Among the biggest lies of the welfare states on both sides of the Atlantic is the notion that the government can supply the people with things they want but cannot afford. Since the government gets its resources from the people, if the people as a whole cannot afford something, neither can the government.
There is, of course, the perennial fallacy that the government can simply raise taxes on "the rich" and use that additional revenue to pay for things that most people cannot afford. What is amazing is the implicit assumption that "the rich" are all such complete fools that they will do nothing to prevent their money from being taxed away. History shows otherwise.
After the Constitution of the United States was amended to permit a federal income tax, in 1916, the number of people reporting taxable incomes of $300,000 a year or more fell from well over a thousand to fewer than three hundred by 1921.
Were the rich all getting poorer? Not at all. They were investing huge sums of money in tax-exempt securities. The amount of money invested in tax-exempt securities was larger than the federal budget, and nearly half as large as the national debt.
This was not unique to the United States or to that era. After the British government raised their income tax on the top income earners in 2010, they discovered that they collected less tax revenue than before. Other countries have had similar experiences. Apparently the rich are not all fools, after all.
In today's globalized world economy, the rich can simply invest their money in countries where tax rates are lower.
So, if you cannot rely on "the rich" to pick up the slack, what can you rely on? Lies.
Nothing is easier for a politician than promising government benefits that cannot be delivered. Pensions such as Social Security are perfect for this role. The promises that are made are for money to be paid many years from now -- and somebody else will be in power then, left with the job of figuring out what to say and do when the money runs out and the riots start.
There are all sorts of ways of postponing the day of reckoning. The government can refuse to pay what it costs to get things done. Cutting what doctors are paid for treating Medicare patients is one obvious example.
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