Economy & Budget

The Rich Are the Most Dangerous Game

A reader recently emailed to take issue with my celebration of the end of the bipartisan Joe Biden deficit reduction commission.  “I fail to understand how the actions of the House Republicans solve anything,” he said.

Holding “bipartisan” committee meetings behind closed doors is the course of action that wasn’t solving anything.  The manner in which we address our towering national debt – or fail to address it, and face destruction beneath it – is a deeply partisan issue.  In fact, it is currently one of the most significant differences between the parties.  America gains nothing by blurring that line.  The judgment of all those politicians wheeling and dealing behind closed doors has come into question.  Let’s hear their arguments, check their math, and decide which party is making more sense.

This reader felt the Democrats’ intransigent stance on tax increases made more sense than the Republicans’ equal determination to avoid them.  To summarize his argument:

We haven’t had an income tax increase since 1993, and the Democrats just want to restore the pre-Bush tax rates. 

The only income bracket that has done well over the past decade is the top one, and Democrats just want to kick their taxes up by four percent or so. 

Balancing the budget will require an increase in revenue.

“This isn’t about Left versus Right any longer,” my correspondent concluded.  “This is about the Haves versus the Have Nots.”

Of course, there are lots of taxes besides income taxes, plus the vast weight of increasing regulatory burdens and unfunded mandates to consider, but let’s stick with income taxes for the moment, and consider the eternal struggle between the Haves and Have Nots.

The quest to “soak the rich” is one of the most dangerous obsessions in human history.  The moral implications of class warfare should disturb any lover of liberty.  Who gets to decide on the membership of the evil “Haves,” and how much their property rights attenuate with success?  Why is it immoral to oppose a tax increase on people who make more than $380,000 per year, but equally immoral to call for increased taxes on those who make $350,000 per year?

The power to set the limits of virtuous income is vast, and fuels an ever greater appetite for power among those who presume the wisdom and virtue to determine it.  Those who obsess over the tax returns of the Evil Rich are easily distracted from more pressing matters.  Why are we worried about how much a millionaire is forking over in taxes, when the government gives millions to China for the study of methane emissions? 

“I do think at a certain point you’ve made enough money,” President Obama famously mused.  What has that line of thinking ever done for the Have Nots, besides maintain their obedience?  They should be more concerned about what kind of money their ruling class makes, and where they get it from.  They should be angrier about fortunes accumulated through compulsion, rather than commerce – most definitely including the crony capitalism that has always been with us, but is especially widespread these days.

There are millionaire bank robbers, and millionaire businessmen.  How they accumulated their fortunes makes all the difference in the world.  The businessman is not less virtuous, or useful to society, because he has more money than the bank robber.

There has never been a society without Haves, and the astute observer will note that societies most openly dedicated to socialist ideals feature the most staggering differences in wealth between the ruling class and the Have Nots, who are far more impoverished than in free capitalist societies.  Liberals like to fume about the income disparity between CEOs and entry-level workers.  What is the income disparity between Fidel Castro or Hugo Chavez, or their high-ranking henchmen, and the average citizen trapped beneath their rule?

Class warfare ideology is remarkably childish.  It’s no surprise that its devotees behave like confused children, struggling to deal with endless waves of “unexpected” economic news.  It’s time to grow up and understand the truth: the rich are the most dangerous game society can aggressively pursue.  They have many options for evading high taxes, and they generally lead to less economically productive pursuits than unsheltered income does.  That’s why tax increases never pull in the kind of money they’re supposed to, especially when targeted at high income earners.

When Democrats claim that tax increases on the Evil Rich are necessary to address our budget crisis, they are not merely wrong, but lying.  There is no reason for the American people to listen to liars any more.  Take it from Jim Pethokoukis, writing at Reuters:

“Let’s say all the Bush tax cuts were left to expire, as was AMT relief. Assuming no economic fallout, according to the CBO, revenue would be 23.2 percent of GDP by 2035. Three problems here: a) even with all those tax increases, the annual budget deficit would still be nearly an unsustainable 10.7 percent of GDP in 2035; b)  the U.S. tax code has never generated that level of revenue and almost certainly can’t without a value-added tax; and c) there would be tremendous economic fallout.

“Axing all the Bush tax cuts would chop three percentage points off GDP growth, according to Goldman Sachs, certainly sending America back into recession. Tax revenue would again plummet.

“And as bad as those numbers are, they don’t fully take into account the economic impact of all that debt. When the CBO does makes those calculations, total debt as a share of output is not 187 percent of GDP – the number you frequently see in media accounts – but rather 250 percent of GDP since economic growth would slow sharply due to debt overload. And more than likely the economy would suffer a debt crisis long before 2035 came around.”

No amount of tax increases will resolve the national debt.  Not even the outright confiscation of rich Americans’ assets would do it – and such confiscation would destroy the wealth that generates income.  The endless quest to “soak the rich” inevitably produces conditions that lead all of society to ruin.  It is a game that can only be played by conceding ever-increasing amounts of power to the government, which diminishes liberty.  The overall wealth of society dwindles away in the absence of liberty.  Growth and reduced spending are the essential ingredients for fiscal sanity.  We’re decades past the point where anyone should be surprised that punishing achievement retards growth.

Free people should not be obsessed with compromising the liberty of their fellow citizens, for both moral and practical reasons.  The urgent task awaiting Americans is revoking the self-appointed authority of the political class to tell us how much money we should make, and what we should do with it.  The government has plenty of money.  What they’re doing with it is the problem.  Anyone who tells you otherwise is using you as a pawn, in a very old game that never ends well for the pawns.

Sign Up