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The Economic Pie: how to refute liberals

Written on Saturday, April 28, 2012 by

pieChart

For decades now, a liberal mantra has been the cliché that the poor should “get a bigger slice of the pie”.  For example, the First Lady of the Marxist-in-Chief spouted:

The truth is, in order to get things like universal health care and a revamped education system, then someone is going to have to give up a piece of their pie so that someone else can have more.

Well, OK, how about giving up your taxpayer-funded vacations?  And maybe also give up what Mark Levin called the Obama Rule: Presidents should pay a lower tax rate than their secretaries!  That is, voluntarily paying more taxes than they owe, e.g. by waiving their deductions.  But then, the “patriotic millionaires” who call for more taxes refused to pay more when challenged to:

Leading by example has never been a strength of the monumentally hypocritical Left—see Patriot column The Hypocrisy of Hypocrisy Charges.

The pie has become much bigger

In reality, Mrs. Obama, like the left in general, sees the economy as a zero-sum game: for one person to gain, someone else must give up something.  However, as explained earlier on Patriot, in a market, both sides win by getting something they value more.

Thus she has wilfully overlooked the alternative free market solution: bake more pie so everyone gets more.  Indeed, this is exactly what has happened in America: “poor” Americans are richer both than “average” Europeans of today, and “average” Americans of a few decades ago.

For example, thanks to cheaper computers and the Internet, even poor Americans can instantly communicate across the world at no cost, and obtain information with a few mouse clicks.  30 years ago, even the richest people on the planet couldn’t do this.  Also, even back in 2005, 99.7% “poor” Americans had their own refrigerators, a luxury no one had a century ago.  97.7% have their own televisions, so they can watch movies in their own home, something only the wealthy could do.  78.8% have air conditioning, another modern luxury, whereas only kings of old could employ people to fan cool air over them.  Even back in 1970, only about a third of all households had A/C. 81.4% have a microwave—it’s hard to imagine a kitchen without it, but back in 1971, fewer than 1% of all households had one.

Indeed, in so many areas, the pie has become so big that poorer Americans have almost everything that average Americans do, just about 10–15 years later.  Also, while liberals look  to the United Socialist States of Europe for inspiration, the average living space for all Europeans is 20% smaller than that of poor Americans.  And there are only 2.6% of poor American children under five suffering from malnutrition, while this is endemic for average children in most parts of the worlds that liberals prefer.

See Bill Whittle, who knows what poverty is like, explain the above two paragraphs with the facts and figures that the Left doesn’t want you to know.

The Left only wants to punish the bakers!

The main problem with the Left is that they are envy-mongers who want to redistribute the “pie”, but have no interest in how it is baked in the first place.  Somehow, the pie appears magically, and there is an evil wealth-distribution genie who distributes it unfairly. Indeed, they punish the main bakers by confiscating more of the pie they bake, and regulate them to make it harder to bake.

The Left, such as the Occupy Whatever thugs, also think that those who refuse to contribute to “baking the pie” are still entitled to slices of that pie.

Leftist tax demagoguery explained by pies

Obama has long been demagoguing that the rich should pay even more than they do.  This can be refuted by another pie analogy: let a pie represent the tax revenues.  So let’s imagine ten friends go out after work every Friday night to a pizza parlor, and order $100 worth of pizzas.  They have widely different incomes, so the richest of them offers to pay more. He suggest that as the top 10% of taxpayers pay 70% of taxes (although they earn only 45% of the income), he will pay $70 of the cost.  And as the bottom 47% pay no federal income tax, he suggests that the poorest five eat for free.   Then the remainder was as follows: the second pays $15, the third pays $10, the fourth $4, and the fifth $1.  This is something like the way the “rich” pay more than their fair share of the taxes.

Then let’s suppose that the pizza parlor owner decides to reward them for being regular customers.  He would allow them a 20% discount, so he would need to refund the ten friends.    But then he thought that there shouldn’t be a refund to the five who were eating for free.  Obviously, there would be no refund for the five who ate for free.  But then if he shared the $20 equally among the other five, it would be silly, because the fifth friend would be paid $3 to eat there.

So the owner refunded in roughly  the proportion to the amount paid.  So the richest was refunded $13.  The fifth was refunded $1, so ate for free as well as the poorest five.  The others were refunded as follows: the second $3, third $2, fourth $1.

So the total bill of $80 was now shared this way: the richest now paid $53, the second $12, third $8, fourth $3, and the others ate for free.  They were all happy that they were paying less than before.

But when they left, the fifth richest complained, “I only received a dollar back, while the richest guy got $13 refunded.”  The others also complained that the richest received much more money back than they did. The poorest five were especially indignant that they didn’t get any refund, and screamed that the owner was against the poor.

So the nine others beat the richest guy up.  Then next Friday, they showed up to the pizza parlor, and thought “good riddance” that the richest was not there this time.  But when they saw the bill, they were dismayed that they had far more to pay.

How this pie represents real life

That’s the problem with the Left: of course those who pay no federal income tax won’t receive tax refunds!  And those who pay more tax will receive the most in refunds.  Further, if they are overtaxed or persecuted, then they might just leave.

Right now, American companies have over $1 trillion overseas—including Apple’s $60 billion, and won’t bring it home because America now has the highest corporate tax rate in the world.  So America is deprived of a real stimulus that wouldn’t raise the national debt.

Even domestically, “soak the rich” has been a disaster.  Economic historian Burt Folsom writes in a recent column about the Senate’s rejection of Obama’s “Buffett rule” about the 73% “tax on the rich” under Democratic President Woodrow Wilson:

“Some might say, so what? They can pay it. But in fact they didn’t. The rich invested their cash in tax-exempt bonds, art collections, and foreign investments. They refused to pay three-fourths of their earnings to the government. As a result, the U.S. lapsed into a recession and faced 12% unemployment in 1921. Fortunately, Presidents Harding and Coolidge cut that top marginal rate to 25%, and so much economic investment came pouring into the U.S. during the Roaring Twenties that American unemployment dropped to a 3.3% average from 1923-1929. GNP grew substantially and revenue from the income tax had actually increased by 1929 from what it was earlier in the decade.”

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