On reviewing elements of President Joe Biden’s extraordinarily extensive $1.8 trillion American Families Plan, George Bernard Shaw’s famous quote stuck in my mind: “A government that robs Peter to pay Paul can always depend on the support of Paul.” The glue that held the thought in place got even stronger when I read Fox News Sunday host Chris Wallace’s summary of Biden’s Wednesday evening speech:
“And the other thing that’s pretty popular is he said, ‘You’re not going to have to pay for it. Big corporations are going to pay for it. People making more than $400,000 are going to pay for it.’ But the vast majority of people watching tonight aren’t, so offering a lot of stuff and saying you aren’t going to have to pay for it is pretty popular.”
The vast number of people named Paul should be delighted. And Peter? There aren’t enough of them to matter much.
At least politically, that is. High earners don’t draw a lot of sympathy in 2021. Still, America’s founders may have called this a classic case of persecution of a minority by a majority. At least, that’s how the plan is being sold — but not those exact words, of course. While the politics of the tax-and-spread situation is clear, the justification offered by White House economist Heather Boushey is a bit cloudy. In a Wednesday PBS NewsHour interview focused on the Biden plan, host Judy Woodruff asked about a small share of U.S. households, along with corporations, paying for Biden’s plan. Boushey responded that we need to boost American’s middle class “by making sure that those at the top are paying their fair share. We have seen over the past decade that wealth has risen, especially and particularly for those at the very, very top. We have seen a lot of companies be incredibly profitable.”
This was not a research seminar, so there was not enough time for Boushey to point out that an important portion of the noted wealth increase was generated by Federal Reserve zero interest rate and quantitative easing policies put in place by Presidents George W. Bush, Barack Obama, and Donald Trump in efforts to stimulate a sagging economy, or that those individuals who paid little or no taxes were following the tax code put in place by the U.S. Congress. The code may not be ideal, but they were not behaving unfairly. Obviously, notions of fairness are always in the eye of the beholder.
Getting back to the matter of taxing Peter to pay Paul, let’s remember that there are conditions when it makes more sense. It’s easier to justify situations when taxes taken from the top fund the provision of public goods, like national defense, which provide long-term benefits to everyone and not just the middle class. When expenditures are invested in early childhood education, which is known to have a high social return for each dollar, then a case may be made for fleecing Peter.
This said, I leave you with Shaw’s quote still ringing in my head. I am not ready to endorse a federal spending program just because a small number of rich people will be paying so that a large number of less-rich people get something for free.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and a dean emeritus of the Clemson University College of Business and Behavioral Science. He developed the “bootleggers and Baptists” political model.
