Bernard Madoff is Small Potatoes Compared to the Government

by | Mar 13, 2009

Bernard Madoff has confessed to a Ponzi scheme whereby he swindled investors of billions of dollars. “In court documents, prosecutors say Madoff reported he oversaw $64.8 billion.” Multiply that staggering amount of money by 3,000, and you get roughly the amount of money that Americans have lost over the past two generations to federal, state […]

Bernard Madoff has confessed to a Ponzi scheme whereby he swindled investors of billions of dollars. “In court documents, prosecutors say Madoff reported he oversaw $64.8 billion.” Multiply that staggering amount of money by 3,000, and you get roughly the amount of money that Americans have lost over the past two generations to federal, state and local government spending on the welfare state, which totaled roughly $5 trillion dollars in 2008 alone.

The Ponzi schemes known as Social Security and Medicare continue. When these programs started, elderly Americans received benefits without having paid into these programs. The programs count on baby booms so that there are more young people paying than there are old people collecting. When the baby boomers of the 40s and 50s turn 65, these Ponzi schemes will collapse. Will today’s politicians ever confess in court as Madoff did yesterday? Will they be reviled as Madoff has been? They should be.

Madoff allegedly wiped out the assets of many wealthy people. But he could not have wiped out more than half their wealth, because the welfare state had already wiped out the first half or more. Consider federal personal income tax, federal corporate income tax, state and local income taxes, sales taxes, property taxes, and other taxes I don’t know about because I’m not rich myself. Even tax shelters cost the wealthy tons of money, because the returns from tax shelters are much lower than what the wealthy could make from other investments if the other investments were not taxed. And then there’s the government’s inflation of the money supply, which robs people who own assets and taxes people on interest income that merely keeps up with inflation.

Welfare statists sometimes argue, wrongly, that the percentage in tax paid by the wealthy is lower than the percentage paid by the middle class. This argument omits most kinds of taxes and the cost of tax shelters and inflation. But the deeper evil of this argument is the smuggling in of the premise that the standard for tax fairness is the percentage of income that is taxed.

Why should an individual who makes $50 million a year pay the same percentage in tax that an individual who makes $50 thousand a year pays? In other words, why should the rich person pay 1,000 times as much money as the average person pays? When you check out at the supermarket, does the cashier say, “That will be 5% of your weekly income, please”? If everyone had to pay the same percentage of his income for everything, then everyone would have the same purchasing power, because everyone has 100%.

It might cost more for the government to protect the extensive property of a wealthy man compared to the modest property of an average man, but little of government spending these days is for the protection of life, liberty, and property. State and local spending in the U.S. was roughly $2.5 trillion in 2006. Less than one tenth of that was for police, prisons, and judicial and legal. The other nine tenths was for the welfare state: food, shelter, health care, “education,” etc. At the federal level, less than one fifth of 2009 spending is for defense, Homeland Security, veterans affairs, policing, and courts. The other four fifths is for the welfare state.

Does the millionaire, who pays 1,000 times as much to the government, receive back 1,000 times as much in services as the average man does? Does the millionaire have 1,000 times as many of his children in public schools? Does he receive 1,000 times as much in Medicare and Social Security benefits, food stamps, and public housing?

Of course not. In fact, the millionaire avoids lousy government services as much as possible. In other words, the millionaire pays 1,000 times as much, and receives much less in return.

From each according to his ability, to each according to his needs!” America has been following that slogan more and more since the federal income tax began in 1913. Obama is just much more of the same.

This article was originally published on Ron Pisaturo’s Blog.

 

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Ron Pisaturo is a writer and philosopher. He has written a screenplay, The Merchant of Mars. Ronald Pisaturo is the author of A Validation of Knowledge, The Longevity Argument, The Merchant of Mars, and Masculine Power, Feminine Beauty.

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