Where Did Our Real Wealth Go?
Two Forks in the Road Ahead — California as Greece
On the one hand, the money is vanishing. Income, state and federal, as well as payroll, taxes here in California may soon top 60% on top incomes (10% state, 15% plus payroll on most of one’s self-employed income, 39% federal). Add in property and sales taxes and we’ve reached the point where the lemon can no longer be squeezed without either more than the current 3,500 a week leaving the state, or going the Greek route of endemic cheating.
(Indeed, as I wrote not long ago: I go to Greece every other summer, and lived in the country for over two years. I come away with one overriding observation: almost every Greek I met in some way either cheated on his tax obligation or conned a way to get some state subsidy — or both, while furiously damning “them.” [“Them” if one were poorer, meant the rich; and if richer, the state; and for both, also meant the United States.])
Bottom line: I don’t see how the state or federal government can up taxes much more and still find wealth-producing, law-abiding, motivated job creators.
On the other hand, as the money runs out, will state workers, pensioners, and entitlement recipients accept that there are too few wealth-creators to fund their pay-outs, or, as in Greece, hit the streets in protest, teenager style, each time some adjustments are necessary?
So if we can’t raise taxes and we can’t cut expenditures what is left? There is no Germany to bail us out? Cut defense? Keep borrowing from the Chinese and Japanese?
Where did all the wealth go? Modern Western society is in some sense becoming drone-like, its entitled sensitive citizens assuming ceremonial roles and attitudes about the very landscape they inherited from their industrious predecessors.
Here in California we idle farmland, though we have the water, expertise, and soil to produce far more food than we do. We put vast swaths of both land and sea off limits to gas and oil production, though we could produce far more petroleum and natural gas than we do. We snub nuclear power, though our population steadily increases and its desire for electronic appurtenance grows, not shrinks. We like “wilderness areas” (who doesn’t?) where we build no roads, harvest no timber, and build no dams. We strangle Silicon Valley with all sorts of labor and business regulations until it fabricates and outsources abroad. In other words, we are creating no real new sources of concrete wealth as we nuance the shrinking capital we inherited.
We Are Still Humans For a Bit Longer
Hollywood is great. Tourism keeps San Francisco alive. Napa Valley produces great wines. We have strong finance, insurance and plenty of regulators. But ultimately our generation lost sight of the fact that we must eat and therefore grow food; we must clothe ourselves and therefore need fibers; we must move from place to place and therefore need fuel; and we must have shelter and therefore have wood, cement and glass.
Yes, we can import all this from the Chinese or the Canadians or the South Americans, but at some point one needs the real capital created by real wealth to pay for it all — not nuancing and adjusting and tinkering with money. Money is simply a representation of stored capital that comes from real production of some sort. Talking about “millions of green jobs” and “a wind and solar future” and “high-tech sector” is well and good. But ultimately Western man has not yet (as we learn from his consumptive habits) evolved to some sort of ethereal existence. Even Harvard Review grandees need real fuel to power Air Force One to get to Copenhagen.
So for a while longer, we need the miner, the oil pumper, the farmer, the fabricator, the carpenter, the road-builder, the railroad guy, the cement layer, the chemist, the computer engineer — and the system that allows them all to create wealth unimpeded by government and in an environment in which the citizen who benefits from their labor appreciates their industry.
The 11th Hour
Yes, before we have the actor, the writer, the professor, the insurer, the investor, the regulator, and the politicians, we need the elemental among us to find or create material wealth. We, the sloganeering class, forgot that, and so subsidize our high living either on borrowed money or the prior productive investment of those now in the grave yards.
And the tab is coming due faster than we ever dreamed. All the soaring, teleprompted rhetoric, the Ivy-League credentials, and the social justice boilerplate will no more create wealth than ceremonial fifth-century AD consuls and robed bishops could fabricate the glory of Rome.
PS. Why am I not too optimistic right now? Our President, who submitted the largest deficits in recent memory, and who is on track to nearly double the national debt in record time, continues to blame Bush — not just for Bush’s lamentable deficits, but for Obama’s own new unsustainable ones. I think his weird logic is: "Bush’s bad deficits made me trump them by a factor of four." When the Commander-in-Chief expects the populace to believe that, or drops real unemployment figures and talks instead of theoretical jobs saved, or flip-flops on everything from evil Wall Street bankers now suddenly good, or bad nuclear power now vital, then we have about as much hope as we would have under Jimmy Carter.
Remember January 2009? In the era of Democratic supermajorities in Congress, a new JFK in the White House, and a media proclaiming Obama "a god," we were all grass-roots saints, who threw out the Bush bums and had at last a great workable Congress and White House — and were a daring electorate eager for hope and change from a non-traditional president. Yes, life was good and we, in the pre-tea-party age, were the salt of the earth that earned an Obama.
Now? Suddenly in our media and politics the people are stupid, full of ingratitude, often racist, the system broken, the Congress bankrupt, all of us undeserving of our one chance in a lifetime state agenda. Yes, the petulant liberal attitude in 12 months went from "We, the People" to "You stupid idiots" — and all because some Democratic congresspeople discovered that the more they went out on the limb on Obama stimulus, health care, cap and trade, higher taxes, bigger government, bailouts and endless deficits, the more they were going to get sawed off in November by the ungrateful people. So naturally instead blame the filibuster, the people, the clingers — anything other than the self-preservation instincts of the political class of your own party.
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