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How to Be a Patriotic Millionaire, Even if You're Not Rich


It's not enough for you to call for more taxes; you need also to pledge that you will work the same amount at the same rate, accepting the lower after-tax income cheerfully.

The only politically correct resolution is to call for government spending cuts in the far future, but spending increases in the present and foreseeable future. This does not have the proven track record of war; on the contrary, it has been tried often, but has never worked. However, that's not your problem. All you have to do is keep your proposed spending cuts small and vague (use words like "reform" and "rationalize" rather than "cut"), or better yet, don't specify them at all. When everything falls apart, blame the unpatriotic millionaires. Everyone else will.

So that's how to write your patriotic millionaire op-ed piece. Call for increases in taxes you don't pay, and promise that you and all the rich people you know will not demand higher pretax wages or investment returns, nor work any less. Promise that you'll pay for the entire tax increase by cutting personal spending, and call on the government to do vague things like "get its house in order" and "come up with sustainable entitlements." Remember that in Washington-speak, an unenforceable promise to grow future spending at a slower rate than previously planned is a spending cut. No one actually has to spend less than the previous year.

There is one final point. You have to make some kind of a pitch for "balance" between spending cuts-sorry, make that entitlement reform and rationalized programs, and tax increases on the rich. No sensible person will disagree with you. The US has a $16 trillion official debt and a much larger unofficial deficit composed of unfunded entitlements, contingent liabilities, and legislated liabilities. The poor cannot pay it off; they don't have the money. No middle class in a democracy has ever paid more in taxes that it has received in direct benefits-that is, cash or things like education and health care that it would purchase out of pocket if not provided free by the government, not general societal assets like roads or military protection. So the middle class will at best pay for its own entitlements, it will not contribute to paying down the debt, or even to paying the interest on that debt when interest rates go up.

If that sounds anti-middle-class, it isn't. The middle class does most of the work, fights most of the wars, raises most of the kids, and supports most of the social institutions. The poor often work hard, but generally at things with little economic value. Some rich people work hard, but they choose to, which is quite different from struggling to support a family. The middle class need make no apology for its contribution to society. However, it will never vote to tax itself unless there is a clear, direct benefit in return. Why should it? Majority rules.

So the rich will have to pay off the debt. It's that or allow default, and the rich lose more in a default than anyone else. A few rich people may renounce citizenship or go on strike, but those are foolish choices. Being a rich US citizen is pretty nice, even if you have to pay a lot in taxes, and something to be proud of.

What's important is the order. The first thing we need are honest accounts that include all government promises: Federal, state, and local. No one will dig deep into her pocket to pay off a black hole debt. We can't have a rational debate with each side making up its own figures.

Honest accounts mean more than just guessing Social Security revenues and payouts in 2040. It means agreeing now what we will do if reality differs from projection (and it will). Will we pay the highest benefits we can afford given the revenue? Will we raise revenue to whatever it takes to pay promised benefits? Will we split the difference? Will we borrow to cover shortfalls, and if so, for how long before we change the rules? Agreements based on dishonest accounts are worthless. The last thing we need is more sign-now/fight-later budget deals.

Next we have to cut spending to a level that is sustainable in the long term. As long as we are overspending, increasing taxes just enables continued bad behavior, and it wastes economic resources that will be needed in future to pay off the debt (including Social Security, Medicare, unfunded pensions, losses at government sponsored entities, interest on the debt, and other items).

Reasonable people will differ about what that level of spending is, but no reasonable people should call for exhausting ourselves bailing out the boat before the leak is plugged. And no reasonable people should look to increasing taxes on the rich to pay for middle class entitlements; the rich have all they can handle to pay for the poor, general social infrastructure, and debt repayments.

Once we have achieved stability in normal taxation and spending, the rich will face stiff tax increases to pay off the accumulated debt. Some will complain, no doubt, but the reasonable ones will realize these taxes are in their self-interest. On that day, I will not wax sarcastic if some rich people write editorials to support higher taxes.
No positions in stocks mentioned.
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