Cliff Notes


December 5, 2012 by Anders Ingemarson


Is this déjà vu all over again, or what? Remember TARP anyone? We were told that Armageddon would be upon us if we didn’t print some $700M out of thin air. Now we’re told the road to Armageddon goes over a “fiscal cliff”.

Don’t get me wrong. I realize the seriousness of the situation. And I’m all for maintaining (or even better, cutting) the not-as-high-as-they-probably-will-be-but-still-way-too-high tax rates.

But the real issue is spending. No tax increase will address our out-of-control government spending. Harry Binswanger hits the nail on the head:

“The red herring here is: focusing on taxes rather than spending…Raise rates, lower rates, leave them the same—it’s re-arranging the deck chairs on the Titanic.”

We have a whole lot of people in Washington rearranging Titanic deck chairs.

It appears the alleged defenders of small government are again walking into the same trap they’ve walked into over and over again: raise taxes now, cut spending later—which means never; if they would only learn from the past mistakes of others (or from Peanuts). Michael Reagan recaps nicely the past 30 years’ mistakes including those of his father.

Why is it so difficult to take a principled stand against taxes and against government spending and stick to it? Ayn Rand once wrote:

“In any conflict between two men (or two groups) who hold the same basic principles, it is the more consistent one who wins.”

(From “The Anatomy of Compromise” in Capitalism: The Unknown Ideal)

Both sides in Washington hold the same basic principles. Morally, both sides hold that sacrifice is a virtue; in order to be good, we have to give up some or all of our earned wealth for the benefit of those with little or no wealth. Politically, both sides hold that government should be an agent for “the good”; the government should help us sacrifice by taking from those who have and give to those who have not. The conflict between the two sides is only over the size of the loot.

But if it’s virtuous to sacrifice, why put a limit on it? One side says “to heck with limits”. The other tries to find a “reasonable level”. Guess who is more true to their basic principles, who is more consistent? Guess who is winning, who has been winning for the past hundred years?

What will it take to change? I think massive and widespread moral outrage. 9/11 was the last time we Americans expressed large-scale moral outrage. We knew, at least implicitly and for a period of time (the doubts unfortunately set in quickly), that what had been done to us was terribly, terribly wrong.

We will only stand a chance when enough of us are able to express that same level of moral outrage at the injustices of taxation and government spending. Then we’ll see candidates for office materializing who will turn our moral outrage into legislative action.

But to express genuine moral outrage, we have to challenge the underlying morality that paved the way for taxation and government spending in the first place—the virtue of sacrifice—and replace it with a rational moral code—the virtue of rational self-interest, of rational selfishness. Until we’re ready, Titanic will continue her fateful journey while we’re busy arranging deck chairs.

2 thoughts on “Cliff Notes

  1. Michael Rivers, CFA says:

    From an empirical standpoint–and let me be clear that the moral point is infinitely more important–no tax increase has ever been effective in getting government finances onto a long term, sustainable footing. Tax decreases don’t create enough growth to keep up with rising spending (the Reagan and Bushx2 administrations demonstrated this clearly), and tax increases both decrease growth and lead to more tax avoidance (both of the legal and illegal kind). Spending cuts are the ONLY effective means, and yet that’s not what the Congress or Executive brances are focusing on.


  2. Mike says:

    I saw an article that calculated if we returned to 2003 spending levels, the budget would be balanced that day. I don’t think life was too terrible in 2003. And that would be the start. Then we could work on reducing spending from that baseline.


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