Killing the goose that laid the golden egg

Over at the Hoover Institution journal, they have a damning article, appropriately titled “The United States of Envy”, where they give us a clear picture of the left’s strategy for the coming election:

In advance of the 2014 election, the Obama administration has drawn the political discussion away from its unpopular and flawed healthcare plan, usually called Obamacare, to bring public attention and support for increased income redistribution. President Obama openly encouraged envy of the top one percent of income earners. Reducing the share received by the highest earners to provide revenue for larger transfers to the lowest earners has long been a main objective of his administration. We can all expect this theme to be trumpeted loudly by the mainstream press as the mid-term election approaches: Some of us can have more, the argument goes, if we force others to have less.

The left has done a bang up job of first creating a massive pool of low information voters and then appealing to their vilest and basest emotions to buy votes in return for table scraps. Oh, they will pretend they can make the case that the data supports wealth redistribution as a means to bring prosperity, but it is, as the article points out, bullshit:

Professor Piketty collected data on income distribution from approximately 20 countries over periods of different length. He concluded that raising the tax rate to 60 percent on the highest incomes and redistributing the receipts to the poor would increase spending and economic growth. The New York Times declared his book, Capital in the 21st Century, one of the great achievements of modern economics. It put it in a class with Karl Marx’s Das Kapital and John Maynard Keynes’s General Theory.

This lavish praise seems both wrong and extreme. I agree that in the past there was a notable positive association between economic growth and the spread between the shares of income going to the top 1, 5, or 10 percent of the earners and the share going to the remainder. The mistake is to conclude that narrowing the distribution contributes to growth. The far more plausible explanation is that economic growth in capitalist countries over the past two centuries contributed to a steep decline in the share of the top earners.

Simply put, Piketty, President Obama, and the IMF have the causality running the wrong way. Taxing the rich to redistribute did not produce growth. On the contrary, growth reduced the share earned by the highest earners.

I have never, ever bought the left’s pretense that their laser focus on splitting the pie, instead of growing it, is what has what caused prosperity. This is a ludicrous notion on the face of it and defies common sense. In fact the article points out how wrong this assumption is:

The data show a remarkable degree of uniformity. The share of income received by the top 1 percent declined persistently from about 1910 to 1980. The share fell from an initial 20 to 25 percent of total income to about 5 to 8 percent. Then the share rose in several of the countries, notably the US, the UK, Canada, and Sweden. By the end of the sample data, about 2005, the share in several of these countries was back to about 10 percent. The share of the top 1 percent in the US reached 15 percent, more than half way back to where it was early in the twentieth century. It is this rise that initiated the loud outcries about the failure of modern capitalism to benefit the middle class.

It is impossible for anyone to show that the decline in all seven countries resulted from higher taxes on the highest incomes and redistribution to the poor. The reason is that the welfare state did not exist in several of the countries and was relatively small in the others. In the United States, federal government spending was rarely more 3 or 4 percent of total spending in non-war years until after 1930. Old age pensions didn’t start until the late 1930s, and healthcare spending did not expand until the late 1960s.

What is blatantly obvious to anyone paying attention how this class warfare shit the left banks on always plays out, is that all that excessive taxation that basically amounts to penalizing the successful has accomplished however is to destroy the economic growth that allowed the left to pretend it was what they where doing that helped. Wasteful government spending and crippling crony capitalism that helps the entrenched oligarchy retain their power – that’s what this class warfare is totally about – has left the economy in shambles. And the left has talked a mean talk about doing things to fix this problem of their making while piling on the shit that causes damage. The stake through the heart of the American economy is Obamacare. It will crush our economy.

President Obama’s program works against this process. It doesn’t reward work. It gives the unemployed and underemployed food stamps, healthcare, housing allowances, and income. Instead of working, many learn to live on the government benefits, supplementing them occasionally by working in the underground economy. Instead of acquiring productive skills, they learn how to live without working at regular jobs. That’s one way that the welfare state worked to increase the share of the highest paid 1 percent after 1980. The welfare state contributes also by weakening and even destroying family structure. Single family women are often on the bottom rung of the income distribution.

A system that punishes success and making good choices while rewarding bad behavior and poor choices will encourage more of the later. The welfare state grows precisely because it is rigged to cause more of that. It’s the age old issue that people making a good living solving a problem really have no incentive in doing that, because it means it is the end of their livelihood. The American war against poverty, now more than 6 decades old, has sucked up over $20 trillion, and yet, all we have to show for that is that we have reached a point where the takers outnumber the producers. And the only change we are looking at is for the scales to tip even further, and sadly, I have to admit doing so faster, in the direction it has been going.

The old axiom that collectivism can only give shared misery to all, because that’s the easy solution to the inequality problem, is, yet again, being proven true. But the gangster oligarchy on the left doesn’t care and the sheep that follow them are too stupid to see the writing on the wall. We either turn this thing around and end the class warfare bullshit, or we are looking at another one of those times Heinlein pointed out would come when the few exceptional people that cause prosperity have again be driven into hiding. Collectivism sucks ass.

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  1. RonK

    the problem with the “how well off the US was with a 90% tax rate” is they forget or ignore the fact everyone paid taxes, their retort is usually well they pay the payroll taxes, my answer to that is do they??, bet they get money back from their taxes that would be equivalent to the “payroll taxes” they, not only that but they will get way more back then they pay in from social security and medicare benefits.

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