The Left's Dirty Little Secret: The Middle Class and Poor Pay For the Entitlement State
Europe’s more than half century experience shows that, no matter hard you squeeze them, the rich cannot pay for a big government that guarantees all its citizens “positive rights” to income, employment, health, and retirement. Such an entitlement state – some call it a nanny state — is funded primarily by repressive taxes on the middle class and the working poor. This conclusion is based on hard statistical facts that neither the right nor left dispute. America’s Left has kept this fact under wraps and out of sight of voters.
For the time being, Obama can rely on lenders (and the Fed) to finance the annual $850 billion deficits projected under the most likely CBO scenario. But the day of reckoning will come. At some point, the “bond vigilantes” will refuse to finance the deficit at sustainable rates, and the government will be forced to cut entitlement spending or vastly raise taxes. When that time comes, then ex-President Obama expects the entitlement mentality to be so deeply ingrained that the middle class and working poor will accept their higher taxes with little protest.
Judging from Europe’s experience, we must dramatically raise income taxes on the middle class, triple social security taxes, introduce a 20 percent federal sales tax, and raise the gasoline tax by $4.00. These taxes are all regressive, which means they fall most heavily first on the poor and then on the middle class.
If you do not believe me, an influential member of the media elite (from the New York Times editorial board, no less), let this secret slip in a remarkably candid admission. (Note his article appeared after the election):
“The experience of many other developed countries suggests that paying for a government that could help the poor and the middle class cope in our brave new globalized world will require more money from the middle class itself….The United States already has one of the most progressive tax systems in the developed world.….. Taxes on American households do more to redistribute resources and reduce inequality than the tax codes of most other rich nations…. Insisting on highly progressive taxes that draw most revenue from the rich may result in more inequality than if we relied on a flatter, more ‘regressive’ tax schedule to raise money from everybody (!!!) and pay for a government that could help every American family attain a decent standard of living.”
The Obama campaign ignored this rather important fact. He offered the voter instead an enticing fable of a European-style nanny state paid for by the rich, ignoring the fact (to cite the Times) that the U. S. already has the most progressive tax system. Obama can soak the rich a little more, but the extra revenue will be meager if anything at all.
the idea that higher taxes can be bad for an economy hardly requires study of other countries where its been tried.
these are simple concepts.
A dollar left in a taxpayers pocket will always provide more potential economic impact than if taken by the govt.
To be clear, economic impact is not the same as GDP.
There are other factors to consider like the multiplier effects that relate to how that dollar gets spent as well as what impacts there might be on a nation's productive capacity.
Clearly, that same dollar spent by the Obama administration is a net loss for the economy if its taken from a taxpayers pocket--no contest.
and this says nothing about what higher taxes does to incentive and behaviour. and how that can hurt productive capacity.
Higher taxes are really a double edged sword as they hurt in two ways:
1.) By punishing the productive class, incentive to work hard is reduced--duh
2.) By rewarding the unproductive and capable with overly generous social benefits that are derived from higher taxes when jobs are available, it destroys the economic potential of a society to produce because some would rather take the easy way out.
The oil patch is a perfect example. There are some low skilled jobs in ND that pay well but industry has a hard time getting people that want to work.
" Insisting on highly progressive taxes that draw most revenue from the rich may result in more inequality than if we relied on a flatter, more ‘regressive’ tax schedule to raise money from everybody (!!!) and pay for a government that could help every American family attain a decent standard of living.”
I'll bet that goes right over the heads of most lefties but a very interesting statement.
One clue- marginal utility of savings and investment as it relates to the productive capacity of an economy.
IOW, there needs to be capital to grow the pie, not just eat it.
A dollar left in a taxpayers pocket will always provide more potential economic impact than if taken by the govt - and that economic impact will be felt in a very positive way by Chinese manufactures.
It's a global economy, and Americans are consumers first.
The majority of the $600 rebate from a few years back went to banks (pay off debt) and to buy consumer goods, the majority of which were produced in Asia.
the direct positive economic impacts of that "rebate" were felt by US retail employees, US bank employees, and foreign manufactures, not necessarily in that order
Gov money hires bureaucrats, consultants, construction workers, teachers, and researchers directly, then trickles down to the Chinese.
If your taxes are lower, you ill not invest in American projects, you will buy more foreign manufactured products.
If your taxes are higher, essentially you (the governed) have hired a bunch of marginally productive and very productive US residents who pay taxes here and create service jobs here.
One makes for some folks having more stuff and but fewer US jobs.
The other makes for more jobs, more folks having some stuff, and an educated, healthy family traveling about on smooth roads or using quiet wi-fi enabled rapid transit.
"Clearly, that same dollar spent by the Obama administration is a net loss for the economy if its taken from a taxpayers pocket--no contest."
Arguable. Dollars taken out of taxpayer's pocket go right back into the economy in some form, either as investment (military, roads etc) or as consumption in the form of different forms of transfer - Social security, Medicare, Food stamps, Unemployment checks.