Tales of wild cards and broken systems

Published 3:00 am Thursday, March 16, 2017

Many analysts have explored the motives of Trump voters in the wake of last year’s election.  A number of thoughtful analyses found that a surprising number of ordinary Americans felt ignored by both parties.  Could Americans who play by the rules really reasonably think that our system is rigged against them?

I think so, and three observations support such a conclusion.  First, people see the rules strictly enforced on them.  Second, they see others seemingly to evade the rules.  Third, they see rules which would benefit them go unenforced.  I will consider an example of each.

Before starting though, I want to elaborate on what I mean by playing by the rules.  I see two main elements.  The first is accepting the need to support oneself and one’s family instead of living off of others.  For most of us, this means that we must work for a living.  Work is critical because prosperity requires production.  The second is accepting that others’ labor might be worth more than yours in the market, which avoids prosperity-destroying redistribution based on envy.

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Consider first a case of strict rule enforcement, the income tax.  Warren Buffet claimed a few years ago that his secretary paid a higher share of her income in taxes than he did, while President Trump may have significantly reduced his taxes using business losses.  Most Americans who work as employees, by contrast, have little opportunity to shelter income or avoid paying taxes.  Employers withhold taxes, typically in excess of taxes owed, and so many Americans get tax refunds.  But this is because employees can’t take income as capital gains or claim business-related deductions.

Student loans provide an example of others seemingly evading the rules.  Many Americans who work for a living never when to college or if they did, they attended an inexpensive community college or regional state university and did not incur significant student debt.  Financing college for all Americans may be a worthwhile goal, but student loans can be used to attend high-priced schools and pursue graduate and professional degrees.  Forgiveness of student loans, which has not happened yet, will make working taxpayers foot the bill for a party they didn’t get to attend.

Even now some borrowers get out of paying back student loans.  Reduced payments and cancellation of the remaining loan balance after ten years are available for various public or non-profit jobs.  And universities have found ways to take further advantage.  For example, Georgetown law school devised a way for students willing to take low paying non-profit jobs after graduation to fund their education using Federal student loans which they did not have to pay back.

Finally, immigration provides a case where the law is ignored when people would benefit from enforcement.  As I’ve written about before, we currently strictly limit legal immigration while tolerating millions of undocumented workers.  While I think that the case for increase legal immigration is extremely strong, undocumented workers lower the wages of Americans working in manufacturing and construction.  We should all understand the anger and frustration when the law is ignored.

I could offer additional examples, including healthcare, Medicaid expansion, the growing number of adults on disability, and unfair international trading practices.  The law should assist people who want to live in peace, work hard, and prosper.  Respect for the law is crucial for freedom and prosperity: voluntary compliance with most laws reduces the need for police enforcement.  Erosion of respect for the law will almost certainly reduce our freedom because of a ramping up of costly enforcement.

President Trump may deliver on his promise to make America great again.  But as an outsider with no political experience, he represents a wild card.  Card players know how crazy games with wild cards can be.  It is sad that so many Americans saw a wild card in the White House as perhaps the last, best hope for our system.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision.  The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.

About Dan Sutter

I am the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

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