Making Economic Sense
Making
Economic Sense
by Murray Rothbard
(Contents
by Publication Date)
Chapter 56
Are We Undertaxed?
Every day that passes brings further evidence, in
the marvelous phrase of Bill Kauffman
in Chronicles, of "the enormous gulf between
those who live in America and those who run it."
We who live in America are firmly convinced that we are taxed far too
much, that government
spending and taxation are eating out our substance to support a growing
parasitic army of crooks
and moochers, and that the accelerating burden of government has caused
our economy to
stagnate over the last two decades.
The ruling elites who run America, including the
sophisticated technocratic economists
who lend a patina of "science" to their rule, see the American problem,
of course, in a very
different way. This economist elite, whose task it is to apologize for
Leviathan rule, and to take
highly-placed jobs directing that elite rule is, if nothing else, cool
and calm about their own
counter-theme: "the trouble with America is that it is undertaxed."
To the cries of understandable outrage that greet
this claim, the elite is sophisticated and
"scientific." It is typical of us cloddish types to be narrow and
"selfish," greedily trying to keep
some of our own money from the depredations of the taxman. For they,
the elite, are wise and
all-seeing; in contrast to us narrow and selfish resisters, they have
only the common good, the
general welfare, and the public weal at heart. To point out that their
version of the common good
coincides suspiciously with the narrow and selfish interests of the
selfsame technocratic
economic elite, is to lay ourselves open to one of the worst cuss
phrases in our contemporary
lexicon: "conspiracy theorist of history."
Leading the most recent parade of "many" (if not
all) economists calling for long-range
tax increases are Nobel Laureate Robert M. Solow of MIT, Benjamin
Friedman of Harvard, and
Charles L. Schultze, chairman of the Council of Economic Advisers under
Carter. ("Economists
See Long-Run Need to Raise Taxes," New York Times,
Jan. 27, 1992.) One familiar ploy used by
the nation's serried ranks of economists is to point to other countries
in Europe and elsewhere,
whose percentage of national product absorbed in taxes is greater than
in the U.S. Well, bully.
On that reasoning, why not point to the glorious economic successes of
the Soviet Union, whose
government output absorbed and constituted all of
the nation's resources?
On a closer look, the Solow, et al.
claim is a replay of the old Galbraith thesis, publicized
in his best-selling, The Affluent Society (1958),
which looked around at America and saw the
private sector prosperous and thriving, while the public sector, or the
"socialized" sector, lay in
squalor and disarray. Assuming that the prosperity and efficiency of a
sector depends only upon
the resources spent, Galbraith concluded that "too much" was being
spent on the private sector,
and "too little" on public. Hence, Galbraith called for a massive
transfer of resources from the
private to the public sector.
And after twenty-four years of following such a
transfer program, of taxing the private
sector ever more to feed the swollen public sector, what has been the
result? What has been the
consequence of following Galbraithian doctrine? Patently: aggravated
squalor of the public
sector, accompanied by a noticeable fraying of the edges in the private
sector. The answer of
Solow, Galbraith and others is that we still haven't done enough: that
the government must tax
and spend ever more. If we keep doing so, we can look forward to the
economic situation of the
Soviet Union in 1991 as the end result.
The crucial fallacy at the root of this nonsense is
the idea that government spending really is
saving and investing, indeed a superior
form of saving and investing to the private sector.
Solow and company agree with free-market economists that a rise in the
standard of living can
only come about via increased saving and investment, but their idea
of such saving is collectivist
and can only be effected through government spending.
Thus, in the New York Times
paraphrase, Professor Solow has the nerve to conclude that
"if Americans are seeking to insure that their children live better
than they do, they must learn to
consume less, meaning live less well, and to save and invest more."
Unfortunately, due to higher
taxes, they are already living less well, but
this sacrifice will scarcely help their future state or
their children's. Solow's conception is very much like Stalin's, in
which the State sweats the
consumers, taxes them and keeps down their living standards, all for
the sake of a future
pie-in-the-sky that never comes true.
In contrast, in a free-market economy of private
savings and investment, no one is forced
to sacrifice, for those who are able and eager to save and invest do
so, and the others can
consume to their hearts' content.
The crucial fallacy, then, of this economic elite,
is to designate virtually every bit of
government spending with the honorific label "investment." But on the
contrary, government
spending is not "investment" at all; it is simply money spent for the
edification or the power of
the unproductive ruling elite in the government. All government
spending, far from deserving the
term "investment," is in reality consumption spending by politicians
and bureaucrats. Any
increase in the government budget is therefore a push toward more
consumption and less saving
and investment; and the reverse is true for any cut in the budget.
There is nothing noble, or
public-interest-oriented, or "unselfish" about the call of Solow
and other Establishment economists for more government and higher
taxes. Quite the contrary.
And what of the original Galbraithian claim about
private prosperity and public squalor, a
gap that is even more glaring now than it was in the 1950s? The
observation is true enough, but
the conclusion is wrong-headed. If the public sector is the big
problem, may not the answer lie in
the contrasting nature of the two sectors? May not the answer be to get
rid of, or at the very least
to shrink drastically, the failed public sector?
In short, privatize the public sector, and the
noteworthy squalor would rapidly disappear.
And if anyone should prove skeptical, let's try it for a while. Let's
privatize the government for,
say, ten years, and see what happens; we can even call it a "Great
Social Experiment," performed
in the best interests of "value-free science." Any takers?
Previous Page * Next Page