Reality Check II: Why the Grades-to-Taxes Analogy Doesn’t Work.
So somebody with delusions of cleverness has posted a video online in which they ask liberal college students if they think it would be okay if the school were to redistribute their good grades to students who are failing. You can view the video below. Of course, the students answer that this would be a terrible idea, that it’s not the same thing. The folks who published the video point this out as “evidence” of liberal hypocrisy. But the thing is, the students are correct: it is a terrible idea, and it’s not the same thing.
This analogy is built on several false premises.
False premise: Income is an objective assessment of merit and achievement, and only that.
In this analogy, someone who has a lot of money has it only because they got up earlier, worked harder, hustled faster, finished quicker, and provided a good or a service of both greater objective importance and higher objective quality than everybody else. Moreover, anybody who chooses to similarly get up early, etc, will certainly see similar results. Anyone not wealthy is obviously not willing to do that stuff, and anybody not willing to do that stuff obviously doesn’t deserve to be rewarded with wealth.
I wish this were entirely true instead of only partially so.
In the real world, financial rewards often do come to the guy who hustles faster, etc. But the money is a lot more likely to come to the guy who gets up early and knows someone at the company he’s trying to sell to. It’s a lot more likely to come to the guy who works harder and has a recommendation from the hiring manager’s squash partner. It’s a lot more likely to come to the guy who hustles faster and has a bit of a head start.
In the real world, it’s also almost a cliché for the hardworking but unassuming guy who comes early, stays late, and gets the job done to get passed over for promotion in favor of the slightly less hard working but more outgoing and more connected fellow two cubes down.
Wealth can also come not from diligence, hard work, and high quality but rather through corner-cutting, creative accounting, and fraud. Yes, sometimes when the wealthy commit fraud, they get caught and punished, like Bernie Madoff. But sometimes, when a whole lot of wealthy people commit fraud, they get rewarded, like what happened to the management at Goldman Sachs. (This may be changing in the near future; watch this space for updates)
And of course, this ignores the phenomenon of unearned (inherited) income. We’ll take a look at inherited income vs. inherited grades below.
False premise: Tax money is taken from the wealthy and given directly to the poor to do with as they wish.
The grades analogy proposes to take points from good students’ GPAs and give them directly to failing students, presumably so that the failing students will receive passing grades. For this proposal to truly be analogous to a progressive tax structure, the points taken from the top students would have to be put into a general fund, and from this fund would be taken a few points to help students who have missed class because of illness or bereavement, a few points to help struggling students pass their basic studies classes (only basic studies classes, and no grade higher than D+), and a big chunk of points would get reassigned to well-connected top students (which would bring their GPAs up to something like 6.4). Because that’s analogous to what happens to tax dollars: they’re used for all kinds of stuff, including subsidies to the already-wealthy, and only a very small percentage of the total federal budget directly and exclusively benefits our poorest citizens.
False premise: Grades are exactly the same as money.
They aren’t. This is pretty obvious to most of the students in the video, and ought to be pretty obvious to anyone who has ever spent time in high school. A good grade is an assessment of how well you have learned the material covered in the course. Sometimes the grade is objective, as in Math classes: did you reach all the correct answers? Did you show your work? Did you finish in the time allotted? Yes? A. Did you forget to carry the one, skip a few steps, or not finish? B-. Sometimes the grade is more subjective, as in English Lit: Did you effectively and convincingly make your case that Mister Darcy is a symbol of the systemic oppression of regency-era women by the male-dominated social hierarchy? Did you spell all the words correctly? Did you make an original point or two? Did you make your professor laugh with a few clever turns of phrase? Yes? A. Did you confuse Mister Darcy with Mister Ferrars, misspell or misuse several words, make a ham-handed argument using unoriginal ideas, and make your professor cringe at your clichéd and hackneyed writing style? D+.
A grade is an assessment not of how hard your worked to learn the material, but rather an assessment of your command of the knowledge you were meant to have learned in the class. An A grade tell you that you know the material thoroughly. A B tells you that for all intents and purposes, you know most of what you need, but you missed one or two finer points. A C or below tell you that there are gaps in your knowledge and you might want to re-take the class if you really want to learn this stuff.
To give a failing student a passing grade would not do him a favor at all; It would do him a grave disservice. It would give him the false impression that he knows more than he really does, perhaps that he is prepared for a career when he really is not. This might have consequences only for the student in question if the student’s chosen career is philosophy or literary criticism. But if the student is majoring in chemistry with hopes of becoming a pharmacist, well, telling the graduate that he is prepared to be a pharmacist (and at the same time telling all prospective employers that he’s prepared to be a pharmacist) when he isn’t could have disastrous consequences.
If this premise were true, and grades were like money, then an alumnus would be able to bequeath his grade points to his daughter, and when the kid arrived on campus as an incoming freshman, she would already have a bunch of grade points to boost her grades on difficult classes. She could even take a class, not bother showing up for it, spend some of her inheritance, and squeak by with an A-.
False premise: The poor benefit from government spending and the wealthy do not.
The supposedly analogous “grade tax” program proposes to take grade points from top students and redistribute them only to the bottom students. Under this program, all grade points moved would be moved down the academic ladder. For this to be a true analogy of what happens to tax dollars, all tax dollars would have to directly benefit only the nation’s poorest citizens, and the nation’s wealthiest citizens would see no benefit at all. on the surface, you might say, "Well, that's the way it is, isn't it?" No. For this to be true, the nation’s wealthiest citizens would not be able to drive on the interstate road system, make use of technologies developed by NASA or the defense department (you’re benefiting from several of those right now, if you’re reading this online), listen to a weather forecast that makes use of data from the National Weather Service or NOAA, get letters in the mail, visit the National Parks, and would never ever ever be further enriched with tax money.
Unless you haven’t been benefiting from government-developed communications technology, you’re aware that the housing market collapsed a couple years ago. Among the many reasons for the collapse was this simple one: lots of people who were supposed to have been able to pay their mortgages were not able to pay their mortgages. This was a problem for the world at large because banks had taken those mortgages (which they knew were likely to become worthless) bundled them together to make mortgage-backed securities, told people that the new securities were safe long-term investments, and sold them to state, municipal, and corporate pension funds, private investors, etc. When the people couldn’t pay those mortgages, suddenly those securities became worthless, and (among other consequences) pensions became underfunded all over the world. For good or ill, the government decided to use our tax money (well, our future tax money) to address this situation.
Now friends, there were one or two things the government could have done to keep the economy chugging along. The first thing might have been to start paying the mortgages of people who were suddenly unable to pay their mortgages. This would have ensured that the mortgages that the mortgage-backed securities were made of would keep getting paid, that the people and pension funds that had invested in these securities wouldn’t have lost all their money. This response would have ensured that pensions were funded, retirees still had their investments, most people would get to keep their jobs, and people would get to stay in their houses while they tried to refinance their mortgage with better terms. This wasn't very likely and we didn't expect it. And of course the government didn’t do that, because that looks too much like redistributing wealth.
The second thing was that the government could have investigated the the circumstances leading up to the financial collapse, and uncovered the fact that securities were created that were known to be very risky, and that in spite of this knowledge they were fraudulently rated as safe, and a bunch of people would have gone to jail and a bunch of ill-gotten assets would have been seized, which was what we expected.
But friends, when the government finally acted there was the third possibility that we hadn't even counted upon, and the government handed a great big bag of money to the institutions that created the crisis in the first place, on the argument that if all these big banks collapse, then so will the rest of the economy. What did the banks do with that great big bag of money? Did they use it as a cushion while they renegotiated high-interest variable-rate loans to a more reasonable fixed rate, then bringing our economy back to a mode of slower, but steadier growth? Nope. They pocketed the cash, wrote big bonus checks to their top employees, and foreclosed on lots of people’s homes.
If the progressive grade tax analogy really mirrored the US’s progressive income tax structure, the government’s response to a financial crisis would not be to hand un-earned money to the already-wealthy and expect prosperity to trickle down, but rather to hand that selfsame money to the poor and expect prosperity to trickle up.
But that’s not how the tax system works, and that’s why the progressive grade tax proposal is a false analogy.
The Video isn’t all Bad
The fellow in the video does raise one valid point. At about 4:05 on the video, one of the conservative advocates says that a student from a low-income family might have to work an extra job to pay for school, which takes away from study time, while a student from a wealthy family doesn’t have to work, so he can spend that time studying and earn a higher grade. This is actually quite a good explanation for why the wealthy stay at or near the top of the economic ladder regardless of merit (or lack thereof) while folks who start out at the bottom have roadblocks to accumulating wealth, and often do not rise in spite of merit.
The guy with the sweet job at the investment bank might have landed his job by working his patootie off in the summer to pay for college, working his tuchis off at college to learn his stuff and get good grades, and getting hired based only on a stellar transcript, a timely application, and an interview with a person he happened to have a lot in common with.
Or, more likely, his family were already wealthy, so they lived in a school district with top performing public schools (or else paid to send the kid to an elite private one). Since he went to a high-quality high school, he was well prepared for acceptance to his chosen college. He didn’t have to hold a job while in school, and was able to devote most of his time to his classes. He studied hard, learned his stuff, and was able to get an interview at the bank on the recommendation of a friend of a friend of his family. His grades and his interview skills were good enough to land him the job.
Note that in the second example, the kid is diligent, hardworking, and has merit. He’s probably even a really nice guy. There is no reason for the firm not to hire him. But he still has several advantages that the other candidate does not: he had access to better schools growing up. He had enough wealth that he did not have to sacrifice study time for earning time. He got his interview because he had an ‘in.’ Note that there is nothing wrong with any of these things. He clearly earned his academic achievements, and is clearly earning his income. But to say that the second kid earned his position and wealth all on his own with no outside help at all is rather shortsighted. To borrow a well-used sports analogy, the second kid was born on third base. He didn’t hit a triple.
And this is why a progressive tax structure is fair.