Proper Role of Government
With the present level of income and other tax rates, there is limited room for any increased intervention by governments in the economic and social life of most advanced nations. Any increase in tax rates produces negligible revenue beyond what would have been collected if rates were lowered. As time progresses it becomes more obvious that large scale additions to public expenditures cannot be financed by the more wealthy individuals in society; rather the overall burden must be carried by the masses. Progressive taxes and lavish expenditures can no longer be carried on to the point where their absurdity can be concealed. Governments will have to realize that the same dollar cannot be spent twice. Every penny of further government expenditure will need to be collected from the same people who have long advocated shifting the payment to the rich. Those advocating for more subsidy will henceforth have to foot the bill themselves. Government deficits from publicly owned and operated enterprises will be charged to the bulk of the population.
Similarly with respect to wages in the private sector; when an increasing share of the entrepreneurs profit is spent in taxes and ever increasing wages, the price of the resulting product produced must rise. When this occurs consumers pay more and consume less. The result of this never ending tax and wage action hurts the consumer and is a blow to the rest of the population. Increasing intervention assumes an inexhaustible fund which can be tapped forever. The whole system of intervention collapses when this reserve is drained off. “No government program that gives people things ever shrinks. As the saying goes, any program that robs Peter to pay Paul can always count on the support of Paul. The welfare state’s dilemma: the population of Pauls grows steadily, while the population of Peters eventually shrinks.” (Steven Yeats, 2004, The Coming Financial Train Wreck A Tale of Peters and Pauls, LewRockwell.com).
The private sector has proven to be the best overall institution in a market economy to provide the goods and services required by society. The public sector is designed to do these things best undertaken together as a group and which has no incentive for business or individual accomplishment or profit. Such areas include defense, transportation, some essential public services, currency, justice and planning.
Enter your email address to follow this blog and receive notifications of new posts by email.