Posted by on September 21, 2012

There is a growing view in America, or at least in the Republican Party, that elections are increasingly becoming a battle between the people who pay taxes and the people who receive benefits (see, for example, a recent Bloomberg article).  The Makers versus the Takers.  Or, in a wittier formulation, the people who sign the check on the front versus the people who sign the check on the back.

If this is true, then this is a deeply pessimistic view of the future.  The Takers are by definition more numerous than the Makers.  With universal suffrage, and even adjusting for the heretofore-commendable tendency of Takers to sleep through voting day, the mathematics are unavoidable.  99 beats 1 at the polls every time.

But I think that the Republicans are missing the point…and the campaigning opportunity.  The reality is that there are plenty of “Takers” among the “Makers” too, and not in the puerile way that so many Democrats decry.  I am not talking about social security checks, Medicare, mortgage interest deductiblity and other so-called “middle class” benefits.  I am talking about bailouts.  I am talking about government support and subsidies.   I am talking about “regulatory capture” (that is, the tendency of industries to “capture” their regulators and use them for their benefit) and its handmaid, the “revolving door”.  I am talking about the thousands of preferences and benefits embedded in our absurdly complicated and perversely constructed tax code.

The reality is that there is a lot less resentment against wealth in America than is commonly thought.  The resentment is against unearned wealth, particularly in the aftermath of the financial crisis and particularly in the financial sector.  There is a feeling that the game is increasingly fixed and that lots of people are making vast sums of money for doing fundamentally nothing productive.  And the feeling is right.

Put more succinctly: Nobody multiplied his wealth faster than Steven Jobs over the last few years.  Yet, when he died, the reaction was near-universal mourning despite his billions (and despite the fact that he was a bit of a nasty piece of work).  People could look at the iPhone in their hands and realize that Job’s wealth was but a small fraction of the benefits he brought to society.  Not quite the same with your typical hedge fund, investment banking or private equity millionaire, and not just because people don’t understand what they do.  Believe me, I do understand what they do.  Paul Volcker does too and yet when he was asked to name an important financial innovation over the last 20 years, he laughed and said “the ATM“.  Nothing else.

This is the point, and the opportunity, the Republicans are missing.  One of the strongest arguments against big government is that the current situation, where the “Takers” among the “Makers” use the government for their own benefit, is not a random event.  It is an inevitable result of the uneven battle between the concentrated interests of the few versus the dispersed interests of the many.  The solution to this problem is not the typical reformer’s delusion that you need better politicians or better regulators or better laws; this is what I call the Mary Poppins’ school of political science and economics.  The only permanent solution is to take away the ability of the government to hand out goodies.  In other words, to shrink the government.  This is argument that the Republicans need to make in order to capitalize on the justifiable resentment that is out there.

If the Republicans want to be the party of business and free markets, then it would help if they took a swipe, from time to time, against the unholy alliance between Big Business and Big Government.

Roger Barris, Switzerland

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Posted in: Politics

Comments

  1. Steve
    September 21, 2012

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    Ok. Let’s get going. We can convince people of this!

  2. connor owens
    September 28, 2012

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    Sophisticated argument and it appealing.
    But the maths are overwhelming and make the looming problem a serious issue in countries like Ireland and the UK. In Ire and UK the social welfare system has basically rewarded procreation through additional payments on a per child basis and enhanced housing benefits.
    So leave something like that in place for a generation and you start to see scary stats as working couples agonise over whether they can afford children, 2nd and sometimes 3rd generation welfare recipents do not.
    So there an increasing amount of takers to makers and on top of an ageing profile that cannot be sustained.
    The welfare state was a noble ideal borne out of WW2 but it and universal sufferage have had their day. The alternative is unclear and alarming.

  3. KP
    September 29, 2012

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    You remind me of Eisenhower’s farewell address back in 1961. He focused his comments on the military industrial complex, but you can see the extension today to pharmaceuticals, agriculture, etc. Don’t get me wrong – the Dems have their own list of “favorites” (e.g., organized labor).

    http://www.youtube.com/watch?v=8y06NSBBRtY

    This is starting to feel a little like the beginning of a long run of “internal strife”.

    • Roger
      October 1, 2012

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      Don’t get me wrong. It isn’t just the Republicans and it isn’t just the military, although that is one of the most egregious examples. It is broadbased and, most importantly, it is inevitable. The reality is that the regulatee will always have a much bigger incentive, and much greater capacity, to influence the rule makers than the dispersed (alleged) beneficiaries of the regulations. This is simple mathematics and why the problem is insolvable in the current structure.

      The reason that I picked on the Republicans is that their “small government” stance is severely undercut by a failure to take on the Big Business/Big Government nexus. They are wide open to attacks of hypocrisy. Justifiably.

  4. Jamie
    October 2, 2012

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    Hayek was saying this over 40 years ago. Reduce government controls over the market. Would voters in any election in the world learn from this over the years and as result become more sophisticated, or has their train of thought been derailed by a constant barrage of unkept promises, so that they have become a decisionless rabble?

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