Debunking Democrat Demagoguery (Economically)

Sunday, October 17, 2004 9:25 pm Daniel J. Summers

John Kerry and John Edwards (“Kedwards” hereafter) are making some significant claims about their plan for this country, and using some pretty strong but rather hackneyed rhetoric to get their point across. The term “demagoguery” is defined as “impassioned appeals to the prejudices and emotions of the populace.” Democrats are renowned for this, from the “New Deal” to Clinton's famous “I feel your pain,” Democrats base a lot of their policies on what they can spin to appeal to emotions, rather than facts. Let's take some of these areas, specifically some of those having to do with economics, and see why, I believe, Kedwards is wrong for America.

Tax Cuts for the Rich

This has been a favorite claim of Democrats for ages, and it shows a basic lack of understanding regarding basic economic principles. The biggest thing that Democrats have wrong is their belief that taxes are the governments, to be “given back” to the people. Taxes are the people's money, given to the government to fund needed programs, such as national defense, highways, etc. Tax cuts are not “giving back,” they are letting people keep more of their money.

Another problem with their rhetoric is that speaking of taxes in dollar amounts is inherently going to sound skewed to someone who isn't paying attention (which, sadly, represents a lot more of our current electorate than we'd like). Imagine that there are two people - one makes $10,000 a year, and the other makes $200,000 a year. In this imaginary world, everyone pays 10% taxes. This means that person A pays $1,000 in taxes a year, and person B pays $20,000. Now, here come the media reports about a budget surplus, and Congress and the President decide to cut taxes by 1%. Person A saves $100, and person B saves $2,000 - in both cases, a 10% reduction in the total amount of taxes they have to pay. If you use Democrat thinking, person B got 95% of the tax cut.

Tax cuts benefit everyone. Those who make more, by virtue of simple mathematics, will receive a larger amount reduction whenever tax rates are lowered. However, these are also people who will use this money to reinvest in our economy, either through business expansion (which leads to more jobs), investments in stocks and bonds (which helps fund the economy), or through charitable donations (which improves the quality of life in local communities).

Another point on tax cuts - sometimes a reduction in the tax rate can actually increase tax income. If done correctly, tax cuts don't have to be “paid for,” they pay for themselves. If a gas station lowers its price for unleaded gasoline by $.02 a gallon, they will more than make up for their $.02 loss with their increase in volume. Taxes work the same way - when the rates are reduced, the economy grows; so, while we all pay less rate-wise, we pay more in real dollars. Everyone wins.

Minimum Wage Increase

Yet another favorite topic, and another place that Democrats don't understand economics. A wage is a negotiated contract between employee and employer. Most often, all negotiating is done on the part of the employee, as an employer would say “Here's a job, and here's the pay - want it?” Very few people are raising families on minimum wage, and in their “average annual minimum-wage salary” statistics, the Democrats are including teens, college students, and spouses who work as secondary wage earners in their household. When the government interferes in business by forcing them to pay their entry-level workers more, what do the businesses do? There are either fewer entry-level jobs, or the products and/or services the company produces begin costing more.

There is one segment of the population who benefits from minimum-wage increases - union members. Many union contracts stipulate their wage in relation to the minimum wage - when it increases, their wages increase as well.

Corporate Tax Loopholes

Again, more cries of how these evil corporations are trying to get out of paying their taxes. And, yet again, this is a place that the Democrats don't just get it. They miss it because, economically, there is no such thing as a “corporate tax”. There is a finite amount of money in this country, and corporations only have money if they extract it from the general public. The most common method is by providing a good or service for which people will give their money. With this money, they have to cover their operating expenses, the cost of the good or service itself, the cost of paying their employees, and what is left is called “profit.” Under the current structure, they also have to pay taxes with that money, which eats into profits. The company sets their price based on a few factors, two of which are desired profit, and the market value of their good or service.

With that, what happens when the government takes more money from the corporation? Who pays that tax? The general public, that's who. Corporate taxes make everything cost more, while giving no benefit to the economy whatsoever. All they do is penalize success.

(Things have been pretty crazy here lately - lots of work and family events, with little free time. I hope to have time to attack some other lines from Kedwards in the next few days.)