Upper Class Warfare 6-30-04 New Ruskin College.com
NewRuskinCollege.com
Lecture Notes: 06-30-04 Upper Class Warfare
Here today we are given a perfect example of the shallowness that is Bill O’Reilly.
In defending his previous position that the income tax is ‘Marxism,’ he has just now, again, presented his views on income taxes. That he should so misrepresent the issues involved proves that this is not just an instance of his propaganda, but clearly shows that at the most fundamental level he does not understand what he is talking about.
In his 38 minutes of programming (without ads) he superficially jumped from one area to another shouting and ranting almost incoherently. Let us examine a few examples:
1 What do we “owe” anyone?
2 That levels of taxation can be understood at only the most superficial (literal) level without regard for the underlying economics.
3 That taxes should be based on income, not wealth.
4 That he has never benefited from the state.
1 What do we “owe” anyone?
Throughout the hour he repeatedly jumped around this question making no effort to establish any method of analysis. This is typical of “professional broadcasters.” They are just entertainers; jumping around the issue is a positive advantage in their business as it allows listeners who have just tuned in for a minute to be entertained; they have not missed anything. And if they tune out they also will not miss anything. The entire broadcast is a series of “moments” none leading towards any other. 55 seconds of “outrage” followed by another disconnected, unreasoning, “outrage.” How entertaining.
“A heroin addict who will not work. . .?” this is typical of his method of argumentation. The whole of our social problems is because, the tremendous governmental budget results from, lazy heroin addicts? (This reminds me of Rush Limbaugh, the king of talk radio. I occasionally tune in to find out the score. The last time I checked the score was Rush Limbaugh 28.5 billion straw men zero.) Or for example, “an alcoholic . . . who has a ‘disease’? We are supposed to call it a ‘disease’.” What is his point? Is he suggesting that alcoholism is not a disease? No, he is not making a point. These are just words strung together for a passing audience. He is a carnival barker: “Look, Look, step right up look at this!”
Take an emotional I. Q. test: In order to qualify for government assistance, it is enough that we require of some people, only that they sit up in bed when they are being fed? True or false? Of some people it is enough that they dress and make their own bed? True or false?
What if they are on their death bed? Obviously our expectations are contingent on the circumstances. But the circumstances are just what Bill O’Reilly wishes to avoid. Broadcasting requires a “fast paced presentation;” a full thought, a line of reasoning would take too much time. Then too the broadcaster would have to commit to a point of view. This is why they cultivate the myth of “objectivity.” Bill O’Reilly claims to be an “independent.” What in fact they want to do is maintain the right to contradict themselves in the next broadcast, or even in the next segment of the same broadcast. The government is not doing enough, then after the commercial break, the government is doing too much.
“Do we owe people a house?” The straw man, O’Reilly has talking straw men on his show, says, “A house . . . no . . .” Consider all the ways government is used to block the construction of housing. A recent Harvard study showed that New York, Boston, and San Francisco had so distorted the economy with their zoning regulations, that they had created a housing crisis by government action alone. Ever heard an hour, or even just one rant by O’Reilly against any of these actions of government? Not one; never. If capitalists want to build, for example, 300 square foot condos, and workers want to buy them why would we stop them? Bill O’Reilly, the entire elite, do not care. This issue does not affect them so it never comes up. They are blind.
But a thoughtful examination of this question would draw in a much larger area of public policy and economics for examination. For these zoning and building ordinances are merely one example of a much larger area. But first this message from our sponsors:
2 That levels of taxation can be understood at only the most superficial (literal) level without regard for the underlying economics.
Senator Moynihan used to try to demonstrate this nexus of public policy and economics with the following example:
He would ask someone, for example, the head of a New York teaching hospital that was appearing before the Senate to get public funds. (A “hand out” in O’Reilly’s lexicon.)
Senator Moynihan: Sir, how long does it take you to conduct your student doctors through the wards on your morning rounds?
Answer: Ah, well it has been some time since . . . ah, well, let’s see, we would generally start at 9 am and we would finish up around noon, about three hours.
Senator Moynihan: Three hours. Thank you. Now tell us how long did it take your predecessor, in say, for example, 1892, a hundred years ago, to conduct his morning rounds with his medical students?
Answer: What? 1892? (The witness smiles, clearly lost.) I don’t know? (What can medicine of a hundred years ago have to do with anything. Come on, get with it these are modern times.)
Senator Moynihan: Well, Sir, it took them about three hours. They also would start after breakfast and finish before lunch.
The Senator’s point was just this: every thing in the economy is changing, but not at an absolute, objective, rate. The calendar pages are being turned back for us all, but time affects us all differently. This is Ludwig von Mises’ point about the fallacy of the evenly rotating economy. The reason the market economy works so well is because all of these changes are being taken into account throughout the total system. Not that, as is often claimed by the simple minded conservatives, that the market perfectly perceives these changes. It does not. It is merely the distillation of those imperfect perceptions of the market participants.
Medicine has modernized in the last hundred years. And as we have repeatedly pointed out the advent of Regenerative Medicine, (where we treat the underlying condition, genetically, not just the symptoms as with current medical practice), will revolutionize medicine. Medicine will thus pull away from all other human activities. Regenerative Medicine is more “efficient” and this efficiency will change, (transform), the economy. Great wealth will be transferred to Regenerative Medicine, Recombinant Genetics. In turn other areas of the economy, first those that support this area, then latter those areas of human action that will be benefited by these areas, will surge ahead of other sectors of the economy.
It is a dynamic process, where the relationships of the various sectors of the economy, of human action, are constantly changing, intermediated by the market. Ludwig von Mises’ point, Senator Moynihan’s point, is the same: the rate of change varies from area to area in the economy over time.
For now, and the last hundred years, the sector of the economy we euphemistically call medicine has not experienced the same advances in efficiency as other areas. (I say euphemistically because so much of policy discussion is not technically about medicine, the art and science, but is rather a discussion about income redistribution. (“See,” says Bill O’Reilly, “This one isn’t even bothering to get up for his morning meal. Let him starve.”))
Air planes during this same period have gone from single seaters to planes with hundreds of passengers. See? That is efficiency. Computers? Huge efficiency from mechanical office machines to what you are reading this on. Steel factories. Construction. Manufacturing of all kinds. Sector after sector has experienced huge increases in efficiency and, this is the point we are trying to make, differential changes in efficiency.
See all the words we have gone through to make this point? All these paragraphs? All of this is communicated by the market with just one set of numbers; much more efficient way of communicating. Let’s save the conversation and get down to the money: the bottom line.
That is why Senator Moynihan’s witness was in Washington. To get the money. Because his teaching hospital is not able to keep up with the rest of the sectors of the economy, he needs money. All the service sectors of the economy try to migrate to the state because in general they are less efficient; i. e. less able to keep up with the advances in the rest of the economy created by the application of technology. Education for example still has a teacher in the classroom with 40 students. Shakespeare said that was the ratio in his time: 1 to 40. In California the voters actually voted to decrease that level of efficiency to 1 to 20! California also joined with the other Western States and founded the Western Governors University with distance based, internet, courses. Huge increase in efficiency. However, the professors of California, got the state to withdraw from the University because they feared it would reduce employment of university professors.
Inefficient sectors of the economy seek the protection of the state from the market. In medicine, automated diagnostic, and sensing, equipment have improved quality of care, and efficiency, but not at a rate to allow it to keep up with the rest of the economy. This fact of life is called in economics: inflation. That is, the prices rise in the less efficient sectors relative to the more efficient.
Because doctors still take three hours to make their rounds, meeting with each patient, review it with their students, the doctor’s costs relative to the rest of the economy is rising. (Now as soon as Regenerative Medicine comes in to play, June 6, 2006, this process will reverse. Medical costs to “treat”, no cure, diseases will plummet.) But for now their prices rise and they seek government support. This method of analysis applies all through economics, in every aspect including taxes.
For example, conservatives often claim, rightly, that corporate taxes are “passed along” to the consumers. This is mostly true. Conservatives mean to say that the owners, shareholders, do not pay the corporate tax, as the tax demigods claim, but rather it ends up being charged to the consumers in the form of higher prices. The simple minded are not quite right, because it can be seen that these taxes do cost shareholders something, in the form of lower efficiency of capital. Since as the price rises sales fall and the same amount of capital produces a smaller product. Labor also suffers for similar reasons. As total output declines less labor is needed.
Yet, with these qualifications it is true that in general the corporations act as tax collectors, collecting the tax from their customers and giving it to the government. However, we must be so impertinent to ask, why do conservatives never apply there reasoning further in examining taxes? Income taxes it seems are never “passed on.” Why is that?
Clearly if Mr. O’Reilly is made to pay $50,000 more per annum to the taxman he will demand more than $50,000 from Fox. Can you doubt he will get it? If he has locked himself into a contract that does not allow for such increases there may be a temporary shortfall however we can expect that the contract renewal will be further increased, and or, we can expect more free advertising taken out of the broadcasts, for which he pays no tax at all. And so too for everyone else in the economy. For the intervention in the economy by the taxman is simply another factor in the calculations that make up the market.
Just like the corporations in the earlier example Mr. O’Reilly acts as a collector of the taxes. (Which is how the word ‘capitalist’ originated. The capitalist originally was the one who bid on the taxes to be collected from the provinces of Rome. Pilot was a representative of a syndicate that had bid on the taxes to be collected in Israel. The capitalist would first pay the winning bid amount to the Senate, in Rome, and then go to the province to collect the taxes.) Mr. O’Reilly collects from the stream of commerce a certain sum, some of which is paid in income, some in stock, some in deferred income, some in free on air advertising on which no tax is paid. True a portion of this total income is in turn paid to the taxman, however, he can raise his price.
The doctor also can raise his prices, fees. Engineers, scientists, lawyers, plumbers, carpenters, etc. all can charge more in response to the imposition of higher taxes. So who ends up actually parting with money to pay the taxman? Sub minimum wage earners mainly.
And anyone else who is caught in the net of the economy. Just as the corporate tax reduced the efficiency of capital and reduced the demand for labor these factors exist in the income tax, for example, Mr. O’Reilly may be under contract that does not allow tax offsets. And so with everyone else, varying from sector to sector, situation to situation, the tax falls on all but some are able to respond with higher prices and some are not. In general the elite can raise prices in response to higher taxes, and the other 75% get stuck, to greater or lesser degrees.
Of this inequality in the fall of taxation on the people, Ludwig von Mises points out that this is another reason to avoid the imposition of the state on the economy. Inequalities are of two types. Those inequalities imposed by Nature and those imposed by the state. Because medicine has not kept pace with the improvements in the rest of the economy the poor sick have suffered most. To the extent this inequality of suffering is imposed by Nature it is unavoidable and beyond our moral judgment. For example, we do not know how to cure diabetes, only treat its symptoms. (This is soon to change with stem cells.) In this case the cost of treatment rises relative to the other sectors of the economy due to our ignorance of Nature. Or, for example, the relative difference in the price of firewood, coal, and nuclear power are in large measure determined by Nature.
To the extent that rises in the relative cost of medicine is due to the imposition of the state we can not, (legally), avoid it directly. For example, only some are allowed by the state to enter the market of health care under penalty of law. All of the government regulations of medicine add to the cost of medicine relative to other sectors of the economy, adding to its inflationary movement. Both the state and Nature act independently of market considerations. The consumer, working in response to the entrepreneurs and capitalists offerings is able to adapt and overcome the inequalities imposed by Nature. In a free market the consumer is able to alter his behavior by, for example, adopting a new product or a new service, a new way of achieving his objective, in response to the changed situation. For example the consumer can shift from firewood to coal as the former becomes scarce and therefore expensive.
Similarly, when taxes are imposed on one area of the economy the consumers can try to shift to another area of the economy where the tax can be avoided. (The mansard roof was in response to a French tax on floors defined as those not under the “roof.” So the mansard roof hides a floor from the taxman’s reign. It was not designed to shed Nature’s rain.) Therefore, seen now from the other side of the income tax transaction reviewed earlier, those providers of the goods and services for which the consumers can substitute a lower taxed alternative, will be less able to pass on their taxes. (Possibly Fox will refuse O’Reilly’s demand for increased payments, hiring me in his stead? (Not likely.) Thus O’Reilly would then have to pay his taxes, unless he can find another firm to meet his new higher price.)
The unfairness, the inequality, of the taxes, if they arise and force themselves upon us, and surely they must as we do not all have the O’Reilly option of raising our prices, fall “unfairly” on us not because they are imposed by Nature but by the state. They fall arbitrarily in the economy the same way that Nature’s impositions are arbitrary but we have, at least in principle, control over the state. The state, says Ludwig von Mises, because it is a creation of man, is properly subjected to our moral scrutiny, and here we should try to reduce its inequalities by reducing the state’s involvement in the economy. Our reliance on the state should be reduced whenever possible precisely because, he says, of this inherent, unavoidably, unequal and arbitrary quality of its impact.
Why must it needs be so? Because the economy is merely a reflection of society which is inherently, unavoidably, unequal and arbitrary. Why? Because people are unequal. Why? Genetics. Why is it fair that O’Reilly can pass on the income tax and you and I can not? Thus has it ever been. Ludwig von Mises points out that if the baker and the tailor go to war the baker is in the advantaged position. You can go without clothes longer than you can go without bread. In life, and the economy, some have natural advantages. We can only look to avoid adding to those woes when we impose state power.
Notice that in Bill O’Reilly’s discussion no where is it mentioned that the elite are better able to avoid paying income taxes than is his audience. He shouts about his having to pay taxes as if that were the most important aspect of the question. The unfairness that the taxes create in there operation, where the lower orders are stuck with a tax bill which they are unable to shift as easily as the elite never once enters the discussion. This is no accident. It is not just that Mr. O’Reilly is not a profound thinker, shallow, or even that he is vain and selfish and self-centered, egomaniacal, nor is it just that he wishes to keep secret the true aspects of how taxes fall in our economy, the better he and his fellows in the elite can continue to control and dominate us, all of which is true, but finally, he does not cover these issues because he is in broadcasting. His mass audience needs to be ready for the next commercial, not bothered by a lot of ideas.
To be in broadcasting is to be shallow. Value neutrality was invented for the mass media. It is this aspect of the mass media that facilitated the rise of fascism in the last century and may again in this century.
3 That taxes should be based on income, not wealth.
Because O’Reilly is a Harvard graduate we assume he has read Ludwig von Mises. Therefore we conclude that his failure to show any knowledge of these issues is a deliberate attempt of obfuscate and conceal the truth from the American people, least ways that part that tunes into his show for 15 minutes or so during the week .
A tax based on wealth would essentially fall on the economy as we have just seen with the income tax. However, there is a small, upwardly mobile portion of the population that though it has large incomes has little wealth. These are exactly the people a progressive public policy should try to help. To the extent possible taxes should be shifted from income to wealth. An additional advantage is that this shift would put pressure on capital to be invested in the economy efficiently, in as much as the tax will be due whether or not the capital has been put to its highest and best use.
However, this issue will never be mentioned by O’Reilly because his preference is to talk about O’Reilly, and O’Reilly’s income, and O’Reilly’s tax. (Have you noticed that he even started talking about O’raq. Not Iraq, but O’raq. Get it? Pure egotism.)
4 That he has never benefited from the state.
This is the most constant of his many lies. Those who perished at Valley Forge, Iwo Jima, Normandy, all of that sacrifice, or even those who are falling in Iraq even as you read this, none of it, has ever benefited Bill O’Reilly.
Public Schools? Never went to ‘em. But he enjoys living in a society with fellow citizens who have had access to a public education. Would Fox even exist if not for all that has been done, by so many, so selflessly?
Here we reach the end of Ludwig von Mises’ Catalytic Science: Economics. His postulates do not include selfless acts. His is a study of gainful employment, human action, of a certain, narrowly defined kind. This is a limitation of the science, which is why it is said to be a tautology. It is not concerned with understanding all of human action only economics, as defined.
Yet this society, which has made so much possible, exists not because of the free market. The free market exists, largely, because of this society. Our state, our Union, allows the free market. When the editors of the Wall Street Journal advocate unlimited immigration into the United States, they do so one suspects because they are certain that it will not be allowed. It is true that if a billion people were allowed to immigrate into the United States the normal market forces would create an equilibrium. Mothers in Calcutta would chide their children into eating there meals by reminding them that children in Chicago go hungry every night.
The Wall Street Journal editors, like O’Reilly, live in a world of privilege, remote from the conditions they discuss so glibly. Perhaps if those editors and O’Reilly get their way they will be among the first the mob hangs. If so, we can agree with Moynihan’s remark on a similar case to the effect that, “it will be very richly deserved.”
NewRuskinCollege.com
Lecture Notes: 06-30-04 Upper Class Warfare
Lecture Notes: 06-30-04 Upper Class Warfare
Here today we are given a perfect example of the shallowness that is Bill O’Reilly.
In defending his previous position that the income tax is ‘Marxism,’ he has just now, again, presented his views on income taxes. That he should so misrepresent the issues involved proves that this is not just an instance of his propaganda, but clearly shows that at the most fundamental level he does not understand what he is talking about.
In his 38 minutes of programming (without ads) he superficially jumped from one area to another shouting and ranting almost incoherently. Let us examine a few examples:
1 What do we “owe” anyone?
2 That levels of taxation can be understood at only the most superficial (literal) level without regard for the underlying economics.
3 That taxes should be based on income, not wealth.
4 That he has never benefited from the state.
1 What do we “owe” anyone?
Throughout the hour he repeatedly jumped around this question making no effort to establish any method of analysis. This is typical of “professional broadcasters.” They are just entertainers; jumping around the issue is a positive advantage in their business as it allows listeners who have just tuned in for a minute to be entertained; they have not missed anything. And if they tune out they also will not miss anything. The entire broadcast is a series of “moments” none leading towards any other. 55 seconds of “outrage” followed by another disconnected, unreasoning, “outrage.” How entertaining.
“A heroin addict who will not work. . .?” this is typical of his method of argumentation. The whole of our social problems is because, the tremendous governmental budget results from, lazy heroin addicts? (This reminds me of Rush Limbaugh, the king of talk radio. I occasionally tune in to find out the score. The last time I checked the score was Rush Limbaugh 28.5 billion straw men zero.) Or for example, “an alcoholic . . . who has a ‘disease’? We are supposed to call it a ‘disease’.” What is his point? Is he suggesting that alcoholism is not a disease? No, he is not making a point. These are just words strung together for a passing audience. He is a carnival barker: “Look, Look, step right up look at this!”
Take an emotional I. Q. test: In order to qualify for government assistance, it is enough that we require of some people, only that they sit up in bed when they are being fed? True or false? Of some people it is enough that they dress and make their own bed? True or false?
What if they are on their death bed? Obviously our expectations are contingent on the circumstances. But the circumstances are just what Bill O’Reilly wishes to avoid. Broadcasting requires a “fast paced presentation;” a full thought, a line of reasoning would take too much time. Then too the broadcaster would have to commit to a point of view. This is why they cultivate the myth of “objectivity.” Bill O’Reilly claims to be an “independent.” What in fact they want to do is maintain the right to contradict themselves in the next broadcast, or even in the next segment of the same broadcast. The government is not doing enough, then after the commercial break, the government is doing too much.
“Do we owe people a house?” The straw man, O’Reilly has talking straw men on his show, says, “A house . . . no . . .” Consider all the ways government is used to block the construction of housing. A recent Harvard study showed that New York, Boston, and San Francisco had so distorted the economy with their zoning regulations, that they had created a housing crisis by government action alone. Ever heard an hour, or even just one rant by O’Reilly against any of these actions of government? Not one; never. If capitalists want to build, for example, 300 square foot condos, and workers want to buy them why would we stop them? Bill O’Reilly, the entire elite, do not care. This issue does not affect them so it never comes up. They are blind.
But a thoughtful examination of this question would draw in a much larger area of public policy and economics for examination. For these zoning and building ordinances are merely one example of a much larger area. But first this message from our sponsors:
2 That levels of taxation can be understood at only the most superficial (literal) level without regard for the underlying economics.
Senator Moynihan used to try to demonstrate this nexus of public policy and economics with the following example:
He would ask someone, for example, the head of a New York teaching hospital that was appearing before the Senate to get public funds. (A “hand out” in O’Reilly’s lexicon.)
Senator Moynihan: Sir, how long does it take you to conduct your student doctors through the wards on your morning rounds?
Answer: Ah, well it has been some time since . . . ah, well, let’s see, we would generally start at 9 am and we would finish up around noon, about three hours.
Senator Moynihan: Three hours. Thank you. Now tell us how long did it take your predecessor, in say, for example, 1892, a hundred years ago, to conduct his morning rounds with his medical students?
Answer: What? 1892? (The witness smiles, clearly lost.) I don’t know? (What can medicine of a hundred years ago have to do with anything. Come on, get with it these are modern times.)
Senator Moynihan: Well, Sir, it took them about three hours. They also would start after breakfast and finish before lunch.
The Senator’s point was just this: every thing in the economy is changing, but not at an absolute, objective, rate. The calendar pages are being turned back for us all, but time affects us all differently. This is Ludwig von Mises’ point about the fallacy of the evenly rotating economy. The reason the market economy works so well is because all of these changes are being taken into account throughout the total system. Not that, as is often claimed by the simple minded conservatives, that the market perfectly perceives these changes. It does not. It is merely the distillation of those imperfect perceptions of the market participants.
Medicine has modernized in the last hundred years. And as we have repeatedly pointed out the advent of Regenerative Medicine, (where we treat the underlying condition, genetically, not just the symptoms as with current medical practice), will revolutionize medicine. Medicine will thus pull away from all other human activities. Regenerative Medicine is more “efficient” and this efficiency will change, (transform), the economy. Great wealth will be transferred to Regenerative Medicine, Recombinant Genetics. In turn other areas of the economy, first those that support this area, then latter those areas of human action that will be benefited by these areas, will surge ahead of other sectors of the economy.
It is a dynamic process, where the relationships of the various sectors of the economy, of human action, are constantly changing, intermediated by the market. Ludwig von Mises’ point, Senator Moynihan’s point, is the same: the rate of change varies from area to area in the economy over time.
For now, and the last hundred years, the sector of the economy we euphemistically call medicine has not experienced the same advances in efficiency as other areas. (I say euphemistically because so much of policy discussion is not technically about medicine, the art and science, but is rather a discussion about income redistribution. (“See,” says Bill O’Reilly, “This one isn’t even bothering to get up for his morning meal. Let him starve.”))
Air planes during this same period have gone from single seaters to planes with hundreds of passengers. See? That is efficiency. Computers? Huge efficiency from mechanical office machines to what you are reading this on. Steel factories. Construction. Manufacturing of all kinds. Sector after sector has experienced huge increases in efficiency and, this is the point we are trying to make, differential changes in efficiency.
See all the words we have gone through to make this point? All these paragraphs? All of this is communicated by the market with just one set of numbers; much more efficient way of communicating. Let’s save the conversation and get down to the money: the bottom line.
That is why Senator Moynihan’s witness was in Washington. To get the money. Because his teaching hospital is not able to keep up with the rest of the sectors of the economy, he needs money. All the service sectors of the economy try to migrate to the state because in general they are less efficient; i. e. less able to keep up with the advances in the rest of the economy created by the application of technology. Education for example still has a teacher in the classroom with 40 students. Shakespeare said that was the ratio in his time: 1 to 40. In California the voters actually voted to decrease that level of efficiency to 1 to 20! California also joined with the other Western States and founded the Western Governors University with distance based, internet, courses. Huge increase in efficiency. However, the professors of California, got the state to withdraw from the University because they feared it would reduce employment of university professors.
Inefficient sectors of the economy seek the protection of the state from the market. In medicine, automated diagnostic, and sensing, equipment have improved quality of care, and efficiency, but not at a rate to allow it to keep up with the rest of the economy. This fact of life is called in economics: inflation. That is, the prices rise in the less efficient sectors relative to the more efficient.
Because doctors still take three hours to make their rounds, meeting with each patient, review it with their students, the doctor’s costs relative to the rest of the economy is rising. (Now as soon as Regenerative Medicine comes in to play, June 6, 2006, this process will reverse. Medical costs to “treat”, no cure, diseases will plummet.) But for now their prices rise and they seek government support. This method of analysis applies all through economics, in every aspect including taxes.
For example, conservatives often claim, rightly, that corporate taxes are “passed along” to the consumers. This is mostly true. Conservatives mean to say that the owners, shareholders, do not pay the corporate tax, as the tax demigods claim, but rather it ends up being charged to the consumers in the form of higher prices. The simple minded are not quite right, because it can be seen that these taxes do cost shareholders something, in the form of lower efficiency of capital. Since as the price rises sales fall and the same amount of capital produces a smaller product. Labor also suffers for similar reasons. As total output declines less labor is needed.
Yet, with these qualifications it is true that in general the corporations act as tax collectors, collecting the tax from their customers and giving it to the government. However, we must be so impertinent to ask, why do conservatives never apply there reasoning further in examining taxes? Income taxes it seems are never “passed on.” Why is that?
Clearly if Mr. O’Reilly is made to pay $50,000 more per annum to the taxman he will demand more than $50,000 from Fox. Can you doubt he will get it? If he has locked himself into a contract that does not allow for such increases there may be a temporary shortfall however we can expect that the contract renewal will be further increased, and or, we can expect more free advertising taken out of the broadcasts, for which he pays no tax at all. And so too for everyone else in the economy. For the intervention in the economy by the taxman is simply another factor in the calculations that make up the market.
Just like the corporations in the earlier example Mr. O’Reilly acts as a collector of the taxes. (Which is how the word ‘capitalist’ originated. The capitalist originally was the one who bid on the taxes to be collected from the provinces of Rome. Pilot was a representative of a syndicate that had bid on the taxes to be collected in Israel. The capitalist would first pay the winning bid amount to the Senate, in Rome, and then go to the province to collect the taxes.) Mr. O’Reilly collects from the stream of commerce a certain sum, some of which is paid in income, some in stock, some in deferred income, some in free on air advertising on which no tax is paid. True a portion of this total income is in turn paid to the taxman, however, he can raise his price.
The doctor also can raise his prices, fees. Engineers, scientists, lawyers, plumbers, carpenters, etc. all can charge more in response to the imposition of higher taxes. So who ends up actually parting with money to pay the taxman? Sub minimum wage earners mainly.
And anyone else who is caught in the net of the economy. Just as the corporate tax reduced the efficiency of capital and reduced the demand for labor these factors exist in the income tax, for example, Mr. O’Reilly may be under contract that does not allow tax offsets. And so with everyone else, varying from sector to sector, situation to situation, the tax falls on all but some are able to respond with higher prices and some are not. In general the elite can raise prices in response to higher taxes, and the other 75% get stuck, to greater or lesser degrees.
Of this inequality in the fall of taxation on the people, Ludwig von Mises points out that this is another reason to avoid the imposition of the state on the economy. Inequalities are of two types. Those inequalities imposed by Nature and those imposed by the state. Because medicine has not kept pace with the improvements in the rest of the economy the poor sick have suffered most. To the extent this inequality of suffering is imposed by Nature it is unavoidable and beyond our moral judgment. For example, we do not know how to cure diabetes, only treat its symptoms. (This is soon to change with stem cells.) In this case the cost of treatment rises relative to the other sectors of the economy due to our ignorance of Nature. Or, for example, the relative difference in the price of firewood, coal, and nuclear power are in large measure determined by Nature.
To the extent that rises in the relative cost of medicine is due to the imposition of the state we can not, (legally), avoid it directly. For example, only some are allowed by the state to enter the market of health care under penalty of law. All of the government regulations of medicine add to the cost of medicine relative to other sectors of the economy, adding to its inflationary movement. Both the state and Nature act independently of market considerations. The consumer, working in response to the entrepreneurs and capitalists offerings is able to adapt and overcome the inequalities imposed by Nature. In a free market the consumer is able to alter his behavior by, for example, adopting a new product or a new service, a new way of achieving his objective, in response to the changed situation. For example the consumer can shift from firewood to coal as the former becomes scarce and therefore expensive.
Similarly, when taxes are imposed on one area of the economy the consumers can try to shift to another area of the economy where the tax can be avoided. (The mansard roof was in response to a French tax on floors defined as those not under the “roof.” So the mansard roof hides a floor from the taxman’s reign. It was not designed to shed Nature’s rain.) Therefore, seen now from the other side of the income tax transaction reviewed earlier, those providers of the goods and services for which the consumers can substitute a lower taxed alternative, will be less able to pass on their taxes. (Possibly Fox will refuse O’Reilly’s demand for increased payments, hiring me in his stead? (Not likely.) Thus O’Reilly would then have to pay his taxes, unless he can find another firm to meet his new higher price.)
The unfairness, the inequality, of the taxes, if they arise and force themselves upon us, and surely they must as we do not all have the O’Reilly option of raising our prices, fall “unfairly” on us not because they are imposed by Nature but by the state. They fall arbitrarily in the economy the same way that Nature’s impositions are arbitrary but we have, at least in principle, control over the state. The state, says Ludwig von Mises, because it is a creation of man, is properly subjected to our moral scrutiny, and here we should try to reduce its inequalities by reducing the state’s involvement in the economy. Our reliance on the state should be reduced whenever possible precisely because, he says, of this inherent, unavoidably, unequal and arbitrary quality of its impact.
Why must it needs be so? Because the economy is merely a reflection of society which is inherently, unavoidably, unequal and arbitrary. Why? Because people are unequal. Why? Genetics. Why is it fair that O’Reilly can pass on the income tax and you and I can not? Thus has it ever been. Ludwig von Mises points out that if the baker and the tailor go to war the baker is in the advantaged position. You can go without clothes longer than you can go without bread. In life, and the economy, some have natural advantages. We can only look to avoid adding to those woes when we impose state power.
Notice that in Bill O’Reilly’s discussion no where is it mentioned that the elite are better able to avoid paying income taxes than is his audience. He shouts about his having to pay taxes as if that were the most important aspect of the question. The unfairness that the taxes create in there operation, where the lower orders are stuck with a tax bill which they are unable to shift as easily as the elite never once enters the discussion. This is no accident. It is not just that Mr. O’Reilly is not a profound thinker, shallow, or even that he is vain and selfish and self-centered, egomaniacal, nor is it just that he wishes to keep secret the true aspects of how taxes fall in our economy, the better he and his fellows in the elite can continue to control and dominate us, all of which is true, but finally, he does not cover these issues because he is in broadcasting. His mass audience needs to be ready for the next commercial, not bothered by a lot of ideas.
To be in broadcasting is to be shallow. Value neutrality was invented for the mass media. It is this aspect of the mass media that facilitated the rise of fascism in the last century and may again in this century.
3 That taxes should be based on income, not wealth.
Because O’Reilly is a Harvard graduate we assume he has read Ludwig von Mises. Therefore we conclude that his failure to show any knowledge of these issues is a deliberate attempt of obfuscate and conceal the truth from the American people, least ways that part that tunes into his show for 15 minutes or so during the week .
A tax based on wealth would essentially fall on the economy as we have just seen with the income tax. However, there is a small, upwardly mobile portion of the population that though it has large incomes has little wealth. These are exactly the people a progressive public policy should try to help. To the extent possible taxes should be shifted from income to wealth. An additional advantage is that this shift would put pressure on capital to be invested in the economy efficiently, in as much as the tax will be due whether or not the capital has been put to its highest and best use.
However, this issue will never be mentioned by O’Reilly because his preference is to talk about O’Reilly, and O’Reilly’s income, and O’Reilly’s tax. (Have you noticed that he even started talking about O’raq. Not Iraq, but O’raq. Get it? Pure egotism.)
4 That he has never benefited from the state.
This is the most constant of his many lies. Those who perished at Valley Forge, Iwo Jima, Normandy, all of that sacrifice, or even those who are falling in Iraq even as you read this, none of it, has ever benefited Bill O’Reilly.
Public Schools? Never went to ‘em. But he enjoys living in a society with fellow citizens who have had access to a public education. Would Fox even exist if not for all that has been done, by so many, so selflessly?
Here we reach the end of Ludwig von Mises’ Catalytic Science: Economics. His postulates do not include selfless acts. His is a study of gainful employment, human action, of a certain, narrowly defined kind. This is a limitation of the science, which is why it is said to be a tautology. It is not concerned with understanding all of human action only economics, as defined.
Yet this society, which has made so much possible, exists not because of the free market. The free market exists, largely, because of this society. Our state, our Union, allows the free market. When the editors of the Wall Street Journal advocate unlimited immigration into the United States, they do so one suspects because they are certain that it will not be allowed. It is true that if a billion people were allowed to immigrate into the United States the normal market forces would create an equilibrium. Mothers in Calcutta would chide their children into eating there meals by reminding them that children in Chicago go hungry every night.
The Wall Street Journal editors, like O’Reilly, live in a world of privilege, remote from the conditions they discuss so glibly. Perhaps if those editors and O’Reilly get their way they will be among the first the mob hangs. If so, we can agree with Moynihan’s remark on a similar case to the effect that, “it will be very richly deserved.”
NewRuskinCollege.com
Lecture Notes: 06-30-04 Upper Class Warfare
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