Whose Money Is It?
Not all wealth belongs to Washington
Paul Ryan's budget blueprint already has done the nation a service by illuminating the strange liberal conceit that Americans have a right to other people's money, but not to their own.
Even as Ryan was unveiling the details Tuesday, critics were slamming his plan. The Washington Post's E.J. Dionne condemned its "radically redistributionist purposes," and hoped Ryan would be candid about "whom he is taking benefits from and toward whom he wants to be more generous."
Paul Krugman of The New York Times also condemned Ryan's proposal because it would "massively redistribute income upward." In The New Republic, Jonathan Chait likewise insisted Ryan would "redistribute income upward." At The American Prospect, Jamelle Bouie alleged that Ryan was "massively redistributing wealth to the wealthy." On The Huffington Post, Ethan Rome warned Ryan and his fellow Republicans to "ask corporations and the very rich to pay their fare share" before "asking the rest of us for anything."
On a very superficial level, these charges almost make sense. If you were to draw a pie chart of U.S. income distribution at the current moment, and a pie chart of income distribution a few years after the Ryan plan took effect, then the two charts would look different. And they would look different in just the way Dionne, Krugman, et al. describe: The well-off would have a bigger share of the nation's wealth under distribution B than they currently do under distribution A, and the less well-off would have a smaller share.
And if that is as far as you look, then it is easy to view Ryan's plan as Sheriff of Nottingham economics: a cruel injustice that (to quote Dionne again) "transfer[s] even more resources from the have-nots and have-a-littles to the have-a-lots." But it is not enough to look only that far.
First, there is no such thing as "the nation's wealth." Wealth is not collectively owned, nor should it be. Second, the current division of income in the U.S. is itself the product of considerable re-distribution. The federal government now collects more income-tax revenue from the top 1 percent of filers than from the bottom 95 percent. This is due partly to the concentration of wealth near the top, but also to tax policies that exempt a great deal of low- and middle-class income from taxation.
Forty-seven percent of American households pay no federal income tax at all, points out the Tax Foundation, and the IRS hands out more than $70 billion in refundable tax credits. Washington also spends hundreds of billions a year on social safety-net programs that benefit persons who pay little or no federal income tax. Entitlement spending constitutes the single largest category of federal outlays (which is precisely the reason Ryan has taken it on). You can say this massive transfer of wealth is good, or you can say it is bad. What you cannot do is pretend that the transfer has not taken place.
In this light, to speak of Ryan's proposal as transferring wealth to the wealthy borders on the mendacious. If Fred pays $100 in taxes, and Mortimer pays nothing while collecting $25 out of Fred's tax payment, then it is fatuous to say lowering both Fred's tax bill and Mortimer's benefit check by $10 is "taking money away from Mortimer and giving it to Fred." That is not what is going on at all. The government is still doing just what it was doing before—taking money from Fred and giving it to Mortimer—only to a lesser degree.
And yet progressives insist on pretending otherwise, again and again.
Look at how proposals to extend the Bush tax cuts were described in December: as a "giveaway to the very wealthiest" (Sen. Kent Conrad); a "huge giveaway to the super-rich" (Rep. Jim McDermott); "unconscionable . . . giveaways for our country's wealthiest" (AFL-CIO president Richard Trumka); a "windfall" (the Los Angeles Times); "giving more money to those least likely to spend it" (The Washington Post's Ruth Marcus); and so on.
Talk of this sort makes sense only if you assume that all money belongs to the government, which then spreads the wealth around in whatever manner it deems appropriate. The same assumption explains how pundits can speak of tax cuts "costing" X or Y billion dollars, in the same way a grocer's accountant might speak of a sale on oranges costing the grocer revenue. From the perspective of the taxpayer, tax cuts, like sales on oranges, do not cost money—they save money. Those who speak of tax cuts costing money reveal whose side they are on.
Fortunately, all money does not belong to the federal government. But unless something is done to correct the nation's fiscal trajectory soon, that will change.
A. Barton Hinkle is a columnist at the Richmond Times-Dispatch. This article originally appeared at the Richmond Times-Dispatch.
