Friday, November 30, 2012

Takers and Makers

Scrambling to explain their electoral defeat this month, some conservatives are trying to comfort themselves--and scare the rest of us--with the notion that this country has reached a tipping point where the beneficiaries of government largesse are starting to outnumber the productive members of society. Like Mitt Romney's famous "47%" remarks (except that Mitt found out it's actually more than 50%), this theory posits that the ever-expanding group of "takers" is going to vote for more and more government spending to subsidize their indolent lifestyle, while the "makers" find more and more of the fruits of their labors taken from them, to the point where they have no more incentive to work.

Another version of this argument appears in a Forbes article identifying states that are in a supposed "death spiral." which supposedly starts to occur when a state has more "takers" than "makers." If, for example, you have a software company in San Francisco employing 100 people, those 100 hard-working "makers" are, according to the article, supporting 139 "takers," and so the company will have an incentive to move its operation to Texas, where they will only have to support 82 "takers." Granting that taxes are lower in Texas than California, and that some companies will move to take advantage of lower taxes, there are still a lot of flaws in this analysis. For one thing, I'll bet software companies in San Francisco are paying better wages than companies in Texas. That might give the owners even more incentive to re-locate, but a lot of their employees (who are the makers in this analysis) might have preferred to remain in California, despite its proportionately larger dependent population.

In general, however, the idea that so-called makers are paying more and more to subsidize a growing number of takers is simply false. A New York Times study published today demonstrates that overall, the combined burden of federal, state and local taxes is actually LESS for ALL income groups than it was in the 1980's. How much less? For those making over $350,000 annually, average combined tax rates have fallen from 49% of their income in the 1980's to 42% today. For those making less than $25,000 in annual income, the combined tax rate has dropped from 20% to 19%. If almost everyone is paying less on average, obviously we are not being swallowed up by an army of takers.

I also have a problem with the way the Forbes piece defines makers and takers. According to their calculations, every government employee is classified as a taker, while every private sector worker is a maker. But government employees pay taxes like the rest of us. They also perform valuable services, like driving buses and teaching our kids to read, and some of them even make things. The private sector provides goods and services that are not so different in character from the benefits we obtain from the government. The private sector also includes a lot of people who are performing contracts for the government, whether they are building military jets or preparing environmental impact reports. Moreover, all of us are dependent on government at some points in our lives, and for some things throughout our lives. We all need schools and roads and police and fire services. If we didn't pay taxes to pay the people who take out our trash and clean our streets, we would have to pay for those services in some other way.

Even if we could could separate takers and makers, there is no magic ratio between the two groups beyond which the economy will fail. In the early part of the last century, most people were working on farms. We needed a lot of  makers to feed all of us takers. But now with something like 5% of the population working in agriculture, we only need one maker to feed 20 takers. Similar changes have taken place in manufacturing and construction, allowing us to produce more goods using fewer workers, and thus enabling us to support more "takers." Think of a family's economy as an analogy to a state or nation's economy. In some families, take Mitt Romney's for example, a single breadwinner is able to provide quite nicely for his wife and five boys. On the other hand, in my family, where we have two makers and two takers, we're probably going to have to take out some loans to put our kids through college. In other words, it doesn't seem to matter what percentage of the population is employed in some productive capacity. What matters is whether that workforce is productive enough to provide a decent living for all of us. Someday when we've managed to automate everything, we might all enjoy being takers while we let machines do all the making.

People who subscribe to the takers vs. makers dichotomy might recognize that it is a bit simplistic to claim we are in a death spiral as soon as the number of "takers" exceeds the number of "makers." Nevertheless, they would still argue that there must be some limit to how many unproductive people society can support. Thoughtful conservatives will also recognize the need to maintain roads and bridges and provide for the common defense. What they are really talking about, when they get alarmed about wasteful government spending, are transfer payments: the exploding costs of Medicare and Medicaid, the rising use of food stamps, and growing unfunded pension liabilities for public employees. If those are the problems they are concerned about, we should focus directly on those problems. Let's figure out how to reduce poverty and unemployment; let's get some actuaries to calculate how to afford our pension obligations; and let's make health care delivery more efficient. If we label the problems correctly, we might find they are actually manageable. What makes them seem unmanageable is the kind of rhetoric that labels all public employees as a drag on the economy, or that disparages everyone who needs a government-subsidized college grant or unemployment assistance at some point in their lives.

What we need to do is stop dividing people up in ways that can only cause resentment. We also need to recognize that most everyone who can work is working in some form or other, and that all of us are dependent on the work of others and on the benefits that government provides for all of us. Practically everybody tries to contribute and everybody wants to be taken care of. That makes us all  both takers and makers.


(Illustration by Keith Negley for the New York Times)

2 comments:

  1. << If almost everyone is paying less on average, obviously we are not being swallowed up by an army of takers. >>

    That is not true. Even if relatively less taxes are paid now than in the 80s, if the number of people being subsidized by the state of California is so great that it easily outstrips revenue, while businesses are leaving and unfunded liabilities are rising, the state is on a death spiral.

    << Even if we could could separate takers and makers, there is no magic ratio between the two groups beyond which the economy will fail. >>

    Of course there is. Dangerous debt as a result of spending more than we bring in is a death spiral.

    << What we need to do is stop dividing people up in ways that can only cause resentment. >>

    This is too much. Your party just won a Presidential election doing this and you were a great part of it. War on women, racism, tax the rich, blacks, Hispanics, old, mad white men. You helped do that. You helped build that.


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  2. if the number of people being subsidized by the state of California is so great that it easily outstrips revenue, while businesses are leaving and unfunded liabilities are rising, the state is on a death spiral.

    Except this isn't the case, it can't legally be the case, and the "takers" stat from the Forbes article was calculated using a very scientific method called "pulling numbers out of the author's ass".

    Of course there is. Dangerous debt as a result of spending more than we bring in is a death spiral.

    Except the US has always had a national debt, California (and most states) aren't allowed to run deficits, and you never addressed what this "magic ratio" supposedly is. Probably because (surprise!) there isn't one!

    Your party just won a Presidential election doing this and you were a great part of it. War on women, racism, tax the rich, blacks, Hispanics, old, mad white men. You helped do that. You helped build that.

    Sorry, no. YOU helped build that. Pointing out that the opposing party is filled with racist, sexist assholes who care only about serving the interests of the wealthy isn't divisive, its informative. FFS, your own candidate openly dismissed half the country as unworthy moochers who should feel lucky to breathe the same air as he does!

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