For all the talk of getting people out of poverty, this policy will likely backfire. As shown by the work of Robert Doar, president of the American Enterprise Institute – and someone who, having run New York City’s welfare programs from 2007 to 2013, also happens to have a better understanding of this issue than most people who write about welfare – poverty isn’t just about money.
The Biden and House proposals would raise the statutory and effective tax rates to either the highest or nearly the highest in the OECD (see the table below). Both proposals increase the tax burden on domestic corporate investment, reduce the incentive to invest in the United States, and increase the incentive to shift profits and high-return assets into low-tax jurisdictions.
The mania for “justice” reached such extreme levels that on December 28, 2020 New York Governor Andrew Cuomo signed an order imposing strict penalties—with fines up to $1 million per offense—for any injustice in the dispensation of vaccines. Since the criteria for “justice” were vague, and in fact contradictory, this meant that a large number of perfectly safe doses of the vaccine were intentionally thrown away in the first month, rather than give anyone an undeserved benefit. Cuomo, with the enthusiastic support of the legislature at the time, went so far as to threaten to revoke the medical license of any health care worker who gave a vaccine to anyone not in the priority list, even if the alternative was literally to throw the vaccine away because it spoiled quickly after being opened.
If the memo’s roadmap is followed, there isn’t much in the US economy that the FTC won’t oversee. Khan’s vision is for an agency that prescribes outcomes and processes for the economy. Her memo says the agency will deliver “a fair and thriving economy” for “consumers, workers, and honest businesses.” By this, she means the FTC will make businesses smaller and shape “the distribution of power and opportunities across our economy.”
The traditional American approach is being replaced with one uniformly more bureaucratic, eschewing courts and economic evidence in favor of political judgments. These changes—encouraged by both populists on the right and postmodernists on the left—will make American antitrust more European.
An ambitious new study on the subject by the Emory University researcher Thomas H. Costello and five colleagues should settle the question. It proposes a rigorous new measure of antidemocratic attitudes on the left. And, by drawing on a survey of 7,258 adults, Costello’s team firmly establishes that such attitudes exist on both sides of the American electorate. (One co-author on the paper, I should note, was Costello’s adviser, the late Scott Lilienfeld—with whom I wrote a 2013 book and numerous articles.) Intriguingly, the researchers found some common traits between left-wing and right-wing authoritarians, including a “preference for social uniformity, prejudice towards different others, willingness to wield group authority to coerce behavior, cognitive rigidity, aggression and punitiveness towards perceived enemies, outsized concern for hierarchy, and moral absolutism.”
Keynes carefully documented the relationship I just described: Governments print money, inflation surges, profits head skyward, and the world points a shaking finger at business leaders. Yes, Keynes used Biden’s favorite word, profiteering, but he went on to bemoan how the blame game caused the public to lose deserved respect for the many business leaders who make markets work for all participants.
Keynes described the besieged business leaders as “now to suffer sidelong glances, to feel himself suspected and attacked, the victim of unjust and injurious laws—to become, and know himself half-guilty, a profiteer.”
Mostly because of inflation.
Biden and his key economic advisors are certainly aware that inflation can be a cruel tax that erodes a weekly paycheck’s purchasing power just as surely as would higher taxes. The administration’s $3.5 trillion spending package is now being pushed partly using the argument that some key provisions will work to reduce lost purchasing power by offering more meaningful federal support for child care, health care, and improved public transportation.
But the administration should also be aware that calling for more spending to calm inflation is like pouring gasoline on an already smoldering fire. Pointing fingers at business leaders and calling them profiteers is music to some people’s ears, but it distracts us from the real source of the problem, and that’s too much printing-press money.