Does the practice of robbing Peter (taxing the top tier) to pay Paul (subsidizing the poor) have a theoretical limit? If so where is the tipping point? Like the luxury liner, Costa Concordia, are we already seeing the signs of capsize? Are our captain and crew already in the lifeboats, “coordinating” the rescue of the passengers?
I am starting to think that while the governmental practice of robbing Peter to pay Paul, has worked for quite a while, in the past few years we have reached some tipping point that has moved the paradigm into a new dynamic. While I accept that the motivations for the practice are grounded in human decency and the desire to provide for the helpless and the downtrodden, at some point it has become part of our collective existence and not a real safety-net for the helpless.
It seems to me that at a point, perhaps when the Pauls become more than one-half of the population that the efficacy and sustainability of the process fall apart. In fact, I would argue the tipping point is, at least mathematically, less than 50% because the system consumes resources to pay for the process itself. Even if it is highly efficient, the cost to pay for the bureaucracy to provide the robbing and paying is at least 5%. The basic grade-school math says that one-half (50%) minus the 5% cost would yield the ability to only pay for 45% of the Pauls. Today, the Peters are already paying a significant amount to about 48% of the Pauls. Roughly, 48% of the people in America are getting almost half of their income from some form of federal subsidy, directly or indirectly.
The second observation is that we are no longer subsidizing just the poor in America. In fact our continually expanding set of ideals is drastically changing. In the 1930s it became obvious to many that something needed to be done to help the poor in America and the government took action. In the 1950s the government took more actions, and in the 1960’s President Johnson declared the War on Poverty and took even more actions. We have been waging this War on Poverty for many years and have spent huge amounts of money–it seems that no effective gains on helping the poor have been realized. They are still poor and we are simply increasingly subsidizing the poverty.
The disturbing trend is that it was the rich and the middle-class Peters that felt it was their duty to help pay the poor Pauls. But now the dialog has shifted. The president wants to add the middle-class to the list of paid Pauls. In fact, the middle-class started to become Pauls when the government began providing program eligibility at the 200% 300% and 400% of poverty level.
It appears to me that at some point, robbing Peter to pay Paul becomes robbing Peter and Paul to pay Peter and Paul. I would submit we are either at this point or damn close to it already. Not only are we now shifting our classification of who needs help in America to include the middle-class, but we already have numerous programs that indirectly are subsidizing even the highest echelons of the Peters because we provide incentives (subsidies) for many industries and business segments where we are not competitive on the world stage and we are proposing to add more subsidies. So almost all Americans, if not all Americans, are getting some or much of their ‘revenue’ from the federal government. If you look at the unqualified increase in the amount of currency since 1974 it can be said that almost all of our money has come from nothing other that taking something from all of us in terms of devaluation of the currency and giving back a disproportionate share to selective groups–not all of them the poor.
Have we arrived at the point where we are just robbing ourselves to pay ourselves? If so when do we really address this problem? I think we clearly are at at least at the doorstep of this dilemma, and more likely our toes have already crossed the threshold.