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If it is impossible for something to continue indefinitely, it will eventually stop.
The politics of the modern redistributionist state is founded on the assumption that politicians can buy votes by promising voters ever more munificent entitlements - from federal deposit insurance against bank failures to government-subsidized medical care - with the money for these things always somehow being painlessly extracted from somebody else.
Once voters have agreed to forget that every single dollar of tax revenue is extracted from the productive economy by threat of force (including corporate taxes, which are then passed along as higher prices), there is no incentive for any politically favored interest group to do anything but eat subsidies as fast as it can, before all those less deserving other interest groups get a snout in. The demand for entitlements, income transfers, and subsidies will, accordingly, rise without limit. And why not, when “somebody else” is paying?
For this con game to continue working on the suckers voters who buy it, there always has to be a “somebody else” from which more money can be painlessly extracted. It’s “the rich” or “corporations” or (when governments borrow money against future tax revenues) ourselves in the future.
But what happens when there is no “somebody else” left? California’s voters posed that question today when they rejected six referenda designed to raise taxes or borrowing, all of it allegedly intended to pull the state out of a $21-billion-dollar hole. Exit polling made the voters’ reasoning clear; they don’t believe that allowing taxes to rise will produce anything but ever larger deficits as politicians recklessly overspend on behalf of those politically favored interest groups. The state of California is now facing imminent bankruptcy.
The U.S. as a whole will almost certainly face the same problem before the end of Barack Obama’s administration in 2012. Social Security obligations were due to exceed collections in 2013; even before Obama quadrupled the federal deficit this meant a giant blazing meteorite was already hurtling straight at the heart of the Feds’ dinosaurian finances. And the second-order effects of Obama’s socialism-lite economic policy are pushing tax revenues rapidly downwards as investors cut back economic activity in order to avoid being skinned (that is, skinned worse than they already are - the top 1% of earners already pay 39% of all income taxes).
The underlying problem is that in any democratic system, the political demand for redistribution of wealth rises faster that the economy’s ability to generate wealth to be redistributed. Even if none of the money ever stuck to our political class’s fingers on its way through, the structural trend would be to ever-increasing deficits; moral outrage about corruption, while justified, is a distraction from the real problem, which is redistributionism itself.
But. If it is impossible for something to continue indefinitely, it will eventually stop.
Soon - very soon, in historical time - it will become clear that democratic redistributionism cannot deliver on its promises. All such systems, not just California’s and the U.S’s, are running headlong towards a terminal state of moral, political, demographic, and financial bankruptcy.
Then, the question will become: what happens afterwards? And it is a serious one, because the crisis could resolve either through the end of democracy or the end of redistributionism. On one path, we learn that we must live within our means and reject the delusion that redistribution can solve more problems than it causes; down the other path lies Peronism on steroids.
I am not in doubt which of those I will choose. If I am given any choice…
Sunday, May 31, 2009
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