Conservatives argue that as long as the system is fair and rules are equally applied to all, each and every citizen has an equal opportunity to pursue his or her happiness.
That’s why they support the flat-tax system, in which, regardless of income, everyone pays the same tax rate. They believe the flat-tax system is not only fair but also economically important, because the system allows the rich keep more money to grow business, supposedly translating into more jobs — a classic trickle-down economic argument.
The Democrats deem that despite this, in a free-market system, there will be winners and losers and rich and poor. In other words, no matter how perfect the system is, there will always be some who get more out of the system than others. Also, the equality gap is as much as the product of a political system. Therefore, helping bridge the gap is not only a compassionate gesture, but also a fair call.
Hence, they support the progressive income tax, a system that requires a person who earns higher income to pay a higher percentage in income taxes, as opposed to a single rate. Democrats also believe that the inheritance tax, another form of a progressive tax, is important to bridge the equality gap, as well as level the economic opportunity playing field.
Besides the above differences, Republicans and Democrats are miles apart on other issues, including regulation and big versus small government.
However, contrary to the popular perception, the ideology divide is not about regulation versus no regulation, small government versus large government, or higher taxes versus lower taxes — it’s about how these attributes apply to businesses and consumers.
While Republicans oppose regulations that protect consumer interests, they support those that favor the business enterprise, especially large corporations. They regard regulation to be a barrier to the free market system and an economic burden to businesses. And because they believe that, ultimately, the market takes care of everything, regulations are unwarranted.
Yet they want Congress to pass laws limiting product and malpractice liability awards against mega corporations, which puts less power in the hands of consumers, as well as wanting other economic benefits.
Regulations are essential interventions not only to keep businesses honest, but also to safeguard shareholder interest. Is there any doubt that if the Sarbanes-Oxley law was in place prior to 2001, Enron and Arthur Anderson would still be in business today? There are countless of other examples in which regulation has worked in the interest of a business as well as consumers.
Without regulations, the public would not be protected from breathing polluted air and drinking toxic water; neither would businesses be protected from frivolous lawsuits. Therefore, the disagreement is not about regulations or no regulations — nor should it be. It is about finding the right balance between the public interest and the interest business.
And although the “small government” issue has been a permanent fixture of the Republican mantra, especially during election cycles, they have done nothing to reduce the size of government, despite being at the helm of the presidency for 20 years in the past three decades. Once again, while they talk about small government, what they really mean is downsizing the agencies that protect the poor and vulnerable class — but not downsizing military spending, a significant portion of the federal budget and a handout to the military-industrial complex.
The Bush tax extension compromise law — recently signed by President Obama — is yet another misrepresentation of the tax-or-no-tax debate and the outdated trickle-down theory argument made by Republicans. The idea might have some validity in an old economy, when most goods consumed in the US were actually manufactured in the U.S. But in the global economic environment, in which the labor market is far detached from consumption, such arguments fall short of economic logic.
Even if the tax break granted to the rich invites investment, there is no assurance that the investment is going to create jobs in the U.S. instead of in China, Brazil or India.
• The writer is a finance consultant in Silicon Valley, now consulting for Cisco Systems, and president of the Tracy Democratic Club.