Economics

The Progressive Feeding Frenzy

The progressive agenda assumes that no amount of taking will ever lead to less earning.

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In any system of social accounting, it is necessary to reconcile revenues with expenditures. Private firms do so because they fear insolvency and bankruptcy. Public institutions don't have the option of bankruptcy, so they invoke three related strategies to avoid the inevitable: raise taxes, print money, or incur debt to meet their obligations.

Done prudently, it is possible for governments to keep their books in balance. But not when these three tools are in the hands of modern progressives and would-be socialists who use them to save the world from environmental disaster, to equalize income and wealth, to codify an ever-widening class of positive rights, and to rectify an ever-greater set of supposed grievances through private lawsuits or government regulation.

These goals may look plausible—even tempting—when taken in isolation. It might seem churlish to argue anyone should be denied a cleaner environment, a college education, universal health care, or guaranteed housing. Perhaps cost should be no object. These proposals are often strategically vague on matters of detail so as to make it impossible to put a price tag on each separate initiative, let alone all of them in combination. The excuse is then made that wealth production is best handled by a combination of monetary and fiscal policy. The first makes credit cheap, and the second uses government purchases to pick up any slack.

How then are these gargantuan expenditures to be funded? The first problem is that the private sector will be so debilitated that government revenues will fall even if tax rates are kept at their current rate. But taxes won't stay at their current rate, because the progressive mindset ignores incentives and treats all wealth transfers as zero-sum. They assume that no amount of taking will ever lead to less earning and that the top 1 percent of Americans, who earn about 20 percent of total income, comprise a deep well.

But that well has already been tapped; today these same rich people also pay 40 percent of federal and state taxes. Some of that money generates return benefits in the form of government goods and services. But today, Social Security, Medicare, Medicaid, and lesser entitlement programs consume an ever-larger fraction of public wealth. We are on the wrong side of the Laffer curve, where higher taxes will generate even smaller revenues. Foreign investors will stay away or pull up stakes and move elsewhere. Many older professionals will choose to retire rather than take a cut in after-tax income. Meanwhile, everyone else will lobby to get on the government gravy train.

None of these prospects seem to deter progressives, who insist, despite strong evidence to the contrary, that they can fund annual trillion-dollar deficits with increased taxes on billionaires and near-billionaires.

Look at the roster of proposed reforms: Cut the estate tax exemption from its current level of $11.4 million to about one-third that amount. Next, make the income tax more progressive. Finally, enact something along the lines of Elizabeth Warren's annual wealth tax of 2 percent on personal estates worth between $50 million and $1 billion, and 3 percent on estates over that amount. These numbers are just a starting point, of course. Proponents will soon say, now that the principle of the wealth tax is established, that the numbers are a mere detail and can be adjusted upward without any serious constitutional limitation.

Should this economic coalition succeed, the American system will fall into the kind of death spiral that has characterized so many socialist regimes. Wealth will flee, revenue will fall, and the entitlements will become nominal, not real. You will have a right to education, health care, and housing, Just not today. Wait obediently on a queue until your name is called, at which point it may be too late. But never even dream that you should be allowed to escape the clutches of a well-intentioned monopoly that demands exclusive public support. Forget those pesky charter schools that provide better education at lower costs.

Trust that government-run firms will continue the private sector's legacy of tech and transportation innovations. Rest easy knowing that America's most powerful and productive companies will be governed by boards of directors with members chosen by government bodies that champion "responsible" investing.

For the past 80 years, the United States has managed to balance the trade-off between innovation and equity without imposing any mortal threat to our social institutions. Not anymore. The progressive agenda, if enacted with full rigor, will create massive economic dislocation that will threaten our democratic institutions to their cores.

NEXT: Brickbat: Laboring Under a Heavy Burden

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  1. They’re counting on the fact that people are idiots and that in a couple of generations, the kids won’t know who much worse off they are then they would have been.

    1. True-but the article itself is a home run and dead on about where we are most likely headed. Frankly this is the best thing I have read here on Reason in some time and we can always point to it as prescient evidence of how statist policies inevitably lead to ruin.

      1. All these Socialist “Paradises” have the resident flight problems.

        New York, California, Illinois, Chicago, Detroit (being the worst in recent history)….

        You don’t here much from the MSM or reason about Detroit anymore. #MemoryHoled

        1. Reason covered Detroit heavily up to and after the bankruptcy. What more is there to say beyond “Detroit is a failed city, in every way”?

          1. You’d be surprised how in denial Detroit residents are. I have family and friends back there and they think everything’s going great since the bankruptcy– real estate values are up, new hipster restaurants are opening, downtown is gentrifying, etc.. Of course, it’s all built on one company (QuickenLoans) and one man’s (Dan Gilbert’s) investment… if that goes away, the whole house of cards collapses. But then again, Detroit area residents are used to betting the entire city on one industry.

          2. Gut Detroit’s high wage jobs through unfree trade and blame high taxes??? That’s not very nice

            1. Yes, that’s exactly what happened. It isn’t like the Auto industry, especially foreign car manufacturers are expanding factories in Southeast states because of their lower tax rates and lower regulatory burden. It must be all some evil globalist,-capitalist plot.

      2. I’m very impressed that there wasn’t a “but Trump”.

        Good article, like to see more from reason like this.

  2. They’ll actually pay for everything by printing more money and then blaming inflation (which is nothing more than a hidden tax) on greedy corporations.

  3. loved the way it explained here.
    rrbntpcresult

  4. And what will the wealthy do in response to these new taxes: Leave the US. For them, relocation is an inconvenience.

    The example of David Tepper is illustrative. Here in the People’s Republic of NJ, Mr. Tepper owned a nice estate in Essex county. The Democrat NJ Legislature, in their wisdom, loudly discussed (and then passed) a special millionaire tax which was then veto’ed by the Governor at the time. Mr. Tepper was no fool, he saw the fiscal landscape of the People’s Republic and said (figuratively), “Fuck this, I am outta here”. He went to FL. And NJ lost ALL the revenue (north of 140MM annually – a huge hit to the state budget).

    Now what do you think will happen if Fauxahontas (or the other Communist Dwarves) pass her wealth tax horseshit into law? Or even if the Congress even makes a serious run at enacting those taxes?
    Answer: The uber-wealthy will pick up their shit and leave.

    The collective stupidity of politicians never ceases to amaze me. They so aptly prove one of Einstein’s observations: Intelligence is finite, but stupidity is infinite.

    1. Answer: The uber-wealthy will pick up their shit and leave.

      Question: Where will they go? Venezuela? Cuba? (not so) Great Britain? Europe? Greece? Italy? Russia?

      1. Such a stilted list. Cayman Islands, Belize, Switzerland….?

      2. Monaco, Singapore or Dubai most likely. Always someplace where the leadership can figure out that being a tax haven is a better way to wealth than driving away the tax cattle.

      3. Free…You’re kidding me, right?

        Here is the short list: Singapore, Switzerland, Monaco, Portugal, Lichtenstein, Hungary…

        Plenty of places the uber-wealthy can go and pay less tax.

    2. Wealth is not a Scrooge McDuck full of cash and jewels. It is stocks and bonds. David Tepper could move anywhere and still retain that wealth. What NJ lost was income to tax, not wealth.

      Your example is irrelevant.

      1. “”What NJ lost was income to tax, not wealth.””

        His point was clearly that NJ lost tax money. The wealth Atlas was referring to belonged to a citizen, not the state. I really don’t see how you think he was referring to the wealth of NJ.

        1. Let me rephrase that for the slow:

          What NJ lost was income to tax, not wealth to tax.

          My point is that moving from one US state to another can dodge state income tax. It can’t dodge a federal wealth tax, not can wealth be moved as easily as income. Move the the Caymans? Sure, you can; but not your factory. Go ahead and take your stock certificates with you, they are just paper; any regime bent on confiscating wealth will just confiscate the factory and leave you to wipe your ass with the stock certificates.

          1. Or, again, for the slow, let me rephrase your claim:

            The uber-wealthy cannot pick up their shit and leave.

            Leave, sure. With their shit, no.

            1. Wrong. Many will see what is coming – sell out and then leave.

              1. Yes, they will sell at a steep loss because everybody who could buy is also selling out.

                Confiscation takes many forms.

              2. There are also exit taxes. Since all that money is controlled by banks, who are controlled by governments, that money is easily confiscated too.

                Or do you think they’ll barter for diamonds and gold?

                1. https://nomadcapitalist.com/2018/12/19/cost-renounce-citizenship/

                  THE COST TO RENOUNCE CITIZENSHIP AROUND THE WORLD

                  Quotes:

                  I was in Langkawi, Malaysia, when the US government announced that it was going to raise the fee to renounce citizenship from $450 to $2,350.

                  The cost of renouncing US citizenship is the highest in the world – especially since so many US citizens renounce.

                  1. Oh my! 2,350? How will they afford that? Wow!

                    Haha

                    1. Should it make USA citizens PROUD to be subjected to the world’s highest exit taxes?

                    2. That’s not actually it. It’s 23.5% of your wealth over $2 million

                    3. Wow! I wasn’t aware of that! Greedy bastards!!!

                      https://americansoverseas.org/en/knowledge-centre/us-taxes-and-liability/exit-tax-us/

                      Quote: Generally, if you have a net worth in excess of $2 million the exit tax will apply to you. This tax is based on the inherent gain (in dollar terms) on ALL YOUR ASSETS (including your home). You will also be taxed on all your deferred compensation—such as pensions at the time of expatriation.

          2. Um…..WRONG! In addition to losing annual income tax, NJ lost future inheritance tax, property taxes, and all sales taxes.

            1. What’s that got to do with the price of buttered bread in Sri Lanka?

              The topic is wealth and how to move it out of a too-taxing jurisdiction.

              1. Dude [what do I call you, cuz I am not replicating your alias], are you being obtuse wrt selling stocks and bonds? When David Tepper sells his personal investments today he is not paying any tax to NJ. When he lived in NJ, he would have paid NJ taxes on the gains. So yes, Mr. Tepper leaving the People’s Republic of NJ cost the state beaucoup bucks. Now FL gets that tax money at whatever rate they charge.

                The uber-wealthy can leave anytime. It is a mere inconvenience. If Fauxahontas (or the Congress) makes a serious run at her wealth tax, I can virtually guarantee that uber-wealthy will pick up their shit and go. We don’t want that, do we?

                1. Yeah, but he’s got a point that a lot of wealth can’t be easily moved or sold (like stocks, or ownership in a factory or real estate).

    3. Well, first the uber-wealthy will pay some lobbyists to carve out exemptions and loop-holes for them from whatever new taxes are being proposed. If that fails, then they will pick up and leave.

    4. Well, that may all be true, but still, something needs to be done because everything is so terrible and unfair!

      Haha

    5. Let them leave. Us fealty are sick of those enriching themselves with crony capitalism, untenable “free trade” labor arbitrage from over-representation that the best government money can buy. Very few industrialized countries give the Uber rich such good treatment as the USA.

      1. Yes how dare they make money selling us products we want and giving us jobs. The very nerve of them.

  5. I’ve said it many times, capitalism is a system for producing wealth and socialism is a method of distributing wealth.

    If there’s not enough wealth to be distributed, well obviously that’s a failure of capitalism to produce enough wealth, isn’t it? If your cow doesn’t give enough milk or your chickens enough eggs or your pigs enough bacon, you cut their rations and beat them until they start producing more, don’t you? It only stands to reason you’d treat capitalists the same way.

    1. The barnyard guttersnipes would agree.

  6. Hopefully Pocahontas will overreach (likely by grabbing guns) and our currently in progress second civil war will finally go hot so we can get the purge over with. Heads on spikes speak in a way that no other solution can.

    1. Open wider, clinger.

      Your obsequious compliance with the preferences of your betters (who stomped your preferences in the culture war) is appreciated. You get to whine and rant and mutter inconsequentially all you want, though.

      All-talk malcontents with violent fantasies are among my favorite faux libertarians.

      1. STFU bladders. Your’re boring, not to mention repetitious.

        1. Volokh had a nice 9-11 remembrance yesterday, and guess which commenter laid the first turd in the punch bowl? He can’t be civil for even the non-political posts.

          1. First turd was his nickname in grade school.

            1. Go easy on the old man. He’s under some kind of delusion that a war has been fought, and his side won.

              Don’t know bout y’all but I ain’t feelin’ none too subjugated by “betters” like the senile rev. Life is good…….

              ……..And that is kryptonite to the rev and his brigade of whiny grievance peddlers.

              Haha

    2. Eeeuuughh. Can I opt for a less gory, market-driven usurpation of progressive despotism? Decapitation makes me a sad panda.

      1. Firing squad? Hanging? Electric chair? Lethal injection? Gas chamber ( that could be too problematic, given historical references so scratch that one)?
        We could go more gory. Drawn and quartered maybe? Or my favorite, blood eagle.

      2. Everyone sues everyone.

  7. Greed is a fact of life. Government greed for power and money is the worst because it can accomplished with an armed police force, and a legal system to incarcerate those that don’t want to feed it.

    1. “Of all the tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under the omnipotent moral busybodies. The robber barons cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.” CS Lewis

  8. One option not mentioned here: Government Almighty can just declare bankruptcy (or partial bankruptcy) as a way of funding itself! The Donald has gone bankrupt 6 or 7 times, and look at how well it has worked out for Him! So The Donald (and presumably His Republican overspending Minions) will want to do the same with the Fed-Guv’s budget! The Donald has even mused in public about such things!

    https://www.nytimes.com/2016/05/07/us/politics/donald-trumps-idea-to-cut-national-debt-get-creditors-to-accept-less.html
    Donald Trump’s Idea to Cut National Debt: Get Creditors to Accept Less

    1. No dumbass, he hasn’t gone bankrupt. Businesses he’s owned have.

      1. Same difference… He wins, He wins. He loses, His creditors lose! It’s how He got rich! By screwing others! And now greedy voters have put Him in power, to rip others off, for our supposed long-term benefit! The Donald has a track record of “winning” for Himself and His Family, by ripping others off… So we figured, He can do the same for US. America first… All other nations are second class. As if karma has been revoked, and what comes around, no longer goes around, and other nations will NOT notice that they’re sucking hind tit, and will NEVER think of shitting right back on us.

        1. Relax. You seem obsessed.

        2. “…Same difference…”

          Is it painful to be so stupid?

          1. Your arguments are stupendous! Great citations! Inescapable logic to boot!

  9. I never understood how it is that progressives will readily admit that hiking taxes on things like cigarettes and alcohol helps to discourage people from buying as much of those, yet continually hiking taxes on other stuff will not discourage or reduce those things.

    By the same token, these people—on a state level—will offer tax breaks to lure certain businesses to an area or encourage business expansion, but will oppose lowering taxes otherwise as having “no benefit to the greater good” other enriching a few already wealthy people.

    It’s as if taxes have magic powers and their are good spells and harmful spells!

    1. *there are* Damn spellcheck and lack of an edit button.

    2. Taxes on sins are intended to discourage those sins.

      Taxes on other stuff is intended to raise money without having a discouraging effect.

      Only simpletons without imagination believe in principles and consistency instead of the magic of intentions.

      1. Take_Away: My Intentions Are Magical{31:00}32’h!!!
        Increment_Counter{31:00}32’h <= Increment_Counter{31:00}32'h + 1'b1 ;

        All Hail!

  10. Meanwhile, everyone else will lobby to get on the government gravy train.

    It’s like chum in the water.

  11. “It might seem churlish to argue anyone should be denied a cleaner environment, a college education, universal health care, or guaranteed housing. Perhaps cost should be no object.”

    No it doesn’t. You have no right to my income.

    Next.

    1. The U.S. Constitution, specifically Art. I, Sect. 8 and Amend. XVI, disagrees with you.

      1. Not everything legal is right.

        1. And not everything right is legal. It’s a perfect venn diagram, with the 2 circles slowly moving away from each other.

    2. Progressive dogma 101: if you have not achieved something it has clearly been “denied” you. Even if you didn’t try.

      Cuz everything is so terrible and unfair!

      Haha.

  12. “RICHARD A. EPSTEIN is the Laurence A. Tisch Professor of Law at New York University Law School”

    Good for you man. How you still have a job there while holding reality based beliefs is a feat in itself.

    1. He was at U od Chicago for a long time, a much better fit for him.

  13. Hauser’s Law, or the Iron Law of 20 Percent.

    Post-war US tax revenues have not exceeded 20 percent of GDP. And it’s likely they never will, regardless of what tax scheme the Ds come up with. People simply won’t stand for it.

    1. “”People simply won’t stand for it.””

      I agree. A lot of the people thinks the money is coming from someone else. As soon as they find out they too will be paying up, they will cry foul.

    2. We probably could raise more than 20%, but to do so we would have to radically change out tax system to rely on a much broader tax base. In other words, we would have to do as Europe does, and tax the middle and lower income earners much more than we do in the U.S., resulting in a less “progressive” taxation regime. The left would never propose that because to do so would be political suicide. These lower income groups have become quite accustomed to shouldering a small share of our fiscal burden, whereas in Europe, these groups have been heavily taxed for millennia. Unless and until they are willing and able to tax like Europe, they need to give their socialistic fantasies a rest.

  14. If deficits didn’t matter of, why tax at all?

    1. Good point — seems so obvious now that you’ve mentioned it. Be interesting to hear how the candidates responded, except they’d just shuck and jive and dodge the question.

      1. the “answer” is to control inflation.

        the MMTers think govt can print and spend infinity, then if things get too hot you tax away the excess.

        it’s insanity, but there’s your answer

        1. Yes, to some extent. Although I’d like to believe that they do pay some attention to debt to GDP. That too may go out the window soon.

    2. Whenever I ask the question, I get some weird answer about “taxes sop up excess money to prevent inflation” or some horseshit like that.

  15. If deficits don’t matter, why tax at all?

    Thanks, auto correct. I swear English is my first language.

    1. Bullshit-we all know that Bender is from Mexico.

      1. We all know Bender’s first language was binary.

      2. And we know he was defective but inspector no. 5 didn’t do his die diligence and allowed a defective bending unit out into the public. Fucking inspector no. 5.

        1. In fairness, he did get an honest bureaucratic job where he could at least keep an eye on the whore-mongering, chain-smoking, alcoholic.

          1. Only because his Olympic Limbo career was ended by his obsession with manwiches and his obsessive rivalry with Barbados Slim.

  16. Can we at least stop using the word “progressive”?

    Socialist is correct enough, but I”m thinking neo-feudalists would be better, with each serf dependent on the good will of his lord.

    Other suggestions?

    1. Ever read marx? It is obvious that he longed for a return to feudalism. His problem was that the genie of capitalism was out of the bottle. So he tried to design a new feudalism that would simultaneously destroy capitalism.

    2. I like Global Socialist
      Aka
      Gazi

      Probably hits too close to home for Reason though

    3. “Leftist” always works for me. Also, I use the term “socialistic” to describe European social welfare states.

    4. Evil. That sounds like a good replacement for progressive. Yes, let’s go with that. Evil.

    5. “Leftwing Fascists” is the term I personally use…..and living in the Shiticon Valley as I do, I resort to it often.

  17. Good thing we have a Republican President and Senate to reign in this out-of-control spending.

    Wait a minute…

    1. And they’ve finally stopped even pretending to care. The number of openly fiscally conservative national politicians can now be counted on one hand.

    2. The Democrat House will not let any spending bill through that doesn’t raise spending.

  18. This article explains the issue flawlessly, and perfectly describes the resulting actions that will follow these proposed policies.

    Thus, it is undeniable that Mr. Epstein is a racist, bigoted, homophobic, Nazi.

  19. It’s just not the proggies who engage in a feeding frenzy when it comes to other people’s money.
    The GOP does it too but for different reasons.
    That’s the joy of being a republican or a democrat: enjoying the fruits of other people’s labors.

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