The Democrats' Magic Income-Redistribution Formula

The great irony of this election is that we are about to vote-in a government well to the left of those of Europe and Canada, whose citizens have always prided themselves on being much more “progressive” than Americans. I cannot imagine the cognitive dissonance that this will produce.

The coming Obama-Pelosi-Reid regime promises to take us where the Europeans have already been, while the Europeans – having seen what Obama promises the American future to be in their own countries- are now in a slow, painful process of trying to undo the damage before it’s too late. Thus far, none of the current European leaders has proven to be another Margaret Thatcher who single-handedly pulled Britain back from the abyss in the 1970’s, but at least the Europeans seem to recognize that they can’t keep going down the path they’ve been traveling since the end of World War II.

Economist Adam Lerrick, writing in the Wall Street Journal, gives us a preview of the Obama future:

What happens when the voter in the exact middle of the earning spectrum receives more in benefits from Washington than he pays in taxes? Economists Allan Meltzer and Scott Richard posed this question 27 years ago. We may soon enough know the answer.

Barack Obama is offering voters strong incentives to support higher taxes and bigger government. This could be the magic income-redistribution formula Democrats have long sought.

Sen. Obama is promising $500 and $1,000 gift-wrapped packets of money in the form of refundable tax credits. These will shift the tax demographics to the tipping point where half of all voters will receive a cash windfall from Washington and an overwhelming majority will gain from tax hikes and more government spending.

In 2006, the latest year for which we have Census data, 220 million Americans were eligible to vote and 89 million — 40% — paid no income taxes. According to the Tax Policy Center (a joint venture of the Brookings Institution and the Urban Institute), this will jump to 49% when Mr. Obama’s cash credits remove 18 million more voters from the tax rolls. What’s more, there are an additional 24 million taxpayers (11% of the electorate) who will pay a minimal amount of income taxes — less than 5% of their income and less than $1,000 annually.

In all, three out of every five voters will pay little or nothing in income taxes under Mr. Obama’s plans and gain when taxes rise on the 40% that already pays 95% of income tax revenues.

The plunder that the Democrats plan to extract from the “very rich” — the 5% that earn more than $250,000 and who already pay 60% of the federal income tax bill — will never stretch to cover the expansive programs Mr. Obama promises.

What next? A core group of Obama enthusiasts — those educated professionals who applaud the “fairness” of their candidate’s tax plans — will soon see their $100,000-$150,000 incomes targeted. As entitlements expand and a self-interested majority votes, the higher tax brackets will kick in at lower levels down the ladder, all the way to households with a $75,000 income.

Calculating how far society’s top earners can be pushed before they stop (or cut back on) producing is difficult. But the incentives are easy to see. Voters who benefit from government programs will push for higher tax rates on higher earners — at least until those who power the economy and create jobs and wealth stop working, stop investing, or move out of the country.

Other nations have tried the ideology of fairness in the place of incentives and found that reward without work is a recipe for decline. In the late 1970s and throughout the 1980s, Margaret Thatcher took on the unions and slashed taxes to restore growth and jobs in Great Britain. In Germany a few years ago, Social Democrat Gerhard Schroeder defied his party’s dogma and loosened labor’s grip on the economy to end stagnation. And more recently in France, Nicolas Sarkozy was swept to power on a platform of restoring flexibility to the economy.

The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.

The economic tides will not stand still while Washington experiments with European-type social democracy…

Shmuel Rosner on why Jews are voting for Obama:

As was previously established by polls, Barack Obama will be the candidate for whom Jewish Americans are going to vote. While getting the majority of Jewish votes, it looks as if Obama will not nab quite as large a percentage as previous Democratic candidates have. It is still interesting to understand the reasons for these voting patterns, and a new study has some answers.

“American Jews and the 2008 Presidential Election: As Democratic and Liberal as Ever?” (released by the Berman Jewish Policy Archive at NYU Wagner) was conducted by distinguished experts. They affirm that “there is some reason to believe that this election may see a narrowing of the traditional gap between Jews and other Americans in their vote for president” – namely, Jews will not be as liberal as they were in recent years. The “gap”, though, hardly disappeared (note: the data quoted in this study is from September, so some changes should be expected):

“The Jewish tilt toward the Democratic candidate may be seen through two comparisons. First, Jews split 67-33 in favor of Obama, producing a gap of 17 percentage points with the nation. Second, and even more telling, is the contrast with non-Jewish whites. While only 37% of white respondents declared a preference for Obama, 67% of Jews did so — a gap of 30 percentage points. In short, with undecided voters eliminated from consideration, non-Jewish whites tilted heavily toward McCain, while Jews tilted even more heavily toward Obama.”

However, this study is not just about support but also about the reasons for this support. One conclusion: Israel, to say the least, is hardly a dominant issue:

“Commentators have suggested that Jews’ concern for Israel may well serve to diminish their enthusiasm for the Democratic candidate. Indeed, Jews do care about the Israel-Palestine conflict more than other Americans. Yet, with that said, the Israel issue ranked 8th out of 15 issues in importance as a presidential election consideration for Jewish respondents. Aside from the economy (a prime issue of concern for the vast majority of respondents), ahead of Israel on Jewish voters’ minds were such matters as health care, gas prices and energy, taxes, and education. Ranking just below Israel in importance for Jewish respondents were appointments to the Supreme Court and the environment. In fact, when asked to name their top three issues, just 15% of Jewish respondents chose Israel as one of the three, and these were heavily Orthodox Jews.”

So what is it that makes Jews vote Democratic, and what will make them vote for Obama?

While their political views tending in the liberal direction help explain their support for Obama, and their concern for Israel may actually pull them in the other direction, political views alone cannot explain their high levels of Democratic vote intention. Neither can the major socio-demographic variables. Rather, their vote intentions are a product of their political identities – their long-standing association with the liberal camp and the Democratic Party.

The professors responsible for this study should be commended for concluding on this bold and revealing point:

“Ironically, Jews and other highly educated voters often view other Americans as responding to instinctual, historic habits, to their political heritage, if you will. People like to think of themselves as totally rational and driven by carefully considered values.

“In fact, Jews in the upcoming election also respond to their identities. In their case, they will be reflecting their long-held, multi-generation attachment to the liberal camp in America, and to the Democratic Party.”

Of course, this doesn’t mean that they vote for the candidate with the wrong views. It just suggests that they didn’t seriously ponder the implications of their vote — and didn’t even try to entertain the other option.

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