Part II. The Only Way the Democrats Can Decisively Defeat Trump and MAGA
Part II: Economic Policy Proposals
First, Harris and Walz must declare that they are not “communists” or even “socialists”, or anti-business, or anti-wealth, since wealth is essential for investment, without which no country can prosper. They must assert that solving social problems is not being socialist or communist, it is intelligent policy, benefiting capitalist, free-market free-enterprise nations such as ours. They must explain that communism means nationalizing the means of production and not having a free-market free-enterprise economy, and that they are completely against all that, contrary to Trump’s dishonest, libelous accusations. In fact, Harris and Walz should immediately sue Trump for libel.
Second, Harris and Walz should stop demagogically accusing businesses of being greedy and of price gouging. Whether they like it or not, the laws of economics, similar to the laws of physics, do not bend to ideologies. They should therefore acknowledge that reality and assert that the free market economy is the best system, and that inflation resolves itself through competitive free market forces.
Harris and Walz must explain why price controls are always counterproductive, inevitably leading to shortages and ultimately even higher prices. That has been the experience with housing rent control everywhere in the world, as it was with effectively price-controlled oil prices during the 1950’s and 1960’s up to OPEC’s expropriation and nationalization of its oil fields in 1973 and the resulting end of the price controls imposed by the U.S., leading to an overnight 600% increase in the price of crude oil, from $2 a barrel to $12 a barrel, and our first stagflation experience.
They must also explain that costs and prices rose sharply starting in mid 2020 when Trump was still president due to Covid supply-chain disruptions, and then after February 2022 due to Russia’s invasion of Ukraine which drove up oil and gas prices along with grain prices. And that Biden’s big Covid stimulus in 2021 was absolutely necessary to avoid a depression, even if it meant that there would be a temporary imbalance in supply and demand due to income maintenance (thanks to the Biden stimulus) not matched by supply maintenance (due to Covid supply-chain problems). The unavoidable trade-off decision Biden had to make was low inflation along with a severe depression due to no major stimulus; or swift economic recovery due to a major stimulus with a temporary rise in inflation. Harris and Walz must make sure all voters understand that.
Third, to further prove they are not socialists or communists, Harris and Walz should include in their policy proposals, contrary to liberal ideology, the need to eliminate the estate and gift tax, for two reasons. First, since an estate’s assets are acquired with after-tax income, for that reason the estate tax is not just unfair, it is also illegal double taxation. Second, the estate/gift tax is unconstitutional being in violation of the 5th Amendment’s “no taking” of private property clause, the very reason the federal government does not and cannot tax real estate, since it is property.
Harris and Walz must also acknowledge that the estate and gift tax is a fraud perpetrated on the American people by Congress which intentionally circumvented the 5th Amendment’s “no taking” clause by asserting that the estate tax is not a tax on property, rather that it is a tax on the transfer of estate property. The intentional fraud of Congress is revealed by the fact that if the estate tax were truly a transfer tax, the tax would be calculated on the value of the assets at the time they are transferred, not on the value at the time of death; and by the fact that the tax would be due at the time of transfers, not within nine months of the date of death, even in the absence of any transfers! The unfairness and unconstitutionality become even more apparent when one considers that commercial transfers (i.e., sales) are taxed only by state and local sales taxes, never by the federal government, and furthermore that estate and gift transfers are non-commercial transfers. Also to be considered, sales tax rates never exceed 10%, whereas estate tax rates are comparable to income tax rates, which can exceed 40%.
Harris and Walz should also explain that the reason local real estate taxes are not unconstitutional is that those are not really taxes on property. Rather, they are essentially fees for services rendered by the local government to the real estate property, such as road and sewer maintenance, garbage collection, public schools, public parks, police and fire departments. In fact, total annual local “real estate taxes” (a misnomer, since they are real estate fees) cannot materially exceed actual local expenditures without becoming unconstitutional.
As for fallacious, demagogic and invidious arguments that eliminating the estate tax would be very bad for the nation and would lead to even greater wealth inequality, Harris and Walz must explain that the very wealthy largely avoid estate taxes through legal tax shelters (though they are economically counterproductive). Furthermore, that whatever the wealthy do with their money is good for the economy. When they use their money for consumption, that is good for economic and employment growth, and when they invest, that is good for technological advances, infrastructure improvements, and economic and employment growth. All that in turn results in higher income and sales tax revenues, more than offsetting the loss of estate tax revenues. Harris and Walz should point out that most investment is made by very wealthy individuals or highly profitable companies. Where would investment and venture capital in particular be without the wealthy and highly profitable companies? Without many wealthy citizens and profitable companies our nation would simply be poor!
Fourth, another point Harris and Walz should make is that the problem is not wealth or income inequality, the problem is poverty and low incomes. And that both poverty and low incomes are a function of a low level of education, or of unemployment, or of a weak economy, they are not a function of income or wealth inequality. The solution to low incomes and poverty, it must be repeated, is to have truly excellent public schools, run as the best private schools with strict class discipline, lots of homework and study hall, school uniforms (the psychological value of “dress the part” should not be undervalued) and with an enlightened curriculum providing a solid, broad educational base for the advanced, complex, highly competitive global economy, while minimizing psychological problems. (With truly excellent public schools, Appalachians would never have been poor even as coal jobs disappeared, as they would have been qualified for jobs other than in the coal industry. With highly educated Appalachians transitioning out of coal-related jobs, many companies would have had the incentive to make non-coal investments in Appalachia.)
Fifth, another step Harris and Walz should take to prove they are not socialists or communists, is to go against liberal ideology and eliminate capital gains taxes, especially long term capital gains taxes, whereby, for example, people selling their homes end up with much less money to buy a new home after paying capital gains taxes. That is absurdly unfair. Furthermore, long-term capital gains are often in large part due to inflation, they are not real gains in terms of purchasing power, and therefore should not be taxed. In any case, of crucial importance, capital gains are not income; they are the result of the sale of appreciated assets. And the sale of assets, whether homes or stocks, should be taxed only by states and cities at their sales tax rate (payable by the buyer, not the seller), not taxed by the federal government as income.
Harris and Walz should also realize and explain that eliminating long term capital gains taxes would unlock enormous amounts of capital immobilized by the capital gains tax and sunk into economically unproductive tax shelters, leading to an investment and consumption boom, to much higher economic growth, to lower unemployment and higher wages, and to higher income and sales tax revenues, more than offsetting the loss of capital gains tax revenues. The whole nation benefits enormously. Who cares if the wealthy do too? Only the envious, due to an inferiority complex and not having been properly loved by their parents.
Harris and Walz must state that they do not want the Democratic Party to be the party of small-minded envy, of ignorant class warfare. It should be the party which solves serious social problems, such as poverty, addiction, violence, abuse, crime, high numbers of mentally disturbed citizens, high numbers of undereducated citizens, and the lack of true, real equal opportunity for every single youth. Real equal opportunity, it must be repeated, depends on having truly excellent public schools with strict class discipline, lots of homework and study hall, school uniforms, and an enlightened curriculum capable of preparing our students to succeed in the highly complex and competitive global economy, and capable of minimizing psychological problems.
Since such truly excellent public schools are in the national interest, the federal government should subsidize them whenever necessary, in particular to overcome the problem of poor localities not having the funds to make their public schools truly excellent. It should also institute a tough, prestigious national high school graduation exam, in order to stimulate schools to properly educate their students with an enlightened curriculum, and in order to ensure a uniformly high level of public education nationwide.
Sixth, Harris and Walz should also explain to the voters that wealthy companies and individuals contribute much more to society than the income taxes they pay (whether or not their effective tax rates are low because of legitimate depreciation and interest deductions). How? By creating jobs, by investing, and by the sales and income taxes their consumption and investments generate directly and indirectly.
© Edward Sonnino 2024
August 17, 2024
