In many ways, government undermines productivity.
The problem is that this cost of government is unseen. The great French economist and philosopher Frederic Bastiat famously said that the difference between a good economist and a bad one is that the good economist considers not just the immediate and visible results of an action, but also the long-run and often hidden results. Americans would be far better off, wealthier but also less fractious, if it weren’t for the relentless expansion of the federal government over the last century, but few of them ever think about the production (and innovation) that has not happened because government obstructed it. The lost benefits are unseen.
We are like a drunkard who has been boozing it up for so long that he has no idea how much better he would feel if he had remained sober. Big government is our perpetual hangover that we’ve come to accept as normal.
Modern “liberals” constantly extol our federal leviathan and want to increase its size and power, but if you go back in time, you find that liberals (true liberals — people who wanted more liberty) understood that government was the enemy of prosperity. French liberals of the 18th century knew that the lavish spending of their monarchs did not stimulate the economy, but merely transferred wealth produced by the farmers, artisans, and businessmen into the maw of the state, where aristocrats and their hangers-on mostly squandered it. French liberals did not think there was some “multiplier” when Louis XIV built palaces and paid his bureaucrats. They knew that the state was enriching a few at the expense of the many, and making the whole society poorer.
Unfortunately, later liberals figured out that they could control the state and thereby enjoy power and wealth. That was when they turned from liberals into authoritarians and began an ongoing campaign to hoodwink people into believing that government was their friend and protector. That campaign has been extremely successful. Millions of Americans have been conditioned to focus solely on the crumbs the state hands them and never to think that they would live better if it weren’t a millstone around the neck of productive people.
The higher taxes Obama demands that “the rich” pay will mean that they will have less to spend, invest, or donate to charity as they think best. Instead, federal officials will get to decide how to use the funds. Will that trade-off help to restore economic vitality? No. It will further depress it as more resources will be wasted and incentives to produce take a battering.
The Democrats bank on the majority of the people not comprehending how much damage the government does to their prospects for a more prosperous life. Sadly, very few Republicans are any good at explaining that to them.