Elephants in the Room

Is it not heartening to politicians to seize and distribute today’s wealth and promise more in future obligations knowing that erosion of the value of fiat currency will reduce the burden of government debt incurred?

Is not their public debt simply a scorecard representing the cumulative transfer of wealth mostly driven by past entitlements, for which politicians lacked the chutzpah to lay at the feet of the taxpayers?

To erase it with excessive printing of money would silently extract value from savers and investors, and most importantly cause capital to flee or be hoarded and essential investment to be foregone.

Does anyone expect the bill to be paid with constant-value dollars when it comes due in another generation’s time? Does the burden vanish, or is it socialized, and if so, to whom?

Will it be borne by the population today, most of which pays almost no income tax through relegating the burden to the upper-middle class, which ever since World War I has been taxed by the Treasury and the states at between a 40 percent and 90 percent rate?

Or will it be transferred to a population of tomorrow, whose less affluent may suffer real wage erosion and not enjoy the benefit of the heavy investment in capital stock that has made today’s prosperity possible?

What incentive exists for wealth to remain still in the crosshairs of an untaxed rabble, which thinks it moral, even righteous to stake a large claim on another man’s paycheck and remove half the unspent remainder when he dies, not to mention the cacophony of other taxes government imposes?


Bill Baker,
for The Daily Reckoning

[Editor’s note: This passage is reprinted from William W. Baker’s book, Endless Money: The Moral Hazards of Socialism, with the permission of John Wiley & Sons, Inc (©2010). You can get your own copy of his book here.]