Actions Have Consequences

Yesterday The Washington Examiner posted an article warning of the consequences of passing the Biden administration’s infrastructure bill.

The article reports:

We are often told to “follow the science.” This is true of wearing masks, how we teach children to read, and addressing the perils of climate change. So we should probably better do the same with the economy, no?

Consider the new Congressional Budget Office report on that very thing, the budget, the economy, and how we tax it. Let’s assume that we want the Federal government to spend lots more money on infrastructure. I don’t, because I’m certain that the money will be sprayed up the wall like the last few trillions were.

Still, the CBO report is useful in laying down the basic science of taxation. Whatever we tax, we’ll get less of. Tax corporations and there will be less corporate activity. Tax the income from capital investment and there will be less investment. Tax labor incomes and fewer will work so hard to make that money. Put simply, if people get less from doing something, they’ll do less of it. Toddlers grasp this: they will do more for two pieces of candy and less for one. In the jargon these are known as “deadweights.” That is to say, things that do not happen, economic activity that is wiped out by taxation.

Yes, it’s true that we can buy lovely things with the money that has been taxed, or at least we might. But it is still true that the act of taxing itself reduces economic activity. Worthwhile tax and spend is defined as that which is even more lovely in its results than what we’ve lost by financing it.

The Democrats seem to be unaware of the Laffer Curve. That is the principle that says that after people who produce wealth are taxed to a certain point, they will stop producing wealth. We will reach a point where the only way to pay for our bloated government is to devalue our currency. That is happening to some extent right now. The result of that will be hyper-inflation and a total collapse of our economy. That is the end result of unbridled tax and spend programs.