Tuesday, February 07, 2006

Airy pomposity . . .

The great philosopher king Captain Fishsticks had a post a few days ago about a couple of letter writers to the Pioneer Press who had the temerity to question a column that he had written in the Pee Pee. Specifically, the letters took exception to this statement:
The flaws in liberal economic theory are many. Liberal economics ignores the most fundamental of observations — government produces no wealth. Government can redistribute no wealth until someone else creates it. Wealth is a dynamic resource renewed by private investment in the private sector that produces it.
Part of Sticks’ response to the letters is reproduced here:
The second writer commits much the same confusion but adds the insidious germ that individual accomplishment “owes” something to society. Unconsciously, perhaps, playing the class envy card, the writer says that those who become wealthy had the help of both government and the people that work for them. True, but they paid taxes (ideally in proportion to the service they received), and they paid the people that worked for them (ideally in proportion to their contribution to wealth creation).

What this letter writer seems to imply is that the “wealthy” then owe something more. That notion supports my contention that government can produce nothing until it takes wealth, through taxation, from someone else. The “something more” is discretionary wealth produced outside of government.

That is not to argue that government should not tax, but it is to argue that government should tax only for criteria-based public goods (services that people would pay for even if government did not provide them) and not for “something more” that simply redistributes wealth.
Sticks writes with such airy pomposity that Spot is surprised that Sticks has not just floated off by now! So liebschen (sorry, wrong channel), boys and girls, is Sticks right? Well, everyone knows that tax payments just go into a big hole in the ground and are never seen again, right? The name of the hole is Halliburton!

Well, not really. But Halliburton, Bechtel, Lockheed Martin, and all the other contractor-hogs at the public trough make the best examples of redistribution of wealth. Not the single mothers and their children or the elderly or the disabled. Richard P., the veep, the flatliner - did he create all his wealth, or did he just get it redistributed his way?

Of course government spending is just like private sector spending. Procurements, salaries and wages, agricultural subsidies (sigh), entitlements, and every other thing the government spends money on goes right back into the economy. Well, except all the interest on the public debt that W. & Co. has done so much to increase and that is paid to the Chinese and other foreign lenders!

Let’s assume for a moment that the federal or state government started to really look hard for ways to make money, taking advantage of its natural monopoly in a number of markets: utilities, transportation, or law enforcement? People like Sticks would scream bloody murder about encroachment on the holy prerogatives of the “private sector.” The public sector doesn’t create wealth in Sticks definition primarily because Stickians don’t want it to. Fine.

But only ego-maniacal social Darwinist hunter gatherers like Sticks posit the notion that government is not critical in the formation of wealth. The United States is like a giant venture capitalist, providing institutions for learning and for creating business organizations, capital formation and limiting the liability of investors, protecting those investments and savings against fraud and institutional failure, promoting innovation through the protection of intellectual property, enforcing property rights that permit the accumulation of wealth; well, the list goes on and on.

Civilization is the thing that permits the formation and accumulation of wealth. And taxes are the price we pay for civilization. Boy, that’s catchy; Spot wonders if somebody said that before? Well yes, actually it was Oliver Wendell Holmes, Jr. Jared Diamond, the author of Guns, Germs and Steel, would undoubtedly agree with the sentiment.

Spot commends this and this to his readers. People like Warren Buffett and Bill Gates – both senior and junior – disagree with the Stickians. Sticks or Buffett? Buffett or Sticks? Spotty reports; you decide.


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