Wednesday, October 15, 2008

Joe the Plumber and the American Dream

Plumber From Ohio Is Thrust Into Spotlight -

Mr. McCain...[cited] “Joe the Plumber” [Wurzelbacher] as a symbol of how Mr. Obama’s tax policies would hurt small businesses. Since his initial exchange with Mr. Obama, Mr. Wurzelbacher has become a favorite of anti-Obama bloggers and television commentators. On Neil Cavuto’s program on Fox News, for example, he was asked if Mr. Obama’s response about “spreading the wealth around” satisfied him, and gave an explanation that the McCain campaign was quick to send around to reporters. “His answer actually scared me even more,” Mr. Wurzelbacher said. “He said he wants to distribute wealth. And I mean, I’m not trying to make statements here, but, I mean, that’s kind of a socialist viewpoint. You know, I work for that. You know, it’s my discretion who I want to give my money to; it’s not for the government decide that I make a little too much and so I need to share it with other people. That’s not the American Dream.”

I'm working right now on a paper for a conference on the American Dream so these issues are much on my mind. American Dreamers assume that the Market is perfectly efficient and so, given that people respond to incentives, will produce the greatest desire-satisfaction for the greatest number. The Fundamental Theorem of the American Dream is that there are trade-offs between equality and opportunity, security and freedom.

It is easy to see how opportunity preludes equality. Some people are just going to be more productive than others because of their native ability and propensity for hard work. If you smack them down with redistributive tax schemes in the interests of promoting equality, they'll have no incentive to produce and we'll all be worse off because there will be less stuff to go around. It is also easy to see why security and freedom are incompatible. People need the stick as well as the carrot. Where there are social safety nets in place, potentially productive individuals won't be driven to extend themselves out of fear and will, as a consequence, be less productive.

The Theorem however is false, which shows that there's either something wrong with derivation or the axioms from which it was derived. The US trails affluent, industrialized nations in both equality and social mobility: American men are less likely to find themselves in different economic segments of the population from their fathers in the US than in social democratic, egalitarian Denmark. As for the fear factor, insecurity discourages risk-taking. Americans, contrary to all expectations, turn out to be more risk-averse than Chinese who, relying on economic safety nets provided by kin and by the state, can afford to extend themselves.

After 15 years of hard work Joe the Plumber was in the process of buying a plumbing business, which he anticipated--rightly or wrongly--would net him more than $250,000 a year. An unseen presence throughout the debate, McCain invoked him in an appeal to the nation of shopkeepers Americans imagined themselves to be. But in fact there are are relatively few small business owners in the US and, of those, very few net $250,000 or more:

According to figures compiled by the Small Business Administration, there are fewer than six million small businesses that actually have payrolls. The rest are so-called nonemployer firms that report income from hobbies or freelance work done by their registered owners, earning as little as $1,000 a year. Of these, according to a calculation by the independent, non-partisan Tax Policy Center, fewer than 700,000 taxpayers would have to pay higher taxes under Mr. Obama’s plan. But even some of these are not small-business owners in the traditional sense; they include lawyers, accountants and investors in real estate, all of them with incomes that put them in the top tax brackets.

The American Dream Joe described is out of reach for most Americans, and may not even be feasible for Joe. The odds are stacked against small business owners and even if his business doesn't fail in the first year, as most small businesses do, it is unlikely that he'll make $250,000 a year out of it.

Most people can't even make a start on Joe's American Dream. I could never even dream of starting a plumbing business because I couldn't be a plumber. I'm a woman: women can't get apprenticeships in plumbing or other blue collar trades. That's just the way it is. Back when I was a kid even being male wasn't enough to open the magic door to plumbing: you had to be Italian. And even then, it wasn't easy if your grandparents came from the wrong part of Italy.

There are a thousand assumptions, customs, practices, informal procedures and unwritten rules that restrict people's options in virtue of sex, race, ethnic origin, family connections or lack thereof, economic status and circumstance. School and scouting are fair meritocracies: if you're smart, hard-working, ambitious and persistent you get your grades, credentials and merit badges. But adult life in the Real World, particularly in the part of it working class Americans inhabit, is nothing like that.

Most grown-ups know that the official rules are a sham. Everyone knows that women have to work harder than men to prove themselves and that there are some jobs women just can't get--as well as jobs men just can't get. Everyone knows that it's not what you know but who you know. Everyone knows that open bidding is usually nothing but window-dressing: construction projects go to relatives and croneys. Everyone knows that hard work, initiative and persistence rarely pay off. A few very lucky people have jobs where achievement and advancement are feasible. Most work at routine jobs where there is simply no way to to show their stuff: you clock in, do what your told or look busy if there's nothing to do, and clock out.

It isn't big government or high taxes that impose constraints, but the customs, practices and unwritten rules operating under the radar that restrict our freedom, limit our options and undermine initiative. Government is the liberator. By legislating and enforcing official rules to achieve fair meritocracy, the state imposes relatively minor restrictions on the few but opens wider opportunities for the many and expands overall freedom.

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