The Liberty Intrigue

by Tom Grace

  “Social Security only works if more people pay money in than take money out. As soon as the numbers get close to equal, the pyramid collapses. The same is true for public sector and large group pensions, which is why so many states, cities, and entities with large unionized workforces are going bankrupt. Geometric growth in public or private payrolls is impossible to sustain in the long run and will always lead to the collapse of these pension funds.

  “Current obligations must be met, but to achieve sustainability in the long term, we must transition to a program that generates individual wealth independent of corporate, union, and especially government control.”

  “Which leads us to tax policy,” Redmond said. “Mr. President, the tax rates put into effect during your predecessor’s tenure in office were set to expire almost two years ago. At the time, you signed into law an extension of those rates for an additional two years. With a significant tax increase looming at the start of the New Year, what is your agenda for your second term?”

  “My opponent says he plans to cut taxes,” the President replied. Well, I cut taxes two years ago and our current economy is proof positive that his supply-side, voodoo economics simply doesn’t work. If anything, it hampered our deficit reduction efforts and cost the government money. I wasn’t thrilled about cutting taxes at such a difficult time, and I’ve been proven correct.

  “This time around, I will let the tax rates for our country’s wealthiest individuals return to their appropriate level. Those who have benefited most should and must pay their fair share. I promise that working Americans will not see a dime of new taxes taken from their paychecks. I will also continue to work with Congress to overhaul our tax code. Economic justice and social justice go hand in hand.”

  “Brief and to the point, Mr. President,” Redmond said, receiving a ripple of chuckles from the audience. “Mr. Egan, your thoughts on tax policy?”

  “First, a point of clarification,” Egan said. “The tax rates for all Americans are the same today as they were when the President took office. The bill the President signed into law maintained the status quo and did not cut taxes. The stimulative effect of these tax cuts took place several years ago, when the taxes were actually cut. The positive economic effect of these tax cuts was pronounced. Tax cuts, economically speaking, continue to bat a thousand.

  “I am sure the President will sigh with relief when I say that this does not mean you can cut taxes indefinitely.”

  Egan paused for the laugh.

  “A zero percent tax rate might sound like a blessing, but it starves the government and prevents it from undertaking those essential duties assigned to it by the Constitution, like defending the nation from foreign aggression. At this extreme, a zero percent tax rate equals zero revenue for the government.

  “Going to the other extreme—and please don’t get any ideas, Mr. President—is a confiscatory tax rate of one hundred percent. The government takes everything—lock, stock, and barrel. The economy shrivels to nothing and, in very short order, government revenue evaporates. Like the zero rate, a one hundred percent tax rate quickly equals zero revenue for the government.

  “Like any business,” Egan explained, “the government should be run in a way that maximizes its income. I like pie, so I’m going to equate our economy to a juicy apple pie.”

  Egan paused as the audience laughed.

  “Unlike the pies my mom bakes, our nation’s economic pie grows or shrinks depending on how much of it the government leaves for the rest of us. It can have a big old slice of a tiny pie, like something that popped out of an Easy Bake oven. Or it can have a thin slice of a pie that would win a spot in the Guinness Book of Records. The thin slice is a whole lot more pie.

  “My father taught me that fifty percent of a hundred dollars is less than ten percent of a thousand dollars. There’s a sweet spot for taxation that maximizes the amount of revenue the government can take in. Raising the rates from that spot cuts revenue because it shrinks the economic pie. Lowering the rates again cuts revenue, but the impact here comes as increased deficits or cuts in essential government services.”

  “This is nonsense,” the President countered. “Our nation enjoyed times of prosperity with tax rates significantly higher than they are now. And the Reagan tax cuts conservatives so proudly boast about exploded the deficit and greatly increased the federal debt.”

  “Anyone who passed introductory economics, or ever tried to make money, knows that income and expense are two separate items on the balance sheet,” Egan countered. “In the example you cite, the Reagan tax cuts more than doubled government revenue as the economy grew. Had government spending remained steady, those tax cuts would have generated surpluses that could have been used to pay down the debt. Instead, government spending in all areas exploded to absorb the tax cut windfall. Like the rest of us, the government should make as much money as it can, spend within its means, and sock a little away for a rainy day.

  “Now, Mr. President,” Egan continued, “in addition to allowing the so-called tax cuts for the rich to expire, I understand that you and your committee of tax advisors are looking at additional ideas for raising revenue. Is it true that ideas like a value-added tax and a tax on net worth are on the table?”

  “We are considering a number of reasonable ideas for enhancing revenues to the federal government,” the President replied. “The two you cited have been used successfully elsewhere.”

  “I’d be interested in hearing what your definition of successful is,” Egan countered. “To the best of my knowledge, those taxes in combination with a progressive income tax have always resulted in economic stagnation, the devastation of individual wealth, and revenue shortfalls. Sounds like a lose-lose to me.

  “Taxing income and wealth effectively punishes people for being productive. It’s both anti-capitalist and, to use the President’s turn of phase, socially unjust. I propose to completely scrap the current tax system in favor of one that taxes consumption rather than production.”

  “I’m confused, Mr. Egan,” the President said snidely. “You seem to be speaking out of both sides of your mouth. Are you for or against a national VAT tax?”

  “That’s probably just my Yooper accent throwing you off—doublespeak being your native tongue,” Egan quipped back. “I favor a national tax on the sale of all goods and services in lieu of our current tax code, not in addition to it. Taxation simply becomes part of every consumer’s decision to buy a good or service.”

  “But such a tax would hurt the poor,” the President argued.

  “Hardly,” Egan replied. “The burden of this tax applies to everyone equally—and isn’t equal treatment under the law what we all want? And built into my tax proposal is a poverty line refund for every citizen of the United States. The government sets the poverty line—the income level below which a person is deemed to be poor. The refund equals the tax that would be paid by someone earning right at the poverty line who spends every dollar they make. The net result of this refund is that nobody pays one red cent of tax until their earnings rise above the poverty line. The real benefit of this form of taxation is that it rewards saving, which puts more money to work in the form of loans and investment.”

  “Mr. Egan,” Redmond interjected, “such a sweeping tax reform would be difficult, if not impossible to enact.”

  “Indeed it would,” Egan agreed. “The first major hurdle is Congress, which uses the tax code to favor friends, punish enemies, and solicit contributions from lobbyists. The consumption tax would strip them of this power. Crucial to my proposal is the passage of a constitutional amendment to deny Congress the ability to levy any form of income tax. Once we drive a stake through the heart of our bloodsucking tax code, we don’t want it coming back from the dead.

  “Another power that I will fight to strip from the government is the ability to print money. Every time the Federal Reserve increases the money supply, the government steals a sliver of value out of every dollar already in circulation.
Steal may be too strong a word—the right term for government appropriation of private wealth is taxation. Since no good was created or service provided to give these new dollars value, then the government must have taxed them into existence. The only way to stem this subtle, underhanded form of taxation without representation is to return to the gold standard. That way, the marketplace can function as it should and the money we make can maintain its value.

  “These fights won’t be easy, but what I’m proposing is sound economics, not crackpot Keynesianism. Dutannuru employs the exact system I propose and it works perfectly for both the people and their government.”

  “Thank you, Mr. Egan,” Redmond said. “Mr. President, the sweeping healthcare legislation you championed and signed into law continues to be a source of much debate, and it serves to highlight the issue of government entitlements. Your opponent recommends that all government expenditures be put on the table in the conversation on cutting the budget deficit and the growing national debt. You follow the more traditional path of respecting the distinction between discretionary and nondiscretionary spending and approaching the nation’s budgetary shortfall through revenue enhancement. Given the growth we’ve seen in nondiscretionary spending and debt service, and the lack of growth in the national economy, is it now time to address those untouchable items on the national budget?”

  “Contrary to what my opponent believes,” the President said, “there is no quick fix to our nation’s economic problems. Deficits incurred during my first term in office reflect both falling revenue due to the terrible recession I inherited and increased spending by the government to stimulate economic activity and to steady the financial markets with quantitative easing. We’ve sought advice from the finest economic minds in the country and crafted policies grounded in sound economic theory. My economic council is a who’s who of men and women with Nobel Prizes in Economics—these people know what they’re talking about when it comes to reviving and restructuring our nation’s financial house.

  “The signs of improvement we’re seeing prove that we are making progress toward full recovery, complete with gains in both jobs and housing. I caution patience as our policy initiatives slowly work their way through down to the roots of our economy.

  “With regard to entitlements, these are the social safety net that keeps those most vulnerable of our citizens from financial ruin. Social Security, Medicare, and Medicaid are fundamentally sound programs of proven benefit to millions.

  “The same is true of federal unemployment insurance, which has a proven stimulative effect on the economy. Unemployment insurance injects demand directly into the communities hardest hit by unemployment, demand that translates directly into jobs.

  “The healthcare reforms that I signed into law are just now slowly taking effect. Change is difficult, but with so many millions of Americans unable to obtain affordable healthcare, these reforms were absolutely necessary. The system we had was broken. Costs were out of control. Those that could afford medical care got it, and those who couldn’t were out of luck. Those with preexisting conditions were out of luck. Those whose job offered no medical benefits were out of luck. The elderly, the poor, and the folks most in need of medical care were all too often out of luck.

  “Entitlements are part of the social contract our government has with the people of the United States. It’s there in the Constitution, the requirement for the government to promote the general welfare.

  “As the economy recovers, the government can scale back on stimulus investment and eliminate wasteful tax cuts for the rich, shrinking and eventually eliminating the budget deficit. The course proposed by Ross Egan is both reckless and irresponsible.”

  “Your question, Mr. Egan,” Redmond said.

  “Reckless and irresponsible,” Egan repeated to start his rebuttal. “If that’s not the pot calling the kettle black.

  “In his farewell address, President Eisenhower offered this warning: ‘We cannot mortgage the material assets of our grandchildren without risking the loss of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.’ The reckless and irresponsible spending of the past few years has brought that insolvent phantom much closer to today.

  “The debt amassed under this administration exceeds the most extravagant, reckless, and irresponsible spending by any government in history. The President famously complains about the deficits run up by his predecessor, yet his deficits dwarf them by comparison. And any return on the President’s so-called investments are decidedly negative. Thomas Jefferson had it right when he declared: ‘It is incumbent on every generation to pay its own debts as it goes.’

  “Nobel Prizes or not, the President’s economic dream team is profoundly wrong. The theories they espouse fail every time they’re tried and they should be tossed onto the trash heap of bad ideas. In fact, the only time these theories should ever be discussed is so that future generations can learn from and hopefully avoid repeating these mistakes.

  “To be clear: There are no signs of a recovery on the near or distant horizon, and nothing that this administration has done or is now doing will create the conditions in which a recovery can occur. This economy is, at best, barely treading water.

  “The claim that unemployment insurance stimulates the economy and creates jobs is insane. Only fifty-five cents out of every dollar in unemployment insurance gets spent by the unemployed, so the vaunted multiplier effect of this investment is actually division. And for all the billions spent in extended unemployment insurance, not a single private sector job has been created. If the government really wanted to reduce our appallingly high unemployment rate, it would leave the money consumed by these bloated federal programs in the economy, where it would create jobs.

  “The very term entitlements offends me. Among the inalienable rights granted to all people, the three explicitly identified in our founding documents are life, liberty, and the pursuit of happiness. This is not a guarantee of happiness, but the right to pursue those goals and activities that satisfy us. It is the right to work toward something—the right to create, build, and achieve. No one is entitled to the fruits of another’s work; rather they are entitled to go out and work for their own. Democracy ceases to exist when you take away from those who are willing to work and give to those who are not.

  “The great difference between conservatives and progressives lies in how we view the rest of humanity. Conservatives believe that what we achieve over the course of our lives is a matter of the talent we possess and the choices we make. There will be winners and losers in the end, but each of us has an equal opportunity to play.

  “Progressives believe in equality of outcome—regardless of what paths we take, all roads lead to the same end. There are to be no winners, because winning is unfair. That makes losers of us all in the end—all except the people rigging the game to achieve this unrealistic, utopian fantasy. These folks make out quite well on the deal. Tyrants always take care of their own.

  “I fully support having an economic safety net, but not as a permanent lifestyle choice. Perpetually extending unemployment benefits only dampens the incentive of many idled workers to accept any form of employment. It locks able-bodied people into a form of economic slavery and, judging by the current crop of alarmist campaign ads with apocalyptic warnings about conservatives cutting these programs, it smacks of the worst kind of vote buying.

  “My main objection to federal safety nets is that they violate the principle of subsidiarity, which requires matters be handled by the smallest, lowest, or least centralized competent authority. The solution to any human problem starts with the individual, then the family, the community, the state, and as a last resort, the nation. Instead, we manage the entitlement welfare state with the largest, highest, and most centralized bureaucracy possible. In truth, there are very few problems in everyday life that require federal intervention.

  “I do believe that every fede
ral program should be reviewed and the vast majority either cut or eliminated. And the laws that make the budgets of the so-called entitlement programs untouchable must be repealed. Federal entitlement programs offer few benefits that couldn’t be provided better and more efficiently by sources closer to the individuals in need.”

  “Thank you, gentlemen,” Redmond interjected. “I have the final question of the evening, which is on healthcare. Mr. President, healthcare reform is the signature legislative accomplishment of your first term, and arguably the most controversial. The reform package was singled out as the key issue in the midterm elections. The current Congress has made several attempts to repeal or defund the reforms and polling shows it remains both divisive and unpopular among voters. Given the rapidly rising cost of healthcare and the millions of uninsured in this country, few would argue that some kind of reform isn’t needed, but how do you address the concerns of the American people over these particular reforms?”

  “I did not write the historic healthcare legislation that became law”, the President said. “The reform package that passed both houses of Congress and that I signed into law may not be perfect, but it is a monumental step in the right direction. It addresses the problem of the staggering number of people without health insurance, people just one illness or accident away from complete financial ruin. It addresses corporate greed in the healthcare and pharmaceutical industry, attacking the exorbitant profits raked in by these corporations at the expense of the American people.