Now that McDonald’s has started playing Christmas music, it is time to start thinking about Santa. The second-to-last paragraph of “Diagnostics and Therapeutics in Political Economy” by Robert Higgs offers a seasonally appropriate comparison:
Many Americans now believe many things about their government that are false, and they expect much from the government that the rulers cannot provide. The public at large embraces myths about what the government can do, what it actually does, and how it goes about doing it. Only people enamored of such myths can support, for example, a gigantically expensive health-care “reform” at a time when the present value of the government’s promised future Social Security and Medicare benefits alone amounts to several times the current GDP. (I am disregarding here the interested parties who expect to reap short-run pillage from an intrinsically doomed system.) Until more people come to a more realistic, fact-based understanding of the government and the economy, little hope exists of tearing them away from their quasi-religious attachment to a government they view with misplaced reverence and unrealistic hopes. Lacking a true religious faith yet craving one, many Americans have turned to the state as a substitute god, endowed with the divine omnipotence required to shower the public with something for nothing in every department – free health care, free retirement security, free protection from hazardous consumer products and workplace accidents, free protection from the Islamic maniacs the U.S. government stirs up with its misadventures in the Muslim world, and so forth. If you take the government to be Santa Claus, you naturally want every day to be Christmas; and the bigger the Santa, the bigger his sack of goodies. This prevailing ideology constitutes probably the most critical obstacle to reductions in the government’s size, scope, and power. Getting rid of this ideology will be diabolically difficult, if possible at all.
The author has a Ph.D. in Economics from Johns Hopkins (compared to my meager collection of econ courses taken), but I believe him to be wrong about Social Security and Medicare benefits. As pointed out in my blog postings on While America Aged, Congress has the authority to change the Social Security age of eligibility to 75 or 80 or to adjust Medicare so that anesthesia returns to the good old days of whiskey and a bullet to bite. It is states and local governments that are truly stuck with their pension and health care promises.
For Americans who don’t pay income tax, perhaps the government truly is Santa Claus. According to the Brookings Institution and the Urban Institute, roughly 47 percent of Americans either pay no tax or a negative tax (i.e., the government sends them money every year through such programs as the Earned Income Tax Credit). So you’d think that any new government spending program would attract at least 47 percent of potential voters. On the other hand, millions of people who do not suffer the scourge of income tax still get hit with assorted other taxes at both the state and federal level.
What am I telling people that I want from Santa this year? World peace, of course (because I want to win the Nobel Prize after Sandra Bullock gets hers). And that I want Barack Obama to become immortal and then to be elected President-for-Life.
Where do you get the 47% figure from? The table you link to says that 46.9% of tax units (I assume these are like households) pay zero or negative income tax. But a lot of these households pay payroll tax.
In fact, only 23.9% of households pay negative sum of income and payroll taxes. You may still think this is very high, but it’s a lot less than 47%. You cited this figure to argue that any government spending program would attract 47% of potential voters. This might be correct if you believe very strongly in the separation of the Federal government’s general fund and the various Social Security trust funds.
Guan: The table and my posting were specific to personal income tax. As noted at the bottom of the second-to-last paragraph, I noted that millions of people “get hit with assorted other taxes”, by which I meant to include payroll tax, sales tax, property tax, excise taxes, car registration fees, and anything else the creative minds of government can think of extracting.
On the other hand, here are a whole bunch of economics PhDs, including a couple of Nobel laureates, urging health care reform as necessary for the fiscal health of the nation. I tend to believe them over the guy you cite. Since every other industrialized nation in the world manages to use government to provide health care more cheaply and effectively than we do, it doesn’t seem that it’s impossible to do so here, even if our broken institutions make it very difficult.
Phil: Thanks for making that clear.
I guess payroll tax is a little different from the other products of government creativity in that it is levied by the federal government and for most people who pay little or no federal income tax (and are not subject to the cap on payroll tax), the payroll tax is essentially like an income tax and has roughly the same tax basis. But you are absolutely right about spending programs at the state or local level.