“Free lunch” with “tips” for Nancy, Barney & Chris

During the recent campaign President-elect Obama played Robin Hood. He’d tax “the rich” (the 5% making over $250 thousand per year) so he could give all the money collected to the other 95% of Americans.

Obama and Speaker Nancy Pelosi, Congressman Barney Frank, Senator Chris Dodd and others of “Robin’s band” would decide how best to distribute the new tax revenues.

Obama’s opponent, Sen. McCain didn’t play the Sheriff of Nottingham. But he didn’t do much to remind American’s who really pays for the Robin Hood tax policies Obama and the Dems favor, either.


But in the Times of London Jamie Whyte does a suberb job explaining who pays and why - - -

Children are selfish. Not because they are unkind (though many are) but because they believe in cost-free transfers. They do not understand that providing the toys and other amusements they demand imposes a cost on their parents.

Children live in a fantastical world where Barbie dolls and trips to the zoo can be delivered without depriving their parents of something they might have enjoyed, such as a bottle of wine or a few extra hours off work.

Learning that cost-free transfers are impossible is an important part of growing up, and parents usually make sure it happens quickly. Most of us learn that there is no such thing as a free lunch long before we have ever picked up a bill.

Except when it comes to public policy.

Encouraged by politicians, many adults indulge the infantile fantasy that the Government can bestow gifts on us while imposing costs on no one.

No one asserts this plainly, of course; that is never how nonsense is promoted. As usual, the fantasy is insinuated by a special way of talking.

Politicians and commentators demand that corporations, markets or societies carry various burdens, never pausing to note that the cost must ultimately fall on the individual people who make up these abstract entities.

During the presidential campaign, Barack Obama derided John McCain's plan to lower the corporate tax rate, claiming this would mean tax breaks for “some of the richest companies in America”.

To an economic child, taxing companies sounds like an obviously good idea. Who cares about companies? Can a company be hungry, homeless, uneducated? Will you put the interests of these wealthy inhuman entities ahead of real, flesh and blood people, many of whom are struggling to make ends meet?

But companies cannot be rich or poor; only the people who own them or work for them can be. Nor can the cost of taxation fall on a company; it must ultimately fall on the company's owners, employees or customers. Before you can tell whether corporate tax is a good idea, you need to understand who bears the cost and how it affects their behaviour.

Once you do, it turns out that taxing companies is a bad idea.

Research shows that the cost of corporate tax falls more or less evenly across a company's shareholders (in lower dividends), employees (in lower wages) and customers (in higher prices). So, in terms of the “social justice” so beloved of the Left, corporate tax is no better than a combination of income and sales taxes.

But, in terms of efficiency, it is worse. Research also shows that corporate tax has a greater “deadweight cost” than both income and sales taxes, because it discourages the allocation of resources to productive uses - in other words, it discourages investment.

There’s more before Whyte closes with - - -

When it comes to bearing costs, there are no companies or markets or other aggregations of people. Costs are always borne by individuals.

That is what Margaret Thatcher meant when she denied the existence of society: “They're casting their problem on society. And, you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people.”

Denying people morally convenient fantasies makes them angry. That is why Baroness Thatcher's simple observation has always caused such outrage and why David Cameron's new, pandering Conservative Party has repudiated it.

It is a shame they are not capable of more honesty.

Many people today wish to offload rather than repay their debts. No one should indulge the fantasy that this can be achieved without imposing the cost on other individual men and women.

Whyte’s entire column’s here.
***************************************************************

Comments:

There’s nothing Whyte says that isn’t true and hasn’t been demonstrated and proven time and again.

But, as he says, some people don’t want to learn reality; it’s too comfortable, at least in the short run, indulging in fantasy.

Then there are all the people who don’t get much chance to learn economic realities. In many high school and college classrooms the truths Whyte presents are presented as “heartless,” “a throwback to imperialism” and “capitalistic greed.”

Here’s one of the comments on Whyte’s column thread which goes along with that- - -

WHAT A WONDERFUL READING!!!

I wish i had a lecturer like this during my uni times .... *sigh*

Dominik von Muehlberg, Cologne, Germany