The Dummy's Guide to Government

Who says, and Who pays?

Unity means that people agree well enough to rub along together without murdering each other, but what is government?

George Washington touched on what government is when he said, "Government is about force.  Government is force and nothing but force."  That's a start - we expect government to use force to protect us from enemies at home and abroad, but it doesn't explain how government affects us from day to day.

Mr. Washington also said, "Government is like fire - an uncertain servant and a fearful master," but he missed the essence.  At its core, governance boils down to two questions: "Who says?" and "Who pays?"

"Who says" is simple.  We all know control freaks who like telling other people what to do.  Many control freaks go into government or law enforcement because they can put you in jail if you don't do what they tell you.  That brings us to "Who pays?" which is more complicated.  Control freaks like telling us what to do, but they also like being paid to tell us what to do.  Government needs lots of money to pay all the people who tell us what to do and to pay all the other people who write rules which list all the things control freaks get to tell us to do.

Government never produces anything; the only place government can get money to pay their control freaks is by taking money from people who earn money.  Income tax gives the government a piece of everybody's action.  Everybody who gets any money is supposed to give some to good 'ol Uncle Sam so his minions can tell us what to do.

No matter how much money it gets, government always wants more.  There are two ways government can get more money: 1) increase tax rates so they get a bigger piece of whatever action goes around or 2) increase the amount of action.  Increasing tax rates gives them a bigger piece of the same pie.  Making more action gives government the same-size piece, but the pie gets bigger so they get more.

Remember when the Whitewater prosecutor spent $40 million investigating the Clinton's land deals?  People who criticized the prosecutor for wasting $40 million didn't understand how the system works.  First, just about all the $40 mil went to pay lawyers, FBI agents, and such.  These people pay around 30% income tax, so right off the top, government got back 30%.  Income tax gives the government a 30% discount when it pays people to work for it.

Well, then, did the government waste the remaining 70%?  Not really.  70% of 40 mil is 28 mil.  Sounds like a lot, but the Whitewater investigation launched a lot of economic activity.  Newspapers wrote about it; people bought the papers.  Authors wrote books about it, people bought the books and publishers made money.  Every penny anybody made on Whitewater was subject to income tax.

The government took 30% of every dollar anybody made writing about Whitewater or talking about Whitewater.  Government at least broke even on the investigation and probably made money.  Whitewater increased the amount of action so it increased the government's piece of the action without raising taxes.

Republicans like to increase the government's piece of the action by lowering taxes.  Lower taxes increases economic activity.  Government revenues go up when there's more action.  That's what happened with the Bush and Reagan tax cuts.

Democrats hate cutting taxes.  They won't admit that cutting taxes leads to more action and more money for the government; they can't stand to think of taxpayers keeping any more money.  Democrats always talk about raising taxes.

They know we voters don't like bigger taxes so they talk about taxing the rich as if they weren't going to tax you or me.  Their spiel of taxing the rich is a big black lie.  Talking about taxing the rich is a lie and they know it's a lie.  There are two reasons it's a lie:

First, though the rich have more money than you do or I do, their money is nothing to the government.  You'll find the Federal budget at in a document named 2008BudgetinBrief.pdf.  It says, "Total outlays for 2007 are now estimated to be $2,779 billion."

A billion dollars boggles the mind, but they're talking about 2,779 billion dollars per year, a number like 2,779 we can understand.  A work-year is about 2,000 hours, our government spends 1.4 billion dollars per hour during the work year.

Let's see what we could get from taxing the rich.  Bill Gates of Microsoft is worth maybe $50 billion.  Suppose the government took every penny he has.  I don't mean take all his income; I mean take every penny in his bank account, all his stock, his house, every dime he has and leave him broke.  That would give the government his entire $50 billion.  50 billion / 1.4 billion per hour is 35 hours.  All the money Mr. Gates has would run the government for less than one work week.  Then what?  Well, Mr. Buffet has maybe 40 billion, 40 / 1.4 is 28, every penny Mr. Buffet has would run the government for just over 3 work days.

Not even Democrats are talking about taking away a rich person's assets, they want to take a higher percentage of rich people's income.  What does Mr. Gates make in a year?  Nothing like a billion dollars.  If they took 100% of Mr. Gates' income, it wouldn't run the government for even an hour.

Democrats lie when they say they'll only tax the rich.  They may try to get more out of each rich person, but there simply aren't enough rich people to run the government, even if you took all they make.

The second reason Democrats lie when they say they'll tax only the rich is that rich people can afford to pay bribes--, oops, sorry, campaign contributions to the Ways and Means Committee which writes tax rules.  The reason our tax code is so confoundingly complicated is that generations of rich people have paid the Ways and Means Committee members and staff to write innocent-sounding rules into the code which mean they don't have to pay much tax at all.

We have the finest tax-writing committee that money can buy.  Rich people buy off the committee, committee members make it easy for rich people to avoid taxes, so rich people get representation without taxation.

What about you and me?  We pay taxes.  We can't afford to pay the committee to write rules for us, so we have to pay all our taxes.  Thus we have taxation; do we have representation?  Do our elected officials represent us?

Not hardly.  The debate on immigration showed that a majority of voters want an immigration law to send illegals home.  Did we the people get the law we want?  No, big-money guys want to hire illegals because they work cheap.  They paid bribes--, oops, sorry, campaign contributions, to the right committee members and the law didn't change.

Rich people get representation without taxation; we get taxation without representation.

What do we do about this?  Hard to say.  Nancy Pelosi's people took over Congress partly because the voters were mad at Republicans stealing their money.  Pelosi promised to clean up Congress, but funny things happened.  Pelosi's Democrats threw out a law that would have required that they list lawmaker's names when a lawmaker spent money on a pet project.  When representatives steal our money, they don't want us to know which of them stole it.  They threw out a law that would make it illegal to send money to businesses that hire lawmaker's relatives.  When they steal our money, they want to split the swag with their families.

The only thing Pelosi's people didn't like about Republicans stealing our money was they weren't in on it.  Now that they get to steal our money, it's business as usual.

You now understand government.  The only issues in government are "who says?" and "who pays?".  Control freaks tell us what to do.  Republicans want to cut taxes and get more tax money by making the pie bigger.  Democrats want to raise taxes and get a bigger piece of the same pie.  Democrats say they'll tax the rich.  That's a lie because 1) there aren't enough rich people.  2) rich people don't pay taxes, they get representation without taxation while we get taxation without representation.

Peolosi's people proved that no matter which party runs government, they'll rob us blind.  So the only question is, would we rather be robbed by Republicans who promise to cut taxes or would we rather be robbed by Democrats who promise to raise taxes?

That's the dummy's guide to government.

Read other articles by Hobbes or other articles on Economics.
Reader Comments

Couldn't have said it better myself. I hate to dish out work (no, I really don't) but, you should write an article on just how much of our pie the government takes.

Not as a whole, but individually.

I love the writing style and look forward to reading more!

September 26, 2007 3:55 PM
First of all, no one ever says "we'll ONLY tax the rich." Democrats often say things like "we'll only INCREASE taxes on the rich." Obviously the rich can't pay for all government, but with ~20% of the people making ~80% of the money, the government can get significantly more money by taxing the rich more than they tax others. Hence, our current tax system. Continuing this line of reasoning, it only makes sense that when taxes increase, they should increase first (or at least more) on the rich.

Why taxes should *have* to continue to increase is still a bit of a mystery to me, but that's not what you were talking about...
August 2, 2009 4:14 PM
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