July 9, 2011
Living BastiatBy Ryan Craig
Like many of you, I have been living through Bastiat's economic arguments, and I would like to relate them here from a personal, rather than philosophical, perspective. This helps make things more tangible, since the best teachable moments are the ones we go through ourselves.
For those of you not up to speed on your dead economists, Frederic Bastiat argued in his "Broken Window" analogy and "That Which is Seen, and That Which is Not Seen" that economic theory must take into account the whole picture, including second- and third-order effects of policy.
For example, the government institutes a tax to pay for a stimulus project. Money is collected, funneled through a bureaucracy, and then doled out to a construction company that will do the work. That is what is seen. What is not seen is where that money was to be spent had it not been taken from the taxpayer in the first place, and the results are often more positive had the money been left alone.
I was raised with a strong work ethic, so I didn't really have a "20s" -- that time in our lives spent partying and experimenting out in the world away from our parents. I graduated high school at seventeen and immediately went to college for a year and a half while working up to three jobs before joining the Army. I eventually made it back to college, earning a B.A. and M.S. I am almost finished with my PhD. I did all of this through marriage and divorce, with kids in tow.
With my work ethic, experience, and education, I have increased my earning potential and moved up some tax brackets. This doesn't mean I am immune from the job market. Far from it. I went through the first eleven months of 2009 without a full-time job. I refused to go on welfare, and I ended up burning through my savings and 401k while working part-time in a menial labor position before finding my current job. This brings us to the present.
Due to a myriad of circumstances, no taxes were withheld from my income for the first six months of 2010. I didn't think much of it because they were withheld in the latter half of the year, and the government always takes out too much. I was also working in a part of the world where people were shooting at me, which means tax exemptions.
It turns out that I did not qualify for those exemptions. Because of this, though due more in part to the fact that I have worked endlessly to better myself and increase my earning potential, I "made too much money" to qualify for tax breaks for interest paid on my house, for child tax credits, for house remodeling, or for any of the other special breaks instituted to lower the burden. My total bill to the IRS was a couple grand under what I had in my recovering savings account. Two-thirds of that amount went to the federal government.
That Which is Seen
The government took that money and threw it into various pots. To be clear, I have no problem funding the legitimate functions of government, such as defense or the court system. It is with the social welfare and redistribution programs that I find fault, because these constitute an irrational form of taxation that punishes the very people who do the right things in life and try to live without being a burden on others.
Some of my money went to pay for a health care program I am not eligible for. Some went to a retirement program that will not exist by the time I am eligible to retire. Some went to pay for food stamps for people I do not know. Some went to pay for some congressman to upgrade to first class. Some went to the president to fly Air Force One to an official speech and unofficial campaign stop. You get the point.
That Which is Unseen
Before my money was to have been spent, it would have sat in my savings account, where the bank counted it in its total assets. The addition of my money into the bank's system meant that the bank had more capital to loan out to individuals to buy cars and to businesses to expand and hire.
My portfolio was decimated, and my money was supposed to go to invest in a company drilling for oil, a move which would have helped them buy new equipment that would have allowed them to bring more oil to the market, thus helping lower fuel prices for everyone. Some was to go to various tech companies that are producing tomorrow's vehicles, medical devices, and energy sources, extending the human lifespan and making everyday activities cleaner, cheaper, and more efficient -- all while helping ensure that I do not need to depend on others for my retirement.
My roof leaks in places, and my money was supposed to go to a local company to come and replace my shingles. The operation would have employed at least five people directly, to say nothing of the people responsible for producing the shingles and the products used to attach those shingles to my house.
My gutters are rusted in some places and detaching from my house in others, and my money was supposed to go to another local company to replace my gutters. Four people would have been directly hired for this job, with second-order effects reaching the workers who produce the gutters and leaf guards.
Pets and general wear and tear have made my carpets stained and worn, and my money was supposed to go to a local hardware store that sells a specific brand of hardwood flooring. While this is a project I am doing myself, the store is local, and the manufacturing company is American.
If I had bought those goods and put those local professionals to work, all of these people and enterprises would have earned money, which would have resulted in an increase in economic activity and taxable income and events. But they did not get my business. Instead, my money went to pay for the interest on an ever-expanding national debt, for housing vouchers at HUD, and for government lawyers to argue a case in support of a horrible health care law that 26 states have formally rejected.
Whether the argument is at the state or federal level, we are in this economic mess of ours because of a philosophical breakdown. The economic theories espoused and put in practice today by the people we elect are regressive, born of jealousy and envy, and were disproven over a century ago. We will not get out of this mess until an overwhelming majority of the country stands in unison and yells "laissez-nous faire!" With the Tea Party movement and the last election, we are off to a good start.
Ryan Craig serves as an editor and writes regularly at Federalism Online.
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