Another Perspective

A Hollow Victory

The details of the tax deal are fine -- but what about its moral underpinnings for economic freedom?

By 12.8.10

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As news came out Monday about the tax deal reached between President Obama and Senate Republican leaders, all eyes were on the details. Highlights of the deal include:

• Bush tax cuts extended for all tax brackets for two years.

• Unemployment benefits extended for 13 months.

• Estate "death" tax maximum rate lowered to 35% (down from 55% for 2011) with an exemption on the first $5 million (up from $1 million for 2011).

• Capital gains tax maximum rate remains 15%. (This is perhaps the most important aspect of the deal for financial markets.)

• AMT "patched" to avoid its hitting over 20 million additional households.

• 1 year reduction of Social Security "payroll tax" of 2%.

• Continuation of certain Obama "stimulus" bill taxes, including for college tuition and equipment purchase write-offs; also expanding the earned income tax credit.

It remains to be seen whether the current crop of House Democrats will go along with the deal. It also is possible that a Senator, maybe Bernie Sanders (I-VT) or Sherrod Brown (D-OH) will filibuster a bill to implement the deal, and there may not be 60 votes for cloture during the lame duck. So while there's a deal, it's not a "done deal."

There will be plenty of time to analyze the economic and political impacts of the "compromise." But one striking aspect of the debate is the utter lack of discussion of a political philosophy underlying anybody's negotiating position. Where is the explanation of why tax cuts (or, more precisely, extension of the current tax rates) are not just good for the economy but are more moral (or, more precisely, less immoral) than accepting the Democrats' desired policies?

On Monday, as Barack Obama offered his usual leftist pablum regarding his wish to raise taxes on those earning over $250,000 while suggesting willingness to give that up in return for Republican agreement on extending unemployment benefits, he demonstrated a world-turned-upside-down misunderstanding of the source of wealth and the proper role of government.

First, Obama said that continuing the current rates for the upper tax bracket is something the government "can't afford right now." Sadly, some large percentage of Americans including nearly all Democrats take that statement at face value without thinking about what he's really saying: that money which high-earners earn is first the property of the government and only secondarily, and only if government feels generous, should be allowed to be kept by those who earned it.

Second, Obama implores Congress to extend unemployment benefits for people who have lost their jobs "through no fault of their own." Again, many or most Americans will simply accept this statement at face value. And again, learning the lesson from Bastiat that we must consider "that which is unseen," what do Obama's words mean? They mean that because someone is suffering a hardship which is not "their own fault," it is everyone else's responsibility to give our money, or more precisely our children's and grandchildren's money, to that person.

The "no fault of their own" argument is the 21st century analogue of "to each according to his need"; and 99-week unemployment benefits paid for by deficits and the 1% of taxpayers who pay 40% of income taxes is the analogue of "from each according to his ability." Obama's argument is naked socialism.

It's one thing for Republicans to take political victories where available. To be sure, even with Republicans agreeing to Obama's desired unemployment insurance extension, getting all the Bush tax cuts extended, not to mention the other tax cuts and extensions in the deal, will be a stunning victory during a lame duck session in which Democrats retain huge majorities in both houses of Congress.

But this is a short-term purely political victory. Again, the Republicans have done precious little to explain WHY the tax cut extensions are not just good economics but are more moral, or at least less immoral, than making our income tax system even more "progressive." They have done nothing to explain WHY "through no fault of their own" is an immoral argument.

Liberty and free markets cannot be expected to triumph in the long run if there is no intellectual foundation laid for pro-capitalism policy. The left argues successfully, more often than not, based on how much they care, based on how they can help one victim group or another. Conservatives and libertarians can't win without fighting that emotional appeal on two levels. It's true that we should point out that the left's policies, whether keeping poor people poor through fighting reform of public education and social security, or whether destroying the American black community through the creation of the welfare state, never accomplish Democrats' stated goals.

But that argument only goes so far. If you argue purely based on outcome, you leave room for the left to claim that a policy they prefer will likely have an outcome which a majority of Americans might desire (despite history showing that almost never to be true). In order to foreclose the left's ability to make those arguments, lovers of liberty must explain in a believable way why the left's policy desires, for which Barack Obama is a perfect spokesman, are immoral and not just un-American but anti-American.

So, let's suggest some "talking points" to counter Obama's Marxist language: There is no tax cut that government "can't afford" as long as government is spending money on things which it should not be, and is not constitutionally authorized to be, spending. What the government can't afford is the spending on entitlements, which is bankrupting our nation. And what we the people can't afford is government taking our money to support their wasteful addiction to spending other people's money. President Obama, it's OUR money, not yours. We're done letting you get away with saying you "can't afford" not to spend our money.

And just because someone loses a job through "no fault of his own" does not give that unemployed person a moral claim on our money. Does the Red Cross demand our money at the point of a gun? No, it's a thief who does that. In other words, unemployment payments beyond what is covered by existing unemployment insurance reserves are government-sanctioned theft, even if marketed by Obama as charity. Or, to put it another way, if an unemployed person forcibly took your money while arguing that his financial situation is "not his fault," he would go to jail. Having the US Treasury take your money on behalf of the unfortunate unemployed worker simply means you're having a bigger gun pointed at you as your wallet is drained.

Until the American public comes to understand economic policy at a moral level, the left and the government will always, as Jefferson foretold, continue to gain ground while liberty yields.

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About the Author
Ross Kaminsky is a self-employed trader and investor and is a senior fellow of the Heartland Institute. He is the host of The Ross Kaminsky Show on Denver's NewsRadio 850 KOA on Saturday mornings from 6 AM to 9 AM. You can reach Ross by e-mail at rossputin(at)rossputin(dot)com.