Political Sound Bite

Free is on the rise.

Free is a wonderful sound bite for politicians. It should, therefore, be suspect. As with many things political, the implication of the word and the meaning of the word are quite different.

Free, in an economic sense, means without cost. Clearly in that sense nothing can be free. Everything has a cost. Politicians however have created another meaning. In their lexicon, free means without payment.

Without payment and without cost are vastly different issues. Without payment implies someone else will make the payment and the user will be payment free. Politicians are prepared to have the government be the payor and many voters overlook the problem.

The “free” problem

It is two part

  1. The government has no money of its own and what they use is printed, borrowed, or it is taken from those who have wealth. The taking is usually called taxing, but taking is more accurate. No one pays taxes, taxes are demanded at the risk of law enforcement on those who refuse to pay. If money is borrowed, someone will pay taxes later to repay the borrowing. I suppose you could believe borrowing could go on forever, but that seems unlikely. Printing money with no exchange for anything of value diminishes the value of money already in existence. A more subtle form of taxing.
  2. Both borrowing and printing rely on the ability of the government to tax. Failing that, the economy would blow up quickly. Ultimately everything relies on tax policy and tax policy relies on the ability to take money from those who have money. Rather like Willie Sutton’s answer to, “Why do you rob banks?” “Because that is where the money is.”
    People must come to understand the rich have limited resources too. In 2018 Forbes listed 585 billionaires in the United States. They have a total net worth of about $4 trillion. By comparison, the United States federal government spending budget for 2018 is $4.4 trillion. So the billionaires could pay for the federal government for 11 months or so. But, then there is the state and municipal budgets to fund. That looks like a short term fix. Clearly too little money there.

The real need

If we would like rich people to pay for more things on our behalf, we need more rich people. The few we have cannot make it work.

How we get more rich people?

Socialism creates dependent people and capitalism creates independent people. If you want more rich people, you must support the system that creates them. Without the rich, there will be no money for the government to spend and consequently no free stuff.

American writer, David Horowitz provides a useful summary:

“In practice, socialism didn’t work. But socialism could never have worked because it is based on false premises about human psychology and society, and gross ignorance of human economy. In the vast library of socialist theory (and in all of Marx’s compendious works), there is hardly a chapter devoted to the creation of wealth to what will cause human beings to work and to innovate, or to what will make their efforts efficient. Socialism is a plan of morally sanctioned theft. It is about dividing up what others have created. Consequently, socialist economies don’t work; they create poverty instead of wealth. This is unarguable historical fact now, but that has not prompted the left to have second thoughts.”

As always the extremes do not help us.

Find the middle where common sense can reign.

Socialism makes distribution of wealth the key, while capitalism makes the creation of wealth the purpose. Eventually people find they cannot distribute what does not exist. With elections on the horizon, the study of precedent can provide useful insight into what could work. Socialism can’t work and the left is unwilling to address that point. Pure capitalism is unacceptable too.

We should seek a responsible middle ground we can all accept as producing wealth and distributing fairly.

I help business owners, and professionals understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

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