Forbes / Dean Zarras

04/24/2011

On April 13th, President Obama proposed his budget, one based on the progressive fallacy that our current level of government spending today is correct.  And because we have a deficit, we require more revenue to make up the difference.   So goes the thinking of a President who knows no boundaries as to what government can and should do.

Within the first paragraphs of his speech, Obama’s vision of what has made America great goes off the rails:

Going for it.

We believe, in the words of our first Republican president, Abraham Lincoln, that through government, we should do together what we cannot do as well for ourselves.  And so we’ve built a strong military to keep us secure, and public schools and universities to educate our citizens.  We’ve laid down railroads and highways to facilitate travel and commerce.  We’ve supported the work of scientists and researchers whose discoveries have saved lives, unleashed repeated technological revolutions, and led to countless new jobs and entire industries.  Each of us has benefited from these investments, and we are a more prosperous country as a result.

If you asked a group of people who had just started a country what services they’d want from their new country’s government, “feeling safe and secure” would probably make everyone’s list.  And yet almost no one would have the resources to create their own private army, air force or navy, so having the government collect money to provide those services to everyone makes a lot of sense.  Even extending this thinking down to the local police forces and court systems would still pass muster.

But take a closer look at the other items on the list, which is by no means exhaustive of what our government does now.   “Laid down railroads and highways…”    Where should they go and what should they connect? “Built public schools and universities…”   What should they teach? “Supported the work of scientists and researchers…”   What should they study?   And who should own the products and “entire industries” that they might create?

These are the questions that inevitably arise when government decides that it would be nice for it to get involved in this, that and the other.    In a world of unlimited wants but finite resources, the questions are inherently divisive.     And does it follow that absent government, society would have no roads, schools, science, or anything else?  Taken together, it all boils down to a single philosophical argument:  Who decides?

President Obama and his fellow believers in big-government have decided that they can and should decide.    This makes his claim of putting “our faith in free markets and free enterprise as the engine of America’s wealth and prosperity” rather disingenuous, to put it mildly.

What’s even more sad, and ultimately impossibly expensive, is that this vision extends all the way to how we as human beings should care for each other.   Because what’s certainly implied by Obama’s vision as put forth in his speech is that if government didn’t care for us, we wouldn’t care for each other, either.

Indeed, all of the so-called insurances that Obama ticked off as part of our government’s social safety net are not in fact insurance at all, but rather, terminally expensive wealth redistribution programs.   True insurance is based upon risk assessment of unlikely events.   Hopefully, we will all grow old.   Inevitably, we will all require medical care.   Over the course of an entire career, we may very well lose our job unexpectedly.  But did millions of people leave their every possession and emigrate to the United States because of the promise of unemployment benefits?  Was (or is) our social safety net the defining characteristic of America’s lure?

One simply can not afford to “insure” all of the events that a person will experience with near certainty, especially the events, like retirement, that may last until our death.  In this impossible game of trying to finance such a Utopia, Obama has the gumption to say that “that those who have benefited most from our way of life can afford to give a bit more back.”    Again, this comes from a particular “who decides?” stance.   Who decides what “a bit more” is?   A smooth-talking progressive President? A majority of Congress?  51% of the voting public?

The problem is, “the rich” already pay “a bit more”.   In fact, they already pay for nearly all of it.   Here’s The Tax Foundation’s take, reporting on the latest available data on individual income taxes (2008) from the IRS:

The top-earning 5 percent of taxpayers (AGI over $159,619), however, still paid far more than the bottom 95 percent. The top 5 percent earned 34.7 percent of the nation’s adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes.

In addition, budgets built more and more upon the incomes of “the rich” tend to be less fiscally stable, because the incomes of the rich are less stable, as Robert Frank documented in a recent Wall Street Journal article, “The Price of Taxing the Rich”.

In the face of these types of statistics, to even bring up the “fairness issue”, you have to admit Obama’s got one big helping of chutzpah.

But it gets even more surreal if we dig into Obama’s implication that soaking the rich can get our country back on its financial feet.   An IRS study from 2004 (the most recent of its kind), provides an extremely enlightening thought-experiment.

Imagine the segment of the population whose net worth exceeds 1.5 million dollars.   Now imagine Obama simply confiscating — for the good of the country!  — any and all net worth that exceeds $1.5 million per person.  Bill Gates, we’re taking your billions and your net worth is now $1.5 million.   Warren Buffet, the same for you (you’ve begged for higher tax rates, no?).  Derek Jeter, Michael Jordan, Sean “P. Diddy” Combs, Oprah, Streisand (hey, liberals can’t dodge this) — you all keep $1.5 million, which is still way more money than most people have, right?

Following the stroke of that pen, Obama would raise about $9.7 trillion.

Now consider Obama’s latest budget proposal, containing about $2.6 trillion in projected revenue, but about $3.7 trillion in spending.   There’s your budget deficit of — take a deep breath now — $1.1 trillion.   So the $9.7 trillion taken from all those fat cats whose success we “rightly celebrate” (Obama’s words, not mine), would seem to handle that deficit for about nine years.   That would buy us a lot of time, maybe? Right? Possibly?

But hold on.   Remember you’ve just taken entire companies, factories, investments and savings — a very significant chunk of the nation’s capital stock — and pledged to turn it into cash so it can be spent on stuff.    And of lot of the workers whose company or factory just got liquidated, at best, are holding out their hand for some of that cash.

Farmers have a saying for this stupidity and short-sightedness:  “Eating your seed corn.”

Think the above example is just patently absurd, that we could never come close to blatantly taking that much wealth from private citizens, (even as much as some people might want to see it happen)?

Good.  You’ve just proven to yourself that class warfare isn’t going to make much of a difference to our country’s true financial affliction:  We’re strung out on a spending addiction, brought about by a willful ignorance of our Constitution, and we need to enter rehab.