire.
I can see them, in their golden years, playing games on their computers.
But how to pay? We have to say something. I’d like to see our commission answer this: Why isn’t it fair if we make the top 1 percent pay for the entire raise for the bottom “50 percent.” I mean, both to “fix” the existing Social Security deficit and “raise” it up to half. After all, by the time the Social Security crisis hits in 2045, the top 1 percent will probably take in the same share of national income–the same share, of the U.S. economy’s total income–as the “lower 50 percent.” They will get what perhaps 200 million Americans will get! When that happens, will the top 1 percent need a bigger pension? No. They’ll have even more of the national wealth, if not every single damned gold doubloon of it.
So let the top 1 percent pay for half the nation. Let them pick up the bill for the entire Social Security deficit which is being projected now and then pay for half of what it takes to get to 50 percent. (Maybe, on a sliding scale, the next nine-tenths of the top 10 percent who are just below Warren Buffet could chip in a bit as well.) That would get us up to, say, 45 percent, still below the wealthy-nation average of 70 percent. The rest of us would have to cough up the rest–but remember, these are the kind of taxes we’d be spending on ourselves.
Thomas Geoghegan is a Chicago-based labor lawyer. He is the author of several books, including Which Side Are You On?, The Secret Lives of Citizens, The Law in Shambles, Only One Thing Can Save Us, and Were You Born on the Wrong Continent?