Dane Smith’s most recent Legal Ledger column “If taxes are bad for us, how did we get so healthy, wealthy and wise?” provides the most vivid example of strawman abuse since the Wicked Witch of the West plucked the Scarecrow.

Dane is a pretty reasonable guy, so when he resorts to calling those who disagree with him “anti-government” and “anti-tax,” you know he’s on shaky ground. It is not “anti-government” to be concerned when government consistently exceeds its constitutional authority; it is not “anti-tax” to uphold the constitutional principle of the sanctity of private property and think it wrong for the state to tax for programs and projects that exceed its constitutional authority. That said his column is made for fisking, and that just what I’ll do.

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If taxes are bad for us, how did we get so healthy, wealthy and wise?

by Dane Smith, Growth & Justice

Here’s a tax-and-budget Question for the Century, as we brace ourselves in Minnesota this summer for continued cuts to our state and local governments, all in the holy cause of not raising state income taxes ever again under any circumstances whatsoever.

Actually, not raising state income taxes ever again sounds like a pretty good objective when you consider what it means. It means that that economy is healthy, that more people are working, more wealth is being generated, and more tax revenue is being collected. It means that instead of relying on inefficient, unstable revenue generated by narrowly based, high marginal rate taxes, the state would transition to more efficient, broader-based, low rate taxes, which produce a stable revenue source providing sufficient revenue to meet the state’s constitutional objectives. When Dane tries to be sarcastic with the phrase “under any circumstances,” he succeeds only in declaring a tax increase to be the last resort of the incompetent.

Answer this: If government and taxes are so bad for growth and general prosperity, why did we grow so much and get so generally prosperous over the last century, especially in Minnesota, a period during which government and taxes grew exponentially?

Okay, so what is it? In past pieces, Dane has told us that Minnesota taxes have not kept up with the national average and the size state government has remained constant and is actually below its apparently Creator-endowed 17 percent of state income. But that aside, the question Dane is asking might be addressed with an analogy.

Suppose I challenge LaBron James to a little game of one-on-one basketball, and he beats me 21-zip. We play again, and to make things more fair LaBron wears 25-pound ankle weights. He still beats me 21-zip. Now suppose, as Dane suggests, we “exponentially” increase LaBron’s handicap and attach 50-pound weights to his ankles. This time he beats me 21-1. Same outcome: LaBron wins. Relative to kicking my butt, it is accurate to conclude that even 50-pound ankle weights did not affect LaBron’s performance, but it is not logical. Of course the 50-pound weights affected LaBron’s performance, but he is so much better than I am, he still beats me handily. So it is with capitalism.

The economic engine of capitalism, the adaptability and innovation of free people in a capitalistic system can carry a lot of deadweight government activity. That is accurate, but it also follows logically that without carrying excessive government on its back, a capitalistic society could produce a whole lot more wealth for a lot more people. It also logically follows (and Dane acknowledges later in his column) that at some point even a superstar can be handicapped beyond ability to produce. Chain LaBron James to a truck, I just might beat him; chain capitalism to a government that finds virtue in “expanding exponentially,” and capitalism is defeated.

Since 1909, and with big spurts in the 1930s and 1970s, the federal-state-local government’s share (anti-tax types like to call it “take”) of income in Minnesota and the United States grew steadily and sharply, from about 5 percent to 35 percent.

A seven-fold increase in taxes should have left us a howling wasteland, if one subscribes to the anti-government theory of anti-tax zealots. We should have less wealth, no creativity, diminished entrpreneurialsm, little technological innovation, and no incentives to do anything but seek or wait for the next government check.

The exact opposite happened as government grew.

Our mostly well governed nation, and high-tax Minnesota in particular, and other democratic and capitalistic nations with expanding public sectors, got very rich during this period. And more important, our quality-of-life improved dramatically, beginning with life expectancy but extending into a multitude of aspects ranging from education to mobility to more fairness and equality for the two thirds of society (women and non-white males) who were second-class citizens in 1909.

Dane needs a little lesson in the difference between correlation and causation. Over that same period of time, Al Gore tells us the earth was getting warmer, carbon emissions were increasing, and dramatic changes were occurring in the Earth’s ecosystem. Using Dane’s logic, I can only conclude that global warming is good for the economy.

I would point out to Dane that it was government that denied certain civil rights to women and non-white males, so it is kind of cheap to give points to government for the wisdom to correct its own mistakes – mistakes that those of us advocating for limited government understand result from government overreaching in the first place.

It is always interesting to me that when progressives want to justify government they point to areas where government has a defined constitutional role (education being a state but not a federal obligation). They also use as a measure of success “participation” rather than “effectiveness” – education being the prime example. Today, public schools proudly proclaim they “take everyone,” and quietly disavow that they cannot “educate everyone.” As in my mythical game of one-on-one with LaBron James, the deadweight of government hasn’t yet reached the point where it completely burdens the resilience of a free people, but image if that burden were diminished.

Now to be fair to Dane, as a nation and a state, we do accomplish good things, collectively, through government. But the point Dane never seems to grasp is that we live in a constitutional republic, not a democracy. Democracy is how we make collective decisions about collective actions, but it does not tell us when collective action is appropriate or allowed. We do not vote on when we get to vote. It is our federal and state constitutions that define when we act collectively. We are a republican government of enumerated powers, and the problem is, Dane does not recognize that restraint. In his progressive view, government authority is defined by the consent of the governed, the will of the many, and the rights of the minority are protected only by the grace of the majority. It is no wonder then that he takes the inevitable and makes it look like a plan when he gives government points because the majority controlling government finally decided to provide equality for women and non-white males. Are we to assume then that it was okay when the majority denied equality to women and non-white males?

Again to be fair, Dane has some handicap weight to carry when we debate. To denigrate my ideology, he must come up with terms like “anti-government” and “anti-tax.” To denigrate his ideology, I merely have to use his self-description – “progressive.”

This question and sound answers to it are posed strongly and clearly in a gem of a little book penned right here in Minnesota “Cracks in the Foundation: Refuting the Conservative Case for Low Taxes and Small Government.’’

Its author is Elaine J. Handelman, a lifetime Minnesotan and a recent addition to the Growth & Justice Board of Advisers. She’s neither a left-wing academic nor an advocate for taxpayer-funded causes. She’s a business professional with expertise in quality improvement initiatives for the private sector, who has a real grasp of economics and history.

“If freedom varies with the portion of our income we keep,’’ Handelman observes in the book, “then we were freer in 1900.

“Yet most of us, I suspect, would prefer the freedom we had in 2000…The capacity to exercise choice is an important part of our freedom and there is no question that the number and quality of choices increased over the century… (And) that growth would not have been possible without significant investments in the public sector.’’

If I might borrow from Robert Browning, I would suggest that Ms. Handelman’s reach has exceeded her “real grasp of economics and history,” but then what’s a government-run utopia for?

In the first sense, Handelman is talking about “freedom” as manifest in the principles the U.S. Constitution – the primacy of individual sovereignty, the sanctity of private property, and preservation of the rule of law, the protection of which is why our government was formed and our Constitution written. In the second paragraph she is talking about “freedom” as opportunity, the result of the wealth created by a free people, each person acting in his own self-interest absent coercion of any kind.

In the first respect, yes to a large degree we were freer in 1900 than we are today. In the 1900’s we were even free to campaign against government’s denial of women’s suffrage and government-imposed Jim Crow laws; today, even the president of the United States by implication compares those who campaign against the government-sanctioned view of climate change with “holocaust deniers,” and we have a Patriot Act that is used against people who support a presidential candidate who advocates a return to constitutional principles.

Even were one to acknowledge Ms. Handelman’s conclusion, “that growth would not have been possible without significant investments in the public sector,” where does she suppose those investments came from? They were the result of private sector wealth production. Why were those public sector investments required? To support private sector growth, not to subjugate the primacy of individual sovereignty, the sanctity of private property and the rule of law. Without that freedom and the wealth it produces, we will not have the freedom of opportunity in 2100 that we had in 2000. Frankly, we don’t have it in 2009.

Handelman, with careful footnotes and sourcing, nails down the facts of public sector growth and all the ways that taxes have provided humanity-enriching investments — from building national parks to ensuring financial security for old age to probably the most cost-effective spending of all, our state and national appropriations in behalf of educational equality and attainment.

Recognizing and celebrating the basic virtues of business and profits and private enterprise, Handelman scores strong points on several other important spin-off issues raised in the eternal debate between public and private.

“The oft-heard “points of light’’ claim — that private charities and non-profits can fill the void if our governments abdicate that responsibility — is just not realistic as a total solution. Private spending for the economically disadvantaged currently amounts to only 10 percent of what government spends. If government pulls out of the safety-net business, does anyone really expect Americans to increase their giving tenfold? Or even half?

“The notion that the private-sector always does it better than the public sector is dispelled, with anecdotes and statistics. Handelman cites numerous success stories in government, including the consensus that programs like Medicare and Social Security are remarkably efficient and low in overhead costs.

Here’s where Dane plucks the Scarecrow. Yes, some people make these arguments as absolutes, but there are far more fundamental issues – respect for the Constitution for one – that are at stake. For example, the issue is not whether or not a “safety net” is in place, the question is because we have some individuals who are economically disadvantage must we reinvent government outside its constitutional authority and create massive government programs that impinge upon the entire population to its determent and still don’t help the disadvantaged?

Universal health care is a prime example. Much like Dane’s effort to make government correcting its disenfranchisement of women and non-white males into a virtue, universal health care is government’s effort to correct its misguided creation of a bureaucratic, highly regulated managed care system (not by any-stretch a free-market health care system) that caused the economic distortions progressives call a “crisis.”

Because some people can’t participate in our state-imposed, highly regulated, managed health care system is not a good reason to give government even more authority over health care. Instead, why not consider freeing the health care system of the ankle-weights of government interference. More toward a free market in health care where patients control their health care dollars, doctors compete for patients not insurance dollars, and insurance companies compete for customers by writing diverse policies targeted to individual need. And the disadvantaged? Why not provide them with health care vouchers and let them participate in a free health care market with the same freedom and dignity as others instead of pushing poor people into government programs that provide neither quality care nor the self-esteem and motivation to become self-sufficient?

“And yes, taxes obviously have their limits and cannot be raised without consequences for growth. And governments need to redouble their efforts at accountability and cost-efficiency. “Everyone agrees that taxes can not be increased endlessly (and) the manner in which the tax burden is distributed on businesses and individuals has economic consequences.’’

Handelman concludes: “We all agree that government should defend us against enemies foreign and domestic, provide a safe environment and enforce the law. I argue for the value of government in additional roles: Our public investments provide us with increased individual choice, expanded business opportunities, increased scientific and technological ideas for our entrepreneurs to exploit, improved health and an improved quality of life.’’

Okay. Dane quotes Ms. Handelman and confirms the old wives tale that if we engage in the self-abuse of excessive taxation too long, we will eventually go blind. But citing the second paragraph, Dane also wants to keep doing it until we need glasses.

As noted above, it is a fundamental progressive belief that government is restrained only by the consent of the governed and the will of the majority. Dane advocates raising taxes and expanding government until the majority determines that there are “consequences for growth” but without guidance on what constitutes a “consequence.” Cap and trade certainly has “consequences” for growth, not to mention it impinges on individual sovereignty, the sanctity of private property and makes a mockery of the rule of law. But apparently, the national self-abuse of cap and trade is still on the path to eyewear and won’t yet cause climatic blindness, only economic disaster.

Dane and Ms. Handelman can argue for “the value of government in additional roles,” but in the context of our constitutional republic, they nor anyone else has the legitimate authority to expand government into a role not granted to it by the Constitution, irrespective of the benefits.

I couldn’t have put it better.

Here, I agree with Dane – he could not have put the progressive case better. The weight of progressivism’s immorality, economic illogic, and contrariness to constitutional principle would be too much handicap for even the intellectual equivalent of the athleticism of LaBron James. One-on-one is simply not the progressives’ game.

This entry was posted on Monday, July 13th, 2009 at 12:29 pm and is filed under Blog Posts, Craig Westover, Limited Government. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.