The Hidden Cost of Progressivism

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Commentary

With the U.S. Constitution, the Founding Fathers created a nation of maximum individual freedom, maximum individual responsibility, limited government, and classical liberalism. Having fled anti-democratic European aristocracy, privileged class structure, and limited opportunity, American colonists did not want government in their lives. The Founding Fathers believed that Adam Smith was correct when he said individuals independently pursuing their self-interest to survive naturally organize society. Without government planning, it was the invisible hand of nature.

In 1933, America flipped that vision. To progressives, freedom now meant freedom with government. President Franklin Roosevelt turned government from a neutral third party, whose sole purpose is to protect life, liberty, and property, to government as an active third party, whose sole purpose is to provide life, liberty, and property. This is the nation we have today, where all citizens (to some degree) are dependent on government.

That reversal comes with a cost: the hidden cost of progressivism. Every individual or family earning $50,000 per year is, today, paying a hidden tax of at least $28,100 per year over and above federal and state income tax.

Examples:

1. Government has so regulated the market for health care that the market no longer exists. American health insurance today is not insurance; it’s prepaid health care—that’s why it costs two to three times what it should, two to three times what it costs anywhere else in the world. With health insurance in the United States automatically paying for most procedures, citizens no longer bargain over price. To nothing else in life are they so indifferent. Citizens in New Jersey, for instance, are indifferent to the fact that the price of health insurance in Pennsylvania is three times less. In complete violation of interstate commerce, progressive federal law forbids citizens from purchasing health insurance across state lines. Before Medicare, the cost of health insurance was $200 per month (in 2022 dollars), $50 per month for a young person—the price of auto insurance, property insurance on a $1 million home, or life insurance. Today, it’s $600 per month, provided your employer contributes an additional $800 to $1,000. The employer doesn’t care; it’s a tax write-off. Eliminate government from health care, and the price of health insurance will drop by 66 percent. Ask your employer to give you what he’s paying on your behalf. It’s your money. $800 per month times 12 is $9,600 per year. Hidden tax one.
2. Social Security takes 15 percent of your income. You pay 7.5 percent, and your employer pays 7.5 percent, but it’s money your employer would otherwise have given you. Fifteen percent, however, is more than is necessary. Properly invested, 10 percent is sufficient. That 5 percent differential on $50,000 is $2,500 per year. Hidden tax two. (That 10 percent of $50,000, $5,000, when invested at 5 percent annual interest compounded monthly, in 40 years is worth $658,194. In 50 years, $1,147,283.)
3. In 1964, President Lyndon Johnson said unequivocally that there would be no increase in taxes for the War on Poverty. A gullible nation now knows that, to date, that “war” has cost $23 trillion; that the poverty rate, 15 percent in 1964, on average, remained 15 percent; and that today, the war is paid for by borrowing. Roughly $900 billion per year (15 percent of the federal budget) divided by 150 million taxpayers is $6,000 per person. Hidden tax three.
4. Until 1890, schools were private. Parents who couldn’t afford to send their children were provided the means—from property taxes. Thank you, Thomas Jefferson. But then progressives amalgamated them into today’s government-administered unified school districts—except that once a huge enterprise becomes a government project, it’s open to rent-seeking and politicization. This allowed political pressure in the 1970s to force public schools to try to create equal outcomes for all students—which they found was impossible without lowering standards, which is why middle-class parents pulled their children and sent them to private schools at a cost of $20,000 to $40,000 per year per child. If just one child per family attends private school at $20,000 per year ($10,000 per parent), over and above the property taxes the family already pays (even if they are tenants), that’s hidden tax four.

Hidden Taxes Per Year

So if we add up the above hidden taxes, it looks like this: $9,600 plus $2,500 plus $6,000 plus $10,000 equals $28,100.

Actually, there’s much more. Any serious constraint on business causes businesses to raise prices, a hidden tax. Domestic farm subsidies and tariffs on foreign goods raise prices. A hidden tax.

Solution: Reverse all federal legislation since 1933. Social Security, Medicare, everything—except legislation that reinforces civil rights and national defense. Remove government from the economy, and the federal income tax rate will drop to 15 percent.

Let citizens keep that $28,100 per year! Universal basic income.

In a Jeffersonian democracy, where no citizen is denied the vote, it’s understood that citizens can and do think for themselves. We’re not living in Plato’s Republic, an island of progressivism, where the nation’s most capable, its aristocracy, are in power. Dictatorship. In Plato’s Republic, the masses didn’t vote.

Arguments for Doing Nothing

The wealthy do not object to high income taxes; they’re not paying! Let the middle class continue to pay!

Large corporations do not object to regulation and monitoring by government. They can afford the millions of dollars in legal fees to comply—Sarbanes-Oxley, Dodd-Frank—then buy up the smaller firms that cannot. Monopoly. Let them continue to do that! The corporations that survive create the efficient corporate state: Bismarck, Mussolini, Hitler, China. National socialism!

For U.S. prosperity, all that’s necessary is that the United States has less regulation than elsewhere in the world. That would give the United States an enormous competitive advantage. Let governments worldwide tax and regulate business, forcing them to increase prices, and prices in the United States will be lower. U.S. manufacturing and exports will rise.

Let the United States offer more social, political, and economic freedom than elsewhere in the world, and it will continue to attract the world’s most independent and entrepreneurial talent—what enabled the United States to go to the moon in 1969 (German scientists), what today keeps the United States at the forefront of high technology, information technology, and quantum computing (71 percent of those in Silicon Valley are foreign-born). With American public schools being the lowest achieving in the industrialized world, with foreign students outscoring American students on the SAT and enrolling in U.S. universities, let smart immigrants continue to arrive. The U.S. has nothing to worry about.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.