More Fun When You Share
This week I received a credit card offer that suggested I share duplicates of my card with family and friends. "It's more rewarding when you share," the offer promised. Just call the 800 number, and we'll zip a duplicate of your card to any of your family members or friends.
Of course, you'll be responsible for the charges. That's what sharing is all about.
And that conception of sharing has been showing up everywhere lately. It was front and center in Hillary Clinton's 2008 presidential campaign, when she screeched that she'd like to seize ExxonMobil's profits and redistribute them to "smart" green energy companies -- smart start-ups like Solyndra, not corporations like Exxon that actually produce something of value.
The same idea underlies Obama's constant talk of "fairness" and of taxing those who "can afford to pay a little more." Obama is simply reciting the fundamental Marxist doctrine of equal distribution of wealth. That idea of equality never translates into reality in actual Marxist societies -- far from it. But it is an idea that can be useful to a cynical politician appealing to the baser instincts of lower-income voters. It is the basis of Obama's 2012 reelection campaign, and of every socialist power-grab in history.
It sounds so civilized, so reasonable, and so humane. By taxing those who can afford to pay, society as a whole will be uplifted. Even the rich will be better off in a society in which poverty has been eliminated -- an idea that Michael Bloomberg stressed while taking the plunge to give away half his accumulated wealth. The best thing a billionaire can do with his money, Bloomberg said, is "to make the world better." "Your kids get more benefit out of your philanthropy than you will," he added.
Obama's billionaire buddies, Warren Buffett and George Kaiser, have jumped on the fairness bandwagon as well. Buffett and Kaiser are just two of the nation's über-rich to take the Giving Pledge -- a promise to donate half of their wealth to charity before or upon their deaths. (Others include Larry Ellison, Ted Turner, and T. Boone Pickens.) This kind of sharing draws praise from the liberal media, and of course from the president, but does it benefit the poor whom it is largely intended to aid?
When a wealthy individual like Warren Buffett or Bill Gates transfers his capital to a nonprofit foundation, that capital is eventually drained from the private sector. Shares of Microsoft or Berkshire Hathaway are sold to fund the charitable activities of the nonprofit in question. In many cases, those activities are inefficient and wasteful, if not destructive. Had the capital remained within the private sector, it would have produced a healthy return (averaging nearly 8% long-term for the S&P 500). Compounding at 8%, the invested capital would have added greatly to the nation's growth rate, and this economic growth would have created jobs, tax revenues, and increased prosperity for all.
Compounding at 8%, Gates's $60-billion fortune would swell to $2.814 trillion over a period of fifty years. Over a hundred years, it would reach $1,320 trillion. But having been gifted to a charitable foundation which is obligated to spend down its assets "promptly," that capital will soon disappear. It will no longer be available to spur growth and create jobs.
The best way for Buffett and Gates to help the poor would have been to allow their fortunes to remain invested in the private sector. Unfortunately, America's elite now seem to view the private sector as little more than a piggy bank to be raided to support their favorite social causes. But the problem with raiding the piggy bank is that soon enough, it is empty.
Raiding the piggy bank is an idea that appeals to liberals everywhere, but especially in Europe. Last week, the European Commission's executive body recommended a financial transactions tax that would impose a 0.1% tax on the purchase or sale of stocks and bonds and a 0.01% tax on derivatives contracts. That may not sound like much, but it is estimated that it would reduce future GDP by 0.5% and investment returns for retirees and others by a much greater amount.
With turnover within a typical stock mutual fund running over 100%, a buy-and-sell transaction tax would reduce returns by 0.2% annually. Compounded over ten years, that amounts to slightly more than 2%. Over a fifty-year period of investing, taking compounding into account, the transaction tax would reduce living standards for retirees by 30%. And that number does not take into account an even greater reduction in returns due to lost growth in asset value resulting from a 0.5% reduction in annual GDP.
The transaction tax, in other words, is a prescription for larger government, less economic and personal freedom, and a lower standard of living. But socialists, like those on the European Commission, do not seem to care about economic growth or living standards. They care far more about sharing the wealth.
What other reason could there be for the justification offered by Algirdas Semeta, EU tax commissioner, for the transactions tax? "It's fair to tax the financial sector," he said. "The financial sector plays a central role in the economy."
Huh? Either Semeta is saying that the entire economy belongs to government, and every sector of the free market operates at the discretion of government, or he means that the financial sector is a big pot of money, and it's "fair" to take money from anyone who has a lot of it. It would seem that Semeta is either a communist or simply a thief. Or perhaps both.
The same can be said about President Obama, since "fairness" is the philosophical justification for everything he has done. As Obama the candidate said in a 2008 commencement address at Wesleyan University, "[f]ocusing your life solely on making a buck shows a certain poverty of ambition[.] ... It's only when you hitch your wagon to something larger than yourself [like government] that you realize your true potential."
This is a president who is contemptuous of "just" making a living, "merely" providing for your family, "simply" working and saving. Like the EU Commission and his billionaire pals, he has a much better idea. Why not hand over everything you have worked for and let government dispense it "fairly" to those in need?
That conception of fairness underpins every legislative and administrative action of Democrats in Washington. Liberals are bewitched by the perverse notion that a temporary handout actually aids the poor, when instead it is economic opportunity that is needed. And the only way to assure economic opportunity is by safeguarding the private sector against the rapacious growth of government.
Jeffrey Folks is author of many books and articles on American culture and politics.