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Government as Parasite

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The Republicans still don’t get it. They say they want a tax cut because “the surplus is the people’s money,” but their heart isn’t in it. If they truly believed that, they wouldn’t quickly add that we need a tax cut to avert a recession. They supported the tax cut before there were signs of an economic slowdown, so why reach for that justification now? Keynes is dead; let’s leave him that way.

How do they expect us to believe them when they propose to cut taxes by only a small percentage of the expected budget surplus? The House Republicans voted for an even smaller cut than President Bush proposes. If the surplus is really the people’s money, why can’t we have it all?

Well, they might say, the government needs the rest of it to do the people’s business. But that’s an opening the Democrats can drive a truck through. They are unfazed when Republicans say it’s the people’s money. In the Democrats’ view, government is the agency that spends money on behalf of all the people. For them and their constituents, it makes no sense to cut taxes in the name of the people, since it would deprive the government of what it needs to benefit the people. And since about half the income earners in the country pay little or no income taxes, the Democrats will find many sympathetic ears.

If the Republicans wish to counter the Democrats’ case, they will have to do it at the bedrock level. When the Democrats say that the surplus is the people’s money and that’s why they want to spend it on the people’s needs, the Republicans will need to point out the fundamental problem with that view. Government doesn’t spend the people’s money on the people’s needs. “The people” consists of separate individuals. Some of them produce wealth and pay taxes. Others produce little or nothing and consume taxes. The government is the transfer machine that moves money from the first group to the second. A tax cut reduces the amount of money transferred from producers to nonproducers. Thus tax-cutting is a matter of simple justice.

It would be nice to hear the Republicans say this. But they can’t be too clear about it. If they were, we might question a lot of things that they plan to do. For example, if they were to forthrightly condemn the transfer system, we might question their plan to subsidize faith-based social-service organizations. Why should the taxpayers be forced to support those groups? The Bush folks will respond that secular groups are already subsidized and the Bush plan simply would end discrimination against religious groups doing the same kind of social-welfare work. But there is a better way to end the discrimination: cut off the money to the secular groups. Let people keep their own money and decide what, if any, social-welfare activities they wish to contribute to. That’s more consistent with Mr. Bush’s message that the money belongs to the people.

He undercuts his message in other ways as well. He favors a prescription drug subsidy for low-income elderly people. In other words, he wants some people to be forced to pay for other people’s medicine. This will have serious economic consequences. For example, it will set a precedent for the wider subsidies favored by the Democrats. Worse, it will begin a process that will most likely lead to life-threatening price controls on the pharmaceutical industry. But the fundamental objection is moral: it will transfer money from producers to nonproducers. If people want to help others buy medicine, fine. But force is not justified. If the GOP really wants to sell its tax cut, it will have to explain to the American people that government doesn’t look after “the people’s” welfare. Rather, it helps certain favored groups at the expense of everyone else. It does so by taxing the wealth of producers in order to subsidize other people’s consumption, depriving the rightful owners of the freedom to consume or invest as they see fit.

In other words, the Republicans will have to identify the government as the parasite it is. But can they do that while engaging in parasitism themselves?

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.