Free Markets, Free People

The Mask Comes Off

President Obama did the nation a huge service today, in two respects. First he took off the mask and told us explicitly that the "change" he wants is an explicit move towards welfare-state socialism, and, second, in doing so, he set out the major thrust of his re-election campaign. In a 55-minute speech in Osawatomie, KS, the president explicitly argued that capitalism is a failed economic system, and the main thrust of government economic policy should be the redistribution of income.

It’s darkly amusing that he makes this argument just weeks—perhaps months—before a major political and financial crisis, caused mainly by their socialist policy leanings, strikes Europe. They are just about to hit the stark reality of what happens when you run out of other people’s money to spend to finance extravagant social benefits. President Obama, it seems, is keen to rush us down the road to meet them. Not that we aren’t already pretty far down that road ourselves. The national debt is now over $15 trillion, more or less 100% of GDP, with no clear path to reducing that percentage in the near future, or even in reducing the rate of growth substantially.

President Obama apparently thinks that the solution is to take the money from "the rich" and distribute it to the rest of us. The trouble is, we could take pretty much everything the rich have, as well as all the profits of all the Fortune 500 companies, and it wouldn’t even even cover 1 year’s worth of government spending. As economist Walter William notes:

This year, Congress will spend $3.7 trillion dollars. That turns out to be about $10 billion per day. Can we prey upon the rich to cough up the money? According to IRS statistics, roughly 2 percent of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies one as being rich. It’s not even yacht and Learjet money. All told, households earning $250,000 and above account for 25 percent, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would yield the princely sum of $1.4 trillion. That would keep the government running for 141 days, but there’s a problem because there are 224 more days left in the year.

How about corporate profits to fill the gap? Fortune 500 companies earn nearly $400 billion in profits. Since leftists think profits are little less than theft and greed, Congress might confiscate these ill-gotten gains so that they can be returned to their rightful owners. Taking corporate profits would keep the government running for another 40 days, but that along with confiscating all income above $250,000 would only get us to the end of June. Congress must search elsewhere.

According to Forbes 400, America has 400 billionaires with a combined net worth of $1.3 trillion. Congress could confiscate their stocks and bonds, and force them to sell their businesses, yachts, airplanes, mansions and jewelry. The problem is that after fleecing the rich of their income and net worth, and the Fortune 500 corporations of their profits, it would only get us to mid-August.

We could take everything the rich have, and it still wouldn’t give us a balanced budget for one year. Collecting money the next year would also be…problematic, too.

But, the president has to be—well, not admired, exactly, but recognized—for his utter inability to accept that reality. As well as his apparent ability to construct "realities" that aren’t true.

At no time during the president’s hour-long perversion of the country’s economic history did he even allude to the massive growth in government spending we’ve seen, the cronyism between government and big business that led to private profits and socialized losses, or the explosion of debt that’s grown from $1 trillion in 1980 to $15 trillion today, all of which has resulted in removing money from the productive economy, and funneling it into government priorities, rather than into private income and investment. At no time did he mention the aggressive enforcement of the Community Re-Investment Act, which essentially forced banks into making sub-prime loans—indeed, explicitly instructed banks to make such loans—that led to the mortgage bubble and, when the less credit-worthy mortgagees couldn’t pay, it’s collapse—as a prime cause of our present economic difficulties. These are failures of government, and the president calls it a failure of capitalism.

"The market will take care of everything," they tell us. If we just cut more regulations and cut more taxes — especially for the wealthy — our economy will grow stronger. Sure, they say, there will be winners and losers. But if the winners do really well, then jobs and prosperity will eventually trickle down to everybody else. And, they argue, even if prosperity doesn’t trickle down, well, that’s the price of liberty.

Now, it’s a simple theory. And we have to admit, it’s one that speaks to our rugged individualism and our healthy skepticism of too much government. That’s in America’s DNA. And that theory fits well on a bumper sticker. (Laughter.) But here’s the problem: It doesn’t work. It has never worked.

In the president’s mind, economic freedom and capitalism don’t work. Never have. How he explains America’s ability to become the richest country the world has ever seen while operating under such a system is a complete mystery. And never mind that, to the extent the American system has failed, it is the reduction of economic freedom and the growth of government—especially over the last 50 years—that caused the failure.

But have no doubt that he believes this foolishness, even as the government-run technocracy he admires so much is literally weeks away from running the European Union’s economy straight into the ground. In a bit less than a year from now, we’ll see whether a majority of Americans believe it as well.

And if they do believe it, then the interesting question will be how they expect to pay for it.

Dale Franks
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22 Responses to The Mask Comes Off

  • I feel ill. Really.

    I think the only “solution” to this problem is to run out of money after raising taxes. (I would wager the tax increases bring in very little revenue as the economy will tank again – see FDR raising taxes in ’34 I believe.)

    Once we are finally out of money, some leader on the left will have to tell the peons the truth. Until then, its useless. I tried to have a discussion with a lefty on Google+ yesterday about education spending not bringing in results. I was polite, which was very hard to do, BTW. I showed statistics not only from CATO (she didn’t like CATO) but from our own state government. I suggested compromises like any savings achieved from cutting admin (which she thought was too big too) would be split 50/50 with teachers and ta reductions. I was willing to read her “rebuttal” which was an article about a Norwegian entrepreneur who make oil rig parts who loves his government’s socialism. (I suggested that Norway’s 20% of GDP from gas and oil should give California a good idea how to raise our GDP.)

    But this morning, her final reply was that conservatives and libertarians are racist or something close to that. She’s obviously in the realm of feel-good socialism trumps political reality, just as OWS and their facebook supporters are. They don’t understand the numbers. I see it time and time again – story about a welfare queen? Let’s talk Wall Street bonuses – as if the right isn’t concerned by those either, and also as if those could cure the problem by taxing them. I don’t they understand how much we are spending. Its still head in the sand mode.

    • My god, I need an edit button!

      • @Harun Heh. Just as an aside… how come livefyre has a text limit on comments when I used Internet Explorer on a PC but I can write as much as I like if I use my Android phone???

        • @DocD @Harun Just as an aside, why are you using Internet Explorer?

        • @DaleFranks @Harun Ha, yeah good question. It’s my development machine and for various reasons I keep the installation of extraneous applications to a bare minimum.

    • @Harun “tell the peons the truth” … you must be kidding, they will still lie.
      If Obama believes what he says then he won’t oppose a 98% tax on Nobel Prize winners and a 90% tax on the royalties of present and former federal government employees, elected and non-elected, who write or speak about their time in government.

      • @Neo_ They will lie as to where the blame belongs, but they will admit the money is gone and “tough decisions will have to be made.” This has happened in numerous countries, eg New Zealand, Canada, etc.

        • @Harun @Neo_ Reality has a nasty habit of doing what needs to be done. NZ is an excellent case-study. By the mid-80s the economy was dead and the country was at the bottom of the Western world on almost any measure.

          “The economic policy of successive governments had left the domestic economy sheltered and unresponsive to consumers. Inflation, … , was high by the standards of the country’s major trading partners. There was a persistent fiscal deficit. The public sector was inefficient. A large part of the economy was controlled by regulation, some arbitrary or inconsistent. The political consensus of the post-war years produced stability at the cost of innovation. Both major political parties maintained the high levels of protection introduced … from 1936 onwards, and … both parties had aimed at maintaining a structural shortage of labour. Beneficiaries of the regulated economy flourished in both public and private sectors.”

          From a summary here

          Basically NZ got to the bottom faster than anyone else after WW2. Marginal tax rates were high (66%) and the government was involved in extreme crony economics.

          Sound familiar?

          Ironically the reform came with a leftist government in the late 80s, which was forced to take an axe to tax rates, subsidies and deregulated almost everything. NZ had no alternative at the time, no room to raise more taxes people were already poor and highly taxed. Times were hard then and after, but the alternative would be that NZ would otherwise now be a few sheep wandering empty hillsides.

        • @DocD @Harun @Neo_ Reason magazine had a good article on NZ.

      • @Neo_ @Harun tell the peons the truth” … you must be kidding, they will still lie.

        >>> Bingo. Some villian will be blamed for stealing and squandering the money that would’ve financed utopia. And believe me, when it comes down to it, in the absence of any class villians to fight, the left will go back to their standard enemy – the Jooooos.

    • @Harun The left has a strange set of ideas. Bring up the corrent deficits, and they change the subject, usually to Clinton’s supposed surplus or to the cost of the war in Iraq. Never mind there was never a real surplus in the 90s, that what good was achieved came from Newt and the GOP, or that the war costs are a small part of the current deficits. What matters is that they can pretend to be right while attacking Bush and the GOP. Then can even stick their fingers in their ears if the need comes up.

  • Its the simple explanation of the situation at hand that reveals the real villain. The media.

    They could easily pass that information along but choose not to.

  • The one thing that people don’t realize is that tax the rich schemes are Trojan Horses to tax everyone. Similar to ‘Bush Tax Cuts’ alway portrayed as a benefit of the rich when almost everyone has some benefit from them.

    Just isolate one group for taxation at a time. Income over $250,000 first, Income from $200k to $250k next, Income from $125k to $200k, and so on… propagating the tax increases down.

    I’m no real fan of the rich in this. Its rich liberals who fund Obama. They fully exploit every tax shelter available to them to the fullest. If they can’t ply the politicians for exemptions, they can ply the bureaucrats to write in loopholes. And failing that, they have an army of lawyers and accountant that work on avoiding taxes full time. With the final option to just shift their holdings completely outside the country.

    So the government just goes looking down the scale to find tax revenue they failed to collect on the rich until they get down low enough on the earnings scale where such counter-measures aren’t available. That’s basically why tax the rich is really a path to tax everyone.

  • I have dubbed this Obama’s “Army Of Strawmen” speech. It would be interesting to go though it and try to count them all…from the mythological Ozzie-world of the “old economy” to the lies about a “new economy”.

    I don’t feel sick about this…I feel energized. I love it when liars tell obvious lies. It makes screwing them to the wall SOOOOoooo much easier…!!!

  • I seen some politicians do some dumb things but that Obama speech was one of the worst ever.

  • Dale is crazy, the President was in Texas yesterday.

  • It doesn’t work. It has never worked.

    >>> Yes, it has never ever worked out for us. That’s why the United States is in the dustbin of history along with the USSR. That’s why we’re cold, dark and starving like North Korea. That’s why people are risking their lives on the high seas to get from Florida to Cuba. That’s why our citizens have died under tank treads like in China.

    Apple what? Coca-Cola who? McDonalds which? Levis huh?

    Yeah, this sh*t NEVER EVER WORKS.

    Dear Obama: Hey b*tch, it’s winter out, and I’m in a warm home with plenty of food to eat and plenty of electricity to power the appliances that keep me amused and occupied when it is snowing outside. I’m not slowly dying because I have to scavenge for grass to eat on a frozen hillside you flaming dipsh*t. Nope, this system NEVER EVER WORKS.

    What a craptasitc excuse for a President. What a craptastic excuse for a man.

  • “Congress could confiscate their stocks and bonds, and force them to sell their businesses, yachts, airplanes, mansions and jewelry.” To whom would they sell them?