Amid all the political and
media hoopla about the "fiscal cliff" crisis, there are a few facts
that are worth noting.
First of all, despite all the melodrama about raising taxes on
"the rich," even if that is done it will scarcely make a dent in
the government's financial problems. Raising the tax rates on
everybody in the top two percent will not get enough additional tax
revenue to run the government for ten days.
And what will the government do to pay for the other 355 days in
All the political angst and moral melodrama about getting "the
rich" to pay "their fair share" is part of a big charade. This is
not about economics; it is about politics. Taxing "the rich" will
produce a drop in the bucket when compared to the staggering and
unprecedented deficits of the Obama administration.
No previous administration in the entire history of the nation
ever finished the year with a trillion-dollar deficit. The Obama
administration has done so every single year. Yet political and
media discussions of the financial crisis have been focused
overwhelmingly on how to get more tax revenue to pay for past and
The very catchwords and phrases used by the Obama administration
betray how phony this all is. For example, "We are just asking the
rich to pay a little more."
This is an insult to our intelligence. The government doesn't
"ask" anybody to pay anything. It orders you to pay the taxes they
impose and you can go to prison if you don't.
Then there are all the fancy substitute words for plain old
spending -- words like "stimulus" or "investing in the industries
of the future."
The theory about "stimulus" is that government spending will
stimulate private businesses and financial institutions to put more
of their money into the economy, speeding up the recovery. But the
fact that you call something a "stimulus" does not make it a
Stimulus spending began during the Bush administration and has
continued full-blast during the Obama administration. But the end
result is that both businesses and financial institutions have had
record amounts of their own money sitting idle. The rate of
circulation of money slowed down. All this is the opposite of
What about "investing in the industries of the future"?
Does the White House come equipped with a crystal ball? Calling
government spending "investment" does not make it investment any
more than calling spending "stimulus" makes it stimulate
What in the world would lead anyone to think that politicians
have some magic way of knowing what the industries of the future
are? Thus far the Obama administration has repeatedly "invested" in
the bankruptcies of the present, such as Solyndra.
Using lofty words to obscure tawdry realities extends beyond the
White House. Referring to the Federal Reserve System's creation of
hundreds of billions of new dollars out of thin air as
"quantitative easing" makes it seem as if this is some soothing and
esoteric process, rather than amounting essentially to nothing more
than printing more money.
Debasing the value of money by creating more of it is nothing
new or esoteric. Irresponsible governments have done this, not just
for centuries, but for thousands of years.
It is a way to take people's wealth from them without having to
openly raise taxes. Inflation is the most universal tax of all.
All the pretty talk about how tax rates will be raised only on
"the rich" hides the ugly fact that the poorest people in the
country will see the value of their money decline, just like
everybody else, and at the same rate as everybody else, when the
government creates more money and spends it.
If you have $100 and, after inflation follows from "quantitative
easing," that $100 dollars will only buy what $80 bought before,
then that is the same economically as if the government had taxed
away one-fifth of your money and spent it.
But it is not the same politically, so long as gullible people
don't look beyond words to the reality that inflation taxes
everybody, the poorest as well as the richest.
COPYRIGHT 2012 CREATORS.COM
Thomas Sowell is a senior fellow at the Hoover Institution,
Stanford University, Stanford, CA 94305
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