With the quasi-resolution of the fiscal cliff comes new taxes for everyone. Some of Obamacare’s 19 taxes are starting to kick in. The payroll tax cut expired, and some new taxes on the wealthy, such as the expiration of the Bush Tax Cuts and an additional 0.9 percent payroll tax for high earners as part of Obamacare, were allowed to take place.
The increased tax burden on the wealthy, driven entirely by the wishes of Democratic lawmakers, brings to light the contrasting views that Democrats and Republicans have about the economy, especially considering that those tax increases hardly put a dent in the federal deficit.
Imagine that the economy is comprised of 10 bakeries, each making 10 pies a year for a total of 100 pies. Those pies represent gross domestic product, or all taxable income. If the pies were distributed like income in the U.S. economy, the top 20 percent would get 50 pies and the bottom 10 percent would get only one pie, according to the U.S. Census Bureau’s 2007 Economic Survey of income data. Democrats and Republicans agree that this is a problem, yet they have two very different ways to go about solving it.
Democrats subscribe to what is being called “The Blue State Model,” which involves redistribution. They want to take more pies from the top 20 percent and give them to the bottom 20 percent.
Republicans don’t believe that this is effective or right. What Republicans want to do is get the government out of the way and help more people get into the workplace so that bakeries can make 11 pies each or possibly an 11th bakery can be opened.
These are policies and strategies that grow the economy, creating more pie for everyone, making us all better off. The Democratic Party’s approach discourages economic growth.
Naturally, if you’re waking up early and spending all day making pies only to have them taken away from you, you’ll probably wake up later, not make as many pies, and choose to spend more time doing economically unproductive things.
This is the big debate of our time. Republicans need to shift their pitch from defending the rich to recognizing that income inequality is a problem that needs solving.
We can solve it by creating more pies for everyone to eat, including those at the bottom.
The Democratic model never actually solves this problem. The rich can only foot so much of our nation’s growing bill. The real taxable money is in the middle class and upper-middle class, people whom both parties claim to protect. History has shown us that once entitlement programs start, they keep growing to an unsustainable level. When you can get free money, why wouldn’t you take it? Eventually, the money to fund them is going to have to come from these less-well-off people.
After winning legislative victories that got more pies to working people, Samuel Gompers, a labor movement leader of the late 19th and early 20th centuries, was asked, “Well now that you’ve won, what do you want?” He replied, “More.”
This is exactly what happens to entitlement programs. Everyone just wants more of other people’s pies until there aren’t enough of other people’s pies to give out. The people making the most pies stop working as hard, and the economy shrinks.
It’s time to help the poor by having an opportunity-focused society, not an entitlement society. It’s time for Republicans to refine their pitch to reflect this intent.
The original article can be found here.