For Progressives, the purpose of taxation is to fund an unlimited government with the power to achieve “fairness” by transferring wealth from one party to another. The progressive tax is the instrument of choice because it makes it look like those who pay little or no taxes can benefit at the expense of “the rich.” Although this pitch may win elections, it is not sustainable because it is based on the illusion that those with high incomes and wealth do not have the power to shift the burden of taxation onto their employees or suppliers or customers. Although Progressives insist otherwise, increasing marginal tax rates is associated with slower growth, high unemployment and a shrinking middle class.
Property rights and the enforcement of contracts are also anathema to Progressives. In their view, expansive rules and regulations can narrow the differential of power in the workplace and among economic agents. But, the regulatory state now threatens the middle-class. Today, for example, banks spend more on complying with an ever more burdensome regulatory regime than they spend on making loans. No wonder they are laying off thousands of middle-class workers as they cut other costs in order to maintain the profitability that is the pre-requisite for staying in business.
And, the federal government’s extensive efforts to allow individuals who have defaulted on their mortgages to remain in their homes have made lenders understandably reluctant to extend new mortgages to anyone but those who pose the absolutely lowest risk. That, in turn, has accentuated the housing downturn by putting home ownership out of the reach of thousands of individuals who otherwise could have reasonably expected to qualify for a mortgage.
The consequence is a downward spiral of low economic growth, rising budget deficits, a shrinking middle-class, more political pressure for increased transfer payments to those in need and higher taxes. Seen in this light, the European financial crisis is not so much due to mismanagement as it is the inevitable consequence of Progressive economic and social policies writ large. As Epstein says: “Consistent bad results can only be explained by consistent bad policies and not by some mysterious run of bad luck.”