The Corner

Robert Reich’s Full-Unemployment Agenda

Robert Reich, after a lifetime of effort, has finally come up with the worst idea in the history of bad ideas. 

HOW TO DEAL WITH LOW-WAGE EMPLOYERS. I met yesterday with a former executive of a big corporation who had a good idea. Taxpayers spend at least $55 billion a year on benefits (Medicaid, food stamps, etc.) to working people whose employers don’t pay enough to provide them and their families a decent standard of living. So in effect we’re subsidizing these employers – many of which (like Walmart) are large and profitable. His idea was to tax these employers by that amount. It would be easy enough to do since the IRS and the states have the Social Security numbers of all employees who receive these benefits, and can connect them to their employers. Not only would this “lousy-pay” tax be fair to other companies that pay higher wages and don’t get the subsidy. It would also help replenish federal and state budgets. And it would prod these low-paying corporations to raise wages so their employees don’t have to rely on taxpayer-financed benefits. What do you think?

What could he possibly be thinking? Adding an additional cost to the employment of low-wage workers — whose employers already regard them as replaceable, hence the low wages — makes employing them that much less attractive. With his simplistic, mechanistic view of how markets operate, Professor Reich’s training as a lawyer really shows through. He really believes that if you want X outcome, you can simply pass a law mandating X and that will be that. That is not stupidity or ignorance, but a sort of highly cultivated anti-intelligence that is the main product of our law schools. 

We do not “subsidize” businesses by offering welfare benefits to their low-wage employees any more than we “subsidize” the Democratic party by offering welfare benefits to the unhappy residents of the cities its members govern. (Well, now that I put it that way . . . ) Labor is like anything else: It’s worth what you can sell it for. There is no such thing as “should” when it comes to prices; people like what they like and they want what they want, and their economic priorities are what they are. A wage is a price, and there is no moral dimension to prices any more than there is a moral dimension to its being cold in the winter.

And just who is doing the subsidizing here? Professor Reich habitually writes as though businesses are not taxpayers; in fact, the ten largest business taxpayers pay enough in corporate-income tax alone to fund the Departments of Justice, Energy, Commerce, and Interior, along with the EPA and NASA, by themselves. 

It’s important to keep in mind that for teacup totalitarians such as Professor Reich, this isn’t just about money: It’s about power. It is important to them that the public sector have more money, but it’s at least as important that businesses not have it. Progressives have always had a keen appreciation for the fact that the state’s main competitors are religion and commerce, which is why they are always at war with one or the other or both. If you want to improve the lives of low-skilled workers, Professor Reich’s proposal is self-evidently a poor one. But if you want to force businesses into a position of submission, it is perfectly sensible. Progressives’ political playbook isn’t Das Kapital, it’s Discipline and Punish.