The War Against The Producers

by Victor Davis Hanson
Pajamas Media

Stimulus, Stimulus and Not a Drop…

A “stimulus” of nearly a trillion dollars was proposed, without which we were told, unemployment would skyrocket and credit would tighten further. Six months later — unemployment having risen even higher than the administration’s forecast would have been the case had their stimulus package not been implemented — now the same proponents of massive borrowing demand a second stimulus to accomplish what the first ’successful’ borrowing apparently did not. If you fail, then try the same thing to fail even bigger the second time — while calling for more success to follow the earlier success?

The Larger Agenda

Note here I mean something quite different from the accustomed notion of “accomplish.” You see, I think the point was never much to build more bike paths on borrowed money or just bail out GM, but rather more to reengineer the tax code, as part of a grander vision of creating a new equality of result in America.

Soon we will all end up after each April 15 about making the same, driving the same sort of cars and using the same sort of mass transit, living in about the same sorts of houses, and having about the same sorts of “”they will take care of it for me” philosophies — all overseen by brilliant, but highly ranked and exempt Platonic Guardians who suffer on our behalf as they jet and limo at breakneck speed ensuring our welfare.

Gorging “the Beast”

We are beginning to sense the debate is not about “stimulus” (politicians did not even read the various bills that they rammed through and care little about the fiscal impact from them). Rather, we are witnessing an inversion of Reagan’s sort of playing chicken, once called “starve the beast” (which I thought was a wrong notion), a philosophy of cutting taxes to cut revenue to starve the federal government’s excessive spending in the face of spiraling deficits.

Under Obama’s “gorge the beast” version, America will simply write so many bounced checks, run up such an enormous $10 trillion debt, that taxes will have to rise on “them” — and wasn’t this really the point of it all anyway: to “spread the wealth around” and “never let a crisis go to waste”? Since new programs never shrink, but, like Johnson grass, grow with impunity, and since Democrats, even more so than wasteful Republicans, don’t worry about deficits, taxes must escalate to avoid catastrophe.

The Bad Guys

Ponder a simple fact: The Obama administration is dispersing income lavishly to those who do not pay taxes and it will have to be paid for by those who do. For all the talk of that awful percentile who make over $200,000, this administration has not distinguished the hyper-rich 1% that make untold money (e.g., the Buffets, Soroses, Turners, Gateses, Kerrys, Gores, etc.), from the much more demonized, larger 5% of the population whose income does not come from investments and insider influence and deal-making, but rather from providing more tangible goods and services — the family doctor, the plumbing contractor, the small lumber company owner, the car dealer, the local family-held insurance company, the airline pilot, the car-leasing firm, the patent attorney, etc.

“Their Fair Share”

Last fall we heard that this percentile was unpatriotic, did not wish to spread the wealth around, and had made off like bandits under Bush. But the fact is, to quote Mayor Gavin Newsome’s ‘like it or not’, they are precisely those who decide most dynamically whether to hire, fire, expand, contract, buy/sell goods, etc.

And the results of the Obama war against them are threefold: 1) in major key states, the productive minority’s state income taxes will near or exceed 10%; their federal rates will go to 40%; the abolition of caps on FICA will ensure 15% plus of most their income will go for new Medicare and Social Security bites; and they may well be eligible for a newly proposed punitive health-care surcharge tax of 4-6%.

Add It Up

1) If one were to add all that up (forget rises in sales taxes, inheritance taxes, luxury taxes, etc.), then one can get to 70% of one’s income. So right this minute, the electrical contractor is thinking:

‘I made $412,000 last year due to Saturday jobs, overtime, risky bidding, gambles on new equipment, and new lines of credit, but under Obama I will pay maybe $50-80,000 more of my income to the government. In other words the cost of, say, hiring two more entry-level electricians, or the cost of outfitting an entire new van with boom and equipment, or what I cleared every Saturday last year — all that will go to the government.”

Ripples of Doubt

And that means rippling throughout this key sector of the economy — even before these taxes have been enacted — are hesitation, stasis, and ultimately constriction — at first for psychological reasons, soon confirmed by the actual facts of less money. In short, very bright people will be thinking how to hide income, how to barter, how to slow down and not produce goods and services, rather than blast full speed ahead and enrich angry others.

A Certain Paranoia

2) Do not discount again the psychological element. This putative electrical contractor also knows that after handing over his profits to the new government, and delaying or ending his plans for enlargement, he will not be praised, but continually demonized (I scanned CNN, MSNBC, CBS, and NBC the other evening, and all the stories had a common theme: the “rich” (yes, you see, ACME Electric is now about the equivalent to AIG and Citibank) will have to pay their “fair share” for all sorts of “overdue” necessities: cap-and-trade, nationalized health care, education grants and freebies, and new social programs.

You Owe Us

So our electrician senses that despite his newfound, sizable contribution to the public good, he will a) not be thanked but only further ridiculed; b) see his money diverted from his own wise use of it, to anonymous agencies’ liberal expenditures of it: the money will not be just lost, but invested in things that will make things worse, not better, through subsidies of failed programs and the destruction of incentives; c) see that the world under Obama is now unfair in Orwellian fashion: the Citibanks and AIGs, in Robert Rubin fashion, are so well connected to both parties that they will suffer little for their mistakes; the Ivy-League and Washington technocratic class that is to run all this is happy with its government perks and does not think new taxes and compliance apply to themselves (cf. Dodd, Rangel, Geithner, Daschle, Murtha, etc.).

You Never Needed All That Anyway

3) Finally the now chastised and ossified electrician will begin to see that his new truck, his boat, his vacation home, all these are somehow immoral in carbon, political, cultural, racial, and social terms. And he senses that others, who do not pay any income taxes (approaching 50% of the population), see themselves at war with him: the more he pays in taxes, the more others see that his compliance with such new burdens is proof of what he “really” owed all the time, and a sign that he can pay even more next round.

A Most Revolutionary Vision

Final observations: Obama brilliantly conflated the Wall Street class with the upper-tier of Main Street in Animal Farm fashion: the former gets lectured, but stays enriched through bailouts; the latter takes both the moral hit for the former’s crimes and greed and the actual hit in higher taxes.

(Nota Bene: the new Democrats, in Prince Charles fashion, like the taste and culture of the hyper-rich, who care little about taxes, are sensitive behind their ramparts to the less well off, and know high-culture (think Streisand, Gates, Soros, the Georgetown/Hollwood/Silicon Valley, Upper East Side, Cambridge, Mass, set). These aristoi despise the wheeler-dealer, always on the move, uppity, wanna-get-rich scrambler that is desperately trying to get his kid through Public University, and add a wing on his gross MacMansion, while towing his outboard up to the lake for five hours of water-skiing, without an opera, symphony, or NPR analysis on the radio).

Bottom Line

This recovery cannot work, other than a brief spurt that results from trillions in printed money, because we are rewarding unproductive areas of the economy (federal money for more wind farms, federal hurdles for pumping more known natural gas or nuclear power construction; more of the community-organizing model, less of the productive small business model) and punishing the engines of the economy.

The New Culture of “Pay Up, Mister–or Else!”

For Obama to pull this off, an entire sort of new vocabulary, rhetoric, and attitude is necessary. And the model is California: the carpenter and the bricklayer are laid off, and the state snoozes; while the assistant solid waste inspector of Green Acres is on television every night (his union can afford the advertising) to weep, and claim that if he and those like him (retire at 55 with $100,000 for life) are laid off, then Dantesque things follow.

Remember the logic: the poor Californian voter who works at Starbucks or Target is angry that the grandee social worker is unnecessary and grossly overpaid at $90,000 a year, with lush retirement and benefits, and so is told that if he does not raise taxes to over 10% income and 9% sales, then firemen, police, and water workers will quit/be laid off/furlow and so he will starve, be murdered, and have no sewage.

Screw the Fool Hammering, Save the Grandee Behind the Desk — and Call it Egalitarian Morality

That is the model here in California and that is the model we are soon to see in Washington: the government worker and those who receive his largess, are kings; those who pay for them, and who work in private enterprise for far less, are, well, less than fools.

Whereas thousands are fleeing the natural paradise of California for the arid deserts of no-tax Nevada, there is no Nevada to the United States — the last hope of an otherwise depressing planet.