Big Gov't does more than tax & spend

Baker's comments are worth keeping in mind when we debate taxes and the role of Big Gubument.

The Education of Robert Samuelson: Government Doesn't End With Taxes and Spending

By Dean Baker – "Beat the Press" blog

December 16, 2008  |  Prospect.org

 

Okay, someone has to take responsibility for educating the Washington Post's columnists. Mr. Samuelson is making the case that the rich don't have excessive power in the United States, because if they did, they would pay lower taxes.

 

While many rich people are in fact working quite hard to lower their tax burden (with considerable success), most of their benefits from government actually come on the before tax side of the equation. This should be especially obvious now, when the government is backing up trillions of dollars of questionable debt incurred by the wizards of Wall Street.

 

This is the story whereby Henry Paulson (in his Goldman Sachs days), Robert Rubin and other Wall Street luminaries made hundreds of millions of dollars trading on a free government insurance policy known as "too big to fail." These brave wizards of finance were able to get others to risk money with their banks because their investors rightly believed that the government would step in if the banks messed up too badly.

 

The financial shenanigans, that made so many of our richest people rich, would not have been possible without this free insurance policy from the government. Anyone doubting this should ask how many people would have invested with Goldman Sachs and Citigroup if they were told that there was an ironclad commitment from the government to let these institutions fail if they got into trouble?

 

Of course even wealthy people outside of the financial sector generally can trace their fortune to the hand of government. Bill Gates is one of the richest people in the world because the government gives him a monopoly on Windows. It will arrest anyone who sells the product without his permission. The patent protection that makes the pharmaceutical companies hugely profitable is also a gift from the government.

 

Copyrights and patents do serve a useful purpose beyond just making some people very rich, but where is the analysis that shows that these government granted monopolies are the most efficient mechanisms for supporting creative work and innovation? In fact, such analysis does not exist.

 

There are many other ways in which the government structures the market to redistribute income upward. Read my non-copyright protected book, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer to get more of the picture.

 

The basic story is that the government's tax and spending policy is just a small part of the distributional picture. Samuelson is wasting his readers' time when he implies that they are the whole story.