The Slippery Slope of Fairness

If I could ban the word “fair” from political speech I would. Life is not fair. And politicians cannot make life fair. But fair is probably the most frequently used (and abused) word in the political lexicon.

The problem with using the word fair in political speech is that fairness is subjective. What seems fair to one person may be seen as unfair by another person. There is no objective standard that can be applied to determine if some policy is fair. The primary determinant of whether some thing or some policy is fair is self-interest. If that policy benefits you, you will think it a fair policy. If the policy does not work to your benefit you will think it unfair.

Many people, especially those with a progressive bent, will say that if a policy benefits a majority of the people it should be considered fair. But that determinant does not take into account the disparate impact that the policy would have on the minority. A majority of people in the antebellum South might have thought slavery was acceptable because that policy benefited the majority (most of them whites) in the South. But such a policy would be nothing more than a dictatorship of the majority, and the Founders sought to avoid majoritarianism and to protect minorities (although in the case of slavery it took a Civil War and many decades of struggle against Jim Crow to obtain such protection).

Communism and socialism are both based on this majoritarian concept of fairness. Both philosophies believe that the wealth generated by free market capitalism is based on the exploitation of the labor of the workers and that such exploitation is unfair. Both systems attempt to impose fairness either by confiscating the means of production from the capitalists by force or by imposing confiscatory taxes on the income and wealth created by capitalism. So what if such systems are unfair to the rich capitalists? There are a lot more workers that will benefit from a fairer system.

But there are two problems with these “fairer” systems. The first is that these systems produce much less income and wealth that can be redistributed to the workers leaving, not only the capitalists, but also the workers, worse off. But secondly, and perhaps more importantly, such systems can only be imposed by force. Even regimes that purport to be democratic do not give the impoverished workers the ability to change the socialist economic system in order to relieve their poverty. That’s not democracy. There is no such thing as a democratic socialist no matter what Bernie and AOC say.

If we want a pretty fair economic system we need one that is widely supported by a broad consensus of the people, not one imposed by a dictatorial central authority. Because of human nature, it is impossible to develop a society and economic system that is considered “fair” by everybody in that society. But it is possible to develop a society and economic system that the people consider “not too unfair.”

A lot of things in life are unfair but not too unfair. A graduated income tax might be considered unfair by some, but those that earn more and thus have to pay a higher tax rate realize that poor people have less discretionary income and high taxes for them would mean sacrificing necessities and not luxuries. So, wealthier people can be tolerant of paying higher taxes that they think are unfair as long as those taxes are not “too unfair.”

But if they think the taxes are too unfair they will seek a remedy. They can vote for candidates that promise to lower taxes. Or they can move from a high tax state to a lower tax state, as is happening to New York and California right now. What they cannot do is cheat on their taxes. And they won’t as long as they believe that the higher taxes they pay are not too unfair. But if they believe the taxes are too unfair they will be motivated to evade those taxes just as people throughout history and across the globe avoid and evade unjust laws that destroy their liberty. The rule of law requires not only obedience to the law but also the reasonableness of the law. Unjust law and its enforcement is oppression. Law that is not too unfair is not perfect, but it can be reasonable.

Once we have come to the conclusion that it is impossible to create a society that is fair for everyone, and equally impossible to build a sustainable society that is very fair for some and very unfair for others, then we are left with the task of creating a society that is not too unfair for just about everybody. How do we do that?

First, we have to honest with people. There is no free lunch. Someone has to pay for the lunch. If someone makes a donation so that someone else doesn’t have to pay for the lunch, that is a very nice charitable thing to do. But if someone is forced to pay for someone else’s lunch, that’s unfair. Likewise, if the government pays for someone’s lunch and taxes you to pay for it, that’s unfair. But is it too unfair or not too unfair? Generally, most people are happy to pay for a certain level of welfare for people down on their luck. But the people making such a charitable donation, the taxpayers not the politicians, would not be unreasonable to ask for some accountability on the use of those funds, certain restrictions on the use of the funds and that the recipients make reasonable efforts to get off the dole so that future donations would no longer be needed. And deficit spending to pay for welfare is mere political deception if not just plain old fraud. Borrowing money to give people current benefits makes people in the future, our children and grandchildren, responsible for paying for the welfare without having any say about it. That’s not just unfair, that’s fraud.

Second, we know that we have to pay taxes to the government for all the benefits it provides to all the people. Remember, the reason the Founders held the constitutional convention to create the US Constitution was because the government under the Articles of Confederation lacked the power to tax and therefor couldn’t provide the services that people demand of government. I would happily pay my taxes if I thought I was getting a good value for my payments, that I thought my money was well spent and going to the areas of need I cared about. As a thought exercise I imagined an America where everybody had to pay their taxes as usual, but that they could direct their tax payments to the areas of government that most needed that money. I imagine that the flow of funds would be very different than the priorities set by recent administrations. Conservatives could direct their taxes to pay for border security and defense while progressives could direct their taxes be paid for welfare and social justices causes. In reality such a system probably wouldn’t work but such a thought exercise does give us some insight on how government’s current priorities are screwed up.

And if deficit spending in the trillions of dollars is a giant fraud, then we must be unindicted co-conspirators for electing the people spending all that money and defrauding the people in the future who must repay those obligations or defrauding the investors whose principal will be repaid with dollars eroded by years of inflation.

So if we want to have a fair and just society, we have to admit that the path we are currently on is unsustainable. Maybe that’s why 70% of the people in our country think we are on the wrong path. We are clearly on the wrong path! But how do we get on the right path?

We must admit to ourselves and to our fellow citizens that we will never achieve a perfectly fair and just society. We will deal with justice a bit later, but we can understand from the previous discussion that Americans will never be able to agree on what makes a society fair. A society that one person thinks is fair another person might think is a hellhole. But there is a standard that we can achieve – a society that we all think is not too unfair. An acceptable society instead of a perfect society.

What would an acceptable society look like? Let’s take a look at how we can apply the not too unfair standard to some of the contentious policy issues that we are facing.

Politicians try to apply the fairness standard to almost every issue that we face. As we have seen, this is an impossible standard to achieve so why do they do it? They obviously think that voters want “fair” policies and that by promoting policies to achieve the impossible standard of fairness they will enhance their chances of being elected or reelected. What are some of these issues? Well there is Free and Fair Elections, fair compensation to reduce income inequality, the Fair Share of Taxation that the wealthy are supposed to pay and welfare to offset the unfair economy created by capitalism. But voters need to understand that “fair” policies and programs are not always what they seem. We need to look at these issues through the lens of “not too unfair.”

Free and fair elections

These days elections are deemed to be fair based on who won. If my side wins the election is fair, if your side wins the election is a fraud. This may sound like some trite joke but Donald Trump’s insistence that his reelection was stolen has torn this country apart. Even more so than when Hillary Clinton said her loss was fraudulent. Also more so than when Al Gore insisted he was the winner in the 2000 election.

And some elections actually have been stolen. The 202 votes discovered in ballot box 13 in Jim Wells County Texas six days after the election propelled Lyndon Baines Johnson to victory over Coke Stevenson in the 1948 Democratic senate primary. Multiple witnesses have testified that those votes were fraudulent. President Trump’s insistence during the 2022 elections that Republican candidates support his assertion that the 2020 election was stolen led to the current narrow Republican majority in the House of Representatives that has created all the chaos in Congress. The lack of election integrity has consequences.

Democrats claim that rules to guarantee election integrity are unfair to minority voters with President Biden calling Georgia’s voting rules ”Jim Crow in the 21st century.” The progressive Brennan Center for Justice states that the voting turnout gap between minorities and whites is due to voter suppression ignoring the fact that the average age of blacks and Hispanics is much younger than that of whites and that older Americans turnout in greater numbers than younger voters (a trick I learned by reading Thomas Sowell).

So we need elections that are not only fair but also trusted. Many of the claims that elections are unfair or stolen are not true. Such claims are often made by the more extreme wings of the major parties to serve a particular agenda and are often exaggerated or totally fabricated. But such claims throw seeds of doubt among more mainstream voters. So election rules must be structured such that people have confidence in the result.

But voting access for eligible voters and a high level of voting integrity are not mutually exclusive and, in fact, the combination access and integrity will give the public greater confidence in election results. That is exactly what is lacking in today’s election environment.

Fair compensation

When it comes to fairness in income equality, progressives clearly believe that, no matter how productive a person might be, each person deserves equal income based on their needs. Conservatives believe that more productive people deserve greater income. Jonathan Haidt notes in his book, Righteous Minds, that progressives and conservatives have different notions of fairness. Progressives believe that fairness is based on equality of outcome while conservatives believe that fairness is based on proportionality of productive effort. That does not make one side good and the other side evil. But it does mean that progressives and conservatives will never agree on what is fair.

Much of the confusion about income comes from erroneous assumptions about the nature of income. Many progressives believe that wealth and income are zero sum games where the benefit of some comes at the expense of others. Likewise, many conservatives believe that lower paid workers are lazy and inefficient. But the truth is that many wealthy entrepreneurs have expanded the economy and provided better products and services to the benefit of workers and consumers alike. And the Covid 19 pandemic raised the awareness of the entire population about the importance of the many poorly paid workers providing essential services to the entire country.

Minimum wage laws may be economically inefficient but can provide a living wage for many essential workers. But exceptions should be made for entry-level positions, internships and apprenticeships that help young people learn how to make a living. Adults with family responsibilities should not be working minimum wage jobs better suited for new entries in the labor market. Adult workers need to develop the work and life skills to be productive members of society, even if that means rejecting the moral equivalency of multiculturalism and adopting the middle class values (such as getting a good education, getting a first job and waiting until marriage to have children) that made America the prosperous nation it is.

Taking money from productive people to support unproductive citizens isn’t generous, it just pisses off the productive. Confiscatory taxation will not create the functional prosperous society we seek, at best it can only paper over the disfunction (although there are some taxes that make sense).

CBS News’ Sunday Morning recently did a feature on the sidemen, chorus members and understudies that back up major headliners like Billy Joel. These backups made only a fraction of the income of the headliners but asserted that they understood their place. Taylor Swift’s New Eras Tour would never had made the $2.2 billion in ticket sales if the headliner was anyone other than Ms. Swift. Everyone has a role to play in our society. But some roles are more significant than others and the people serving in those roles will receive more compensation than people in lesser roles. The Sunday Morning article called Playing in the Shadows featured an interview with Mark Rivera a saxophonist backing up Billy Joel. He asserted he was content with his role. He’s a good saxophonist but working with a big star like Billy Joel gives him more opportunities and more income. “It’s knowing where your place is. That’s very important.” America will be better served if those in lesser roles can be the best that they can be in that role, rather than enviously complaining about the more productive people in society who receive all the accolades.

Fair Taxation

President Joe Biden (along with Senators Bernie Sanders, Elizabeth Warren and many others) are constantly demanding that the wealthy pay their fair share of taxes to fund the ever expanding welfare state that they seek to create. But what level of taxation do they think is fair? AOC wants a marginal tax rate as high as 70% as a “corrective tax” to fix the problems of “exploitative capitalism.” And Bernie Sanders, in his 2020 presidential campaign proposed a top marginal rate of 56% according to the Tax Foundation. The progressives say that such high taxes do not have a negative impact on the economy and point to the booming economy in the 1950s when the top marginal rate was 91%,

But Federal Reserve data shows that the actual tax receipts collected in the 1950s was not very different from the level of taxes collected now, as a percent of GDP. Federal government receipts were 15.4% of GDP in 1955 when the top marginal rate was 91% and 16.0% in 2020 when the top marginal rate was 37%. And despite the top marginal rate of 91% in 1955, income taxes as a percent of federal government receipts were higher in 2020 at 47.0% compared to 43.9% in 1955.

And who was paying all the income taxes? I don’t have data on the top 1% of taxpayers in 1955, but in 1979 the top 1% of taxpayers paid 18.4% of all income taxes when the top marginal rate was 70%. But in 2020, when the top marginal rate was 37% the top one percent paid 39.7% of all income taxes. So despite the lower marginal tax rate of 37% now, our current tax code is more progressive than it was over forty years ago (and more progressive than in 1955 based the estimate I found for that year). So, if the rich are paying a larger share of income taxes now than during the period of the 1950s that the progressives tout was so wonderful, what is the fairer tax regime they desire supposed to do?

The truth of the matter is that they want to dramatically increase the government’s role in our society and they want the wealthy people to pay for that change. But an expanded role for government means a diminished role for the private sector and it is the private sector that generates wealth (and pays taxes).

We need to generate a consensus on how much Americans pay in taxes. The polls should focus on how much taxes the respondents are willing to pay and not on how much they want other people to pay. We will also need to determine what level of taxation people believe to be unfair and what level they believe to be not too unfair. Europeans believe a high level of taxation is not too unfair. Americans not so much. Then the government needs to learn to live within the means that its citizens are willing to support.

Is Welfare Fair?

As noted in our previous discussion of self-interest, the expansion of government is in the interest of politicians and bureaucrats. But is it in the interest of the people?

America was founded based on the concept of limited government. The powers granted to the three co-equal branches of government by the Constitution were very limited but, luckily for politicians, vaguely worded allowing the politicians over time to expand the role of government. The goal of the Founders was to give the people as much liberty as possible so that they could live fulfilling lives as they see fit – what we now call the American Dream. They worked hard for better lives but they did more than work. They created civic associations, professional associations, charitable groups, religious organizations and churches, fraternal organizations and all the varied organizations and associations needed to create a successful civic society – libraries, hospitals, medical societies, the bar association, volunteer fire departments. Wherever there was a need, people gathered together as fellow citizens to get it done. This is the definition of a vibrant society.

But in his book, The Great Degeneration, Niall Ferguson described how these institutions and associations wither and die. Primarily they are driven to extinction by the encroachment of government. Charitable causes no longer needed to survive on donations and bingo nights. Government could raise the needed funds easily through taxation. Volunteers were no longer needed – replaced by bureaucrats and civil service workers. Volunteer firemen were replaced by first responders. The first responders are dedicated men and women and provide a necessary civic purpose. But the civic participation of citizens has been replaced by professional staff – and something has been lost.

A certain amount of government enlargement is unavoidable in a large modern society like the United States. When large corporations have millions of employees like Wal-Mart and armies of lawyers like the tobacco companies, the government needs a certain heft in order to be able to apply the rule of law even handedly. But can there be too much government? First the government crowded out the civic organizations with licensing and regulation. Then it eviscerated the family structure as welfare programs replaced the need for family support. And now it is sapping the will of the individual by relieving people of responsibility for their actions. With the best of intentions and in the interest of fairness, government has replaced the American Dream with the American welfare state.

These are some ideas on how we can reduce the divisiveness afflicting America by redefining our understanding of fairness and work toward creating the shared values and common goals to get the country back on the right path.