Following the recent budget discussions (and after announcing his intention to run for a second term) President Obama has dropped all pretense about uniting the country and being president of all the people and has instead pulled out his most comfortable tool - that of Class envy!Â He speaks with disdain of the wealthy and insists that they do not do enough, haven't worked hard or sacrificed, don't pay enough taxes, don't care about anyone else, blah, blah, blah.Â He intentionally distorts and disregards the role of capital in our society and speaks in terms that inflame tensions and divides the citizenry.Â He pretends that government is the only way that problems can be solved and insinuates that unless the rich support government (via taxes) they are playing no role in the betterment of society or of their fellow man.Â This is a false choice.
Consider the following diagram.Â It demonstrates a number of ways that the resources of the wealthy are made available to and helps to benefit the rest of society.Â It demonstrates a number of areas where the federal government ought not operate (like deciding who should get scholarships and who should not) or where it performs poorly (aid to the homeless).Â Additionally, it is hardly disputed that government programs are generally not the most efficient way to help many in society, that government cannot create long term jobs, and that government and innovation rarely occur together.
Presenting a false choice to the American people is a consistent strategy of President Obama.Â He took the same tack with the financial stimulus (either this or nothing), health care (either this or nothing), energy (either green energy or nothing).Â Given that we know him to be an intelligent man, his insistence on ignoring alternatives requires that we attribute to him more nefarious motives.
On another level, his constant ranting to tax the rich reveals an inability or unwillingness to address the real truth of his policies and rather to promote the snake oil of policies that appeal to his gullible followers.Â As stated in a recent WSJ article by Alan Reynolds:
â€œIt is not as though we have never tried high tax rates before.Â From 1951 to 1963, the lowest tax rate was 20% to 22% and the highest was 91% to 92%. The top capital gains tax rate approached 40% in 1976-77.Â Aside from cyclical swings, however, the ratio of individual income tax receipts to GDP has always remained about 8% of GDP.
The individual income tax brought in 7.8% of GDP from 1952 to 1979 when the top tax rate ranged from 70% to 92%, 8% of GDP from 1993 to 1996 when the top tax rate was 39.6%, and 8.1% from 1988 to 1990 when the highest individual income tax rate was 28%.Â Mr. Obama's hope that raising only the highest tax rates could keep individual tax receipts well above 9% of GDP has been repeatedly tested for more than six decades.Â It has always failed.â€œ The article concludes this way: â€œBoth individual income taxes and overall federal taxes have long been a surprisingly constant percentage of GDPâ€”8% and 18%, respectivelyâ€” regardless of top tax rates on salaries, small business and investors.Â It follows that the only reliable way to raise real federal revenues over time is to raise real GDP. â€œ
Another aspect of this topic that Mr Obama deftly avoids is who pays taxes. Over 58% of federal tax revenues are paid by the top 5% of taxpayers (incomes greater than $158K) while the bottom 50%pay only 2.7%(incomes below 33K)[as of 2008-link]. Does anything motivate that same 50% when in the voting booth to support candidates desiring less government?
Benjamin Franklin said it best when he reminded usÂ â€œWhen the people find that they can vote themselves money from the Treasury, that will herald the end of the republic."
Perhaps Mr. Obama knows (and likes) that quotation.Â It is difficult to conclude otherwise.