Cuts and Bleeding

With a $1.5T deficit in the news and the GOP sweeping into power promising spending cuts, I’m seeing a return of the left’s hallowed 1990s standby: how dare we think of “balancing the budget on the back of the poor.”

It would be nice if we could give everyone all the things they want or deserve on the basis of whether they are good, hardworking people rather than the value of their contributions as measured by the willingness of other people to recompense them for their efforts in voluntary exchanges — especially if we could do so without seizing the production of other, more productive people. Unfortunately, we can’t, and when we do seize the production of more productive people for the sake of the less productive (again, as measured by voluntary exchange), that tends to lead to people being less motivated to produce value (which is hard work, often the hardest part of which is determining what skills are valuable and obtaining them) and the effort to “fairly” distribute the fruits of production often leads to a general loss of freedom with often horrific consequences, such as the 50M who died in the Great Leap Forward. The question of whether we can do away with the marginal propensity to produce was sufficiently answered in the 20th century for anyone not living in North Korea — even Cuba is now abandoning the notion.

Now, that doesn’t mean we can’t feed the less productive — I have yet to hear anyone suggest cutting food stamps — and help house , clothe, and provide medical care for them. It does mean we cannot promise them the ability to consume an arbitary amount of goods and services paid for by other people — the more gov’t seizes from those whose production is highly valued by society, the less incentive to produce.

It’s all very well to moralize about the “most vulnerable,” but remember even at 1998 levels of spending they still enjoy a standard of living almost unimaginably luxurious for the whole of human history — again, paid for by other people. If you’re going to suck the blood out of the productive for the sake of the unproductive today, you’d better be sure your sanguinary enterprise leaves the victims healthy enough not just to do it again tomorrow but also still able and willing to keep their shoulders thrusting against that grinding wheel of growing prosperity for all.


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3 responses to “Cuts and Bleeding”

  1. Don Avatar
    Don

    You conflate income with productivity. High income doesn’t necessarily flow to someone who has produced something valuable—sometimes a high income just means the person was lucky enough to be at the right place at the right time in order to extract rent from productive people, sometimes it means the person employs people at wages far lower than the value those people create, sometimes it means the person is simply living off investments made by wealthy parents. The people on Wall Street who crashed the economy enjoyed fabulously high incomes then, and mostly still do now—would you characterize them as productive or parasitical?

  2. TallDave Avatar

    Sure, rentseeking is not productive — that’s why I emphasized “voluntary exchange.”
    If you’re living off your parents’ wealth it usually means your parents were productive enough to accumulate wealth, which is now productively invested at a decent return.
    The people who “crashed the economy” were those in government (both parties) that decided to ignore the risks of having the government securitize mortgage debt, in order to hide its risks, in the name of social justice. They grew a bubble.

  3. Don Avatar
    Don

    TallDave, your point about voluntary exchange is well taken.
    We may disagree about the motives of the people who grew a bubble, and their identities—private businesses invented those CDOs and promoted them for private profit—but we can agree that their large incomes don’t measure how productive they have been.