Economics 101
Sharing the Wealth

The election for POTUS has been over for some time and now the country is poised to inaugurate President Obama. The blather in the press has been over BO’s appointments, the Senate race in MN, the seating of Blago’s choice to replace BO and what the Obama team can do about the economic crisis that grips the country and the world. There stock market is rather stale, but there is hope for an Obama Rally.

With the economic crisis solutions being championed, there still is a holdover from the election campaign. That is President elect Obama’s comment to Joe the Plumber about “sharing the wealth”. What does this mean? How is it applied by the government? The idea of taking from the “rich” and giving to the “poor” is a romantic notion rooted in the heroic Robin Hood. But, there are complex issues here, not the least of which are definitions of “rich” and “poor”, and how much is to be shared.

It does appear that increasing taxes [or repealing the Bush tax cuts] is a bit of a back burner issue at the current juncture. In fact, there is talk of a $300B tax cut including some for business. That is a appositive step for which BO should be applauded. However, tax cuts, the enormous new stimulus being proposed by the Obama team, along with TARP and the numerous other rescues must be paid for at some time. Eventually, all what the government has done and will do has to be repaid. BO always talked of cutting taxes for 90% of the population. So, imagine the size of the tax increases on the remaining 10%. Tax increases to “share the wealth” are being delayed not scrapped.

It is no secret that some in society contribute more and earn more. Why? Opportunity, positioning, timing, all come into play. But, many produce more based on innate abilities and hard work. And, the reward for folks in our economic system is “more”…wealth, power and prestige. There are two obvious results from a system that rewards the able hard working individual…greed and envy. The greedy want more and the envious want what others have. Neither should be the driver in a re-distribution ethic. The politics of greed and envy are equally to be avoided.

When considering the question of “Who are the rich?” I submit that each and every American is “rich” vis a vis the rest of the world. Of course, that is not the majority view in this country where there is a desire to compare the “rich” with the “poor”. And, that is a moving target as witnessed by the changes in what earning level determines the middle class in the Obama campaign.

The state re-distributes that which was distributed originally through the economic system. This is done through the power of taxation. The excess of the “rich” is redistributed to the “poor” by taxing the “rich”. Can there be a more inefficient system? For the state to do this requires a massive bureaucratic system. Hundreds and thousands of employees at the state and federal level are required to carry out this redistribution. It costs millions of dollars in overhead before the “poor” receive a penny. And, what about the taxed “rich”? Why will they be willing to work hard or use their abilities to have their earnings diverted through the government to those who did not earn it? Why not invest in tax free investments or take their funds elsewhere. In a global economy, US citizens are not tied to the US economy. Or, what if taxes mollify greed to the point where the rich are satisfied with the status quo? Less work, overseas investment and just sitting on funds all leads to less income for the “rich” to be taxed and redistributed.

The welfare system shows how poorly redistribution works. Welfare begets more welfare. The recipient of welfare is not benefited if he has no idea of how to use the cash, except to be a consumer. There is no making the “poor” “rich” through redistribution. If the distributee has no ability or self-discipline to generate surplus, then they will obviously continue to need redistributed cash. Investment of excess has been the engine of capitalism, not redistribution by taxation. A redistribution scheme produces nothing and without wise investment of the excess, income ceases.

Redistribution is a threat to the formation of capital. Redistribution takes excess that could be invested and distributes it to individuals who do not invest. Redistribution programs also vest more and more authority in the state that holds the taxing power. The “poor” increasing look to the state to cure their plight of not being “rich”. It keeps individuals from looking to themselves for solutions. And, redistribution, by taxing the “rich”, asserts the proposition that the “poor” are “poor” because the “rich” are “rich”. Nannie State must make all her children equal. The “poor” are entitled to be “rich” and the “rich to be “less rich” for the sake of equity.

Socialism as an economic system has never lead to all being equally rich. Rather, it results in an equality of poverty. “Spreading the wealth” dissipates the wealth. Redistribution makes us all dependant on the state because its redistribution has undermined the source and process of wealth creation. Witness the intrusion of the federal government into the market place last year, and continuing. “Bailouts” to large corporations are welfare for the wealthy and, in the case of the financial system, stupid and/or corrupt decision makers. We are told, “It would be worse if we [Uncle Sam] did not intervene.” But, who can tell? It is clear that the state in now deeply involved in the free market system. Who will be next to request corporate welfare?

Christians never look to the Nannie State to being bout equality. A Christian also knows that equality of material wealth is not the goal of living on this earth. There will be rich and there will be poor. Jesus Himself says: You will always have the poor [Matt. 26:11]. Christians are to assist the poor; it is evidence of their Christianity. But, assistance is of a voluntary nature. It is not the involuntary taxation of the state leading to redistribution. Christians give to the poor because of a changed heart, changed by faith in Jesus Christ. The haves want to help the have nots in their community. This is not an impersonal, forced transaction. It is an outreach to those created in the image of God in a personal and compassionate way.

One who is not counted among the faithful Christians, or one who championed the people, Machiavelli, recognized the problems with forced redistribution through taxation:

One man should not be afraid of improving his possessions, lest they be taken away from him, or another deterred by high taxes from starting a new business, Rather the prince should be ready to reward men who want to do these things and anyone who wants in any way to increase the prosperity of his city or his state.

Machiavelli believed that the entrepreneur should not be punished with taxes for his personal improvement translates into improvement for the state. The Christian goes one step further. He sees such programs as a reliance on the state so as to make the state god. This displaces the God of the Universe with an idol. The Church must come forward and be the Church, reaching out to its own and then to the general community to help those in need. Love and charity have been central pieces in the Christian ethic. It is a giving freely of what is available to give, not taking. It is action without mandate, coercion or redistribution. It is part of the service and obedience of a Christian.