Home > conservative, economics, philosophy > The cost of wealth redistribution

The cost of wealth redistribution

Private pay shrinks to historic lows as gov’t payouts rise

To summarize Drudge’s headline this morning: it’s working.  Obama’s wealth redistribution that is.

Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.
At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.

Many liberal talking heads like to criticize the “tea-baggers” for spouting off about socialism without knowing what it is.  Well, here you go.  Simply put, socialism is taking property from individual A and spreading it out amongst many individuals.  That’s what happens whenever the government takes taxes from individual A, and gives them to others by way of Social Security, Medicare, unemployment, etc. (I would argue public education falls into this same category).  The more that is taken from individual A and given to everyone else, the more socialist a country becomes.  If the government takes everything for public use, then socialism becomes communism.  Sometimes socialism can be made to work, as long as the people are content with the high tax rate, and the taxes taken are sufficient to pay for the entitlements.  With respect to this country, however, the former (high taxes for entitlements) has never been true philosophically, and now it seems the latter (sufficient taxes to pay for entitlements) is no longer true either.

As University of Michigan economist David Grimes states in the linked article, the current path is not sustainable.  The reason is simple: there aren’t enough taxes coming in from private incomes to pay for all the entitlements.  Of course, only an advocate of socialism could argue with a straight face that this shift in income — from private income to govt. subsidies — is a laudable result of Obama’s stimulus.

The shift in income shows that the federal government’s stimulus efforts have been effective, says Paul Van de Water, an economist at the liberal Center on Budget and Policy Priorities.

“It’s the system working as it should,” Van de Water says. Government is stimulating growth and helping people in need, he says. As the economy recovers, private wages will rebound, he says.

Regardless of one’s position on the propriety of government entitlements, there is simply no credible argument for government spending equating to growth.  In fact, the stimulus proves the argument to be wrong.  The government spent billions trying to stimulate the economy into creating jobs, and it has been an abject failure.

The reason government spending doesn’t stimulate the economy is very simple, and has been repeated by this blog countless times: the government doesn’t have any of its own money.  Any money it uses to “stimulate” industry must be taken from the industrious.  Any money taken from the industrious is money that doesn’t go to job creation.  Van de Water’s contention that once the economy improves, private wages will rebound is true, assuming the economy improves.  If the government keeps spending money it doesn’t have however, it will need to take more from the people.  Taking ever increasing amounts from the people that work, and giving it to people that don’t, won’t stimulate anything.  Instead, it will simply make those that work stop, and those that don’t work depend on the government for their sustenance.  But then, maybe that’s the whole point.

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