The fallacy of redistribution
Thomas Sowell, as he often does, puts the blue state model’s deficiencies into perspective in an easily understandable article. In this case he addresses redistribution. If honest, even the most rabid redistributionist should come away from reading it understanding how redistribution is a doomed scheme.
Why? For the same reason most blue state ideas fail. They run counter to human nature. In fact, they naively believe they can do something counter to human nature and it will both work and be sustainable.
Redistribution has been something tried among many nations in the past. And, it has pretty much failed each and every time. Again the quesiton: “why”?
Those who talk glibly about redistribution often act as if people are just inert objects that can be placed here and there, like pieces on a chess board, to carry out some grand design.
But if human beings have their own responses to government policies, then we cannot blithely assume that government policies will have the effect intended.
Bingo. While such schemes may work initially, they never factor in the reaction of human beings to something they find disagreeable, dishonest or just plain wrong. Politician who want to tax things to change behavior find this out all the time. But apparently we have to learn these lessons over and over and over again. Throughout history, schemes which run counter to human nature rarely if ever succeed over any extended period of time. There’s a reason for that:
In theory, confiscating the wealth of the more successful people ought to make the rest of the society more prosperous. But when the Soviet Union confiscated the wealth of successful farmers, food became scarce. As many people died of starvation under Stalin in the 1930s as died in Hitler’s Holocaust in the 1940s.
How can that be? It is not complicated. You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth — and that future wealth is less likely to be produced when people see that it is going to be confiscated.
This would seem a simple lesson, given the amount of history in which it has been proven. Yet, for whatever reason, politicians on the left (and many on the right) seem to discover it afresh in each generation. That and the belief that the only reason it hasn’t worked in the past is because they weren’t in charge of its implementation.
We have one of those in office now. For the “smartest guy in the room”, he has yet to understand how human nature works in this regard.
All I can say is if he’s unable to wrap his head around the consequences of pursuing such a policy and is still considered the “smartest man in the room”, it must be an awfully small (and empty) room.
~McQ
Twitter: McQandO
Facebook: QandO
Sen. Democrats can’t produce a budget, but they can still find ways to raise taxes and redistribute income
The latest vote buying scheme? If you’re a small business man who owns an S-chapter corporation (that would be me), read it and weep:
Congressional Democrats and the White House have agreed to pay for a bill to freeze student loan interest rates for a year by raising taxes on so-called S Corporations, according to a top Senate Democrat and senior House and Senate aides, but Republicans said the tax increase may ensure the bill’s defeat in the Senate.
“We’ve got it worked out,” Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin, D-Iowa, said on Tuesday of the formula for paying for the legislation. Harkin spoke after Senate Majority Leader Harry Reid, D-Nev., said he will introduce within the next day a bill to prevent interest rates from doubling to 6.8 percent on July 1. That sets up Senate action on the bill next month after senators return May 7 from a one-week recess. A spokesman for House Minority Leader Nancy Pelosi, D-Calif., said she and House Education and Workforce ranking member George Miller, D-Calif., also signed off on the proposal.
The bill will require S Corporations with three or fewer shareholders who declare income of at least $250,000 a year to pay employment taxes, according to Harkin and Democratic staffers involved in the talks. An S Corporation is a specially structured entity that pays taxes under rules that allow earnings or losses to be passed through shareholders, reducing federal tax payments.
That’s right, S corps would be taxed to help keep interest rates on student loans down. Remember, the government now owns student loans.
And what have we looming right after the July 1st interest rate increase that might be hurt if that happens?
Why the November presidential election, of course.
Any wonder why the White House and Democrats are all for screwing small business to buy off a critical constituency?
It is no different in the category of desired political result than the $8 billion in spending HHS would do at the behest of the White House to slide the Medicare supplemental cost increase seniors will undergo from before the election to after.
This is outrageous. This is blatant vote buying and income redistribution to “pay” for Obama’s re-election. This is the essence of the Democratic ideology laid bare and the deviousness and immorality of their methods exposed for all to see – if they’ll see it.
No one makes anyone take out a student loan. And although it may be expensive, decades worth of those who’ve gone before have acted like adults and paid off the obligations they agreed too.
Now, if the Democrats get their way, it will be the job of those who’ve risked all to open a small business and built it with sweat equity and delayed gratification to pay to keep government controlled interest rates down?
“I don’t think anybody believes this interest rate ought to be allowed to rise,” Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday. “The question is, how do you pay for it? How long do you do the extension?”
Republicans are “in the process of discussing it among ourselves,” McConnell said.
Don’t even think about it Mr. McConnell! If, as Obama has said, it is wrong to raise taxes in an economic downturn, it is ALWAYS wrong. And if you think we’ve turned the corner economically, you’re not paying attention.
Government decided to take over the student loan business and now government can suffer the consequences of its actions. I have no desire or intent to bail it out.
If this doesn’t make you angry as hell then I’m fairly certain which lever you’re pulling in November.
~McQ
Twitter: @McQandO
Obama: Doubling down on economic ignorance
Ever have one of those days? My DSL has been down for 2 days, and I’m currently sitting in a public library trying to get some work done and sending out this post.
And I was actually going to concentrate on work until I saw this article about something Obama said about the Buffett Rule:
President Barack Obama argued Sunday that his calls for wealthier Americans to pay a greater share of taxes aren’t about sharing the wealth, but about getting the American economy on a path for solid growth.
“That is not an argument about redistribution. That is an argument about growth,” Obama said in response to a reporter’s question at a news conference in Colombia. “In the history of the United States, we grow best when our growth is broad based.”
Broad based growth is not driven by heavily taxing one income class, Mr. Obama. Nor is broad based growth driven by government spending (i.e. “redistribution” or “sharing the wealth”).
Broad based growth is driven by private enterprises having confidence in the economy and finding incentives to invest in both business and hiring.
The “Buffet Rule” doesn’t do anything to provide those incentives or inspire that confidence. In fact, it seems to be mostly a tax of desperation. The numbers just don’t support the supposition that it will drive anything but more government spending, and, frankly, not much of that.
This is class warfare plain and simple. It is also an attempt to offer up the rich as a panacea to the revenue problem blamed as the reason we’ve seen government borrow multi-trillions of dollars.
There is no revenue problem. There is a spending problem. And taxing billionaires won’t solve that problem. In fact it will likely exacerbate it.
More importantly, the words Obama has spoken speak to two things: a) a deep seated ignorance of economics and b) a deep seated belief that government is the answer to all ills.
Both are dangerous and promise even more economic woes in our future.
We can’t afford that.
~McQ
Twitter: @McQandO