Tag Archives: Economics

Commentary

How redistribution of wealth kills the entrepreneurial spirit

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There is a perception, especially on the left, but also on the “big government” right, that the federal government should be responsible for redressing every inequality that occurs in society. This is true whether the person brings misfortune on themselves or whether it is accidental. The problem with this wealth redistribution is revealed when you think about the incentives this introduces to the producers and the victims.

  1. Government does not transfer wisdom, skill or responsibility from producers to victims
  2. Government transfers money from producers to victims
  3. Being productive involves risk and hard work on the part of producers
  4. Receiving money involves ingratitude and rationalization on the part of victims
  5. If the government confiscates a large enough portion of the earnings of the producers, they stop producing
  6. Every dollar taken from producers is a dollar less they have for engaging in their productive plans, (e.g. –  running a business or raising a family in a responsible way)
  7. The more money is that transferred to victims, the more the frequency of bad behavior increases – because being a victim is easier
  8. If you subsidize being a victim, you get more of it
  9. If you tax production, you get less of it

“Going Galt” is named after the character John Galt in Ayn Rand’s novel Atlas Shrugs. Galt is an industrialist who withdraws from the economy when faced by punitive tax rates and burdensome regulations. Going Galt refers to slowing down or ceasing production, because the risks and effort involved in producing are not worth the portion of the earnings that producers keep after taxes are redistributed to the victims.

The idea was first brought up afresh by Dr. Helen Reynolds in October 2008 on her blog Ask Dr. Helen. A more recent discussion of the phenomenon is here at the Washington Independent web site.

Excerpt:

“Just this weekend,” said Rep. John Campbell (R-Calif.) on Wednesday in an interview with TWI, “I had a guy come up to me in my district and tell me that he was losing his interest in the business he’d run for years because the president wanted to punish him for his success. I think people are reading ‘Atlas Shrugged’ again because they’re trying to understand what happens to people of accomplishment, and people of talent and energy, when a government turns against them. That’s what appears to be happening right now.”

The plot of Rand’s novel is simple, despite its length — 1,088 pages in the current paperback edition. The United States is governed by bureaucrats, “looters” and “moochers,” who penalize and demonize creative people. The country is in decline because creative people are disappearing — they have followed the innovative John Galt to a mountain enclave, “Galt’s Gulch,” where they watch society crumble. Creativity has gone on strike (the working title of the novel was “The Strike”), and the engine of capitalism cannot run without it.

For Campbell, this is a powerful and relevant story. The congressman calls “Atlas Shrugged” an “instruction manual,” and inscribes the copies that he gives to interns. Rep. Paul Ryan (R-Wis.), the ranking member of the House Budget Committee, also gives copies of the novel as gifts and refers to it to make the case against President Obama’s policies. “It’s an audacious scheme,” said Ryan in his speech to the Conservative Political Action Conference last week. “Set off a series of regulatory blunders and congressional meddling, blame the free market for the financial crisis that follows — then use this excuse to impose a more intrusive state. Sounds like something right out of an Ayn Rand novel.”

Michelle Malkin is posting a lot of messages on her blog from people who are suggesting other ways to Go Galt.

Excerpt from one of the producer’s letters:

It is now fashionable and politically expedient to extend blame for the current financial crisis on greedy businesses and predatory lenders. The reality is that individuals and poorly managed businesses were responsible for the bulk of the problems. Government also played a role – and it was both parties – that encouraged and supported unsound business practices. Now the Government “must” step in to “save” these poor people from losing their homes, and “save” these “too big to fail” financial institutions. What about those of us, and those businesses, that chose to act responsibly? Who chose to live within their means? Who chose sound financial decisions over high risk behavior?

Enough is Enough. Let them all fail. It is not too late. I don’t care about the homeowner that borrowed more than they could afford and now find themselves potentially without a home and bankrupt. I don’t care about the businesses that overlooked sound financial decisions in the name of short term profits. We all make choices in life and it is time to let those that made the bad choices live with their decisions and finally reward those that chose to act responsibly. It has come down to this – either we let those that made the bad decisions fail, or we end up sacrificing our nation, our national identity and our very way of life.

Related posts.

Polemics

Debt and the return of real men?

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Captain Capitalism posted this rant which is an excellent, although very snarky, read. He starts with the fictitious case of Cindi, a suburban princess whose every need was provided for by her hard-working Daddy. But Daddy had to take on enormous amounts of debt in order to buy Cindi everything her heart desired.

Much like debt misled suburbanite Cindi to think free Audi’s, nightly dinners at Applebee’s, free food clothing and shelter, and avoiding any real career that requires math was “standard,” the amount of debt the government and economy as a whole has taken on has brainwashed nearly 3 generations of Americans to be similarly overly optimistic as to just how easy their lives should be. Debt has allowed pretty much every American to live above their means of support. Debt has allowed pretty much every American to live a life that does not produce the wealth necessary to support it. If you can’t afford a car, take it out of your home equity line. You don’t like math or science? That’s alright, piss away some of your dad’s money majoring in political science. Don’t have a down payment for a house? Don’t worry about it, we’ll loan you 100% of the money anyway. But the problem is not just the obvious unsustainability of this behavior, but even worse is how it corrupts and destroys society’s ability to live in the real world.

And where has this avoidance of math and science, normalization of debt and instant gratification led us?

You think the divorce rate in this country isn’t due to people being spoiled rotten brats and thinking marriage is some kind of trial balloon?

You think the childish and [very bad] behavior of people having “kids” and then dumping them off at daycare to have somebody else raise them because the kid was too much of a burden for them to handle, but they still wanted them anyway would have flown during the frugal 40’s?

Would teenage pregnancy even exist if the government wouldn’t perpetually bail these losers out because the government can perpetually “rollover” its debts and borrow more to finance a litany of social programs?

Would you have such a volume of frivolous lawsuits and parasitic lawyers in this country driving up the cost of doing business and destroying the standards of living?

Would you have seemingly endless legions of “environmentalists”… who have no real talents or skills, but find themselves pointless, effortless, made-up crusades to give their meaningless lives meaning at the expense of our freedoms and $3 per gallon gas?

He goes on to argue that the worsening economy will be a boon to real men. The decline of government revenues will reduce the availability of social programs to “solve” social problems that result from poor decision making. (And by poor I mean lacking wisdom, lacking respect for the moral law).

When Jimmy gets Cindi pregnant at 15 and the government is out of money, there will be two real men (the father of Jimmy and the father of Cindi) with shotguns and baseball bats ensuring Jimmy gets a job, goes to school and marries Cindi, not for Cindi’s sake, but for the child’s sake.

When somebody breaks into the house and the cops are too understaffed dealing with the crime wave that happened once the state released all those prisoners to “save money,” he’ll be the one shooting the burglar to protect himself and his family.

When a woman wants to get married and have children, the real man will wait until he’s financially stable, the country has a future, and make sure he is able to provide the kid a decent upbringing ALL THE WHILE MAKING SURE HE DOESN”T GET DIVORCED.

I am worried that the rising tax rates and inflation will cause men to withdraw irreversibly from any enterprising behavior. Big government may help people to feel more secure about making poor decisions. But responsible men fear higher taxes and punitive divorce courts… they are less likely to work hard and to marry.

Real men are just not in demand so long as marxist-feminist welfare state is there to provide everything that real men used to be sought after for. And the big appeal of the state is that it doesn’t ask for anything in return from its dependents.  But why should real men work to pay for social programs to fix the problems of other people?

One of my best friends, Andrew, got married to a fabulous Christian woman who spent time as a missionary in Russia. Men are in a terrible state in Russia – there are few real men. Her experience in Eastern Europe really helped her to understand how important the right man is for the responsibilities of marriage and parenting.

She chose to marry someone who would not only care for and provide for her, but who also understood Christian beliefs and would be able to pass them on to her children in an informed and persuasive way. But today, there is no vision for men as husbands or fathers, nor any vision of marriage as a worldview-incubator for children.

News

Democrat stock-picker Jim Cramer angry with Obama’s socialism

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See this awesome post over at Nice Deb. She’s got the videos up showing democrat Jim Cramer complaining about the economic free-fall caused by Obama’s policies.

There are a lot of people in this country who do not know anything about economics, but they’ve been buying stocks based on hype generated by Obama-supporting Wall Street types.These gamblers (not investors) have not read Hayek or Sowell or Friedman. But they hope that Obama’s socialist policies will make the stock market go up.

According to Business Week, Cramer is a life-long Democrat. According to this article, he contributes to Democrats. I think it is interesting to note that it’s probably Democrats who are taking the most damage from the market right now, because they believe in Obammunism – they think that the market will rise as we go socialist.

Check out this video of Cramer being bullish on the Dow when it was around 14000 in the teeth of abysmal fundamentals, and then later denying that he was bullish.

And now Cramer is surprised that the party he supported is wrecking the economy. I hope he loses piles of money, and I hope everyone who voted for Obama loses everything. EVERYTHING.

Remember, Democrats caused this mess by forcing banks to make loans in order to achieve social justice for the benefit of other irresponsible Democrats who signed legal contracts with banks to purchase more house than they could afford. Many of these banks were being run by Democrats who got million-dollar bonuses while fudging the accounting and paying off Democrat lawmakers to block efforts by Bush to regulate them. Now the Democrat bankers are working for Obama.

The Democrats are voting in wasteful spending bill after wasteful spending bill, and none of this spending will help the economy one iota. And it’s not just socialist tax policy, it’s protectionist trade policy, too. And no matter how much Obama raises taxes on the productive class, we cannot afford to pay for this spending.

Democrats in general seem to believe that their socialism will make the economy grow faster. The falling stock market must be a real wake-up call to their ignorant faith in an ideology of feelings and intentions.

The fact that Obama’s policies are likely to cause inflation and/or stagflation means that the rest of us responsible people who have to pay for this crap will have the additional comfort of knowing that every dollar we saved after our hard work will be devalued when he has to print money to pay for his wasteful spending.