Robbing Mattresses

Editor’s Note: Originally published at The Roots of Liberty October 2019. Like a bad penny, wealth and unrealized-gain taxes keep burbling forth from the lips of our Best-and-Brightest, so today I offer a slightly updated revisit.

Other People’s Money (OPM) is a wonderful thing, especially when those Other People have a lot of it and you have a lot of ideas as to how it should be spent. Progressive economics, distilled down to its essence, brings us to that simple conclusion.

One problem with this viewpoint, of course, is aptly reflected in Hedley Lamarr’s lament:

Unfortunately there is one thing standing between me and that property – the rightful owners.

Since blatant armed robbery by the government is something that would still shock the sensibilities of too many voters, our progressive friends have been engaging in a long-con indoctrination, amassing buckets of word salad from purportedly esteemed economists and other experts while simultaneously pounding the messages that “wealth inequality” is itself deceitfully-derived, unjust, and a prime contributor to the plight of the poor and the working classes.

This multi-pronged attack, covering legitimacy, morality, and outcome, overlaid with convoluted and opaque analyses that the motivated and covetous can point to, is, as before, distilled down to its essence, all about taking OPM without it seeming like what it is: armed robbery.

“Taxation is theft,” goes a libertarian mantra. But, that’s not quite accurate.

First, as I’ve argued on these pages before, there is a case to be made for the legitimacy of fee-for-service payment for some things government does. Drive on a public road, pay for its construction and upkeep, via some mechanism. Ditto for national defense, the court system, law enforcement, and some municipal services. We can debate the mechanism, but the premise that we should pay for the things that we use is one that makes sense to most people.

Second, theft is an inadequate description of what government does, when it takes your money for non-fee-for-service purposes. A thief merely takes what’s yours when you’re not looking. What happens to you, though, if you don’t pay your taxes? Ultimately? If you resist an escalating sequence of demands, you will eventually be accosted by law enforcement officials, who will point guns at you. At that point, you can either continue to resist, in which case you will be subject to physical violence, or you can comply, in which case either your property will be taken against your will or you will be incarcerated (and therefore put at risk of physical violence). The reality is that taxation that is not “fee-for-service” is armed robbery, not mere theft. That armed robbery is made legal by people who covet OPM, who themselves were put into power by people who covet OPM.

This taking is justified in countless ways, including the progressive mantra “taxes are the price we pay to live in a civilized society.” This is a nasty bit of generalization/conflation that erases the distinction between paying for legitimate functions of a limited government and the overt taking of money from someone merely to give it to someone else (with a vig taken out to support the bureaucracy, of course).

In an era where appeal-to-expertise is becoming more and more popular (scientists say! Economists say! Bill Gates and Warren Buffet say!), there’s a clear market for the pedigreed who cobble together “expert opinions” that justify armed robbery to people who are eager that it be justified. Barack Obama and Elizabeth Warren, for example, told us “you didn’t build that,” in reference to the public infrastructure that we all use. Indeed, I didn’t build the road I drive on, but I pay for my use of it with gasoline taxes, registration and other fees, tolls, property taxes, income taxes, sales taxes, and the like. If I stopped using the roads, all the goods and services that do use the roads would continue to pay those taxes and fees, and pass that cost on to me. But, if I went off the grid, if I moved out to Alaska and lived entirely off the land, my association with the roads would end, and I’d be under no further obligation to participate in their upkeep. That’s rational and reasonable, and fits into the concept of fee-for-service I discussed above.

However, that idea is anathema to the likes of Obama and Warren, who envision wealth creators as being under an obligation of eternal servitude to the State and its embodiments, the politicians and bureaucrats. They are takers, and their aim is to maximize the plucking of society’s geese. A big part of that strategy is convincing the voters who they need to put them in power that the geese don’t deserve to keep what they have, that plucking them is moral and wholly different from the armed-robbery reality.

The glitterati, literati, and intelligentsia have made themselves gaga and goo-goo over economist Thomas Piketty and his 2014 book Capital In The Twenty-First Century. It’s their Communist Manifesto, their People’s History of the United States, their Inconvenient Truth, their Handmaid’s Tale. They’ve elevated Piketty to the pantheon of progressive icons, because they now have a big fat paperweight/door stop of a book at which to point and say “See?! It’s proper that we take wealth away from the wealthy!!” Odds are, though, that most of those who appeal-to-authority by citing Piketty haven’t actually read the book. Or, for that matter, any of the critiques, deconstructions, and rebuttals of Piketty’s assertions. These aren’t simply differences of opinion. Piketty’s data is flawed in multiple ways, for one thing. His economics are zero sum, also a fundamental error/falsehood (one that countless progressives also make). He shows a misunderstanding of how markets and supply-and-demand actually work, and crafted a theory of inherited wealth that runs counter to a reality that’s been witnessed throughout history and across cultures. And, he and all those who cite his work treat wealth inequality as presumptively bad, without either explaining why or citing proof of its harmful nature.

That last bit is the kicker. People make statements like:

The world’s richest 1 percent, those with more than $1 million, own 45 percent of the world’s wealth. Adults with less than $10,000 in wealth make up 64 percent of the world’s population but hold less than 2 percent of global wealth.

and rattle forth countless charts and statistics to emphasize and re-emphasize these facts (I haven’t fact-checked them, but that’s another matter), obviously intending to intimate that this is a Bad Thing. And, indeed, many have been convinced that it is a Bad Thing merely through repetition with ominous tone.

First, the why. People behave irrationally when it comes to OPM, and envy and spite will often cause them to make choices that hurt them financially rather than see someone else benefit more than they do. If someone offered you $10,000, but your acceptance would result in someone you don’t like getting $100,000, would you still accept? Studies have shown that many would not, even though it leaves them poorer. This stems from an innate human desire to believe that the world is a fair and just place, and many bristle enough at the idea of someone they dislike receiving an undeserved windfall to harm themselves so as to keep it from happening.

Second, the how. Like all elements of human nature, the desire to believe in justice is rife for exploitation by the power-hungry and self-serving. By downplaying things like individual effort (it’s apparently now a sign of toxic whiteness to believe in individualism) and the concept that one owns the fruit of one’s labor, and emphasizing data that asserts inequality, the manipulators shift and channel our desires for fairness and justice toward envy of OPM and belief that OPM is unjustly acquired. That, in turn, unleashes the greed monster, which is less tempered by the unfairness of stealing from someone else.

Finally, there’s what a political friend has dubbed the “Mattress Fallacy.” Some people think or like to pretend that the wealthy hoard their cash, Scrooge McDuck-like, in the equivalent of vaults and mattresses.

Fact is, though, that surplus cash (i.e. discretionary income) is vital to the health of the economy, because it either gets invested into wealth creation by its earners, or deposited into financial institutions, which in turn use it to lend to other wealth creators. This is Economics 101, which many simply ignore because it refutes their fantasies. Inflation also incentivizes people to do something productive with surplus cash, since it will shrink in value if left in a mattress. Surplus cash is also under constant pressure from market forces – another fact that is conveniently ignored by the covetous. Business owners aren’t sitting on great big piles of profit that can be forcibly reallocated to workers via such things as higher minimum wages, mandated family and sick leave, and the like. Any business that’s making big margins will quickly find itself challenged by competitors, and be forced to either lower prices or lose market share. Unfortunately, many people have a gross misconception of how much profit businesses make, often overestimating by nearly an order of magnitude. Many to most businesses operate on margins in the single-digit percentages, but people often think they’re making 20%, 30%, or even more. This mistake goes conveniently uncorrected by those who lust for OPM, since it helps feed into the “unfairness” narrative.

The Mattress Fallacy is very convenient for progressive redistributionists. It plays to the idea that some people have more money than they need (in the words of our previous President, “at a certain point you’ve made enough money” (and let’s ignore charges of hypocrisy in that regard)), and that they’re not doing anything good with it. Filter that through the (also false) Spock Principle that “the needs of the many outweigh the needs of the few,” and you’ve got all you need to declare that it’s OK, nay, good to point guns at some rich dude in order to take his money.