But what of debt?

by Roxeanne De Luca | November 24th, 2012

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But what of debt?

Glenn Reynolds dis­cusses mar­ginal tax rates at Instapun­dit. High mar­ginal tax rates encour­age peo­ple to ‘go Galt’ when those peo­ple can obtain extra income with extra effort (e.g. free­lancers, sales­men on com­mis­sion, small busi­ness own­ers con­tem­plat­ing open­ing for more days or hours): very often, they will pre­fer leisure time to the dwin­dling return on invest­ment (invest­ment of time, effort, and risk).

Of course, that is all pred­i­cated on being able to make ends meet: those who can­not earn enough to cover expenses will do what­ever it takes to earn enough to cover the short­fall. A gov­ern­ment can thus raise the mar­ginal tax rates with­out reper­cus­sions: a per­son in need of an extra dol­lar with earn $90 and let the gov­ern­ment take $89 in taxes, if the alter­na­tive is starv­ing, los­ing a job for lack of gaso­line to get to said job, or not hav­ing a roof over the family’s head.

Coun­ter­in­tu­itively, a gov­ern­ment that is heav­ily in debt, or a gov­ern­ment that wants to pur­chase votes with free­bies to cer­tain classes of peo­ple, wants the pro­duc­tive class to be irre­spon­si­ble with its money. The hous­ing bub­ble, the infla­tion in food prices, the higher edu­ca­tion bub­ble, sky­rock­et­ing health insur­ance costs, and higher energy costs pre­vent the pro­duc­tive class from going Galt with its mar­ginal income.

Oba­maCare is par­tic­u­larly per­ni­cious: force the entire pro­duc­tive class to fun­nel large sums of money into health care spend­ing via gold-​plated plans that sub­sidise the non-​productive class, and you’ve given peo­ple the choice between being eter­nally yoked to the plow or dying for lack of health care. (Amanda Mar­cotte rel­ishes the idea that we are all forced to pay for her sex life as a cost of insur­ing our­selves and our kids against can­cer and heart failure.)

Ris­ing food prices (influ­enced in no small part by the fed­eral gov­ern­ment, e.g. the ethanol man­date, var­i­ous car­rots and sticks of sub­si­dies) yoke all peo­ple to the plow: work more, let­ting the gov­ern­ment take its pound of flesh in the process, or starve.

The hous­ing bub­ble and the higher edu­ca­tion bub­ble have the same effect: those who work for a liv­ing are forced to work much harder to cover the same costs as a pre­vi­ous gen­er­a­tion. Prof. Reynold’s cor­re­spon­dents are all in the posi­tion of hav­ing paid off houses and stu­dent loans — the spoils of hav­ing been born in a time wherein a col­lege edu­ca­tion cost about 500 minimum-​wage hours per year and a house could be pur­chased on husband’s salary while the wife stayed at home. The younger gen­er­a­tion (my gen­er­a­tion) is yoked to the plow, forced to tend to as many of the government’s fields as it desires.

Do you need a con­spir­acy in order to cre­ate this? No — you just need badly aligned incen­tives, i.e. a rapa­cious gov­ern­ment with unsus­tain­able lev­els of spend­ing and debt, as well as the power to influ­ence the price of food, hous­ing, edu­ca­tion, and energy. But as long as the gov­ern­ment can­not live within its means, it would pre­fer us to not live within ours, so that we will have to con­stantly increase our means, regard­less of what the gov­ern­ment will take from such increased production.

Glenn Reynolds discusses marginal tax rates at Instapundit.  High marginal tax rates encourage people to ‘go Galt’ when those people can obtain extra income with extra effort (e.g. freelancers, salesmen on commission, small business owners contemplating opening for more days or hours): very often, they will prefer leisure time to the dwindling return on investment (investment of time, effort, and risk).

Of course, that is all predicated on being able to make ends meet: those who cannot earn enough to cover expenses will do whatever it takes to earn enough to cover the shortfall.  A government can thus raise the marginal tax rates without repercussions: a person in need of an extra dollar with earn $90 and let the government take $89 in taxes, if the alternative is starving, losing a job for lack of gasoline to get to said job, or not having a roof over the family’s head.

Counterintuitively, a government that is heavily in debt, or a government that wants to purchase votes with freebies to certain classes of people, wants the productive class to be irresponsible with its money.  The housing bubble, the inflation in food prices, the higher education bubble, skyrocketing health insurance costs, and higher energy costs prevent the productive class from going Galt with its marginal income.

ObamaCare is particularly pernicious: force the entire productive class to funnel large sums of money into health care spending via gold-plated plans that subsidise the non-productive class, and you’ve given people the choice between being eternally yoked to the plow or dying for lack of health care.  (Amanda Marcotte relishes the idea that we are all forced to pay for her sex life as a cost of insuring ourselves and our kids against cancer and heart failure.)

Rising food prices (influenced in no small part by the federal government, e.g. the ethanol mandate, various carrots and sticks of subsidies) yoke all people to the plow:  work more, letting the government take its pound of flesh in the process, or starve.

The housing bubble and the higher education bubble have the same effect: those who work for a living are forced to work much harder to cover the same costs as a previous generation.   Prof. Reynold’s correspondents are all in the position of having paid off houses and student loans – the spoils of having been born in a time wherein a college education cost about 500 minimum-wage hours per year and a house could be purchased on husband’s salary while the wife stayed at home.  The younger generation (my generation) is yoked to the plow, forced to tend to as many of the government’s fields as it desires.

Do you need a conspiracy in order to create this? No – you just need badly aligned incentives, i.e. a rapacious government with unsustainable levels of spending and debt, as well as the power to influence the price of food, housing, education, and energy.  But as long as the government cannot live within its means, it would prefer us to not live within ours, so that we will have to constantly increase our means, regardless of what the government will take from such increased production.

DaTechGuy on DaRadio Saturday Noon EST. WBNW AM 1120 Concord WPLM 1390 Plymouth WESO 970 Southbridge, FTR Radio, the 405 Media

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