Better Reading Lists Will Not Fix a Problem Of Too Much Tax Revenue

“The state of the world is terrifying.” That’s the excellent Bret Stephens from a recent conversation he had with the similarly excellent Frank Bruni at the New York Times. Stephens might admit to having overstated things.

The world is “terrifying” relative to what? 2020, when global leaders who would never miss a meal took an economy-crushing break from reality, or 2008 when George W. Bush and friends foisted a crack-up on us since they disdained the message of a healthily correcting market? The horrors of the 20 th century are too numerous to list.

While Stephens argues that “our problems are much deeper than one man and his flatuous administration,” it’s no insight to say that Donald Trump is a major source of Stephens’s unease. But he shouldn’t be so fearful. Good, non-terrifying times allow for foolishness in the way that truly terrifying times do not. As in, we should be most terrified when the electorate is serious, and not electing Trump or Joe Biden.

Stephens laments that “Profligate government spending is as endemic in Europe as it is here.” Government spending is undeniably the biggest, most economy-sapping tax of all, but has Stephens stopped to think about why the spending is profligate? It calls for a digression.

Government spending in Texas dwarfs that of Vermont. So does government debt in Texas. And the why is the easy part: Vermont can claim one billionaire resident, Texas exponentially more. And much more heavily indebted California exponentially more than Texas.

Which explains why California and Texas have substantially more debt than Vermont does. It’s not about ideology, it’s just that both states have taxable access to much more wealth such that investors are eager to buy their debt.

Stephens might consider Europe’s profligacy through the prism of Texas and California’s. Opposite conventional wisdom among conservatives, government debt isn’t a simple effect of spending exceeding tax intake. Markets aren’t that stupid. Debt is an effect of market expectations about how much a city, state, or nation will take in from taxes in the coming years and decades.

It speaks to the real crisis: it’s not the growing government debt in the U.S. and Europe, it’s the debt. Get it? If governments can borrow excessively, that’s a market signal that they have excessive taxable access to the growing wealth of the rich. Meaning the crisis isn’t $40 trillion owed by Treasury, it’s all the progress not taking place since lenders so powerfully trust Treasury’s future tax collections from the rich.

Spending and debt are the horrid effect of too much wealth creation finding its way into the hands of governments. As argued in my next book (co-authored with Oklahoma State professor Steve Trost) California Freedom, Texas and other U.S. states are on the path to California-style misgovernance. How could they not be with growing amounts of wealth to tax?

Except that Stephens isn’t focused on too much tax revenue. Instead, he pivots to non sequitur: “everything started going wrong when we abandoned the cause of teaching civics.” No, government spending is incredibly harmful, period.

Which means the greats of literature, philosophy and political economy that Stephens wants the hoi polloi to read will not a fix a problem of too much taxable access to wealth creation, nor will his call for feel-good measures like “accepting higher taxes or fewer benefits in order to get the deficit under control.” Quite the opposite.

That’s because horrid misgovernance and debt are an effect of too much wealth flowing to government ahead of its mindless misuse. Yes, government spending is incredibly terrifying. Translated for the masses, central planning sucks.

Originally published on Real Clear Markets.