The Economics Of Peter And Paul

David Stokes
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Posted: Apr 11, 2010 12:00 AM
The Economics Of Peter And Paul

Maybe they’re on to something across the pond. It was announced the other day that the next national election in Great Britain will take place on May 6, and the stakes will be high. A 30-day campaign—can you imagine that?

Of course, the reality over there, as here at home, is that political posturing is a 24/7 proposition—relentless and unmerciful. But just the idea that an actual election can be set for a single month cycle is (pardon the pun) a foreign concept to us. Prime Minister Gordon Brown and his leftist Labor party have been gaining ground on David Cameron’s Conservatives, closing what was once a 20-point gap to single digits—lately around 7 per cent—so the timing seemed right.

And while America is being dragged kicking and screaming to the statist left, our increasingly distant cousins could possibly be on the verge of an ironic power-shift. One that has been described “as potentially the most pivotal since the one in 1979 that brought the conservative Margaret Thatcher to power and recast the fundamentals of British politics and society.”

In other words, the culture that gave us Lloyd George, Churchill, and Lady Thatcher, could soon witness “the fundamental transformation” of their nation. Some are calling the campaign of the Tories a “back to the future” effort. Indeed.

Of course, conservatives in the United Kingdom are nowhere near clones of their nomenclature counterparts in the United States. Tories there would barely qualify as “moderate” Republicans here. But the trend is unmistakable and it is not being sufficiently noticed in our neck of the political woods.

Emerging as the hot button issue in the British election is a Labor-backed planned 1% increase in the National Insurance Tax. The Tories oppose this and have countered with an “efficiency saving” program that would address the chronic financial hemorrhage situation in the National Health Service. The NHS, by the way, remains an object of envy to many in our government. Go figure.

Most Americans—especially the nearly half who will pay no income tax this year—haven’t a clue as to how a single payer system works in places like Great Britain. Over and above already oppressive income tax rates, workers must pay a National Insurance Tax, with exemptions only for those who earn, say around 105 pounds per week, then it increases immediately to 11% of income up to 770 pounds per week. Over that, it costs an additional 1% of each worker’s income. So under the new Labor proposal most British workers would be paying a minimum of 12% of their income to fund their single payer system—in addition to already high income taxes.

Even a cursory examination reveals that this is a tax burden that falls squarely on the middle class—something the Brits have been more honest about than some in the current administration in Washington. Of course, the “official” position of the powers that be here is that a single-payer system is not on the table. But for anyone willing to think this political chess match through a few moves ahead, it is clear that there is gleeful hope in many quarters that the recent “reforms” will so stress our current system as to bring it and the country to its knees, paving the way for our own European-style set up.

What Americans need to note is that for a government to operate here as it does in other places will eventually require a great sacrifice on the part of the middle class. We are being sold a bill of good these days, one that some Americans seem all-too-willing to accept. The big lie du jour is that we can have all the purported “benefits” of socialism without the burdens. Tax cuts for low and middle income families were expanded when Obama signed the massive economic recovery package last year. As a result, nearly half the country will benefit from everything the government does without paying a dime for it! And it is not just the poorest of the poor. There will be people who made $50,000 or more in 2009 paying no income taxes. In fact, 47% of workers in America will pay nothing.

And this is, in many ways, a cancer eating away at our national character. We are almost at the place of critical mass where those who derive a benefit from the government outnumber those who pay the bills. And as the old saying goes: “If you rob Peter to pay Paul, you can always count on the support of Paul!”

The irony is that this house of cards will ultimately collapse. Americans who think it’s all a pretty cool deal today—the idea of getting a free ride paid for by someone else—need to look closely at places like Great Britain. Yes, they have exemptions for some in their tax system, but you have to earn less than 6,000 pounds to qualify (roughly 12K in U.S. dollars, give or take). Everybody else pays. In fact, that family making the equivalent of 50K in U.S. dollars over there will pay heavy income taxes plus an 11% National Health Insurance tax for all that “free” stuff.

The other day, the New York Times wrote about the “growing power of the state in British life” noting that “more than half of all those in employment have government jobs, and just over half of the economy is accounted for by government activity.” Is this really what we want for America?

The truth of the matter is that the programs being touted today as to be paid for by the very rich will soon start costing all of us. In fact, it will be a rude awakening one day—if current trends persist—when a worker making an income that had long kept him below a tax-paying threshold sees a big chunk of change taken out of his paycheck.

Yes, they plan to soak the rich right now. But one day, they’ll come for everyone else needing dollars to feed the big entitlement machine. Saul Alinsky, in “Rules For Radicals” talked about the struggle between the “haves” and the “have nots.” And this became the basis for the kind of political energy that brought Barack Obama to the White House. People were trying to get their perceived “fair share.” Social Justice is now all the rage—let’s reshuffle the deck and give everyone a New Deal.

But the problem is that eventually the “have nots” will get all they can extort from the “haves.” Then the “pay nots”—those who have grown accustomed to someone else paying the tab—will have to become “pays.”

The other day, I was listening to BBC America on satellite radio and I heard a round table discussion bemoaning the fact that America has so much more entrepreneurial activity per capita than the U.K. These bright bulbs pondered the reasons and never seemed to have an “A-Ha!” moment. They talked about how maybe if the government gave more “grants” to those who wanted to start businesses.

Clueless.

Years ago, I heard a quote, I don’t remember where—or from whom—to the effect that if you want to see what the U.S. will be like in 40 years, look at the UK now.

Come to think of it, I heard that said just about 40 years ago.