In 2008, President Obama famously said, “I think when you spread the wealth around, it’s good for everybody.” 8 years later, in a speech given in South Africa, President Obama reiterated the virtue of redistribution of wealth (hereinafter called Redistribution). “There’s only so much you can eat. There’s only so big a house you can have. There’s only so many nice trips you can take. I mean, it’s enough…You don’t have to take a vow of poverty… rich people are still rich, but they’re giving a little bit back to make sure that everybody else has something to pay for universal health care and retirement security, and invest in infrastructure and scientific research that builds platforms for innovation.”1 Progressive politicians like President Obama tout Redistribution as simple, pro-growth and democratic. Senator Elizabeth Warren, a Progressive, advanced the same message in her 2-Cent Wealth Tax Plan during her 2020 presidential campaign.2
Joseph Goebbels is alleged to have said: “If you tell a lie big enough and keep repeating it, people will eventually come to believe it.” The evidence for the assertion that Redistribution is simple, pro-growth and democratic is non-existent, and in other cases the available evidence points in the opposite direction: Redistribution is complex, anti-growth and oppressive. In a populous society where material suffering is a scandal, Redistribution will only result in chaos, poverty and oppression.
Redistribution Is Complex
Redistribution, like any economic policy in a complex society, produces a series of effects, some seen and others unseen. Frederic Bastiat, a French economist and politician, writes, “In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause–it is seen. The others unfold in succession–they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee.”3 Senator Warren’s “simple” 2-Cent Tax Plan is an excellent illustration of “That Which is Seen, and that Which is Not Seen.”
According to Senator Warren, “only” 76,000 households will be slightly inconvenienced by her plan but millions will be benefited by it. Among the 76,000 households, the ones with less than $1 billion in net assets, they “only have to contribute 2 cents on every dollar over $50 million.” Those with net assets over $1 billion, they “only have to contribute 2 cents on every dollar over $50 million and 6 cents on every dollar over $1 billion.” According to Senator Warren, “[t]his small new tax on the tiny sliver of ultra-rich families will bring in $3.75 trillion over the next ten years.”
The unseen but foreseeable effects of the Plan are many and here are two of them:
1) The 76,000 households are not the only households which are inconvenienced by the Plan. Most people do not keep their money under the mattress. They spend it, donate it, or invest it. The Plan will take resources from the private sector. There will be less private spending, donation and investment. This will have a significant negative economic impact on people who would have benefited from these lost economic activities.
2) Another group of people who are negatively impacted by the Plan are unseen because they are either not old enough to vote or they are not even born yet. The $3.75 trillion tax revenue will unlikely be realized because the billionaires and half billionaires will move their assets to some tax havens. On the other side of the equation, the actual cost of funding those “common goods” under the Plan will be far greater than the estimated. When a good is free, the demand for it will increase. In the end, the Plan will contribute to a further increase in our national debt($22 trillion as of 2019) and the nation’s unfunded liabilities($125 trillion as of 2019).4 Instead of leaving a heritage to our posterity, we straddle them with a crushing financial burden. Instead of being remembered as the Greatest Generation or the Compassionate Generation, the current generation will likely be remembered as the Narcissistic Generation.
The cost and benefit analysis for any Redistribution plan is never simple. Progressive politicians, like President Obama and Senator Warren, are either inept or purposely misleading when they tell you otherwise.
Redistribution is Socialism
Many supporters of Redistribution envision production and distribution as two distinct events that follow one another. You bake the cake, then you decide how to slice it. They believe production is governed by the laws of economics, but distribution is for society to decide. Since Redistribution only affects the slicing of the cake, it will not cause the kind of economic catastrophes facing socialist countries.
The following example illustrates the fallacy of this Production/Distribution Nexus.5 In her Race and Gender Equity mid-term test, Student Jane got an A and her fellow student John got a C while the class average was B. Suppose the Professor believes that there should be a more equitable distribution of grades and assigns everyone a B. This second distribution of grades will affect how hard John and Jane will study for the Final examination. This is the same with Redistribution. Redistribution is a secondary distribution which the government uses its coercive power to modify the primary distribution. The secondary distribution will destroy incentives for individuals to perform the best he/she could. The aggregate production of wealth will suffer as a result.
When an individual does not own the fruit of his/her labor, he/she has no incentive to work hard. Violation of property rights can happen in the production or the distribution aspect of the economic process. The right to private property, whether it be a toothbrush or a dollar, gives individuals the right to use what they own as they see fit. It gives individuals the right to possess, to control, to exclude, to derive income, and to dispose of what they own. Redistribution infringes upon individuals’ property rights. Redistribution fundamentally moves the economic process from a system based on private property toward collectivism (community of property). If the government has the right to take 2 cents out of every dollar from one person and give it to someone else, the logical conclusion will be that the government has the right to take from “each according to his ability” and to give “each according to his needs.”
What makes socialism, a form of collectivism, an economic disaster is the fact that it violates the institution of private property. Collectivism destroys the incentive for people to do their best work. This translates to reduction in quantity and quality of material wealth in a society. The economic ramifications of collectivism are well-documented. Venezuela, an oil rich country, is a good example of what happens when a society adopts socialism. Venezuela’s GDP per capita in the 1950s was about the same as West Germany. By 2015, under the socialist regime, 76% of Venezuelans were in poverty. The inflation rate was 9,585.5% at the end of 2019.6 Today, Venezuelans queuing for food at the state-run supermarkets is not an uncommon sight.
President Reagan reminds us that “Freedom is never more than one generation away from extinction.” It is also true that countries, like families, can go as the Scots say “from shirtsleeves to shirtsleeves in three generations: father buys, son builds, grandson sells, and great grandson begs.”
Redistribution Destroys the Rule of Law
The word Redistribution conceals a gross sophism as it is made to believe, similar to a donation to the United Way, that money flows from one group/groups to another group/groups. The following is a more accurate description of Redistribution. Taxpayers, under the penalty of fine or imprisonment, relinquish the amount of money that the government deems right to confiscate from them. Then the government distributes the money to the “deserved” group/groups. The implicit assumption is that the government has the right to impose its value on the merits between the needs of different people. It has the right to determine how well off particular people shall be and what different people are to be allowed to have and do.
With Redistribution, we are moving away from a society of rule of law to a society of the rule of men. Under the Rule of law, the government in its actions is bound by rules fixed and announced before-hand, and the rules are applied in the same manner to all. Rule of law is about treating people equally. A sports competition with impartial referees is an example where the rule of law is practiced in private activities. The practice of affirmative action in public universities is a well-known example of arbitrary rule which gives preferential treatment to a particular group/groups in order to create equal outcomes. As the saying “life is not fair” becomes less and less acceptable, we see the rule of men become more and more acceptable.
It is well for us to bear in mind that:
(1) Government is a monopoly operating ultimately by threat or actual use of violence.
(2) Government is not composed of disinterested, wise, prudent, and all around virtuous individuals. As Madison writes in Federalist 51, ”But what is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.”7
(3)Government garners more power as it confiscates more resources from individuals.
2015 was the 800 anniversary of the Magna Carta, which has been described as the signal document in the move from the “law of the ruler” to the “rule of law.” Rule of law is the foundation of the freedom of the individual against the arbitrary authority of the ruling class. It is the bedrock of a free society. With Redistribution, a staggering political inequality is created in the name of economic equality. We do not have a limited government anymore. In effect, Redistribution reduces everyone to the level of a supplicant of politicians. As Friedrich Hayek said, “A claim for equality of material position can be met only by a government with totalitarian powers.”
The Moral Temptation of Redistribution
It is understandable that Progressives believe in Redistribution. They believe government is the engine to progress. Christians who support Redistribution believe this policy will create a more just society. They abhor the materialism of the rich and lament the suffering of the poor. They found the inequality of material conditions in a land of plenty unjust. Pastor Timothy Keller, in Generous Justice, writes, “… the laws of social justice that have to do with the forgiving of debts, the freeing of slaves, and the redistribution of wealth…”8 Pope Francis, the leader of 1.2 billion Catholics, called for “the legitimate redistribution of economic benefits by the State.”9
Their moral indignation resonates with human moral intuition and their message has a tremendous impact on the Christian communities. Unfortunately, people on moral high ground often see no need for complex cost and benefit analysis for policy choices. For them, intention is all that matters, results are not relevant. Reducing the complex economic process into a zero sum game fits neatly into their moral worldview of the rich robbing the poor, whether in a given society or among nations. But the devil is in the details. As the zero sum game representation of the US economy is erroneous, economic policy based on it may sound good, but it will not work as intended. In their zeal to help the “seen” neighbors, they fail to be critical of the unintended consequences of the policies they advocate.
Margaret Thatcher, Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party from 1975 to 1990, said, ”No one would remember the Good Samaritan if he’d only had good intentions; he had money as well.” Christians should resist the temptation to leap from a biblical truth, that what belongs to an individual belongs to God, to the conclusion that what belongs to an individual belongs to some abstract entity like the Society or State. Fuzzy concepts like “relativization of private property” are not harmless, they undermine the institution of private property. The fact is that the Society/State, unlike God, does not produce wealth. Unlike manna from the sky, the amount of material goods that are available depends on how hard each individual works and how best each individual utilizes the limited resources. Unlike the City of God, the City of Man is populated by fallen human beings whose behaviors are guided by narrow self-interest and whose needs are unlimited. Upholding the institution of private property is not about protecting the rich. It does not say that Governor Pritzker deserves $4.3 billion. But it does say that it is not up to the Society/State to determine how much of the 4.3 billion Pritzker can keep. It is about protecting an institution that is vital to the order of a society and the material well-being of millions of people. Human nature and scarcity of resources, like the law of gravity, are stubborn facts of this side of heaven.
In their desire to “immanentize the eschaton” so that there will be no more poor, many Christians put their faith in the ability and integrity of the government. Their faith in the existence of such an omniscient and ethical government not only is incongruous with what the Bible says about the fallibility of human nature, but also blinds them to the many evils of an unlimited government. Christians, like everyone else, are not immune to the Progressive Movement. Progressive ideas such as distributive justice are taught in universities, seminaries and Christian ministries (I have a few of these Christian organizations in mind. If you are interested, email me for more information). The Progressive idea of making people equal(distributive justice) is confounded with Christian’s precept of treating people equally as each individual bears the image of God. The former justice is the antithesis of Christian freedom and should be soundly reputed.
Conclusion
Redistribution is never a good idea because it does not work as intended. Redistribution only works in small communities where the members disavow material comfort. Redistribution is complex, causes disincentive to produce wealth and leads to unlimited government. It will only result in economic, social and political disasters. The experience of previous generations teaches us that, given human nature, the principle of private property and rule of law are the best principles of social order for alleviating human suffering. It is an unfortunate fact that these principles affect different people differently because people are different. Anatole France observed that “The law,…, forbids the rich as well as the poor to sleep under bridges, to beg in the streets and to steal bread.”10 But the alternative is an arbitrary government which will only lead to tyranny.
Footnotes
- https://time.com/5341180/barack-obama-south-africa-speech-transcript/
- https://2020.elizabethwarren.com/toolkit/
- http://bastiat.org/en/twisatwins.html
- https://fee.org/articles/18-facts-on-the-us-national-debt-that-are-almost-too-hard-to-believe/
- Parrot Talk: The Repetition of Common Fallacies, Anthony de Jasay, Cato Journal, Vol 28, No. 1
- https://www.reuters.com/article/us-venezuela-economy-idUSKBN1ZY2YQ
- https://founders.archives.gov/documents/Madison/01-10-02-0279
- https://timothykeller.com/books/generous-justice
- https://news.yahoo.com/pope-urges-legitimate-redistribution-wealth-180649136.html
- https://allpoetry.com/quote/by/Anatole%20Francel