How can America really be exceptional?

Can America still follow its principles of liberty and equality but have a far broader set of free social services (education and healthcare like the fire and police departments)? I think that it can. And if it does, it will have the sort of society that we want – not an oligopoly or crony capitalist one.

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Image Credit: The Atlantic

“America is an exceptional nation, but not because of what it has achieved or accomplished. America is exceptional because, unlike any other nation, it is dedicated to the principles of human liberty, grounded on the truths that all men are created equal and endowed with equal rights. These permanent truths are “applicable to all men and all times,” as Abraham Lincoln once said.

“These principles also mean that everyone has the right to the fruits of their own labor. This fundamental right to acquire, possess, and sell property is the backbone of opportunity and the most practical means to pursue human happiness. This right, along with the free enterprise system that stems from it, is the source of prosperity and the foundation of economic liberty.”

Many Americans believe that the statements above are fundamental – that you must have them all to have the kind of society they value. I’m not sure they are right. I’ve given a lot of thought recently to what society should be like. For those who are opposed to socialism, my conclusion is that society should be organized so that each of us should be trained to look out for one another. We should assume that our role in life is to see that life is the best possible for our fellows. And we should organize our society so that everything is shared and everyone does his or her best to make the society a success for all of us.

Let us imagine that we live in a city. There are houses for the rich, the poor, and those in between.  Progressively, we learn that a powerful kingdom nearby wishes to conquer us.  We can prevent this by building a giant wall around our city. (No, this has nothing to do with Trump and his wall!) So we must contribute to the cost of the building of the wall, as none of us alone can afford to pay the cost on our own. So we need to decide how those costs shall be divided.

Do we each have to pay the same cost for each member of our family? Or perhaps we should pay the cost proportionally to our wealth, since the wall is meant primarily to protect what one has from the onslaught of the powerful kingdom? Or is there some other fair way?

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Let’s think of the cost of having a police department, or a fire department. None of us alone can pay the cost of having this sort of protection. How shall we divide the cost in a way that is satisfactory? Shall we each pay the same amount? Or shall we divide the cost proportionally to our property interests? Or is there some better way?

Let’s think about the principle that “everyone has the right to the fruits of their own labor.” That may be perfectly true. But the right to the fruit of one’s own labor means a right enjoyed within the protection of the society. Keeping the society strong is like having the wall around the city discussed earlier. That society needs a fire department, a police department, a means of educating its children, a medical system, a system that guarantees all of its members a good life as best possible.

Most of these systems, considered as a whole, cannot be erected and maintained without the support of the society as a whole. Take the fire department. What we don’t have is a fire department that gets payment separately from each person that it assists. Instead, we call pay into a common pool to maintain the department, whether or not we actually need its services. We recognize that the fire department is a service in common. Therefore, a wealthy person will pay a fair share of its cost, whether or not he or she actually needs the services for personal use. The same is true of the police department. We don’t try to impose payment based on specific use.

All right, then. What about the water department? We could treat the water department like the fire department. Or we could charge people individually based on use. Since there is a lack of water, and we want people to conserve, there is something to be said for charging individually, but it’s not necessarily so that we should just charge the same amount for the same use. We rarely see a water department that charges each person the same amount annually, because this favors people who waste water. Instead, water departments generally charge by the amount of water used. However, the sort of system favors the wealthy over the poor, because wealthy people can afford the cost of wasting water. If you want to encourage people to save water, you might consider charging a wealthy person five times as much for a gallon of water as that charged a poor person.

As we consider issues like this, we need to measure it against the right to the fruits of one’s own labor. One might argue that charging a wealthy person more than a poor person in order to conserve water imposes a burden on the right to the fruits of one’s own labor. However, the society’s need to conserve water is something that a wealthy person, as a member of society, should bear in mind.

Consider the cost of maintaining an army. That cost is far too great for a single person to pay. You need the whole army to be effective. So you have to come up with a fair way for the society to pay for it. We have tried dividing that payment with a mixed bag of taxes. Some of these are sales tax, some are income taxes, some are wealth taxes. There is really no rhyme or reason for one or the other. The sales taxes are imposed on individual products, and it can be argued that those are fair taxes because they are imposed on the user. But the burden falls on the poor much more heavily than on the wealthy. We could imagine a “life” tax, as being a specific dollar amount imposed on every citizen because they are alive. Obviously, this would be the least burdensome tax on the fruits of one’s own labor because there is no burden on those fruits. But it would be wildly unfair to the poor as opposed to the rich. Or you could have a tax that is on the “fruits” directly. That would be somewhat less unfair, although those who were able to earn more fruit would be paying less proportionally to their needs than those earning less. Or you could charge the way we do with the income tax, and charge a higher rate to those who earn more. Or you could have a wealth tax, which would recognize that those with greater wealth gain greater protection for their wealth from having the society around them.

In many respects, a single wealth tax would be the best sort of tax because it could be designed to be fairest. The only problem is that it’s hard to measure wealth. Land, art collections, and other types of wealth vary in value from year to year (or even more frequently) and the cost of determining actual value would be quite expensive and dependent on expertise.

Let’s consider an issue that has become quite important as of late: healthcare, and how to charge for it. Americans are used to paying for healthcare services by paying doctors and hospitals on an individual basis. Because of the burden of such payments, they developed a complex insurance system, which is meant to spread the risk of having to pay for healthcare across the persons being insured. This works better, but it also imposes large administrative costs on the body of users. A far more efficient system would be a single insurer (namely the government). However, even more efficient would be a system in which the government bears the burden of healthcare risks, pays the doctors and hospitals fair amounts for their services, and takes the payment out of the general pool of taxes collected from the citizenry. Healthcare, in other words, would be no different from the fire department, where the government bears the risk of the cost of operating the department and the citizenry get free services in return for the taxes that they pay.

It could be argued, of course, that giving people free health care would be like giving them free water. Some people would abuse the freedom granted and not take care of their health, in the same way that people might waste water if it were free. If an individual were found by a doctor to be wasting healthcare, the government could, of course, impose some sort of sanction. It could be monetary, or it could be time spent in jail, or a requirement of service to the community. There are plenty of ways of trying to stem waste.

In my own view, you can have a society founding on the “principles of human liberty, grounded on the truths that all men are created equal and endowed with equal rights,” even if there is a tax system based on wealth and a services system in which many services are free to the citizenry (like police, fire, and military protection, but also education, healthcare, roads and bridges). By taxing wealth heavily, you may (arguably) dissuade people from working hard. I don’t believe that. We once had an income tax that taxed people earning less than $2,000 a year at 23% of their earnings and taxed the amounts earned above $200,000 annually at 94%. This didn’t stop people from working. (It was during the Second World War, and people were emotionally driven to work hard for the good of their country). People work hard not just for money. They also work for Achievement, Power, Affiliation, Security and Adventure. The latter motivations still exist – and are powerful – even if money is taxed away.  In other words, if you can earn the right to operate your own business (in other words, to have power and the ability to develop your own solutions to things, and to be viewed as an Important Person) you’re going to work, even if you have a high tax rate.  “Prosperity” is a mental view of society and how you fit into it.

It seems to me that we can have a society with many shared, fire department-like services, coupled with a tax system that places a far heavier burden on the wealthy, and still have a system that sparks innovation and “freedom.” That doesn’t work in an oligopoly or a system of crony capitalism, and that is what we do have. We have to get rid of the notion that government regulation by itself is bad (we really do need to lower the risks of climate change, after all). We need to see that people in society obey the law, and that the laws benefit all of us, not just a powerful few. We need to have a better, fairer society, one that looks after us all, and that we can see as being worthy of our love and protection.

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