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Our Utterly Corrupt Politics October 31, 2007

Posted by David Bookstaber in Government, Taxation.

“Vote for me, and I will take money from somebody else for your purposes.”  We have allowed our federal system of government to degenerate into civilized mob rule.  The only difference between modern American democracy and Communist rule is that Americans demand that more than one political party conspire to rob minorities to cement their power.  This is surely not the American dream.

Amity Shlaes reminds us of an excellent essay by William Graham Sumner entitled, “The Forgotten Man.”

The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C’s interests, are entirely overlooked. I call C the Forgotten Man. For once let us look him up and consider his case, for the characteristic of all social doctors is, that they fix their minds on some man or group of men whose case appeals to the sympathies and the imagination, and they plan remedies addressed to the particular trouble; they do not understand that all the parts of society hold together, and that forces which are set in action act and react throughout the whole organism, until an equilibrium is produced by a re-adjustment of all interests and rights. They therefore ignore entirely the source from which they must draw all the energy which they employ in their remedies, and they ignore all the effects on other members of society than the ones they have in view. They are always under the dominion of the superstition of government, and, forgetting that a government produces nothing at all, they leave out of sight the first fact to be remembered in all social discussion – that the State cannot get a cent for any man without taking it from some other man, and this latter must be a man who has produced and saved it.

Worth reading in full.


1. Edwards - October 31, 2007

Hi federalist, just came across your blog from the “latest posts” section on my dashboard. Definitely with your train of thought and will be bookmarking you to read more when I have some down time. One interesting thing about “The Forgotten Man” is that I believe FDR mentioned it in either an early presidential speech or in a campaign speech, then didn’t talk about it for a few years. However, when it came to pushing the New Deal through, he brought it up again, but then twisted “The Forgotten Man” to essentially be D and not C. That is, “The Forgotten Man” was the “working poor”, as they say now, and not the middle-class person that does their job and doesn’t complain. Quite ironic in that by using the phrase and changing its meaning, the man ultimately remained Forgotten…

2. federalist - November 19, 2007

Donald Luskin has a brilliant essay (“Our ‘Voluntary’ Tax Code”) responding to Rep. Rangel’s plan to “restore a sense of equity and fairness that is critical to the scucess of our voluntary tax system.”

Why not try an experiment in which the tax system is made truly voluntary? Already 42 states (as well as the District of Columbia and Puerto Rico) raise revenues with lotteries, through which citizens voluntarily paid $57 billion last year. It’s a long and noble tradition. Before the birth of Christ, the Han Dynasty ran lotteries to raise the revenues used to build the Great Wall of China.

Government could be entirely financed by voluntary taxation. Yes, the government would have to be small enough to make do, and citizens would have to be sufficiently public-minded about it. But all 13 original American colonies ran lotteries, and playing them was considered a civic duty. Proceeds from lotteries established Harvard, Yale, Columbia, Dartmouth, Princeton, and William and Mary — and paid for the cannons that defeated England in the Revolutionary War.

But today, Mr. Rangel might find that the volunteerism in today’s tax system is a dangerous thing. His bill would raise the tax rate on capital gains income, but the cap-gains tax is voluntary to the extent that one doesn’t have to pay it until one chooses to sell an appreciated asset. That fact is not lost on Mr. Buffett, who believes the rich should pay more taxes, but who has never volunteered to sell even one share of his vast holdings in Berkshire Hathaway — and thus has never volunteered to pay any cap-gains taxes.

What if every investor did that? It’s nice to imagine a nation of long-term investors just like Mr. Buffett. But if stockholders never sold any of their investments, the economy, incomes and job creation would slow to a crawl because a growing economy depends on capital moving freely and continuously to its perceived highest and best use.

Mr. Rangel should also bear in mind that taxes on labor income are voluntary in the sense that one can choose not to pay them by choosing not to earn any labor income — that is, by not working. All the rich need to do in order to make true Mr. Rangel’s characterization of our tax system is to retire to their yachts, rather than continue to contribute to the economy by running hedge funds or doing private equity deals.

3. federalist - March 23, 2011

St. Augustine of Hippo on the difference between governments and robbers:

[W]hat are kingdoms but great robberies? For what are robberies themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of a prince, it is knit together by the pact of the confederacy; the booty is divided by the law agreed on. If, by the admittance of abandoned men, this evil increases to such a degree that it holds places, fixes abodes, takes possession of cities, and subdues peoples, it assumes the more plainly the name of a kingdom, because the reality is now manifestly conferred on it, not by the removal of covetousness, but by the addition of impunity. Indeed, that was an apt and true reply which was given to Alexander the Great by a pirate who had been seized. For when that king had asked the man what he meant by keeping hostile possession of the sea, he answered with bold pride, “What thou meanest by seizing the whole earth; but because I do it with a petty ship, I am called a robber, whilst thou who dost it with a great fleet art styled emperor.”

4. federalist - December 7, 2011

From James Wilson’s “The Greed Fallacy“:

Statists (especially left-statists) … ignore the fact that they created this outcome when they asserted that the State can steal from some to give to others. When Statists argue that politicians can initiate force against Person B for the benefit of Person A, they’re promoting a system that corporations (and others) will use for their own ends. Cronyism, corruption, and the abuse of power are the inevitable results of such a greedy, theft-based system.

5. federalist - April 25, 2012

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