A failed romance with big government

By Kevin Cochrane – The Washington Times – Wednesday, March 6, 2019

ANALYSIS/OPINION:

Occupy Wall Street. Income inequality. “The 99%.” Free health care for all. Guaranteed minimum income. Politicians on the left have made these their go-to sound bites. There is no escape from the incessant bellowing about the unfairness that some have more than others. Socialism must be the answer, they say. Well, to them I reply, Venezuela, Cuba, Nicaragua, and every other country that has tried socialism.

Ask any proponent of democratic socialism to name a successful economy based on its principles and you’ll likely be met with either a blank stare, anger or some muttered response like “Sweden.”

Let’s be clear: The so-called Nordic Economic Model of Scandinavian countries like Sweden, Denmark and Norway often cited by the Bernie Sanders crowd are in fact not socialist. They are at best welfare states that have learned from their failed romance with big government. In the Sweden of today, we find a growing number of citizens purchasing private health insurance because of the poor care given by the “free” government plan. We also see public pension cuts driving people to set up their own private retirement options. And we see estimates by the government’s own economic wonks predicting unsustainable future spending — despite Sweden’s confiscatory tax rates.

The idea that a society can tax its way into prosperity is a non-starter. The flavors of the day all variously rely on some new top income tax bracket around 70 percent. But none of these plans come close to even funding one of the piein-the-sky socialist schemes. Take universal health care. Proponents figure it would cost about $2.5 trillion to $3 trillion per year roughly double the entirety of federal tax collections today. Implementing any of the proposed 70 percent income tax rates on the wealthy would only raise a third of that amount. No, it seems that these tax plans aren’t about paying for government services, they are about punishing the successful.

But what about equality? Perhaps the confiscation of income through taxation isn’t about prosperity, it’s about equality. Let’s have those rich folks pay their “fair share.” Rather than taxing income, Sen. Elizabeth Warren of Massachusetts has proposed a wealth tax. Her proposal is to tax away 2 percent of individuals’ net worth in excess of $50 million. Imagine the survey necessary to tabulate and value everyone’s assets. Essentially the proposal is a modern day Doomsday Book, a la William the Conqueror — and even he gave up. How the IRS would manage the task is beyond unfathomable. That’s why most countries that historically have attempted wealth taxes have abandoned them.

Even were we to take the entire net worth of the top 1 percent, the math works out to about an extra $400 — yes, four hundred — dollars per household. One time.

But don’t be mistaken. Socialism works at first. Every country that has experimented with it claimed great success the first few years. North Korea, Venezuela, Nicaragua and the Scandinavian countries all showed initial economic and social progress. But in every case the system has become unsustainable. Taxes can only go so high, but spending has no limit. In Sweden this has been recognized, like it was in and France. But if left to fester, then a darker problem lurks in even the innocent sounding democratic socialism. Tyranny.

The basis of socialism is that some entity — aka government — is empowered to confiscate what it needs and to spend it on what it wants. The power of individuals to make their own decisions is taken away and concentrated in the hands of a few officials. Government becomes a sort of super condominium homeowners association. And does anyone like their homeowners association?

Kevin Cochrane teaches economics and business at Colorado Mesa University, and is a permanent visiting professor of economics at The University of International Relations in Beijing.

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