11/4/08

By: Stephen Roesler

During the past election, we heard a buzz term that embodied traditional liberal tax ideals and infuriated those on the right.  The public knew this term as “spreading the wealth.”

Most likely used to distinguish Obama’s campaign, the idea of “spreading the wealth” remains a complicated topic.  The most highly educated professionals in our country continually disagree over the social and economic issues that surround this tax plan.  While there is little hope in solving or understanding the issue in full, political consumers of all education levels ought to consider a few perspectives.

Important to understand is the plan itself.  Obama’s proposed tax policy caters to middle class workers but increases taxes for those with an annual income of over $250,000.  Although only the top 5% of American’s would pay more, many question the theory of taxing the upper class, who also pump the majority of wealth into the economy. Should the government tax those with the most because they also benefit the most?  Or should each American pay a similar percentage of income tax?  The answer seems to depend on how we approach to problem.  That is, sociologically or economically.  Or more specifically, what is our greater concern – economic growth or social equality

Lets consider the perspective of sociology professor Dr. Robin Perrin, who explains that individual opportunity depends heavily on the ability to become wealthy. “Not everyone who sits at the top worked the hardest.  The world doesn’t work that way,” he explained.  “The world mostly works, frankly, the other way.  Where if you are born in a certain country, in a certain situation, you are going to be wealthy.”

Many conservatives either ignore these words or simply don’t believe them.  Although Obama is essentially allowing Bush tax cuts to expire, McCain has labeled “spreading the wealth” as socialism.  To McCain, we must ask, was America a Socialist society under Clinton also.

“We [Americans] have a philosophical belief that through hard work we can all get to the top…that no matter where you start, everyone has an equal chance and we know that’s simply not true,” Perrin said.

Looking at the growing gap of inequality proves his point. The past 35 years show the top five percent of Americans increasing their annual income by 106 percent after taxes.  The bottom 20 percent has seen a meager 6 percent increase.

The numbers speak for themselves but it leaves us to ponder the extent of governmental control necessary to get the most out of society. In other industrial nations, Europe and Canada, for example, income taxes are much higher.

“Americans are much more tolerant of these gaps than Europeans,” Perrin commented.  “Europeans seemingly accept higher income taxes more readily.”

But Obama sees these gaps as a threat.  In his book, “The Audacity of Hope,” he explains that globalization and increasing technological advances promote high economic growth but also created instability for the middle class.  “We’ve seen strong economic growth but anemic job growth,” Obama said.  “Big leaps in productivity but flat lining wages; hefty corporate profits, but a shrinking share of those profits going to workers.”

Obama’s observation considers an important point.  These leaps in economic growth tend to benefit a select few at the top, forcing the gap between the upper and lower class to expand. Ultimately, the idea of “spreading the wealth” stems from a legitimate fear of creating an even more stratified America.  This so called ‘America’ would allow the prosperous to live exclusively with all private opportunities available.  With enough money, the affluent enroll in private schools, private security and even private healthcare.  Conversely, the lower tier of society would work longer hours with little or no support from a floundering public sector.

But the argument goes deeper.

With such stratification, opportunity for the younger, less privileged American would decrease proportionally.  With less capital comes less chance for success and upward mobility – an idea that remains central to America’s beginnings.  Thus, “spreading the wealth” is Obama’s solution to sustained opportunity and curbing the gap in social class.

While many understand and empathize with this rationale, we cannot remain ignorant of the economical implications.  For example, how would our crippled economy respond to an increased tax on the upper class?  If the government takes more away from the people who pump the most money in, will spending incentives decrease as well?

“I don’t see his [Obama’s] policies as doing anything that will actually give you incentives to be more productive,” said Dr. Galles, professor of economy at Pepperdine University.

The problem with spreading the wealth, according to Galles, is the economy grows by letting people engage in voluntary arrangements in business.  For example, if we all remain self-interested, then we create what economists consider wealth – gaining more prosperity than you gave up.  But when the government takes away a large percentage of revenues, it forces the “agreement” between individuals to remain dependent on outside factors, causing an adjusted increase in price.  The inflated price then creates a conflict and a potential loss of business.

“The maximization of the amount of peace in society is to minimize government,” Galles said.  “Over time the incentives to become richer and richer are the keys to economic growth, so high tax rates clearly discourage growth.”  He added that the fastest growing economies maintain the least governmental regulation.

Not only is growth discouraged, unequal tax rates raises a question of fairness.  Spreading wealth may seem fair socially, but is seen entirely different from an economist’s perspective.

The economic argument goes as follows.

However rich or poor we begin, we must find a way to make others better off in order to make money.  In other words, we are forced to use our skills in ways to benefit others.  Which, in time, benefit us monetarily.

But these liberties are not completely viable under our current system.  Because of governmental restraints on business, which are in place to compensate for unequal social circumstances, some members of society are given more than they have “earned.”  Although this may be considered “right,” conservatives continually argue the implications of governmental support.

The best example is the welfare system during Clinton’s presidency.  The program was intended to provide temporary financial assistance while people got back on their feet.  Instead, it allowed enrolled citizens to rely on the monthly check as a means of income – never encouraging self-sufficiency or responsibility.  And of course, the taxpayers were forced to bear the financial burden.

“It is true that not everyone on earth is born equally, but there is no way on earth to…make things equal,” Galles said.  “Here is something unavoidable in any system and we are going to use it as an excuse to take from them [the rich] because I want stuff I didn’t earn.”

While it may not be as extreme as Galles says, Americans working in professional labor have seen higher return while industrial wages have fallen.  Mainly due a service oriented economy, blue-collar jobs are in lower demand.  Fair or not, this is the reality and the aggregate data supports this fact.  As the old saying goes, the rich get richer.

This aside, one thing seems sure.  Everyday citizens are blaming the financial crisis on those at the top.  This message of demonizing the rich and victimizing the poor won Obama the election – he had support from the middle class.  Many Americans are now hoping to tax the daylights out of the upper class.  And this attitude is not by accident.  Absurdly high executive compensation packages have not helped the cause.  When an average American hears that a CEO is making 200 million in bonuses, something seems wrong.

Increasing taxes for the rich is popular and it’s not going away.  And although the rich may seem to deserve higher taxes, spreading the wealth may not be the answer. It may hamper economic growth – one thing we cannot currently afford.

Ultimately we must consider the role of government.  While the economy may grow quicker with less oversight and restriction, many other sectors of society may suffer.  So before we rant about the problems with income tax, consider this: there is no simple, fair way to do it.

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By: Stephen Roesler

The once pressing problem of a dwindling ozone layer, increased global temperature and innocent polar bears losing their coveted glaciers seems to be forgotten in today’s economic insecurity. Today, everyone seems to need a job.

But as scientists explain, fixing the U.S. economy by creating jobs is only one minuscule piece of a rather repugnant pie. A warming globe, for example.  And what about our energy crisis?  Yes, that’s a problem also.

As the world continues to expand and industrialize, energy continues to remain a globally pressing issue.  Domestic dependency on foreign oil and increasing green house gases perpetuate the rush to find clean alternatives.  Although astonishingly high gasoline prices once played a role in the search for sustainable energy, we now face a different problem.  With a glaring recession on tap and a depression peering around the corner, President Obama has suggested a solution to the now 26 million Americans out of the job.

On Obama’s weekly Internet address, he promised the economic stimulus package will “create nearly 500,000 jobs by investing in clean energy.”  Now that the U.S has allocated over $1 trillion to bolster the economy, taxpayers question this seemingly ostentatious plan.

“The money will be spent, jobs created, taxes increased,” says former Los Angeles Times correspondent, Michael Williams.  “And we will be no closer to eliminating our need for, and dependence upon foreign oil than we are now.”

Similarly, a debate between scientists, engineers, economists and politicians continues over the correct steps towards advancing sustainable energy options while encouraging economic growth.

Obama’s theory is correct.  As Economist Ron Batchelder, professor of economics explains, federal subsidies allocated directly to a new market will create jobs.  “The benefits in terms of jobs are going to come to those employed in industries that are complimentary to this [sustainable energy] industry.”  The objective, he explains, is creating jobs that produce valuable output while remaining free from artificial inflation.

To make economical sense of Obama’s plan, the Pepperdine professor says, “you have to identify what the source of failure is in the market system – why is the market not investing in this particular sector themselves,” Batchelder asks.  “You have to give an economist the nature of the source of failure as to why this is the necessary approach.”

In other words, to enact policies that would grow this market, we must identify how our economy is being made poorer and how to correct that.  Answering this question remains tricky.  The recurrent argument goes like this:  The U.S. continues to use up limited resources and remains reliant on the Middle East. Rising Co2 emissions and the warming of the planet seem correlated.  But stop right there.  Herein lies the looming controversy for economists.

According to Charles David Keeling who created the Keeling Curve, there is no doubt Co2 emissions are rising and the globe is warming.   For the past 50 years, Keeling tracked Co2 emissions in Mauna Loa, Hawaii. The data is clear but the question is whether rising emissions remain human induced.

Ask someone on The Intergovernmental Panel on Climate Change and you risk your life.   The data is not taken lightly.  “The world has a problem, here is the data, we are causing it and if we don’t respond now we could be to be in deep trouble,” says Steve Davis, professor of Biology.  “There are uncertainties, but our professional opinion is that this data is clear.”

It’s so clear, in fact, that the IPCC won the 2007 Nobel Peace Prize for their findings and it’s only beginning to impact policies.  Currently, the U.S. and China struggle to agree over reasonable tax policies on Co2 emissions.  Additionally, President Obama is considering a 30 percent investment tax credit to homeowners and small businesses that invest in small wind turbines.

But these measures aren’t enough, says Davis.  Modern research suggests that solar power, for example, is endless.  Scientific American magazine suggests that, “the energy in sunlight striking the earth for 40 minutes is equivalent to global energy consumption for a year.” They further suggest that the American southwest is a perfect place to obtain this energy.  Nearly 250,000 square acres remain suitable for the construction of solar power plants.  If we converted a mere 2.5 percent of the annual British Thermal Units (Btu) of radiation in that region, we would match our country’s energy consumption in 2006.

By 2050, 69 percent of the U.S. electricity and 35 percent of its total energy could come from solar power alone.  This would, in effect, lower carbon emissions by 62 percent, require less dependency from politically tense Middle East relations and create domestic jobs. But, to achieve such a goal requires something taxpayers don’t want to hear – capital.

An America perpetuated by clean energy is not simple, says Gerard Fasel, professor of Physics.  First, we lack the policies to develop large public land areas to support the spanning systems.  Furthermore, some find the panels an aesthetic eyesore as many enjoy the desert scape without the painfully blinding reflection of a solar panel.

Second, although the technology is quickly improving, waste is presently enormous.  Our storage systems lack effectiveness, as batteries remain expensive and inefficient.  Similarly, transporting the energy to surrounding cities results in huge losses.  Because most energy would theoretically come from the southwest, the energy would travel roughly 3,000 miles to cities like New York and Washington D.C.  According to Fasel, the existing AC system is not robust enough to maintain the power over the long haul.  Thus, a new high voltage system remains obligatory; again requiring more money.

Third, a national energy plan remains indispensable to such a goal. As Batchelder explains, “the private sector will not collectively invest in certain areas because they cannot capture a private return.”  Currently, the International Energy Agency finds that coal is cheaper and more accessible than solar.  Thus, energy companies need incentive to switch their efforts to renewable sources, which Washington could achieve through a coal or carbon emission tax.

Theoretically, the necessary steps towards a society fueled by sustainable sources require capital, technological improvement and implemented federal policies.  And although capital and development in technology require effort, Batchelder asserts that changed polices present deeper problems.

Although the scientific data is overwhelming, it’s not 100 percent certain.  According to Davis and Fasel, it will take a degree of trust on the part of economists, but the creation of jobs in the energy sector seems prudent.  However, economists look to historical governmental programs for a point of reference.

Recalling FDR’s New Deal, if the U.S. creates jobs for citizens, it often removes them from their area of skill, Batchelder says.  For example, if a car salesman is thrown into a recently created job building roads, the salesman is essentially removed from his area of skill.  Instead of waiting around for the market to rebound, the salesman now produces output from a different sector of the market.  In essence, creating jobs simply on the principle of supply and demand remains dodgy.

“One of the reasons it took so long to come out of the depression is the idea that we shook up our team of assets,” Batchelder says.  “So if I take someone who is a natural quarterback and I make him a lineman, at some point I have to bring that whole team back together and restructure.”

As we experienced post Depression, economic restructuring took years.   President Obama’s quandary is balancing our economic future with today’s hardship.  Amid the balance, however, we must take the advice of experts in their respected areas.  If environmental scientists and geologists largely agree on findings, we better listen.  And this goes for economists as well. At the end of the day, the U.S. faces a strenuous challenge to rebuild an economy, without the neglecting the potentially permanent problem of global warming.

Renewable energy may be that answer.

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Author: Barack Obama

Published by Canongate, 2006

$18.99

362 pages

By: Stephen Roesler

Barack Obama promises a lot. His inclusive political policy and empathy for the less fortunate remain inspiring, but is it highly idealized.

Politics aside, the book is fantastic.  Not only does Obama understand America’s thirst for new administration and modern politics, he presents his ideas in a clear and digestible manner for many demographics. “The Audacity of Hope” contains chapters on race, faith, values and opportunities.  Each functions to explain its relevancy to both a high browed CEO and an average American citizen.  Not only does the Senator from Illinois know how to write, he knows how to sell books as well.

His previous novel, a memoir entitled “Dreams of My Father,” traces Obama’s heritage and clarifies his political ideals.  Named the number one best seller on college campuses by the Chronicle of Higher Education, Obama proved himself a momentous writer.  Where “Dreams of my Father” remains a reflective memoir, the novel lays a foundation for his newest work, “The Audacity of Hope.”

At a little over 350 pages, Obama details his policies, explains his job as a senator and provides useful context throughout each respective subject. And in an attempt to make himself relatable, he revisits his family life numerous times, usually making a rather typical joke along the lines of his wife being the more attractive intelligent of the two.  He says, “I nod, knowing that if I ever had to run against her [his wife] for public office, she would beat me without much difficulty.” Cute. But we’ve all heard it.

Maybe humor is not his strong suit, but an arduous analysis of foreign policy in a chapter entitled, “The World Beyond our Borders,” makes up for it.  Obama uses Indonesia as a metaphor for U.S. foreign policy.  “With more than 240 million people, Indonesia’s population ranks fourth in the world…more than 700 ethnic groups reside within the country’s borders, and more than 742 languages are spoken there.”  The chapter goes on to examine the effects of globalization and sectarianism, ultimately aimed to justify Obama’s foreign policy strategy.

His most notable theme throughout the book exemplifies struggling individuals.  Insisting that the best way to grow our economy is from the bottom up, his focus remains on examples like Tim Wheeler, a middle class laborer who recently lost his job.  Wheelers son needed a liver transplant and with no job, no health care benefits and a dwindling savings account, the chances looked grim.  While we don’t hear the outcome of Wheeler’s circumstance, we do understand Obama’s reasoning – “the ownership society,” pushed by President Bush, left men like Wheeler helpless.  According to Obama, this should change.

The examples of the underrepresented middle class permeate the entire novel, but ultimately leave the reader questioning Obama’s method for change.  He answers by weaving in his experience as the editor for The Harvard Law Review, a civil rights lawyer, professor of constitutional law and ultimately his role as a Senator.  Throughout the various roles, he suggests his ability to embrace the incongruities of each position, suggesting his unwavering sense of self.  “I find comfort in the fact that the longer I’m in politics the less nourishing popularity becomes, that a striving for power and rank and fame seems to betray a poverty of ambition, and that I am answerable mainly to the steady gaze of my own conscience.”

And what would an American politician be without some reference faith in society?

Obama tells a story of him on his way to a city council meeting.  Insisting he enter the meeting through the main entrance, he ran into anti-abortion protestors.  A middle aged man in a cardinal hat and a plaid shirt approached Obama to commend him on being a “Christian.”  Obama thanked him and the man replied, “so how can you support murdering babies?”  After some disagreement, the man’s wife added, “I will pray for you.  I will pray you have a change of heart.”

Shocking stories like these lead into Obama’s struggles with his own family.  In a chapter entitled, “Family,” Obama reveals personal circumstances and marriage difficulties due to long work hours and a newborn child.  “You only think about yourself,” his wife told him.  “I never thought I’d have to raise a family alone.”

But the seriousness is balanced by a wealth of lighthearted encounters.  In one instance, his eldest daughter, Malia, coaches him on twenty-first century etiquette.  After Obama shook hands with Malia’s seven-year-old friend, Malia asserts, “you don’t shake hands with kids. You just say ‘hey.’ Sometimes you wave.  That’s pretty much it.”  After an apology, she replies, “that’s ok, Daddy.  You didn’t know, because you’re used to shaking hands with grown-ups.”

These illustrative examples are woven throughout, each offering the reader a sense of perspective amid the absurdities of political life.  Detailing the heady nuances of the war in Iraq, our economic situation, and religion in American are serious and deeply contemplative topics. But Obama’s deep moral concern shown in the awareness of his own family adds an exceptional element.

Obama’s impressive intelligence, staggering practicality, and rich intelligence make his newest book a necessary addition to every American’s library.  But cynics beware,

“The Audacity of Hope” serves a potent dose of idealism bordering unrealistic.

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