Conservatives Are Apparently Arguing For Huge Tax Increases

The CBO reported yesterday that Obamacare would slightly reduce labor supply but not affect labor demand. A reduction in labor supply means that workers themselves choose to work less while a reduction in labor demand means workers are forced to work less because businesses are not hiring. I pointed out yesterday that this is great news. The U.S. is overworked and the bargaining power of capital is higher than ever. Voluntary reductions in labor supply attack both problems and, as a bonus, people are also getting health care out of it. So that's pretty nice.

As Kevin Drum points out today, much of the media just flatly got the CBO report wrong. Owing to lack of familiarity with the basic differences between labor supply and labor demand, a hugh crush of reports failed to make clear that this was a labor supply reduction and many even presented the report as if it was forecasting a labor demand reduction. Due to this shoddy reporting, I'd bet that the majority of people who came across this news have a false impression of it. That's pretty sad, but also par for the course in a media climate that employs journalists and reporters with little to no subject matter expertise.

Conservative hysteria about the report has largely hinged upon the incorrect interpretation that it is saying businesses will want to hire less, not that workers will want to work less. So wading through them to try to find an argument has been pretty fruitless. It's just confusion all the way down.

However I did find one non-confused conservative argument on twitter from Justin Green of the Washington Examiner (thread here). He argues that our policy should try to make work more necessary for people to get health care and other basic needs because it being necessary is what makes it so meaningful.

The problem with this argument is that it ends up ripping through everything conservatives hold dear. The following is a list of policies that are logically entailed by the view that we should organize policy to create more necessity to work:

  1. Increase income taxesBecause taxes reduce people's income, it increases their necessity to work for a given standard of living. Increasing income taxes can therefore make work more necessary for people to get health care and anything else, thereby increasing net meaningfulness in the world.
  2. Increase capital gains taxes. Because capital gains are not income received from working, increasing taxes on them will make work more necessary to get enough income to pay for your health care.
  3. Levy a land value tax. Because not taxing land value (and the value of all natural resources) allows individuals to capture economic rents that are not derivative of their labor, levying a land value tax will make work more necessary.
  4. Increase inheritance taxes. Because inheritance is income that comes from things other than work, levying a tax on it will make work more necessary.

If conservatives really want to pump up labor supply, then these are all policies they should support. All of them make work more necessary, the first by reducing the return on work, and the latter three by making it harder to live on non-labor income.

When pressed as to why he doesn't support some of these things, Green summoned the laissez-faire baseline as conservatives are wont to do, saying: "I think the state should avoid actively incentivizing sloth, but not advocating tossing weights on folks."

As readers here are probably painfully aware of by now, this argument is totally empty and meaningless. It starts by assuming in the background some set of idealized laissez-faire institutions that have never existed and then defines state actions relative to that baseline. So adding public health care counts as "actively incentivizing sloth" but taking away public health care does not count as "tossing weights on folks" even though both are state policy changes. Similarly, increasing taxes counts as "tossing weights on folks" but reducing them, even when doing so would reduce hours worked through the income effect, does not count as "actively incentivizing sloth." But since the laissez-faire baseline is utterly meaningless and is just as much a function of state-constructed policies and institutions as any other, arguments that rely upon it as some naturalized baseline (as this one does) are always unsuccessful.

Ultimately, I am not so delusional as to think any of this will move conservatives. None of these arguments about the meaningfulness of necessity or even the labor demand stuff actually motivates them. The great majority of them just think poor people do not deserve to have this extra income (in the form of health care subsidies) and that rich people deserve to have it instead. That is the fundamental thing that moves them here. It is a desert theory view. All the rest of it is just post-hoc backfill arguments that, when defeated, do not actually reach their deep motivations and therefore do not affect their policy positions.