George Rebane
[This is the addended transcript of my regular KVMR commentary broadcast on 12 June 2019.]
By this time we have all heard the nearly two dozen Democratic presidential candidates promise Americans so many free things we’ll get that most of us have lost track of all the goodies coming our way when one of the newly declared socialists replaces President Trump. Let me just recount a partial list to get us all on the same page, because I’m going to talk about paying for all the free stuff. We are promised Medicare for All, free college, forgiven student loans, national job guarantee, paid family medical leave, guaranteed national income, and, of course, all the things in the Green New Deal. There is more to the list, but I think that these are enough to give the flavor of what we all are encouraged to expect after 2020.
What no one wants to talk about is how the coming workers’ paradise will be paid for. The few candidates who dare to venture there give short answers that can be paraphrased as, ‘well, we’re gonna tax the bejeezus out of the corporations and the rich, and make them finally pay their fair share’. And this usually brings out a sigh of relief from the light thinkers in the middle and lower income classes – ‘we’re gonna get all this free stuff and other people will be paying for it, where do I sign?’
Those requiring more meaty answers are assured that we will follow the European model, and everyone knows that they’ve cracked the code on how bigger governments are really the source of the people’s succor and largess. However, that’s not the case when we look at their data from the EU and OECD countries. There we quickly find that 1) they get a lot less than our Democratic candidates promise, and 2) the money to pay for it comes from the middle and lower classes, for the simple reason that the rich don’t have enough loot to foot the bill. And there’s even a more sinister method by how the taxes eventually get raised on everyone. The entire story with lots of numbers, charts, and graphs unfolds in the recent Heritage Foundation paper, ‘A Progressive Road Map for Soaking the Middle Class’ by Adam Michel.
Michel summarizes his research with – “Taxes on the rich cannot raise the necessary revenue to fund large European-style welfare states. If left on the current trajectory, U.S. government expenditures will require large tax increases on middle-class Americans. The current progressive agenda to further increase spending on health care, education, environmental policy, and income supports will require even higher taxes on a larger share of taxpayers. If America’s spending continues to look more and more like that of Europe, U.S. tax policy will also need to shift. In European countries, lower-income and middle-class taxpayers pay an average marginal wage tax rate of 49 percent on income above $37,000 a year, and an average value-added tax (VAT) of 20 percent. Those same U.S. taxpayers face a marginal wage tax of 32 percent and an average sales tax of 6 percent. The only sustainable way to avoid a high-tax American future is to reduce the growth rate of federal spending.”
For those still in terminal phases of denial, consider that our federal spending has been growing faster than the economy, tax revenues, inflation, Americans’ wages, and savings. There is no alternative other than taxes have to be raised to European levels to pay for European size governments and spending. And as Michel shows from EU and OECD data, that means tax bills will have to be raised to a minimum of three times for everyone – no one, rich, middle, or low earners will be spared. Everyone will pay because at that level of proposed spending we will have run out of other people’s money.
The Democrats’ proposals will cost a conservative $50T over the next 10 years, more than doubling the current $4.4T annual federal budget which is already one-third funded by debt. The tax implications are so horrendous that no one on the Left wants to talk about it as we witnessed in this week’s Democrat controlled House Committee on the Budget, which pointedly refused to consider any discussion of where the money would come from for all the things promised in just the Green New Deal. My recommendation is that you get some answers to these questions before you vote in 2020.
My name is Rebane, and I also expand on this and related themes on Rebane’s Ruminations where the addended transcript of this commentary is posted with relevant links, and where such issues are debated extensively. However, my views are not necessarily shared by KVMR. Thank you for listening.
[Addendum] To put some meat on the above arguments. Here are a couple of graphics illustrating the data from Adam Michel’s paper. The first shows how much of each nation’s GDP is made up from the total tax burden its government imposes on its citizens. The reason for America’s high ranking in most economic metrics that bear on people’s QoL should be clear. There’s a reason why people from all over the world continue to risk life and limb to get into the United States, a reason that is totally, and I do mean TOTALLY, lost on our Left. (Perhaps promoting policies to make us into a second rate country is the Democrats’ new stealth immigration policy that will then dramatically decrease the pressure on our borders.)
And here’s a compendium of more detailed albeit complex graphs placing the US relative to the EU and OECD countries. It shows how tax revenues are spread over the spectrum of the countries’ wage earners through the marginal rate burdens put on earnings. It should dispel notions that all the socialist goodies currently in the EU, and promised in the US, are paid for by everyone, and not restricted to monies collected from the socially unjust rich and corporations.
The point to focus on in the above graphs is that the Democrat candidates want to put America right into the middle to upper end of the groups of blue dots representing the EU-OECD countries. Check out the new tax rates that would apply to ALL our wage earners, and the resulting growth of government to absorb and redistribute the larger share of our nation’s GDP (from the first figure, we are now only at the 27% of GDP level). Does anyone really think that such a massive hit will not put brakes on our economy with the resulting impact on all our lives and motivation to take investment and entrepreneurial risks? Look to Europe for the answers.
America’s politicians of all stripes know that Americans are overwhelmingly innumerate – they ‘don’t do numbers’. Data such as presented above make no never mind to the overwhelming share of our citizens who, today more than ever, are focused on polarizing one-liners for their understanding of public policy proposals. That is why the Democrats have no problem promising unattainable ‘free’ government benefits after they are elected to office. The tools to make discriminating decisions on such matters were removed long ago from our public educational curricula.
