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Sunday, November 13, 2011

A Bold, New Concept to Eliminate Poverty

The "bold, new concept" I describe here is a reductio ad absurdum, of the sort of Keynesian economic "thought" so belovéd of "liberals", which I had thought of some time ago, but just hadn't yet expressed to anyone --

Victor Reppert:On the highest levels people don't earn money from work, they earn money from investments. Unearned income is taxed at 15%, which is a lower rate than what it taxed for the money you work for. Why is this?

adc: "... Economies are made up of people - and people respond and act according to incentives (Not "Animal Instincts" like Keynesians tend to claim.). ... If you can't create jobs from investing - then you won't collect much money from "working," now will you? ;)"

Ilíon: Indeed, it isn't "working" (or "creating jobs") that is important and that is what a rational policy aims at, it is, rather, the creation of wealth.

Consider this thought experiment -

IF having the government "create jobs" were enough to generate prosperity in our society, and make everyone economically comfortable, THEN we ought, immediately, to set up an office (probably at Cabinet level) tasked to ensure that all able adult Americans are given a “job” at a “living wage”. For example, of those who currently have no a job, half could be assigned to dig holes, and the other half assigned to fill back in the holes that the other half dug.

Such a scheme is fool-proof, is it not? There are no down-sides to it, are there? It’s perfect!

But, of course, such a scheme is not only *not* fool-proof, it is very fool[s-]bait; it is the height of foolishness and social self-destruction; and I expect any half-way rational being to be able to spot at least some of the serious flaws in it. And, thus[, since it is fools-bait], one expects socialist fools to be intrigued by the idea, as a “bold, new” concept for “eliminating” “poverty” - perhaps not understanding that the scheme I have laid is just a restatement of the same old, decrepit policies they already favor, and which already are destroying our polity.

In fact, the above foolish, self-destructive scheme is essentially what we are currently doing, and have been doing since the New Deal era. The only difference between that self-destructive scheme and what we are in fact doing is that we have skipped over the steps of actually digging the holes and filling them back in.
IF we wanted to have a rational tax regime, we would not be taxing income, of any kind, at all; rather, we would be taxing consumption ... as we used to do in the early days of the Republic. But, of course, "liberals", and the green-eyed monster that rules them, would never stand for elimination of income taxes. After all, whatever could they use as the basis for their demagoguery if they couldn't periodically promise that *this time* they were really going to "soak the rich (those 'evil' bastards!)"?

Another reason, over-and-above the economically rational one that 'adc' discusses, that in the US investment income is taxed at a significantly lower rate than earned income is that the “liberals” would never stand for taxing the two sources at the same rate. Compared to conservatives, “liberals” get significantly more of their income from investments than earnings - working is for “the little people”, after all - and to tax investment income at the same high rate as earned income would put a real crimp in their further accumulation of wealth.