Skip to main content

The Cost of Government is What It Spends, Not What It Taxes

The cost of government is the quantity it spends, not the quantity it taxes; that cost representing the financial burden imposed upon those who pay the taxes and all who transact within that economy or through its common currency. Likewise, governments can either take the people’s money through taxation or they can take the people’s purchasing power through money-printing (or the like). 

Therefore, the argument against tax cuts requires further context to appreciate why tax cuts have failed and will continue to fail to deliver economic growth, especially where those tax cuts promote or serve excess indulgence and cheap speculation. In short, it’s not that tax cuts are inherently destructive, or that reducing the tax liability of the wealthiest in society “doesn’t work”; rather, the fact is that the public debt is so high that the country simply cannot afford those tax cuts without defaulting on its debts or — which is the same — covering them through inflation (i.e. money-printing, or the like).


It’s not that tax cuts are inherently destructive to economic growth, but that the deficits run higher by profligate government spending, the protracted low interest rate policy, and the onerous obstacles to real business investment have coalesced to favor stock buybacks and stock market speculation, which disproportionately advantages the wealthy without the kind of capital formation which otherwise benefits the lower classes; combined with an inflationary monetary policy undermining the real incomes and paltry savings of the lower classes, imposing artificial risks upon laymen ill-equipped to manage them and ill-suited for activities as unnatural and unintuitive as stock market speculation, these are some of the primary drivers of decadence and economic inequality. Note that this is not a symptom of capitalism but the consequences of a controlled economy. 


Free enterprise, on the other hand, actually offers the greater benefit to the laborer, whereby capital formation increases both his absolute and proportional share of the total production. The reverse of this happens where capital is decreased, where capital is syphoned from business investment toward ends unaccountable to the payers. 


The truth is that it is only through savings and scaled production, accomplished through economic efficiencies and labor-saving devices, and thereby the business investment of those managing a surplus of wealth, that capital increases and new enterprises are possible; a process specifically promoted by reducing the tax burden on those who invest in capital formation. Contrary to the socialist myths, insofar as the capitalist increases his absolute share of the total production, the absolute and proportional share of the total production going to the laborer will also increase. It turns out that the socialist is so confused that he has it entirely backwards. Indeed, it is the capitalist, not the laborer, who stands to benefit least in proportion to the increase in total production; ironically, it is in the opposite case, where capital is decreased, that the laborer stands to suffer most.


It was the French economist Frédéric Bastiat who so neatly summarized this phenomenon: “In proportion as capital is accumulated, the absolute shares of the total production going to the capitalist increases, and the proportional share going to the capitalist decreases; both the absolute and proportional share of the total production going to the laborer increases. The reverse of this happens when capital is decreased.”


This matter involves a multitude of issues, and it is essential to account for the complete context and overall conditions in the market before rushing to judgment. 

Comments

Post a Comment

Popular posts from this blog

Fischer: Tortured in the Pasadena Jailhouse (featuring the Morals of Chess by Benjamin Franklin)

Buy your copy today of  Fischer: Tortured in the Pasadena Jailhouse (featuring the Morals of Chess by Benjamin Franklin) , available at  Amazon  and Barnes & Noble . The name Bobby Fischer reigns supreme in the world of chess, yet there was a time when it hogged headlines, struck fear into the eyes of the competition, and was on the lips of folks all across the globe. More than the face of the centuries-old game, there was a time when Bobby Fischer was synonymous with the cause and spirit of America, that his moves on the chessboard sought more than checkmate but to pit the strength of “raw-boned American individualism” against “the Soviet megalithic system” which had come to dominate the game of chess at the same time it dominated Cold War politics. Fischer’s triumph over the USSR's Boris Spassky in the ’72 World Chess Championship would ultimately be celebrated as a symbolic and diplomatic victory for the U.S., but, as time would tell, it would not mean the American...
Post a Comment
Read more

The Deal with Tariffs

Over the course of President Trump’s two terms, there has been much talk around the matter of tariffs — taxes on imported goods. However, much of the talk seems to miss the point. After all, for those of us who seek the truth, it’s not really a question of whether tariffs are ‘good’ but whether they are preferable to other kinds of taxes — assuming, of course, that taxes are the rule, as certain as the eventuality of death. First, let’s establish the theory: beyond the generic purpose of revenue generation for the state, the institution of tariffs ordinarily serves to  reduce (or discourage) imports by making them artificially more expensive, while encouraging domestic production by making domestic products more appealing on a relative price basis. In the realm of foreign affairs, tariffs are instituted or threatened in the course of international trade negotiations in order to signal dissatisfaction with existing trade barriers and to push for more favorable trade terms; or in ord...
Post a Comment
Read more

From BC to AD to AI

Artificial intelligence is bound not only to render the ordinary human being boring by comparison, and in many cases practically unnecessary, but to dispose human beings to hostility toward each other where any dares pose a question or raise a concern instead of taking it up with a chatbot (or AI interface); such a course of action eventually assuming such a regular place in human affairs as to stand in entirely for human discourse and daily interaction.  This is not only a very real possibility when considering the future course of human ‘civilization’; it is more than likely imminent or already upon us.  It is left to be seen just what this will look like, just how this will play out, just what tolerance the species (and even beyond) has for such extremes which this technology is to bring about. Likewise, it remains to be seen whether a heavily-indebted society facing never-ending and unavoidable taxes (i.e. taxes on property) can even be expected to retrain and retool for t...
Post a Comment
Read more