Background:
the following text is taken from an aborted exchange between one of our editors and an Ivy League graduate. Ivy guy is in quotes and regular type, the replies and commentary are italicized.“Good to hear from you. You argue as a true conservative Libertarian.” -This sentence seems to be a favorite opening for my statist correspondents. Apply label, no further thought required… “ A key fatal flaw in your argument is simple: the so called "fruits of your labor" are NOT, in fact, independent, unrelated and free standing. They are deeply dependent upon and interconnected with the commons that makes them possible in the first place.” -Huh? When I asked for a definition of this “commons” my correspondent simply dropped out of the debate. (Editor note, 7/09 : thinking about the "commons" it seems as if WiseFool has the entire social web in mind. This is a popular collective idea, usually coupled with the idea the government is somehow its creator and custodian. This is a great rationale for the acquisition of power, but the implication that there was no law or custom or social order until central governments and taxes came about is simply not so. In a society ruled by lawful voluntary exchange, where individually perceived needs on both sides of the trade are adjusted for mutual satisfaction, each transaction can truly be said to be socially beneficial; certainly more so than with a system where transactions between two parties are subject to the satisfaction of a third parties who have entirely different sets of needs to take care of. “No commons, and you get dystopia. Hardly an ideal condition for wealth creation and even proportional retention.” -It seems as if the commons is something to do with markets, money , law? Government, roads, internet? Trade of course needs none of this, only two people willing to exchange. Trade prefigured government by eons. -“Proportional retention” is a gracious way of saying “we’re only taking this much for now, thanks”. “So taxes are simply a way we decide as voters to fund the commons that makes private wealth possible.” -??! Taxes fund the commons! Does that mean there was no trade or commerce before govt. and taxes? Do taxes give entrepreneurs their ideas and start up capital? Voters get taxed! At least he got that part right, but the implication that voters decide how those taxes are allocated is pure fantasy from another planet. “and secure, in the first place.” -Right,The overwhelming financial and physical security we enjoy today is a direct result of governmental action and taxation, especially in the case of our wars in Iraq and Afghanistan! The fact that inflation is destroying value and eating up savings, the fact that markets are paralyzed because of legislative uncertainty aren’t worth considering. Or that the specter of increased punitive taxes on the rich will result in further capital flight and off-shoring, and a further reduction of economic activity. -Elected officials constantly remind us that our enemies seek to destroy us, but those are enemies that they created with a brilliant foreign policy of intimidation and occupation. The real damage to this country has been internally generated. So much for “secure”. “In so far as taxes are set by a democratic process, I would argue that they are "voluntary".” -OK, taxes are voluntary because a small group of party hacks and influential backers in a smoke-filled room pick their front men. Election rules make third party candidacy a lost cause, so no "out of the box" candidates can ruffle the electoral waters. Add the role of lap dog, lap-dancing media into the brew. Then we get to use spiffy electronic voting machines with no paper trail to choose between tweedle dum and tweedle dee. Talk of raising taxes is always a popular campaign ploy, so we can be sure we’re getting straight talk on this important issue. Finally, if you do forget to pay your taxes for some reason, they will eventually send some nice armed men around to remind you of your voluntarism. “I agree that taxes should be proportional and based upon the notion of justice as fairness.” -Glad you do, ‘cause I don’t. “Notion” is a funny word popular in certain academic circles. Its folksy ring disguises the fact that justice and fairness are extremely difficult concepts to get any kind of agreement on once you get past “thou shall not kill” (and some people have trouble with even that). They are therefore basically arbitrary standards which one group imposes on another with the sanction of law. Translation: “Trust me, I’ll be fair…” “So if the commons has done well by you, then you need to do well by the commons -- in a proportional way that can be argued about.” -It seems as if the underlying assumption here is that becoming wealthy is a sort of zero sum game where your gain is everybody else’s loss. -Once again, that proportional argument… so arbitrary, so open to abuse. Smells a lot like envy or class warfare to me. Also, it implies that the only limit to how much a government should spend is how much they can extract, rather than any natural, economic or philosophical limit. -The worst assumption imbedded in the proportional argument is that you do not own the result of your labor. It is some other authority that decides how much of it you can keep. If a slave is a person who gives up 100% of his labor for the benefit of others, what do you call someone who is allowed to keep 10%, or even 50%? “But we clearly do not want "free loaders" nor a class of the permanently wealthy who have contributed zero to the commons by way of productivity.” -Can’t tell if the "free loaders" refers to welfare scammers (corporate or private) or the political classes. It should be both. The role of wealth in providing capital, creating industries and jobs is not mentioned. (Hint: the wealthy generally invest their money rather than spending it all on champagne and orgies of materialism. That's how they stay wealthy. Investment capital is what creates new jobs and new technologies. Thus, even the most idle playboy may in fact be contributing more to WiseFool's beloved commons than the blovating politicians he so admires. As tax-eaters they represent pure consumption, and in many cases through the miracle of bad legislation, constitute a negative contribution to the "commons" (i.e less that zero.) Taxes do not create wealth, at best they redistribute it, and worst they simply remove valuable resources from the private sector. Waste, inefficiency and transactional costs exacerbate matters. Spending a dollar to get fifty cents worth of value is neither sustainable or very smart, oh Wise One. “As Social Security benefits us all, whether we collect it or not, the cost of the uninsured and under insured are very large and imposed upon us all, we should all pay in to reduce our exposure to risk.” -The original mention of Social Security was when I identified it as a Ponzi scheme. Correspondent ignored that point and came back with this can of worms. There is no mention of the role of the government in pushing up health care costs since they began interfering with it in the ‘40’s. How we will be able to reduce our risk using the non-negotiable IOUs that represent the already spent SS funds in the “lock box” is simply not explained. “All income should be taxed for Social Security - an insurance policy for the commons? If there were no cap, I expect the rate could be lowered.” -At least there is a refreshing honesty here. Social Security was not created as an income tax, and the conversion of it into a second income tax takes the veil off the naked greed. “You have money, we want it”. -Legally SS is NOT insurance, it’s NOT a pension and it has no legal obligation to pay anyone, any amount. In fact its legal status is quite vague. When FDR conceived of it, it was a vote-buying device and still is, but it’s a scam that demographics has caught up with. “I note on Google News that NY seems to be building support for a millionaire's tax. All I suggest is a sliding scale that perhaps tops out at 90%. Naturally, the amount of taxes to be raise can be argued about, but that is another issue.” -Eat the rich! Burn their mansions! Be happy with your 10%! “As for waste in the government, I would say that the private sector is currently showing us what an amazingly brilliant job it has doing with greed, fraud, and the destruction of assets and wealth, not to mention trust. -The Fed, Fanny, Freddy, Greenspan, CRA etc had nothing to do with the succession of bubbles and bursts? $600 hammers for the Defense department?The trillions we have blown up in Iraq and Afghanistan don’t count? How much did the failure of Federal levees cost New Orleans? -The market was the one who blew the whistle on ENRON, not The SEC. They were busy with Martha Stewart or some other show trial. The single largest factor in the destruction of wealth is the inflationary policies of the Fed that have led the dollar to shed 95% or better of its purchasing power since 1913. This has effectively created a massive transfer of wealth away from the middle classes to the politically connected. -The entire credit bust couldn’t have taken place without years of low, low Federally set interest rates or Federal guarantees. To pretend that any private sector organization has this sort of financial clout is patently ridiculous. “It is clearly NOT today creating either wealth or trust. The private sector's gross failings today make any short comings in the government look like child's play. I would not hold up the American private sector today as anything to be proud of. It is a disgrace. A Bonfire of the Vanities on steroids.” -Dream on! See above response. Fortunately we can trust the government because they never lie or cover their ass. The 1% interest rates Greenspan created had no role in the meltdown that followed, and we know this because he and his bosses told us so. They had to disperse billions (in secret of course) to a select few because otherwise the sky would fall. To identify the politically connected Wall Street banksters as being typical of the "private sector" is misleading and dishonest to boot. When the Secretaries of the Treasury are all former Goldman Sachs people it shouldn't be that hard to smell a rat. The idea that the public sector somehow rises above the common stew of greed and corruption is a breathtaking exercise in willful blindness. -On the other hand, since the correspondent worked in the Clinton White House he probably does have first hand knowledge of how well the government can create wealth. I mean look what it did for Bubba & Hillary! A few years ago a study found that US Senators were stock market experts, with a 12% return rate that is about twice what The best Investment pro’s can do. They had this uncanny ability to know when splits were about to occur, or some big contract was about to be signed. We are lucky to have smart guys like that in charge! “In fact, if it were not for a government working to clean up the grotesque mess the private sector has made of the economy, where would we be? AIG and the Auto Companies, amongst other culprits, love being baled out by the tax dollars of we the people.” Wise Fool seems to unaware of the Government's involvement in the recent financial debacles- maybe he never heard of the FED or Fanny, Freddy and the CRA and "implied guarantees" and "too big to fail". Maybe he forgot that loans at 1% might be seen as "free money" to be played with. Maybe he is unaware that if traditionally "safe" investments can't keep up with FED created inflation, people will turn to speculation out of desperation, and thus become easy marks for the picking? And especially so when they are subjected to a merciless barrage of financial disinformation via media based market shills and fee-hungry brokers. It’s in the nature of hogs to run to the trough. The farmer with the slop, on the other hand, has a choice about how much to throw in. If he overfeeds them and they get sick, who’s really to blame? If he keeps making them sick how smart is he? When he tells them that it’s not him but the trough, should they believe him? “Now here is the question, since we will have to tax ourselves to clean up…” -Until the mal-investment and inefficiency is cleared no improvement will occur. Bailing out bankrupts and pouring money into public works won’t do this. In fact, it achieves the opposite and rewards failure, recklessness and inefficiency. He also seems to forget that taxes do not create wealth or any new value, but CONSUME IT. -A nation cannot tax itself into wealth, any more than it can print its way there. -Also, the amounts involved are now so astronomical that to pretend that taxes can cover even a small percentage of it is ludicrous. Since they don’t dare to go the repudiation route massive inflation is the only way we’ll go. Weimar Republic time? “… the private sector's wanton ways, who should we tax to raise the required sums? Pragmatically it has to be the top few percent of the income and wealth range as even confiscatory taxes on them will not render them destitute and homeless.” -This guy is generous to a fault, magnanimously allowing them to keep pennies on the dollar. Of course the rich will just sit like deer in the headlights and wait ‘til they are plundered. Move the money out of the US? Close down the factory? They wouldn’t…would they? Besides, we’d be better off without them. We can always sell magazine subscriptions and compact fluorescent lightbulbs to each other to keep the economy rolling…. “Now if the top earners and wealthiest citizens had done a good job managing the commons, rather than savaging it, I might be making different arguments.” -Ah! The mysterious commons again. Somehow it is tax supported but, at the same time, it is also managed by the wealthy elite as their private concern. Actually this sounds a lot like the US government, but I doubt that’s what he had in mind. “But savage it they did, for which there should be consequences born least by those who had little or no part in the savagery. This is justice as fairness.” -The “savaging” was carried out at all levels from the highest officials to the lowest house appraiser, and includes house flippers, developers, banks, private individuals and financial institutions. But without federally set interest rates and implied government backing, none of this would have gotten off the ground. -Pretending moral decay and opportunism in this country exists only in the private sector makes for great demagoguery, but reveals a willful blindness to reality that is both painful and frightening to behold. -Final point. “there should be consequences born least by those who had little or no part in the savagery” is a fine sentiment but using wealth alone as an indicator of guilt is only a little less haphazard than deciding that only red-haired people were responsible. -Conclusion:
Ivy league smarts and indoctrination lead to the formation of sophomoric (Greek for “wise fool”) responses. A little less parroting of the conventional wisdom and some serious study (especially of opposing viewpoints) is the only way WiseFool will escape from his intellectual gilded cage.