Tuesday, October 7, 2008


If there's one word Mr. Obama uses a lot, it's "fairness."

That's a good word, because everybody knows America is built on the concept of fairness. That is, everyone should have unrestricted opportunity. No one should have their path to the American Dream blocked by race, origin, religious belief (unless you're Mitt Romney, of course, then it's okay), gender, etc. That's why various forms of discrimination upset us so much; it's an undermining of this basic principle.

The problem is that Mr. Obama isn't talking about that kind of fairness. What is described above, and what America was founded on, is equality of opportunity. We all believe in that. What Mr. Obama is describing is something we don't believe in: equality of outcome.

Here are some concrete ideas. See if you agree with them:

1. I believe that all students should be given a C grade, no matter how hard they study and how many answers they get right, or how little they study and how few answers they get right.

2. I believe that a race or sports game should result in a trophy for everyone involved, whether they practiced hard and gave their best effort, or didn't bother to practice and hardly tried during the event.

3. I believe that everyone should be paid the same, whether they have studied and worked hard their entire lives to achieve a position of responsibility, or have not worked at their education and have been lazy in the positions they've held.

Mr. Obama's view of fairness agrees with all three of those statements. For most of us, those statements are ludicrous. Of course the person who works hard should get the trophy over the one who is lazy. Of course the student who puts in the time and effort deserves an A and the one who doesn't should receive a lesser grade. Finally, of course the person willing to work long, hard hours to succeed merits higher pay than the one who clocks in a few minutes late, muddles through the most basic duties and leaves as soon as he can.

We believe in the idea that so long as the playing field is level, an individual should be free to distinguish herself through effort, and gain greater rewards and achieve greater success through hard work. That's very different from equality of outcome, which is also known as socialism.

As we look for change this election, it's important not to look to equality of outcome as a valid social model. Where it has been tried, the best result has been mediocrity. Remember clearly Mr. Obama's version of fairness, so clearly illustrated during a debate moderated by Charlie Gibson:

GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, "I certainly would not go above what existed under Bill Clinton," which was 28%. It's now 15%. That's almost a doubling, if you went to 28%.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15%.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28%, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.

That is, it doesn't matter if the idea is a good one or one that works, so long as it is "fair." That's change we don't need.


omar said...

Hi! Found you through Nobody's blog.

I don't know much about politics, but in my pursuit of a Finance degree, one of my classes went into great detail about the theories around how the capital gains tax rate affects the economic health of a nation. Given that I chose a different career path, I never thought I'd reference that information again. Thank goodness for blogs :)

I'm certainly no expert on the matter, but I think Charlie Gibson's data is a little bit incomplete. While government revenue may have increased, he failed to mention that the unemployment rate has historically increased following a capital gains tax cut, and unemployment has generally gone down when the rate is increased.

And when the rate was increased to 28% in 1986 (I had to look that up), the rate of economic growth nearly doubled from that of the previous year.

(Note that there could have been other economic factors at play here, but my historical data is no more arbitrary - and no less accurate - than Charlie's.)

With regard to fairness, the idea of lowering the capital gains tax is not to directly help Joe American who owns some stock, as Charlie's wording implies. Joe American probably doesn't really notice capital gains tax changes. It does directly help Joe Business Owner. The value of his business, should he choose to sell it, effectively increases without him having to go through the effort of making it more profitable.

Obama's answer could have been more thorough, but after getting to the bottom of it, I agree with what he said. More Americans benefit from lower unemployment and higher economic growth than they do from lower capital gains tax.

Andrew said...

Welcome, Omar, nice of you to read along.

I'll take your figures as accurate, though I'd be interested to see what other factors played into that economic growth.

What bothers me most in the exchange is that Obama was willing to accept Gibson's premise (note that Mr. Obama is not shy about correcting an interviewer if he feels the need, and rightly not), but still felt that fairness was a more important goal than anything else.

I suspect an increased capital gains tax doesn't have a causal relationship with lowered unemployment and increased economic growth.

I do know that I don't agree with the concept of fairness of outcome, or from each according to his abilities to each according to his needs as implemented by the government. I believe that to be Obama's end goal, and the underlying motive for his answer.

As for the capital gains tax, it's pretty clear we should be doing everything we can to attract investors to our market. Raising the tax would be catastrophic in the current environment.