Liberal economic mythology has for years confused well-intentioned voters, giving the left an undeserved monopoly on economic compassion and social justice. But genuine compassion and social justice are wholly inconsistent with the economic mythology so entrenched in the liberal mindset. One myth in particular has done untold damage to American economic well-being, due to its emotive qualities and general mass appeal, namely that liberal economic policies encompassing punitive taxes and deficit spending are inherently good for the poor. With complete economic collapse now looming as a result of the debt debacle, and tax increases again under discussion, Americans deserve to know the truth. Examine the facts.
Myth: Liberal policies are good for the poor.
By punishing “the rich,” liberals project an image of charity and sympathy for the poor. But attacking the rich does nothing to advance the poor. Class-driven demagoguery is a political tactic, not an economic model.
Liberals generally favor wealth redistribution as a means of “helping” the poor, but as was observed in the nineties, hand-outs are not a hand-up, since wealth transfers typically lead to more wealth transfers, and not employment. The liberal idea of “help” is to break someone’s leg and then give them a crutch. In the same way, high taxes and wealth-redistribution diminish opportunity, creating an artificial need for government “help.” In point of fact, liberal policies don’t actually help the poor, but instead keep the poor dependent. When people know the government will provide for them, there is little incentive to pursue self-advancement as a lifestyle.[i] Bracket-creep and high entry level taxes put in place to reallocate income to the poverty-stricken act as a barrier to upward mobility, keeping the downtrodden down.
The abject failure of wealth transfers as a means of alleviating poverty is firmly documented. The War on Poverty has gone on 40 years, cost $15.9 trillion and still, poverty will hit record levels this year, according to the Census. More than 40 million people are currently on food stamps. When the War on Poverty began, only 4.3 million used welfare. Half of all food stamp users have been on the dole for 8 years or more.
But the demonstrable failure of welfare and related forms of assistance to achieve the stated goal of poverty reduction has not stopped Democrats from throwing their continued support behind this broken model. Why?
Welfare has clearly failed in its stated objective. But it has been very successful in one key regard: predictable Democrat voters in elections. Democrat proposals to require voter registration in welfare offices would only solidify this relationship. Instead of encouraging welfare users to seek employment, Democrats frequently attempt to increase dependency on food stamps through marketing of questionable legality connecting welfare payments with a vote for the Democrat Party. This approach was instrumental in the Obama victory in 2008.
Real help for the poor starts not with demonizing “the rich,” a category of consumers never properly defined by Democrats, but with economic incentives—like tax cuts and deregulation—to ease the burden on business and encourage hiring. Businesses refuse to hire when expenses (taxes, regulatory costs) are constantly uncertain, and usually opt to relocate to more business-friendly environments, e.g. China, as a result. It seems the ultimate oxymoron that China is now more American than America. The CEO of Coca Cola agrees.
Punishing success punishes the poor. President Obama wants to eliminate the Bush tax cuts, inexplicably, during a weak economic climate. Will producers be incentivized to hire under such circumstances? Consider that multinationals are shifting hiring overseas as a result of continued economic uncertainty, further suppressing domestic hiring.
As with most of the Democrat social agenda, the goal has nothing to do with the advancement of the target population, but with the acquisition and retention of maximum power.
Lesson: Liberal policies do not help the poor.
Myth: Tax cuts benefit the rich.
Tax cuts benefit everyone. Those who pay a larger share of the tax burden inevitably get bigger tax breaks. But those are also the individuals responsible for creating economic opportunity. Besides, it is a known fact that the rich pay a larger share of the tax burden after tax cuts. Why then the virulent attacks on “the rich” so common among the left?
Liberal tax methodology is driven by a single principle: making money takes money from someone else. This backward paradigm is called static analysis, and holds that the economy is a “zero-sum game.” But the economy is not static; it is a dynamic and constantly expanding entity. A tax cut is simply money that is not confiscated by the federal government.
In actuality, the poor have a greater chance of rising when “the rich” are empowered. When given incentives in the form of tax cuts, producers—“the rich”—are more willing to invest and risk wealth on new business ventures. This translates into more jobs for poorer Americans and more general prosperity for everyone. As President John F. Kennedy once remarked, “A rising tide lifts all boats.” Contrary to perception, income mobility increases when taxes are cut. See the Federal Reserve Bank of Dallas report, “By our Own Bootstraps.” In stark contrast, whenever taxes are increased on “the rich,” recession immediately follows. Why then, does Obama favor tax increases on this class of persons? Why ban drilling in the Gulf despite rigs passing new safety inspections, sending thousands to unemployment? To general observers it would seem that Obama desires economic chaos as a means of generating more dependency on government, and by extension, himself. Dependency is the core of leftist economic polices, as demonstrated previously.
Myth: Government spending “stimulates” the economy.
Government spending doesn’t “stimulate” the economy. Government spending takes money out of the economy. Government debt takes future dollars out of the economy. What dollars do make it into the hands of citizens can provide only temporary economic relief, since government-generated economic activity transfers existing wealth, instead of creating additional wealth. By taking money from employers, government prolongs unemployment, delaying true recovery. Government created a few “shovel-ready” Census jobs in 2009. Where are these jobs now? How many jobs could the private sector have created with the $700 billion in failed “stimulus” spending? Bottom-line: Government cannot “stimulate” the economy, but government can create the conditions for genuine economic prosperity.
Lesson: Government doesn’t stimulate the economy; private employers do.
Conservatives must cease negotiating with liars and cheats. Liberal economic mythology relies on repetition in order to sustain the persuasive falsehoods that captivate many Americans. Conservatives must take the same approach in repeating the truth before cameras, instead of resorting to frail, feigned retorts when Democrats seek economically destructive policies. Conservatives must hold fast to tested economic principles, for it is these principles that will deliver the struggling American worker from the depths of the current recession.
It is stupid for conservatives to give away the store when they have power. When Obama brazenly demands tax increases as a condition of debt reduction during a recession, conservatives should move heaven and earth to stop him. Tepid ideological exchanges will not eliminate the need for concrete action to defend the American economy.
Conservatives have not been blessed with a second chance only to allow the radical left to behave as if nothing has changed. In the words of a notable Democrat, “We won.” Adherence to principle, not compromise, is the lesson to be learned from the midterm shakedown. Republicans may be the party of “No,” but Democrats are fast becoming the party of financial insanity. Let them claim this title. Conservatives must blink last.
[i] LaDonna Pavetti, Statement to the House Ways and Means Committee, Human Resources Subcommittee, Time on Welfare and Welfare Dependency, 23 May 1996.