Grubernomics

Grubernomics
It's the stupidity, stupid.
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Sunday, February 5, 2012

Barack Obama is trying to make the US a more socialist state



The ideas the President outlined in the State of the Union are based on the very model that is causing the EU to implode.

President Barack Obama delivers the State of the Union address in Washington. He pledged to fight for a 'fairer America' (EPA) 
What was it everybody used to say about the United States? Look at what’s happening over there and you will see our future. Whatever Americans are doing now, we will be catching up with them in another 10 years or so. In popular culture or political rhetoric, America led the fashion and we tagged along behind.
Well, so much for that. Barack Obama is now putting the United States squarely a decade behind Britain. Listening to the President’s State of the Union message last week was like a surreal visit to our own recent past: there were, almost word for word, all those interminable Gordon Brown Budgets that preached “fairness” while listing endless new ways in which central government would intervene in every form of economic activity.
Later, in a television interview, Mr Obama described his programme of using higher taxes on the wealthy to bankroll new government spending as “a recipe for a fair, sound approach to deficit reduction and rebuilding this country”. To which we who come from the future can only shout, “No‑o-o, go back! Don’t come down this road!”
As we try desperately to extricate ourselves from the consequences of that philosophy, which sounds so eminently reasonable (“giving everybody a fair share”, the President called it), we could tell America a thing or two – if it would only listen. Human beings are so much more complicated than this childlike conception of fairness assumes. When government takes away an ever larger proportion of the wealth which entrepreneurial activity creates and attempts to distribute it “fairly” (that is to say, evenly) throughout society in the form of welfare programmes and public spending projects, the effects are much, much more complex and perverse than a simple financial equation would suggest.
It is probably obvious that the people from whom the wealth is taken will become less willing to incur the risks that entrepreneurial investment involves – and so will produce less wealth, and thus less tax revenue. But more surprising, perhaps, are the damaging changes that take place in the beneficiaries of this “fairness” and the permanent effect this has on the balance of power between government and the people.
There is, it turns out, a huge difference between being provided with a livelihood and feeling that you have earned it. The assumption that all the wealth that individuals create belongs, by moral right, to the state, to spend on benefits or phoney job creation schemes (sorry, public infrastructure projects), is proving phenomenally difficult to expunge in Britain, so ineradicably has it embedded itself in the public consciousness.
In the US, it has had only odd historical moments of favour (Roosevelt’s New Deal, Lyndon Johnson’s “Great Society”), which have been beaten back consistently by the dynamism of a country that sees its existential purpose as being to foster and promote individual achievement and self-belief. It is bizarre that Obama should be regarded (or should regard himself) as a kind-of European who is trying to bring a sophisticated kind-of socialism to American economic life, complete with government-run health care and “fair” (high) taxes on the wealthy. If his European credentials were up to date, he would know that this was precisely the social model that is causing the EU to implode, and whose hopeless contradictions the best economic minds on the Continent are attempting, unsuccessfully, to resolve.
A vendetta against the “wealthy” is one of Obama’s favourite themes, and it strikes a peculiarly familiar note. Back here, Nick Clegg is arguing (rightly) that a tax cut for the lower paid should be accelerated on both moral and economic grounds – because people are struggling, and because allowing them to keep and spend more of their earnings would stimulate growth. But he wants to balance this with a wealth tax or some such penalty on “the rich”. Both Obama and Clegg, by an extraordinary coincidence, used the same semantic trick to try to prove the injustice of their present tax systems. In his State of the Union address, the President slipped subliminally from the fact that his likely presidential opponent Mitt Romney paid tax at a lower rate (because his income came from profits and dividends which were taxed as capital gains) than his secretary (who would have paid income tax), to the claim that Mr Romney paid less tax than his secretary.
Mr Clegg made exactly the same charge against a putative hedge fund manager who “paid less tax” than his cleaner, neatly obscuring the fact that it was the rate of tax that was lower, not the amount which was paid. Needless to say, both Mr Romney and the imagined hedge-fund manager pay vastly more tax than their respective secretaries and cleaners. (The top 1 per cent of earners pay nearly a third of all federal taxes in the US.)
So what does this kind of verbal trick tell us about the honesty – or the desperation – of this argument? At the very least, it is crass populism designed to provoke a particularly counterproductive form of class resentment. What is needed here and in the US are tax cuts for the many, not the few, to adapt Mr Brown, and less demonising of the sorts of people who are able to invest and create the real wealth that will be our only chance for economic salvation.
Obama is clearly living the Left-liberal dream, which still survives in small pockets of American life. He wants to import the democratic socialism that Europe embraced after the war, which was, for European cultural reasons, imbued with aristocratic paternalism and Marxist notions of bourgeois guilt. But neither of these things are part of the American historical experience. The Left-wing intellectuals, including Obama himself, who adopt this language are talking dangerously uninformed rubbish: if democratic socialism was ever a solution to Europe’s problems (and the present crisis is making that seem less and less likely), it is certainly not an answer to any question that Americans are likely to ask.
The United States is a country that was invented to allow people to be free of domination or persecution by the state. Its constitution and political institutions are specifically designed to prevent the federal government from oppressing the rights, or undermining the sense of responsibility, of the individual citizen. If it ceases to stand by that principle, then it will suffer a catastrophic loss of purpose and identity – as well as making a quite remarkably stupid and unnecessary mistake.