The Privilege of Being American

In today's Wall Street Journal, Lawrence Lindsey, a former Federal Reserve governor and adviser to George W. Bush, wrote an interesting op-ed, refuting Secretary of Treasury Timothy Geithner's argument that it is a privilege to be an American and thus, by extension, the richest should pay more taxes. Lindsey's argument is worthy of reprinting in-part.

Last week Treasury Secretary Tim Geithner said that the "most fortunate Americans" should pay more in taxes for the "privilege of being an American." One can debate different ways of balancing the budget. But Mr. Geithner's argument highlights an unfortunate and very destructive instinct that seems to permeate the Obama administration about the respective roles of citizens and their government. His position has three problems: one philosophical, one empirical, and one logical.

Philosophically, the concept that being an American is a "privilege" upends the whole basis on which America was founded. Privileges are things granted to one individual by another, higher-ranking, individual. For example, in my house my children's use of the family car is a privilege. One presumes Mr. Geithner believes that the "privilege" of being an American is granted by the presumably higher-ranking, governing powers that be.

This is an age-old view that our Founding Fathers rejected. First, they argued that the basic rights of life, liberty and the pursuit of happiness (i.e., economic liberty) were natural rights, endowed by our Creator, not by government. Second, the governing powers do not out-rank the citizens. Rather it is the citizens who grant government officials their "just powers." As Jefferson wrote in the Declaration of Independence, governments are instituted among men based on their consent in order to secure the rights of life, liberty and the pursuit of happiness. The notion that a governing authority grants privileges to those it governs directly contradicts Jefferson's declaration.

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This philosophical point is fundamental. But even if you accept Mr. Geithner's case that the well-to-do must pay more for their presumed "privilege" of being governed, his story ignores the empirical fact that they already do pay a record share of income taxes, even relative to their share of income. According to the Census Bureau, the share of income received by the top 5% of American households is now 21.5%, up from 21.4% in the 1990s. Their share of income taxes has risen to 59% under President Obama from 52% under President Clinton. This despite the fact that the top tax rate was five points higher in the Clinton years.

If you go further back to the pre-Reagan days, when the top tax rate was 70%, the story becomes even more dramatic. Under the four presidents of that era, the income share of the top 5% was 16.8% and their share of the income tax was 36%. In other words, the share of income received by the top 5% has risen 28% and their share of income taxes has risen 64%.

Stated differently, based on the data provided by the Census Bureau and the Internal Revenue Service, the relative tax burden of the top 5% of American earners compared with the remaining 95% has grown from roughly three-to-one prior to 1980 to almost six-to-one today.

One can always argue that this ratio should be 10-to-1, that the "privilege" of being governed is worth 10 times as much per dollar of income to someone who is rich than to someone who is middle-class. Once we give up our moral compass of government deriving its powers from the people. we must also give up any empirical compass of how much we must surrender to government. When you begin the argument that being a citizen is a "privilege" for which one should pay ever more, you very quickly find yourself on Friedrich Hayek's "Road to Serfdom."

This brings us to the third problem with Mr. Geithner's argument, a fundamental logical inconsistency. If being governed, or over-governed, is a privilege for America's citizens, shouldn't everyone pay for the privilege? Why are more than half of all American workers paying nothing at all in income taxes? And if the issue is the need to "pay more" for our privilege, why should only those making over $250,000 be the ones who pay more? If being an American really is a privilege, then certainly all who are thus privileged should pay something.

Still, the real problem with this whole privilege argument goes back to what the Founding Fathers were thinking. Being an American is a right, not a privilege. The privilege belongs to those who are temporarily allowed to serve this great nation in a decision-making capacity. When they turn this privilege into a right to distribute government largess in ever larger quantities—and in ways, to use Jefferson's phrase, a "wise and frugal government" would not—it is those in government, and not the governed, who bear the responsibility for our budgetary problems.

A Fair Compromise?

The Obama administration seems to think it has a winning formula in its ill-handled contraception fiasco. Having previously refused to exempt religiously-affiliated organizations from providing contraception through their insurance programs, Obama claims to have accommodated these organizations with a new ruling. The new compromise purportedly exempts religiously-affiliated organizations, but not their insurance providers. Specifically, these institutions no longer need to provide healthcare plans that contradict their beliefs; however, the insurance provider is required to offer supplemental riders, free-of-charge, to any insured policyholders who want to have these services.

The "compromise" is, bluntly, asinine and economic nonsense. It is a political dressing-up of the same program, meant to confuse opponents through a veil of economic subterfuge. The Wall Street Journal outlined the argument well:

...[Y]ou almost have to admire the absurdity of the new plan President Obama floated yesterday: The government will now write a rule that says the best things in life are "free," including contraception. Thus a political mandate will be compounded by an uneconomic one—in other words, behold the soul of ObamaCare.
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Insurance companies won't be making donations. Drug makers will still charge for the pill. Doctors will still bill for reproductive treatment. The reality, as with all mandated benefits, is that these costs will be borne eventually via higher premiums. The balloon may be squeezed differently over time, and insurers may amortize the cost differently over time, but eventually prices will find an equilibrium. Notre Dame will still pay for birth control, even if it is nominally carried by a third-party corporation.

Fortunately, many opponents of this ruling have not been duped by President Obama's and Secretary of Health and Human Services Kathleen Sebelius's twisted logic. They correctly stand firm against the attempted gross encroachment into the private lives of individuals. GOP Presidential candidate Rick Santorum summed it up best, "It’s not about contraception.... It’s about economic liberty."

He "Deserves" a Second Term?

If Obama's arrogance and sense of entitlement have not yet come through in his policies and his speeches, he has made it abundantly clear, in a recent interview with NBC's Matt Lauer, that he deserves a second term. When questioned yesterday by Lauer regarding Obama's 2009 statement, "“If I don’t have this done [the economy fixed] in three years, than this is going to be a one-term proposition,” the president responded by stating “I deserve a second term but we're not done.”

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Regardless of what one thinks about his policies, the hubris that emanates from such comments is revealing. As he has repeatedly demonstrated, Obama's leadership is steeped in a worldview that consistently demands and expects some to provide for others. His mentality and his policies are one of entitlement and obligation, unfortunately in direct contrast to an ethos of individual responsibility and self-reliance. This view is apparent whether the state is obliged to provide health insurance for all, bankers or the rich owe their money and wealth to others, or, now, the American people owe Obama a second term, presumably for his "well-deserved" hard work.