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How To Explain That Seizing Money From The Rich Ruins The Economy For Everyone

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It has become a common feature for progressive politicians to propose fantastical trillion-dollar spending plans with straight faces and earn praise for their daring. This can be seen with the current Green Deal, or the Better Deal before this, or pretty much any idea put forth by Alexandria Ocasio Cortez, Elizabeth Warren, or Bernie Sanders.

It thus falls upon conservative commentators to point out just how expensive and ineffective these plans are. A Green Deal would cost trillions of dollars and hardly do anything for the environment but wreak havoc on the economy.

These politicians and their supporters respond that they will just tax the rich. They can stand to shed a few billion dollars for the greater good. A system with billionaires is immoral, according to Ocasio-Cortez. It would be like Robin Hood, robbing the rich (which curiously never includes millionaires like Sanders or Warren) in order to give to the poor for the sake of fairness.

There are so many things wrong with this thinking that people who disagree often don’t know where to begin. Usually, they point out this would not bring in nearly enough money to fund the proposed program and roll out numbers to prove this. None of this will bother the progressive camp, who have long since learned to distrust facts, because they were never interested in helping the poor anyway. Rather, they wanted to take the superrich down a peg and signal their virtue—and grow more powerful in the process.

After all, why does Jeff Bezos have so many billions? He can be just as comfortable with a few million. Why should Bill Gates, Mark Zuckerberg, Warren Buffet, and all the rest have such obscene fortunes while kindergarten teachers in the inner-city need to take on a second job to pay rent?

Tell a Story About Why We Need Wealth Creators

The response to this is often lackluster. Many will talk about incentives and how this drives innovation and risk, and how high salaries are needed for talented CEOs, and how kindergarten teachers are not as productive as company founders, and how globalization has expanded markets leading to gargantuan profits for inventors, and how the superrich really do pay a lot in taxes. Not that any of this is false—those interested in such an argument should read the book “The Upside of Inequality” by Edward Conard—but it fails to capture the popular imagination.

Rather, the response should reflect the left’s simplicity and narrative appeal. Taking their cue from novelist Ayn Rand, conservatives need to start talking about the rich as “fountainheads” and “Atlases,” individuals who are indispensable to wealth creation and general prosperity. Love them or hate them—and most of the protagonists in Rand’s novels and most real-life billionaires really aren’t that loveable—the rich are a resource.

Instead of regarding these individuals as simply the rich or the “top 1 percent,” people should see them as wealth creators. They have money because they produce something of value like a service, a product, or an idea. Whatever wealth creators do with their wealth will generally lead to more wealth, which means more jobs and ever more wealth creation. They can invest it and create new businesses or expand existing ones. They can save it so banks can invest that money or secure other investments. Or they can spend it and help others create wealth.

In only one case does wealth not lead to more wealth: taxation. Government is not a business, and it does not create things of value. When it tries, it is horribly inefficient and creates mediocre products. While all money that’s outside of government is serving some economic good, money inside government is serving little economic good and often great economic harm through overregulation and creation of unsustainable entitlements.

This Ancient Fable Is a Good Example

As previously mentioned, one can consult any Ayn Rand novel to understand this, but if one lacks the time, one can simply consider Aesop’s fable about the goose that laid the golden egg, perhaps the best story to illustrate modern economic systems.

In the fable, the goose represents the wealth creator; the golden egg represents wealth; the farmer represents the government; and the wife represents society. The fable illustrates what happens in totalitarian socialism: the government (farmer) becomes rich by robbing the wealth creator (the goose), then becomes greedy, or scared, of the goose, so it kills it to take the rest of its eggs (wealth). This is the case in Venezuela, Cuba, and North Korea, where dictators like Hugo Chavez, Fidel Castro, and Kim Jong Un have collected all the golden eggs and eliminated or have driven away all the wealth creators, leaving their countries in extreme poverty.

Had the farmer not cut open the goose for its eggs, but simply took the golden eggs each time they came out, and then spent those eggs on projects for his wife, this would then be a welfare state. Wealth creators are taxed as much as possible, and the government finds many things that should benefit the people (i.e., health care, education, modern art museums) and this goes on so long as the goose doesn’t fly away.

Unfortunately, the wealth of the farm is limited to that one goose. None of its golden eggs hatch into more wealth-producing geese because they are taken by the farmer, and none of its golden egg-laying friends will move into the farm. Eventually, the cost of the farmer’s projects will overtake the goose’s production and either the farmer will have to stop taking so many eggs or stop spending so much money—or start borrowing golden eggs from other farms. This is the case in many developed countries, which suffer from too much government spending.

There Are Some Smarter Farms

Then there’s the free market capitalist approach, where the farmer leaves the goose’s eggs alone. This goose will then give birth to geese that also lay golden eggs. These geese then give a small portion of their golden eggs to the farmer, who in turn will builds protections for them and their eggs. The other portion is given to the wife in return for goods and services (food, care for the goslings, cleaning the nests, etc.). Needless to say, the wife (society) will envy the geese for commanding such power and clamor for more of their golden eggs.

Naturally, this last farm is the most prosperous farm by far and has amenities undreamt of by its neighbors. Other golden geese flock to it and add to its fortunes and wives from other farms hope to come in and work with the golden geese. Such is the case in prospering states like Florida and Texas, and countries like Singapore and Taiwan.

Finally, somewhere in between the free market and socialist farms, there is the corporatist, or crony capitalist, farm in which the farmer treats geese that lay normal eggs as the geese laying golden ones, or worse, the farmer actually gives his golden eggs to the goose. The rich person in this setup does not actually produce something of value, but happens to be friends with the government and is thus awarded a huge contract for substandard work.

This is the problem with economic stimulus plans like the Troubled Asset Relief Program (TARP), which bailed out the superrich (gave golden eggs to otherwise normal geese) and funded bogus companies like Solyndra (treating normal eggs like golden ones) to “pull the country out of a recession” by fostering the illusion of wealth creation. It is debatable whether subsidizing Amazon’s new headquarters in New York City, which would have brought much-needed jobs, accompanying businesses, and tax revenue to the area, qualifies as shameless corporate welfare on the same level as bailing out “too big to fail” companies like GM or AIG.

Inevitably, the corporatist model falls apart since wealth is not being created, but erased, and the government goes into massive debt. They then must consider whether they should start taxing the actual wealth creators more or continue borrowing more to keep up appearances. For decades now, the federal government has chosen the latter option, happily leaving it to younger generations to bear the burden of this debt.

As the fable makes plain, economic success is defined by what a society does with its rich people—more than its poor which, as Christ says, will always be with the world. There was a time when Americans understood this and rejected the appeals of socialist demagogues. They would rightly see the government’s seizure of profits, however large for whatever purpose, as a blow to their prosperity. Today, they welcome it with open arms.

In order to reverse this trend, the gospel of the free market must be shared with masses, and not remain confined to supply-side economics wonks. The poor and their advocates have spoken, and in order to save them, society will need to first save the rich.