Unintended Consequences And The Proposed Buffett Rule
I’m 18, a Millennial, one of the “children and grandchildren” to whom politicians frequently refer. As a member of the generation that will inherit the outcome of the current political debate, I view policy decisions though the lens of my future.
Consider this parable: Nobel Prize winning economist Milton Friedman engages a group of college students in a question and answer session. A brave, idealistic student queries why Ford Motor Company fails to install a device that saves 13 dollars per car in production costs at the expense of 200 lives lost per year. His tone is accusatory and righteous. The professor defends addressing price rather than principal, pointing out that an infinite value cannot be placed on any human life. The student, asked to consider his position given conditions in which each safety guard costs 200,000,000 dollars, stumbles.
This story illustrates the point that government officials and "principled" people support policy untethered from real life consequences – intended and more often that not, unintended. Sound bites and talking points overlook the fact that most issues are subtler than is superficially apparent. In society and economics, fundamental principles exist. The free market and pricing system, for example, have proven the single greatest engine for economic growth in the history of mankind. The Obama Administration has sought to disrupt these guiding rules.
President Obama's proposed "Buffett Rule" is one such example.
I would argue that it fails on its merits:
- The government has no money of its own. It operates using the money of one group to subsidize the activities of another.
- Mr. Buffet -- a billionaire calling for a millionaire’s tax -- can easily visit www.pay.gov and donate his money directly to the treasury. As Grover Norquist notes, moral preening has not translated into the simple act of writing a check. Consider that I’m a foot soldier; without the leadership of a ranking superior, I’m lost! Mr. Buffet, please lead the way.
- The class warfare card is a ploy, full of smoke and mirrors but failing on substance. Class warfare plays well as sound bites but inevitably translates to a much broader tax for the middle class.
These arguments recognize both flaws and implications, but have proven offensive to some. Congresswoman Maxine Waters wants Tea Partiers to “go to hell” and Vice President Biden calls them “terrorists.” Civilized discourse has given way to taunting and name calling, behavior that belongs in the sand box. I would know. I’m far closer to that age than those on the Hill.
I see another consequence.
A tax on capital gains causes "millionaires" to sell the stock on which they have accrued these gains, putting downward pressure on the stock market. For the past few years, since the advent of Quantitative Easing, Ben Bernanke has printed money to boost the stock market, encouraging in part "The Wealth Effect." Accordingly, rising stock prices accompany a rise in perceived wealth. Now, I'm no Keynesian, but that increase in perceived wealth should cause more spending. The Executive Branch now proposes to tax earnings from Capital Gains; so much for the controversial stimulus policies Obama touts.
Never mind the fact that if every American citizen making over 100,000 dollars were taxed at 100 percent, it wouldn't cover an Obama deficit for even one year. Now different forces from within the government are actually working against each other. Not only has government been counter-productive for the macro economy, but it has also retarded itself.
So to all those who have relegated my generation to a talking point; here we are, in the flesh, telling you that enough is enough and we see past your rhetoric. Thank goodness I can finally vote.
