Tuesday, March 03, 2009

In the wagon or pulling the wagon?

I just happened upon a graphic that divided the country into 5 quintiles. (For those of you who voted for Obama, that means the bottom 20%, next to bottom 20%, middle 20%, next to top 20%, and top 20%.) It was a bar graph that showed the difference between the money the government spends on the households in that quintile, minus the money households pay to the government in taxes. The bar graph broke it down by state and federal spending. Good news! 60% of the country is getting more government spending than they're paying in taxes.

Ronald Reagan described it like a wagon with some people riding in the wagon and some people pulling the wagon. And our current tax code is structured so that an effective ruling majority of the electorate is riding in the wagon. The next-to-top quintile is getting screwed by the government, but it's only one sixth as bad as the top 20%.

This is not sustainable. It certainly makes more sense for someone to live in the bottom three quintiles than in the top two. I suppose some altruistic souls really dig their patriotic duty to pick up the tab for the politicians who are buying votes with the tax receipts. But how long does it take before they just shrug and say "Who's John Galt?"

I have been wondering whether someone could actually pull off a producers' strike like in Atlas Shrugged and I think the answer is no. There are some true geniuses out there who cannot be replaced, but a lot of mediocre types would be the scabs to break the picket lines. Instead of a dramatic societal collapse as in "Atlas Shrugged" the 2nd stringers will plug the gaps to varying degrees of adequacy. The really great talents who are tired of pulling the wagon can just shift their energies to non-taxable pursuits.

And it isn't as if anyone will hightail it to Galt's Gulch. Just live in a place where the cost of living is cheap and make just enough to live comfortably. Stop and smell the roses. Life is short. I figure smart money will find more friendly places for capital than the USA (It won't be Europe.) or shift assets into tax shelters.

One thing I learned about Democrats in the early '80s is that they are cool with high taxes because they intend for other people to pay them: They make sure they leave loopholes in the tax code for trust-fund kids like the Kennedy family. That's what tax-free municipal bonds are for. There's a reason why the teleprompter-messiah's appointees have tax problems.

So, capital, along with the talent and sacrifice that might go into creating some serious wealth will just go into hiding. And this is a good thing, when unemployment hits 30%, all the John Galt types will be working two days a week and puttering in their back yards on do-it-yourself projects. One doesn't need a lot to live simply. and that's what these hippy-dippy types all say we gotta do. Pass the granola, man, and make room in the wagon.

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