Slouching Towards Socialism


Below is comment on Ezra Klein by Karl Smith.  It suggested Klein is pushing socialism.  I don’t favor subsidies to business just because they’re small, and I don’t think Karl Smith does either.  I think Smith may be missing the Klein point:  policies are defending by emphasis on the benefits they have on popular groups.  For example tax cuts may help the old money rich, but to sell the tax cuts you emphasize a small group of small businessmen that benefit from the cuts.

 this by Ezra Klein really is pushing a socialistic agenda.

Most Americans don’t like the idea that someone who makes money by playing the market gets taxed at a lower rate than they do. But they do like the idea of Google. So argue that the tax change will hurt the next Google.

Similarly, most Americans don’t like the idea that as the rich have gotten richer over the past few decades, they have also gotten huge tax cuts. But most Americans do like the idea of small businesses. So if you want to keep the tax cuts for the rich, argue that they help a small number of small businesses which are both taxed at an individual rate and bringing in more than $250,000 in income a year.

But this is a very bad way to defend very broad policies. If Jackson is right, and there is something special about tech investment that we would like to subsidize, then perhaps we should subsidize it directly. That would be far cheaper than taxing all capital gains at a lower rate. Similarly, if we want to do more to help profitable small businesses, we can offer them targeted subsidies, or specific tax breaks.

Here Ezra has now dispensed with even the pretext of combating externality. If we “like” Google we give Google special favors. If we like small business, we give small businesses favors.

It precisely this effect -  that the whims of the electorate or the wide-eyed plans of the politicians could directly manipulate the industrial organization of the US economy – that makes socialism paralyzing.

Now, obviously it is impossible to stop all efforts at industrial policy and planning. However, there was self-limitation in the social hypocrisy that we are just trying to combat externality. At least then you have to come up with some plausible case and it can be attacked by the other side as being senseless.

However, if we are descending into simply shoveling money towards favored industries because we like them – no pretense necessary – then we are slouching towards socialism.

Filed under: Economics

Slouching Towards Socialism
Karl Smith
Thu, 22 Sep 2011 21:05:29 GMT

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