Tax the Rich to Punish the Poor

Silicon Valley entrepreneur T.J. Rodgers published an op-ed in the Wall Street Journal yesterday, called Targeting the Wealthy Kills Jobs.  Mr. Rodgers makes the excellent point that punishing the "wealthy" (which really means those who work, create, innovate, invent, build, and invest successfully, to the benefit of us all) ends up really punishing the poor--those who need a job and can't find one.  He provides his own experience showing that private investment in small business creates more jobs per dollar invested than so-called "stimulus" programs, by a large margin.  But taxing those who would make those investments means those jobs are never created.  As he says:

This data squares with the broad numbers showing that private investment is more efficient than government spending in creating jobs. In other words: Every dollar that is taxed away from private investment and spent by government produces fewer jobs than the jobs destroyed by the loss of private investment.

Or as I might say it, government spending destroys wealth.

Here is his take-away point:

Yet the politics of envy, promoted most notably by President Obama himself, continuously stokes the idea that the wealthy are not paying their "fair share." This injured sense of unjust rewards was summed up on a radio show I heard the other day, when a caller said of the rich: "How much more do they need?"

How much more do I need? How many more jobs do you want?

A Keynesian Proof that Government Spending Makes Us Poorer

James Taranto, a daily online columnist for the Wall Street Journal, recently posted a piece making a point I have attempted to prove: that to the extent government spending is merely redistribution of wealth, or is devoted to things that are not "public goods" whose expense is less than their benefit, it has the same economic effect as stealing, and it therefore makes us all poorer by destroying wealth.  Here is his piece:

Bloomberg View's Matthew Klein offers an amusing application of Keynesian logic. He notes a New York Post story about a ritzy Park Avenue apartment building that has been the target of several burglaries. While conceding that "crime is destructive to the social order and discourages people from making long-term investments," Klein argues that the short-term effect of large-dollar property crimes is stimulative for the economy: 

When the thief fences $10,000 or $100,000 in jewelry from an heir who barely knows what he owns, the thief will feel much richer and spend most of that money. Maybe he will buy a new car, or go on a bender at strip clubs, or rent a villa in a beleaguered European country. The heir might be somewhat upset, but it's hard to believe that he will suddenly cut back on his spending because he needs to recoup a relatively small loss. In fact, the heir might end up spending more money as he tries to make his apartment safer from future robberies. 

Klein acknowledges the argument isn't original. He quotes the economist John Cochrane, who in 2009 made essentially the same argument with respect to a massive fraud: "If you believe the Keynesian argument for stimulus, you should think Bernie Madoff is a hero. He took money from people who were saving it, and gave it to people who most assuredly were going to spend it." This is all somewhat tongue-in-cheek, but Klein's conclusion seems serious:

Cochrane writes as if our moral revulsion at Madoff's fraud will overwhelm the logic of his interpretation of Keynes. I can't help but wonder whether redistributing a little bit of wealth from those who have more money than they know what to do with to those who are eager to spend whatever they can get would make the rest of us better off--at least temporarily. Maybe we could accomplish the same sort of effect by tweaking the tax code. At least that way we could avoid rewarding people who break the law.

Behold, a Keynesian proof that taxation is theft.

Of course, theft does not stimulate the economy, but depresses it: The value of what is stolen is much less to the thief than to the victim, so the net result of the "transaction" is negative. But it is ironic that some who promote redistribution as "stimulative" essentially recognize it is theft, even as they fail to recognize that proving it is theft proves that their claim of "stimulation" is false.  Indeed, to say that thievery boosts the economy so defies common sense that only an economist could say it.