Shake the numbers any way you want and the answer is the same: Millionaires are getting richer fast, and their tax burden has been cut in half since World War II. The middle class is slowly sinking, despite working longer hours with greater productivity. And the army of the poor is flooded with new recruits, most of them with a long history of working in lousy, low-wage jobs.
The tax statement is utterly false, of course. Tax rates have come down, but the tax burden has shifted steadily up the income scale. The top 1% of earners now pay about 40% of all income taxes. The bottom 50% pays virtually no income tax. (Moran is vague here, however. The Left has taken to throwing payroll taxes into the mix, which skews the overall tax burden down the income scale, as measured by percentage of income. But even including payroll taxes, the top 1% pays nearly 30% of all federal taxes. Furthermore, Medicare and Social Security are tied to contributions, with the benefit calculations skewed toward the lower end of the income scale, as well. In other words, in relation to what they pay in taxes, lower income folks make out quite well. Payroll taxes are much less progressive, owing to the earnings cap. This is hardly unfair, though. One can hardly say that the economic bottom is being cheated)
How do they propose to correct that alleged problem? Not by liberating the economy from oppressive government, but by targeting the people that by their own admission are doing well. How will that foster a return to economic health? It won’t, but they don’t care. Why? Because they are ideologically driven, uncompromising, unabashed statists:
The irony is that robust government programs on a scale we need today are very popular. The GI Bill helped create the middle class by sending a generation of veterans to college. Social Security ended widespread poverty among the elderly. Medicare made sure they would not die without a doctor.
No serious person can argue that private charity would have matched this government effort.
That last sentence is all too true, and that points to the fundamental problem. The private sector could not and would not match it, because the vast majority of people receiving government “help” neither need it nor are worthy of private, voluntary charity. (The GI Bill is a special case, which can be seen as payment for services rendered in defense of America. But that is beside the main point.) All of those programs are still in place, and have in fact been expanded into uncharted, vastly unfunded territory. And many more have been added. The results are in. But again, the Left statists are not interested in reexamining the entire welfare state concept. Their goal is more of the same, as they press forward toward their long dreamed of egalitarian utopia. The inverted mentality that seeks to achieve a better economy by sacrificing people who are doing well is dramatized on page 535 of Atlas Shrugged:
“There are people who aren’t broke,” said Boyle slowly [at an economic crisis meeting of top-level government officials]. “You boys have no excuse for permitting all that need and misery to spread through the country – so long as there are people who aren’t broke.”
America wasn’t always like this. After World War II, the country made big gains that were widely shared. The result was the most prosperous middle class the world has ever known. Play by the rules and you could make out fine, and expect that your kids would do even better.
What was the difference between the post WWII period and today? For one thing, the New Deal and thus the Great Depression ended, Truman lifted wage and price controls, and the gold-backed Bretton Woods international currency system kicked in. Tax rates were high – 91% at the top – but almost no one paid the highest rates, and they were widely seen as a drag on the economy. Remember that Democrat JFK ran on a 1960 presidential campaign slogan “get America moving again”, and followed that up with his signature tax accomplishment that lowered the top rate to 70% in his across-the-board rate reduction plan.
But the most important difference between then and now was the size and scope of government, which was much, much smaller then. Beginning in the mid 1960s, the welfare state exploded, the gold standard ended, and government spending soared at an accelerating rate. Today, the welfare state has reached new heights, federal spending alone now consumes 25% of GDP, and government regulations are descending upon the economy at the most feverish pace since at least the Great Depression.
No, as Tom Moran says, “America wasn’t always like this.” There was a time when we were freer, and consequently individuals had a much easier time rising economically. The struggles of the middle and lower income people that Moran describes are exactly what one would expect in a controlled economy like we have today. But, the Left doesn’t see the obvious correlation between today’s economic troubles and today’s burgeoning welfare state. They don’t want to see it, because the facts threaten their statist worldview. So, they set up a straw man like the wealth gap, and point to that as a symptom of what’s wrong with the economy. It is a symptom, but not in the way the Left believes. Moran and others on the Left have taken a huge bite of foot, this time. The supreme irony is, all of the government-imposed programs Moran credits for lifting the lower and middle classes are still in place, and have been joined by a myriad of new programs piled on top as the welfare state continues to expand to this day. If the size and scope of the welfare state is to be the measure of middle and lower class well-being, then the only conclusion one can draw is that it has been a dismal failure, having wrecked both the middle class and the economy.
[Note: I use the term “class” only in the economic sense of reflecting income brackets. There are no actual classes in America.]
The dream of every stripe of American socialist is to turn the middle class into a welfare class. This is being accomplished by forcing productive Americans to launder their hard-earned money through politicians’ hands via an ever-growing assortment of wealth redistribution programs, return that money in various strings-attached ways, and then call them vital “government benefits”. Social welfare programs did not create the middle class. They were created by politicians – regrettably, often with widespread popular support; but still, by politicians making an end run around the constitution they swore to uphold. Who pays for the welfare state? It is the productive achievements of private citizens that pay for and make the welfare state possible.
What created the middle class? – The individuals that make it up, led by the highly productive rich who break out to new economic heights, creating the mass market products we see all around us, jobs, raising the physical labor productivity that leads to rising real wages, and providing investment opportunities that enable millions to share in the profits of productive businesses. The middle class arose naturally as a direct corollary of the rise of free market capitalism in the 19th century, which arose naturally as a direct consequence of the American ideals of unalienable individual rights and limited rights-protecting government. Popular support or public opinion polls notwithstanding, the facts speak for themselves: The modern welfare state did not create the middle class, but was made possible by the exploitation of the middle class.
The statist mentality has to create the myth that free individuals acting on their own judgement can not take care of themselves, despite all of the evidence to the contrary, in order to justify the case for omnipotent government. Welfare statists love to claim credit for such things as educating veterans, “end[ing] widespread poverty among the elderly”, and “ma[king] sure they would not die without a doctor”, even though such programs are actually paid for by widespread forced taxation of private productive citizens. But the fact is, the very few people who can’t – as opposed to won’t – take care of themselves were merely the rationalization for forcing everyone into a welfare state trap.
What is it that the Left depends upon to make such a defense of its welfare state crown jewel appear to make sense? Moran writes:
Now that social contract has been broken. In the past 20 years, all of the economic gains we’ve made were captured by the top 10 percent of earners. The bottom 90 percent lost ground.
The “social contract” is a euphemism for the legalized armed robbery of forced wealth redistribution. The Left is driven by a bastardized egalitarian conception that views individuals not as equal before the law but as equal in the sense of an ant colony. All wealth is an anonymous collective achievement, this view holds. Intelligence, self-motivation, ability, self-discipline, innovativeness, and all of the virtuous individual character traits that productive work demands are irrelevant to the “distribution” of that wealth. The wealth or “economic pie” just appears, independent of individual activity, and falls into one big tribal pot. It is created by everyone but no one in particular. If someone has too high an income, it’s because they “captured” too much out of the pot. We are all ants, incapable of individually producing wealth by our own capabilities and voluntary private trade. The tribal wealth pot is a static quantity, where one man’s gain is another man’s loss. Left free, some will “capture” an unfair amount, leaving less for others. We need the queen ant, or the tribal chief, or the welfare state – variations of Plato’s “philosopher king” all - to step in to create a fairer distribution by cutting down the successful top. Then somehow, “the economic gains we’ve made” will keep coming.
Of course, all wealth is the product of individual minds, individual initiative, and individual work – the relative individual value of which is determined by free and voluntary association and trade, and, to the extent there is a free market, manifested in the amount of money each individual makes. This fact is buried under a mountain of collectivist jargon and the tribal view of wealth, which unfortunately is a view held beyond just the Left. The result is an ever-expanding government and the rise of force as the dominant means of social interaction. (See my post of 10/6/11).
Over the past century, power-lusting American politicians, by regularly exploiting the genuine needs of the few and the greed of those unwilling to plan their own lives, created today’s economic crisis. The alleged “income gap” is a straw man. The solution is not to go after the one economic group that still manages to flourish, which will only worsen the plight of everyone else. The solution is to begin to lift the suffocating blanket of statism from the economy – beginning with taxes and regulations.
The income gap isn’t growing because the top 10% is in some mystical way benefiting unfairly, it is growing because the government is stifling upward mobility through taxes, spending, monetary policy, central planning, and regulations, while destroying incentives through an expanding array of handouts that encourage the lazy and the shiftless and discourage the ambitious. The middle and lower economic groups are victims not of the top 10%, but of government. More than ever, to cite the Reagan wisdom that Moran quotes in his article, "Government is not a solution to our problems. It is the problem."
The soft communism of welfare state socialism is inexorably approaching its inevitable blind alley throughout the West. We could be witnessing the last gasp of the deadly 20th century scourge of collectivism. One can observe Moran’s reliance on collectivist premises to fortify his Leftist call to action. It is those collectivist premises that must be challenged, and the only alternative is individualism. There are signs that that challenge is beginning to emerge. But, by and large, the Right has so far failed to mount an ideological counter-attack, thus conceding the philosophical battlefield to statism. We must explicitly uphold individualism, otherwise the largely reflexive national recoil against “big government” epitomized by the Tea Party will crash and burn on the rocks of philosophical incoherence.