The Economist’s Confused Garble About Taxing the Rich

In an editorial of two weeks ago, “The Politics of Plutocracy,” the British prestigious publication The Economist tried desperately to defend socialism and common sense at the same time, and even make a coherent mix of the two. In fact, the readers didn’t have to read farther than the subtitle to know that whoever wrote that article was, ahem, not exactly in their right mind. The subtitle said, “America’s rich should pay more, but there is no need to raise their income-tax rates.”

The mix didn’t work. The article was a superb exercise in utter confusion.

The rich should pay more, was the main premise of the article. Why? Well, because they should pay more. No specific reason is offered, just that they should pay more. It’s obvious, isn’t it.

Then, suddenly, in a quick moment of sanity, the author admits that “deficit reduction works best when most of the burden falls on spending cuts.” Fair enough, that’s how it works, and no sane person would believe that without spending control there can be any deficit reduction. But then, immediately, so that no one would fall into the delusion that the author has abandoned the insanity of socialism, he adds, “But, just as in every other budget squeeze, a portion must come from higher taxes, no matter what the Republicans say.”

Then the author tells us to “Follow the money.” And when he follows the money, he throws at us another bit of common sense: Increasing taxes for the rich would only increase the revenues by 0.3% of the GDP. But then he goes back to his utopia by saying that what must be done is closing the loopholes which make about 7% of the GDP. That should do it, he says, and concludes authoritatively:

The result would be lower rates, more revenue and a more efficient and progressive tax system. If that’s where the debate about wealth ends, it will have been worth it.

If. But it doesn’t end there. So it’s not worth it. In fact, the piece is worthless, and the world would have been better – not to mention the reputation of The Economist – if it has never been written and published. Because 7% of the GDP doesn’t solve any problems either. In fact, no talks about tax increases or reforms solve the problem. Because the problem is not in the revenues; it is in the spending.

What the author of that editorial doesn’t know is that the US government debt is now larger than the GDP. Which means that taxing all the rich at 100%, plus taxing all the working population at 100%, plus taxing all the working companies at 100%, plus taxing all the real estate rents and royalties at 100%, plus taxing all the bank, stock, bond, and loan gains and interests at 100% won’t solve the deficit problem. The talk about 7% of the GDP toward solving the deficit problem is foolish; it makes just as much sense as to talk about saving for a house by moving your cash from your left pocket to your right pocket.

The real problem are the government expenses. Taxes have a limit; government expenses don’t. A government can promise infinite entitlements and purchase infinite amounts of goods and services (and purchase votes too); but revenues are limited to the extent of the economy. There is only so much room to play with how the revenues will be structured. But if the government has no discipline on spending, no revenues can solve the deficit.

The solution is only one: Cut the spending. Immediately. Stop all the government payments, and impose a freeze on any government promises. Stop the wars and return the troops home. (Remind me again, why is the Pentagon buying gasoline at $400 per gallon in Iraq?) End all the welfare, and all bailouts. And end the Fed. Now.

Then end the IRS.

And the deficit problem is gone.

The talk about restructuring revenues is foolishness. You can’t solve a problem caused by socialism with more socialism.