Modern liberalism is a perpetual state of surprise that socialism doesn’t work, coupled with anger at those who attempt to explain why. An article by economist John Lott for Fox News today inspired me to give it another try.
Lott begins by pointing out that “neither government spending nor tax cuts automatically provides an economic stimulus.” These are the simpleminded terms in which economic policy is debated. A brief intermission for a blast of pure concentrated stupid from kook mega-site The Daily Kos, in case you doubt me:
“Listen up, you Republican [expletive deleted] and your corporate lapdogs: you swore on a stack of Bibles piled ten stories high that extending tax cuts for everyone (in wartime, no less) would absolutely positively ‘reduce uncertainty’ and ‘create jobs’ and ‘stimulate the economy.’ And as of January 1, you got yourself a fresh bucket full of tax cuts. But if jobs and the economy don’t come roaring back to life the way your magic pony promise says it will, you’ll get the credit for, once again, not having the foggiest clue what the hell you’re doing. And then we’ll go Galt on your ass in 2012.”
Of course, no one’s taxes are being “cut” – we’re preserving existing tax rates – and the idea of these useless parasites “going Galt” is hilarious. (I doubt he actually knows what the term means – he just knows conservatives use it a lot.) Try thinking down to the Kos level and consider what he’s really saying: if allowing people to keep their own earnings is judged a failure because it doesn’t instantly produce those pony promises, it’s you – the ostensibly free American people – who would be proving you don’t have “the foggiest clue what the hell you’re doing.” After all, it’s not Republican political leaders keeping the money from those tax cuts.
Back to Lott: his purpose is to compare the growth effects of supply-side and demand-side economics, which he defines as follows:
“So what makes the economic pie bigger? There are two sides to this. The supply side: lower marginal tax rates mean the more that people get to keep from each additional dollar that they earn, the harder that they will work and the more that they will produce.
The other view, the Keynesian view, also often called ‘the demand side view’ or ‘the multiplier,’ is that giving the money to the right people to spend which will create wealth. Democratic House Speaker Nancy Pelosi made this claim earlier this year when she advocated more unemployment insurance benefits: ‘it injects demand into the economy and is job creating. It creates jobs faster than almost any other initiative you can name. Because again it is money that is needed for families to survive and it is spent.’”
One of the crucial differences between these views is the role of incentives. They are vitally important, because macro-economics takes place in the future. It’s not about what you’re planning to do with the money in your wallet today. It’s about what businesses, consumers, and the government are planning to do tomorrow.
Suppose we accept the liberal world-view that all money belongs to the State, which will wisely parcel out wealth as it sees fit – “from each according to his means, to each according to his needs.” Even if we imagined an entirely conscientious, disciplined government, brimming with intellect and free of corruption, it would still devolve into the same dreary ruin as all socialist projects, because it would not consider the future: demand and incentive.
What behavior would be encouraged under such a system? No, not just sloth, although that’s certainly a problem. It’s worse than that. The incentive is to maximize demand – to most loudly and clearly broadcast your needs to the State, and persuade maternal government to fulfill them. The most effective way to do that is to band together with allied interests, and drown out the interests of other groups… which become, both emotionally and practically, your enemies. The darkness beneath the vast table of the State is always filled with savage dogs fighting for scraps.
The incentives of a free market encourage earning, achievement, and competition – which socialists routinely confuse with the feral antagonism their ideology breeds. These incentives aren’t perfect in their implementation, as no set of behaviors is ever perfectly responsive to its environment, but the overall push is toward growth. Freedom reaches into the future, while collectivism is a prison made from the dusty bars of past imperatives. Obama’s collectivism, spending trillions of money seized from the future through deficits, proved as useless and inert as every other kind… and it will eventually turn as vicious as every other kind, if left to fester.
The failure of socialism lies in the disconnect between what it expects you to do, and what it rewards you for doing.