Tuesday, 24 May 2016

Some lessons to remember on Budget Week, so listen up


Why do democracies fail?

“A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury. From that moment on the majority always vote for the candidate promising the most benefits from the treasury…”
~ Attributed to Alexander Tytler (unverified)

You’ll hear all the ‘good’ reasons on Budget Week for looting…

"There is always good and sufficient reason for more and more taxes.
    Solomon's temple, the roads of Rome, the rearing of 'infant industries,' military preparedness, the regulation of morals, the improvement of the 'general welfare'--all call for drafts on the marketplace, and the end-product of each draft is an increase in the power of the State. Some of the appropriations seep through to some members of Society, thus satisfying the something-for-nothing urge, at least temporarily, and so stimulate a disposition to tolerate the institution and to obliterate understanding of its predatory character. Until the State reaches its ultimate objective, absolutism, its answer to tax-grumbling is that the 'other fellow' pays all the levies and that seems to satisfy."

~ Frank Chodorov, from his book The Rise and Fall of Society

Clearly, John Stuart Mill was far too hasty in saying …

“The utility of a large government expenditure, for the purpose of encouraging industry, is no longer maintained. Taxes are not now esteemed to be ‘like the dews of heaven, which return in prolific showers.’ It is no longer supposed that you benefit the producer by taking his money, provided that you give it to him again in exchange for his goods. There is nothing which impresses a person of reflection with a stronger sense of the shallowness of the political reasoning of the last two centuries, than the general reception so long given to a doctrine which, if it proves anything, proves that the more you take from the pockets of the people to spend on your own pleasures, the richer they grow; that the man who steals money out of a shop, provided that he expends it all again at the same shop, is a public benefactor to the tradesman whom he robs, and that the same operation, repeated sufficiently often, would make the tradesman a fortune.”
~ John Stuart Mill, writing in 1848

But all these taxes don’t make anyone rich. Not even govt.

“Taxes which are levied on a country … for for the ordinary expenses of the State, and which are chiefly devoted to the support of unproductive labourers, are taken from the productive industry of the country; and every saving which can be made from such expenses will be generally added to the income, if not to the capital of the contributors. When … twenty millions are raised by means of a loan, it is the twenty millions which are withdrawn from the productive capital of the nation…
   “It is by the profuse expenditure of Government, and of individuals, and by loans, that the country is impoverished; every measure, therefore, which is calculated to promote public and private economy, will relieve the public distress; …”

~ David Ricardo, from chapter 17, On the Principles of Political Economy and Taxation

And so does all that govt debt, which could have otherwise been spent productively…

“[It is said] that the debts of a nation are debts due from the right hand to the left, by which the body is not weakened. It is true that the general wealth is not diminished by the payment of the interest on arrears of the debt … but the principal of the debt—what has become of that? It exists no more. The consumption which has followed the loan has annihilated a capital which will never yield any further revenue. The society is deprived not of the amount of interest, since that passes from one hand to the other, but of the revenue from a destroyed capital. This capital, if it had been employed productively by him who lent it to the State, would equally have yielded him an income, but that income would have been derived from a real production, and would not have been furnished from the pocket of a fellow citizen.”
Jean Baptiste Say, from Book III, chapter 9, of his Treatise on Political Economy

But don’t deficits mean govt can spend without raising taxes?

“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.”
~ Ron Paul

But, but …what if we just tax the hell out of the rich? As even Warren Buffett reckons should be done?

Cypress Semiconductor’s T.J. Rodgers points out this attitude stinks for everybody, every way up you look at it.  It is bad, it’s wrong, and it’s immoral.

Like it or not, the 1% actually provides the standard of living for the 99%.

The overwhelming majority of our contemporaries, ranging from the illiterate to the highly educated, are utterly ignorant of the role of privately owned means of production—capital—in the economic system. As they see matters, wealth in the form of means of production and wealth in the form of consumers’ goods are essentially indistinguishable. For all practical purposes, they have no awareness of the existence of capital and of its importance.
    Thus, capitalists are generally depicted as fat men, whose girth allegedly signifies an excessive consumption of food and of wealth in general, while their alleged victims, the wage earners, are typically depicted as substantially underweight, allegedly signifying their inability to consume, thanks to the allegedly starvation wages paid by the capitalists.
imageThe truth is that in a capitalist economic system, the wealth of the capitalists is not only overwhelmingly in the form of means of production, such as factory buildings, machinery, farms, mines, stores, warehouses, and means of transportation and communication, but all of this wealth is employed in producing for the market, where its benefit is made available to everyone in the economic system who is able to afford to buy its products.
    Consider. Whoever can afford to buy an automobile benefits from the existence of the automobile factory and its equipment where that car was made. He also benefits from the existence of all the other automobile factories, whose existence and competition served to reduce the price he had to pay for his automobile. He benefits from the existence of the steel mill that provided the steel for his car, and from the iron mine that provided the iron ore needed for the production of that steel, and, of course, from the existence of all the other steel mills and iron mines whose existence and competition served to hold down the prices of the steel and iron ore that contributed to the production of his car….
    For the capital of the capitalists is the foundation both of the supply of products that everyone buys and of the demand for the labour that all wage earners sell. More capital—a greater amount of wealth in the possession of the capitalists—means a both a larger and better supply of products for wage earners to buy and a greater demand for the labour that wage earners sell.
George Reisman, ‘How the 1% Provides the Standard of Living of the 99%

Because in the end, whatever the politicians tell you when speaking out of both sides of their mouth, the truth is:

A good lesson to remember on Budget Week.


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