The Dangers of Spreading the Wealth

In this week's duel of "gotcha" recordings, Mitt Romney sounds callous toward those who have grown dependent on government programs.  But President Obama may have more to fear from the latest reminder that he "believes in redistribution" of wealth.  

After all, it was around this point in the 2008 campaign that a confident and cruising Obama campaign was put on the defensive after its candidate gave a revealing answer to a question posed by Joe (the Plumber) Wurzelbacher.  "When you spread the wealth around," candidate Obama opined, "it's good for everybody."

Would a President Obama be as hostile to American free enterprise as those words suggested?  We're nearly four years into the process of finding out.  In retrospect, Americans would have been wise to look past his inspiring (but vague) calls for "hope and change" and study instead candidate Obama's economic philosophy.  Recall that in a Democratic Party debate, Obama had expressed preference for hikes in capital gains tax rates "for purposes of fairness," even if the hike had the effect of reducing tax revenues.

Now we see the consequences of a philosophy that prizes arbitrary notions of fairness over pragmatic concerns about what works.  Facing persistent high unemployment and ballooning deficits, we have learned that public policies that aim to "spread wealth" are not conducive to "creating wealth," and our nation desperately needs the latter.

No doubt, spreading wealth by expanding the federal government works out well for the "spreaders."  Of the fifteen counties in the U.S. with the highest median income, ten are located in the Washington, D.C. area.  The city of federal workers has not suffered the job market woes or housing price declines that have hit virtually every other metropolitan area since the financial crisis of 2008.  It seems there's a comfy living to be made in spending taxpayers' money.

But does it help the rest of us? 

President Obama's largest attempt to "spread the wealth" was the $800-billion stimulus package that passed Congress during the first weeks of his presidency.  The logic of stimulus spending is that government can boost total demand to induce more production and create more jobs.  But government cannot create wealth, only spread it.  In spreading it, the Obama administration engaged in cronyism (rewarding constituencies key to his re-election, like the unionized employees of state and local governments).

The expanded role of government also has the unintended consequence of misdirecting the actions of honest players in the economy.  An activist Federal Reserve has made it more lucrative for banks to hold government debt and speculate on changes in the interest rate, instead of sticking to its traditional role of lending to businesses that may fuel the economy of tomorrow.

To unleash the productive powers of the economy, citizens must force a retreat by government and shrink its size and scope.  This time, saving our economy will require actual cuts in government spending (not merely in rates of growth) -- something neither political party has been willing to do.

To change the national mindset away from the philosophy of "spreading the wealth," we need more citizens to become activists in defending free enterprise.  We need citizens who reject the philosophy of "spreading the wealth" to show up not just on Election Day, but after. 

Citizens need to be prepared to do battle in the war of ideas.  "Wealth spreaders" often attack defenders of the free market by creating simplistic straw-man arguments they can defeat.  Because we believe we have too much government, they say we want no government.  Because we critique government programs generating waste and creating perverse incentives, they say we have no sympathy for the intended beneficiaries of those programs.  Because we believe that the complexity of regulations is strangling free enterprise, they accuse us of a naïve faith that the free market will generate perfect outcomes.

In fact, though, it is the defenders of big government who are being naïve and simplistic by believing they can "spread wealth" without harming the incentives to generate wealth.

Better outcomes cannot be willed into existence.  They come from millions of participants in a free market trying to win customers by innovating and driving down costs.  When there is a level playing field, free enterprise spawns competition and cooperation that benefits us all with more wealth, more jobs, and greater choice for consumers.  The Tea Party groundswell recognizes that Washington bureaucrats have harmed our country by trying to pick winners, by penalizing success, and by threatening arbitrary rule changes.  It's time for citizen-activists to force activists in government to the sidelines, to show just how unnecessary they are to the betterment of our country -- and to show all Americans that free enterprise, not wealth redistribution, is good for everybody.

Brad Lips is the CEO of the Atlas Network, which will convene its annual Liberty Forum -- a gathering of free-market think-tank leaders from across the U.S. and 40 other countries -- in New York City on October 3-4.  More information is at AtlasNetwork.org.

In this week's duel of "gotcha" recordings, Mitt Romney sounds callous toward those who have grown dependent on government programs.  But President Obama may have more to fear from the latest reminder that he "believes in redistribution" of wealth.  

After all, it was around this point in the 2008 campaign that a confident and cruising Obama campaign was put on the defensive after its candidate gave a revealing answer to a question posed by Joe (the Plumber) Wurzelbacher.  "When you spread the wealth around," candidate Obama opined, "it's good for everybody."

Would a President Obama be as hostile to American free enterprise as those words suggested?  We're nearly four years into the process of finding out.  In retrospect, Americans would have been wise to look past his inspiring (but vague) calls for "hope and change" and study instead candidate Obama's economic philosophy.  Recall that in a Democratic Party debate, Obama had expressed preference for hikes in capital gains tax rates "for purposes of fairness," even if the hike had the effect of reducing tax revenues.

Now we see the consequences of a philosophy that prizes arbitrary notions of fairness over pragmatic concerns about what works.  Facing persistent high unemployment and ballooning deficits, we have learned that public policies that aim to "spread wealth" are not conducive to "creating wealth," and our nation desperately needs the latter.

No doubt, spreading wealth by expanding the federal government works out well for the "spreaders."  Of the fifteen counties in the U.S. with the highest median income, ten are located in the Washington, D.C. area.  The city of federal workers has not suffered the job market woes or housing price declines that have hit virtually every other metropolitan area since the financial crisis of 2008.  It seems there's a comfy living to be made in spending taxpayers' money.

But does it help the rest of us? 

President Obama's largest attempt to "spread the wealth" was the $800-billion stimulus package that passed Congress during the first weeks of his presidency.  The logic of stimulus spending is that government can boost total demand to induce more production and create more jobs.  But government cannot create wealth, only spread it.  In spreading it, the Obama administration engaged in cronyism (rewarding constituencies key to his re-election, like the unionized employees of state and local governments).

The expanded role of government also has the unintended consequence of misdirecting the actions of honest players in the economy.  An activist Federal Reserve has made it more lucrative for banks to hold government debt and speculate on changes in the interest rate, instead of sticking to its traditional role of lending to businesses that may fuel the economy of tomorrow.

To unleash the productive powers of the economy, citizens must force a retreat by government and shrink its size and scope.  This time, saving our economy will require actual cuts in government spending (not merely in rates of growth) -- something neither political party has been willing to do.

To change the national mindset away from the philosophy of "spreading the wealth," we need more citizens to become activists in defending free enterprise.  We need citizens who reject the philosophy of "spreading the wealth" to show up not just on Election Day, but after. 

Citizens need to be prepared to do battle in the war of ideas.  "Wealth spreaders" often attack defenders of the free market by creating simplistic straw-man arguments they can defeat.  Because we believe we have too much government, they say we want no government.  Because we critique government programs generating waste and creating perverse incentives, they say we have no sympathy for the intended beneficiaries of those programs.  Because we believe that the complexity of regulations is strangling free enterprise, they accuse us of a naïve faith that the free market will generate perfect outcomes.

In fact, though, it is the defenders of big government who are being naïve and simplistic by believing they can "spread wealth" without harming the incentives to generate wealth.

Better outcomes cannot be willed into existence.  They come from millions of participants in a free market trying to win customers by innovating and driving down costs.  When there is a level playing field, free enterprise spawns competition and cooperation that benefits us all with more wealth, more jobs, and greater choice for consumers.  The Tea Party groundswell recognizes that Washington bureaucrats have harmed our country by trying to pick winners, by penalizing success, and by threatening arbitrary rule changes.  It's time for citizen-activists to force activists in government to the sidelines, to show just how unnecessary they are to the betterment of our country -- and to show all Americans that free enterprise, not wealth redistribution, is good for everybody.

Brad Lips is the CEO of the Atlas Network, which will convene its annual Liberty Forum -- a gathering of free-market think-tank leaders from across the U.S. and 40 other countries -- in New York City on October 3-4.  More information is at AtlasNetwork.org.

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