Meme of the Week: Reductio Ad Somalia
This post by Michael O'Hare is an example of the sort of rhetoric that seems appealing--nay, irrefutable!--when you are crafting it over drinks with like-minded friends, and that falls entirely flat when you deploy it against people who don't share your priors.
Among the standard bleats of those who want [to be heard asking for] less taxes on everyone, and want to actually have less taxes on on the bleater personally, is a sort of pugnacious Babbitty claim that "I earned my money by my own efforts and when the government takes it from me it's theft." Another is that individuals will spend a given dollar better than the government.Both of these extremely tiresome memes were thrown around in response to a couple of earlier posts with a confidence that surprised me coming from readers of this blog. So I guess I need to take them on, at least for the record. If you recognize these as ignorant cant, you might as well scroll up or down to the next post which will assuredly enlighten you more than this one. Short version of the first lesson: what's yours is what's left after you pay for what you use up, which means after taxes. Shorter version: don't like government? Try Somalia (and let us know how that works out for you).
This meme seems to be catching on on the left, to judge from my comments and emails, and it's really weak. The equally meaningful right-wing equivalent would be to say "You want higher progressive tax rates? Why don't you move to North Korea? Let me know how real progressive taxation works for you." And sigh, I'm sure there is some one out there on the Interwebs making that argument right now.
Meet Anita the small manufacturer, with gross revenues of $10,000,000, and let's accept that this properly measures the value of her product in everyone's eyes, and compared to everything else. I have never heard such a person claim that this is all her money and she deserves to keep it all; instead she happily lets her employees, landlord, banker, and suppliers confiscate most of it, leaving her only (say) a lousy 10%, or $1,000,000. She may grouse about the prices they charge and wish she could pay less, but she doesn't call it theft of what is rightfully hers.
Why does she let them get away with this? Because she's making deals, agreed in advance, and more important, because these $9m worth of goods and services are completely indispensable to the $10m gross value her business creates. We don't expect the trapeze catcher to call the flyer a thief when he takes half the gate: they're partners, joint contributors to the enterprise. Just like Anita and her team. How they divide the gross varies, but everyone gets a share or the whole thing collapses in ruins. The iron law here is, "you pay for what you use up": "I [not we] earned it" applies at most to net profits, not all the money you take in.
But I didn't mention some other partners in the enterprise, who contribute essential factors of production. Among these are the folks who built the road on which parts come in and goods go out, who patrol it so Anita's shipments are safe, who run the courts that make her contracts worth signing and save her the great expense of a private army of Pinkertons and thugs, and on and on right up to the bureau of weights and measures that make it possible for parts to fit together because everyone knows what an inch is. What these have in common is the property of market failure, which despite libertarian determination to pretend such a thing cannot exist, is a completely non-ideological, non-negotiable, technical property of certain goods, including many very good goods. They all have a real economic cost: making them uses up resources (asphalt, labor, copier toner) that are then not available for something else.
The only way to have most of them is to stand up a government and give it taxing power, and this scheme lets Anita pay for a large class of her inputs. What really would be theft would be for her to figure out a way to consume them and somehow make others pay, and we know how much entrepreneurs despise theft. What would be fatal to the entire business is for the ideologues who demand that government be drowned in Norquist's bathtub to succeed.