Death From Taxes

When it comes to taxation, it is all about who gets to spend the money. Politicians want the money because they feel they have better ways to spend it. They want to take the money away from the people that have proven they can generate wealth and prosperity and then determine its use themselves. Keep in mind these are politicians who are influenced almost exclusively by political whims and lobbyists. These bureaucrats will inevitably take the land, labor, and capital resources from prosperous businesses and combine them in ways that actually destroy wealth. It’s immoral to take the property in the first place, but to use a, “It’s for the greater good” mentality to justify it is also irrational. The greatest good that the money could do is going to come from individuals who actually have the ability to generate wealth, not in the hands of those who cannot.

Take Solyndra, for example. Our government took more than $500 million from its citizens saying they were investing the money in our future. They did this even with warnings from PricewaterhouseCoopers, who said that the Solyndra’s business model was not only problematic, but unsustainable. Politicians, with their, “I can use this money in a better way than you can” mentality lost the nation’s entire investment in the company. They had no right to take the money or to spend it in the first place, but taking it also led  to the destruction of half a billion dollars in savings and wealth. Obviously not the greatest good.

It is completely incorrect to assume that government can be a better investor of wealth than the individuals that had actually earned the wealth. In addition, by taxing extra investment money in general, you are effectively taking that capital out of the business sector entirely. You end up using taxation to fund excessive government spending and therefore disallow that money to be reinvested into the profitable business you are taxing. Investments in the private sector by definition will diminish, which is counterproductive to economic growth.

It’s also incorrect to assume that the government needs more money. Our country quite literally declared its independence by stating that every individual has the right to life, liberty, and the pursuit of happiness. More specifically, our nation’s declaration stated that these rights are unalienable. These rights are rights to act free of coercion from others. Therefore, the only proper role of government is to protect individuals from coercion- as in the taking property by force (no matter how noble you think your ends are). Because they are unalienable, they are rights that cannot be taken away. You don’t lose them the moment you make over $1,000,000. It also means that the use of democracy must be limited by each individual’s unalienable rights; you don’t lose these rights simply because a majority vote says so. Bottom line, every individual has a right to the property they have justly acquired because our rights to life, liberty, and the pursuit of happiness are unalienable.

Increased taxes, which transfers investment choices from successful businesses with proven ability to generate wealth over to politicians, will lead to death of the United States.

"If I had not known that my life depends upon my mind and my effort, if I had not made it my highest moral purpose to exercise the best of my effort and the fullest capacity of my mind in order to support and expand my life, you would have found nothing to loot from me, nothing to support your own existence. It is not my sins that you're using to injure me, but my virtues - my virtues by your own acknowledgement, since your own life depends on the, since you need them, since you do not seek to destroy my achievement but to seize it." –Hank Rearden, Ayn Rand

Stimulus Plans Versus Exchanging Value for Value

Some will say that a stimulus plan creates jobs because they have seen it; they have witnessed the new jobs firsthand. Whether it’s a relative, a friend, or neighbor, there are people that have benefited directly from the stimulus. But, as Frederic Bastiat and Henry Hazlitt have said, you have to keep in mind both, “That which is seen and that which is not seen.”

Every stimulus plan gives money directly to an industry or group of people and more often than not, for the length of the stimulus, that group has some level of prosperity. These “benefits” are generally easy to see, but what about the stuff that is not seen? What most people don’t see are the effects on other industries. The stimulus money given to the fortunate industry had to come from somewhere. When the government gives money to a group, they take it away from other citizens. These citizens now are unable to spend the money in other industries. They can no longer use the money to buy clothes, food, cars, iPods, etc. Every one of these industries now is worse off because government forced taxpayers to spend their money in places politicians (and lobbyists) deemed more important.

Looking at both what is seen and what is not seen shows that stimulus packages simply take money from one person and give it to another. They create nothing and instead merely divert funds from one industry to another. Specifically, from more efficient and productive industries to less efficient and productive industries. To quote Peter Schiff, we took, "land, labor, and capital (all the factors of production) and combined them in ways that actually destroyed value."

Using government to force people to purchase things they wouldn’t voluntarily use their money for is not efficient and does not lead to an increase in prosperity. It may lead to a stimulus in a particular industry, but overall we are all less wealthy because we are operating less efficiently than we could in a free market. Through government:

1. People are forced to buy things they don’t want (by giving money to an industry, product, or service they wouldn't voluntarily use).
2. People are forced to buy more than they want of something (like healthcare plans that cover things they don’t want or don't need).
3. People are forced to buy less than they want (through things like rationing and regulations).

Goods and services are produced and offered to give people what they want. Therefore, letting people voluntarily buy what they want- by definition- leads to the most efficient market. In other words, the goods and services being offered in a free market are exactly what people are looking for. The needs of consumers are being met in the best way possible (at least until someone can find a better way to meet an individual's needs). Using government to force people to contradict and to go against their own free choices will never lead to better prosperity or a more efficient economy. It will only move resources from goods and services that are wanted to goods and services that are not wanted.

To quote Frederic Bastiat:

"The moment the satisfaction of a want becomes the subject of a public service, it is withdrawn, to a great extent, from the domain of individual liberty and responsibility. The individual is no longer free to procure that satisfaction in his own way, to purchase what he chooses and when he chooses, consulting only his own situation and resources, his means, and his moral appreciations, nor can he any longer exercise his discretion in regard to the order in which he may judge it reasonable to provide for his various wants. Whether he will or not, his wants are now supplied by the public, and he obtains from society, not that measure of service he judges useful, as he did in the case of private services, but the amount of service the Government thinks it proper to furnish, whatever be its quantity and quality. Perhaps he is in want of bread to satisfy his hunger, and part of the bread of which he has such urgent need is withheld from him in order to furnish him with education or with theatrical entertainments, which he does not want. He ceases to exercise free control over the satisfaction of his own wants, and having no longer any feeling of responsibility, he no longer exerts his intelligence. Foresight has become as useless to him as experience. He is less his own master; he is deprived, to some extent, of free will, he is less progressive, he is less a man. Not only does he no longer judge for himself in a particular case; he has got out of the habit of judging for himself in any case. The moral torpor which thus gains upon him gains, for the same reason, on all his fellow-citizens, and in this way we have seen whole nations abandon themselves to a fatal inaction." (Bastiat Collection Pocket Edition , p. 919).

You can argue, possibly, that some programs that people don’t want to pay for are still “needed,” but don’t ever say that it will lead to job creation or more prosperity than would exist in a free market. It won’t. There is no such thing as a free lunch. If you force people to have goods and services they don’t actually want, the trade off is a less efficient market with less growth and less prosperity. People are being forced to buy things they don’t want- things they get no utility from. Time and energy are being spent creating goods and services that will never be used. Workers time and effort should be going into things that people will actually use and that will make their life better and easier.

Because better, more valuable and useful goods would be produced (and at cheaper prices), the free market would result in people having more of their time free and more of their money to spend on other things. The free market is where prosperity comes from. If you want to promote stimulus packages and give subsidies and special privileges to certain groups and industries, then you have to sacrifice efficiency and growth in the overall market. To say otherwise is to deny economic reality.

Freedom leads to prosperity.

A good example of this is Henry Ford (it's also mentioned in Part II Peter Schiff video below. In his time Henry Ford made the best automobile available for the cheapest price with the highest paid workers with no regulations, no unions, and very limited government. As Peter Schiff notes, in today's dollars, Henry Ford's workers were making $2,500 a week building cars. Again, this is without regulations, without unions, and the best product being produced. How can this be? Competition and free markets lead to efficiency and better goods and services at lower prices. If everyone is left to buy what they want- the market will always be efficiently producing the best things available at the cheapest cost. People will have the same amount of money, but more things to spend it on. More goods and services can be produced and more jobs created.

Coming from another perspective, Ayn Rand has referred to the concept of trading value for value. Trading value for value, by definition, leads to prosperity and wealth because both sides are gaining in the transaction. When there is a voluntary trade between two individuals- for example, a car for $20,000- one individual values the $20,000 more while the other individual values the car more. Both individuals gain value. When force is used, people are coerced into trading for something they value less than what they currently possess. Either both sides lose value or one side gains while the other side loses. In this instance, wealth is destroyed or, at best, created at a much slower rate than with mutual, voluntary transactions.

The bottom line is that government intervention is not necessary. The free market is far more efficient and capable of deciding what should be produced. Every individual votes for the existence of products and services available on the market when he or she purchases things they want. If no one wants a particular product, it won’t last on the market because it won’t get anyone’s votes. If a product is unsafe, people won't buy it or will sue the producer. In this case the company would incur losses and either go bankrupt (think Enron) or have to change their ways in order to survive (think Toyota and Tylenol).

If a particular product is loved and desired by many, then people want it. They vote for its existence when they pay for it. That is the industry that will thrive (think Apple and iPods). The company will have earned the wealth it has made because they were the ones that provided the best, most desired service. They were the ones that were able to best improve the lives of their customers. They were able to give individuals quality goods at cheaper prices, which allows those individuals to spend their money and time on other things. These companies, working in the free market, are the ones that grow the economy and allow us to prosper; it is not government stimulus.

If money were to grow on trees would we all be richer?

As a child, I remember being told that money doesn't grow on trees. I also remember that I wish it actually did grow on trees because then I'd be able to buy anything that I wanted. But does having an everlasting supply of money actually make you richer? All else being equal (goods and production in the world) if every individual were to have an extra $1,000,000 would the world as a whole be "richer?" No, because money doesn't make us richer; production makes us richer. Money is used to represent each individual's underlying production and wealth in the world. Everyone's purchasing power is still the same if everyone's money supply goes up by their proportion of wealth and their proportion of future production. Nothing would change except it might now cost $6,000 to buy a cheeseburger.

The next argument to come up might be, "Well, if I was the only one to have a money tree, then I'd be richer." This would be true in the sense that your purchasing power in proportion to others would increase because money is used to represent that purchasing power (and you would have more money). But, the problem is that you didn't actually produce anything extra. You would merely be stealing the production of others and spending it as if it were your own. This would be no good for society as a whole (not only are you not producing anything, but you are taking production away from others... this results in a net loss. Wealth is consumed without adding any new production). If (before the money tree) your money represented 5% of the economy's wealth (and you had 5% of the money supply) everything would be fine. But if (after the money tree) you had 5% of the economy's wealth, but had 10% of the money supply, then you would be able to spend as if you had 10% of the economy's production. You would be stealing savings and production from those who have legitimately earned it.

This is what the Federal Reserve does. They are that money tree. The Fed prints money out of thin air. It might not be a problem if the newly printed money were distributed to each person according to their current wealth and their future production. In this case everyone's purchasing power based on their legitimate contribution to society would be preserved. However, the money that the Federal Reserve prints goes to the central banks and is then given to banks across the nation to loan out to people and businesses.

The distribution of the newly created money goes out to the first people that get loans (most often this is businesses). The spenders are rewarded and the savers are punished. The spenders are spending money that isn't actually theirs to spend. As a side note, see this wonderful comic book for the reason why prosperity is built from savings and NOT spending.

So why does the Fed do this? The idea (at least in a stumbling economy) is that an increased money supply given to banks would drive down interest rates (which would boost the economy- i.e. give it a stimulus). If all banks have extra money to give out, then anyone could get a loan from a bank. If the first bank has too high of an interest rate, they could go over to the next bank and get a loan with them. In other words, the surplus of money to loan out (that was printed out of nowhere) would lead to bank competition and lower interest rates for borrowers because there would be so much to lend out.

With the lower interest rates, more people would be willing to invest in things (demand is increased based on this fake money and fake level of interest rates). More specifically, more people would be willing to invest in things they wouldn't normally invest in (if they were to base their decision on their real wealth, their real purchasing power, and the real level of interest rates). This is what is called malinvestment. People and businesses are tricked into investing (and spending) their money on things they can't actually afford based on their real wealth level (they focus on their amount of money from the money tree, not their actual underlying wealth). The excess spending leads to a bubble- a short-term boost to the economy based on the excess spending. Real savings are depleted and once people realize they are spending money they don't actually have because the wealth underlying that money doesn't actually exist, the bubble pops.

The solution to this problem isn't more spending. It isn't more stimulus. The solution is to get rid of the money tree. Let everyone spend money and invest based on their actual wealth and their actual production. "Stimulating" the economy by creating artificial wealth only leads to disaster... see the Great Depression... see the Internet bubble... see the Housing bubble.

An Introduction to Greek Philosophy

Check out a brief introduction to Greek Philosophy, Plato, and Aristotle.

I would like to add the five branches of philosophy to the discussion. Use your understanding of the branches of philosophy to understand where Plato, Aristotle, yourself, politicians, religions, etc. are coming from). Arguments for or against a particular view are fought on these grounds. If you want to attack certain political views, for example, you can challenge the metaphysics, epistemology, and ethics the view is based on. Check their premises to find contradictions and irrationality at the root and you will have won your case against that view.

1. Metaphysics- The study of existence (Is this universe the only existence, or are there other existences out there like Heaven and Hell?).
2. Epistemology- How we acquire knowledge about existence (For this world, we use our senses and our reasoning mind to acquire knowledge and work within the metaphysical world. If you were to believe in Heaven and Hell, epistemologically you would be saying that knowledge of existence can be acquired outside of your senses or outside of your own actual experiences within reality i.e. Faith- accepting something exists metaphysically without actual evidence or proof that it exists. Can you know something without actually knowing it?).
3. Ethics- What actions are right/wrong for an individual (How should I act? With independence, rationality, integrity, honesty, productiveness, etc. According to Ernesto Fernandez, Aristotle's view was that our "natural function is to exercise virtue.")
4. Politics- What actions are right/wrong for society (How should society act? Protect the rights of individuals: the right to life, liberty, property, and the pursuit of happiness).
5. Aesthetics- The study of art (what can be and ought to be).

Here's a wonderful chart of everything included within each branch for the philosophy of objectivism.

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