Posted on August 2, 2009

by

Daniel Clark

If you had to explain to somebody how most politicians see the government's role in relation to the private sector, the "refundable tax credit" from President Obama's stimulus package would be a good place to start. The credit of $400 per individual and $800 per married couple is nothing to sneeze at, especially if you're a two pack-a-day smoker, who needs to offset the annual $450 tobacco tax increase Obama signed earlier this year. The most telling thing about the credit, however, is the title the president gave it: "Making Work Pay."

You may have thought that work paid already, for the simple reason that people will only agree to work in exchange for competitive compensation. Poppycock, the president says. Work doesn't pay until the federal government supplements your salary by a comparatively tiny amount.

This basic miscalculation of the value of labor has also characterized the tax credits Obama pitched as an incentive for businesses to create new jobs. That policy, which the president was forced to drop from his plan, would have given employers a $3,000 tax credit for every new hire. How this would entice a business to employ someone at a salary dozens of times higher is difficult to fathom. That is, unless you assume that the government money is greater in value, for the very reason that it comes from the government.

During last year's campaign, John McCain proposed a "New Manhattan Project for Energy Independence." Republican congressman J. Randy Forbes of Virginia codified this idea into a piece of legislation that later became an amendment to the Democrats' "cap and trade" bill. Forbes would offer monetary prizes to any private entity that succeeded in, among other things, making affordable cars that get 70 miles per gallon without adversely affecting performance, generating solar power as inexpensively as power from coal, and producing biofuels at roughly the same cost as gasoline.

The amounts of those prizes, ranging from $250 million to $1 billion, sound very impressive, but they are miniscule compared to the rewards one would receive from the free market for those same innovations. Any auto manufacturer that invented a car like that described in Forbes' bill would increase its revenues by billions annually. A one-time $1 billion taxpayer-funded prize would not create any more incentive than already exists. If the company had any scruples, it wouldn't even accept it.

It seems to be the prevailing opinion inside Washington that government money is just better than money that has been earned. Consider it a variation on the theme that stolen sweets taste sweeter. Politicians tend to think of private sector rewards, commonly known as "profits," to be dirty money, soiled by the owners' "greed." It is only by processing that money through the government that it may be purified.

How else could they justify giving bailouts and other forms of corporate welfare to companies whose legitimate earnings they treat as criminal? The way they see it, the taxpayer dollars they give to General Motors without our consent are cleaner than any money we might voluntarily pay GM in exchange for its products.

In justifying his $787 billion stimulus package, Obama argued that "only government" could pull us out of the recession. He doesn't trust a free American economy -- the most powerful generator of wealth the world has ever seen -- to do what it naturally does. Instead, he puts his faith in a small band of inside-the-beltway policy wonks. That's because the massive debt they've unnecessarily incurred derives from the spending of virtuous, government money, whereas the free market, though far more productive, is tainted by the profit motive.

The reason politicians decry profits is that profits result from meeting consumer demand, and consumer demand often conflicts with government mandates. If left to its own devices, the market will produce lots of large, powerful vehicles, toilets that flush on the first try, french fries with flavor, and other things our political leaders don't want us to have. To the extent to which they succeed in suppressing the production of these items, it reinforces their belief in their superiority over those they represent.

Our elected officials must think they can multiply the value of a dollar simply by leaving their mark on it, kind of like an all-star baseball player signing a trading card. The difference is that the card the slugger autographs bears his own likeness, whereas none of these distributors of taxpayer-funded prizes could ever be mistaken for the man on the dollar bill.

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