The strange thing about the 2014 election is that Obama seems to have taken it as a mandate … for more liberal polices. In addition to unilateral immigration “reform”, he has just released his budget proposal, which has massive tax hikes and spending hikes, no hint of entitlement reform and claims it will find $640 billion in deficit reduction (a paltry amount over the time frame) from tax hikes, immigration reform and, I believe, money imported from Narnia. It’s a fantasy budget that is making the hard-core liberals at Vox swoon but has connection to reality. And it puts the lie to the idea that Obama is a “conservative” as one newly-retired blogger has argued.
Here’s the thing, though. Liberals have long said that what they favor is a European-style welfare state (such as the one that imploded in Greece). Obama says this and his budget makes noises in this direction and is being praised as a step in that direction.
But the Democrats do not want a European welfare state. As much as they claim they do, that’s not what they want and not what they are advocating. If they really wanted a welfare state, they would be proposing something very different: huge tax hikes on the middle class.
The United States has one of the most progressive tax systems in the world, being very reliant on the wealthy for revenue. The European welfare states, by contrast, are more regressive, having flatter taxes and relying on VATs and sales taxes that are regressive. They have to be that way because you simply can’t finance a welfare state by taxing the 1%.
A welfare state financed by the rich doesn’t even work politically. When everyone is paying taxes, there is more support for a welfare state because everyone is pitching in. The perception is that you’re getting out something related to what you paid in, which is why Social Security and Medicare are popular in this country (both financed by a regressive tax that is denounced by Democrats for not soaking the rich enough). But a system that is dependent on taxing the rich isn’t a welfare state, it’s a plunder state. And as I’ve pointed out before, most people don’t want that. They don’t want to feel like they’re living on someone else’s dime or on stolen property. The Communists discovered this 70 years ago when they tried to “redistribute” estates to the commoners only to discover that the commoners didn’t want that wealth if it was stolen.
The gripping hand, of course, is that there isn’t any support for a huge middle-class-funded welfare state either, which Vermont discovered when they had to abandon their experiment in single-payer healthcare. And so the Democrats keep trying to sneak their welfare state through the backdoor. First it was taxes on the savings in 529 plans, which was quickly killed. Now it’s a tax on overseas earnings. Tomorrow, it will be more sin taxes.
(And if that fails, I expect them to embrace Modern Monetary Theory, currently being pushed by Bernie Sanders. This theory says that government shouldn’t worry about deficits; it can just print money. Taxes only exist to keep the rich from getting too rich. Seriously, that’s what it says. It’s like a politician’s wet dream: spend whatever you like and never worry about the bills.)
Thankfully, none of this is going to fly with the Republican Congress. But Obama’s absurd tax-and-spend proposal is a sign that we are still running out of other people’s money.