Big Lies In Politics

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

The fact that so many successful politicians are such shameless liars is not only a reflection on them, it is also a reflection on us. When the people want the impossible, only liars can satisfy them, and only in the short run. The current outbreaks of riots in Europe show what happens when the truth catches up with both the politicians and the people in the long run. Among the biggest lies of the welfare states on both sides of the Atlantic is the notion that the government can supply the people with things they want but cannot afford. Since the government gets its resources from the people, if the people as a whole cannot afford something, neither can the government.

There is, of course, the perennial fallacy that the government can simply raise taxes on “the rich” and use that additional revenue to pay for things that most people cannot afford. What is amazing is the implicit assumption that “the rich” are all such complete fools that they will do nothing to prevent their money from being taxed away. History shows otherwise.

After the Constitution of the United States was amended to permit a federal income tax, in 1916, the number of people reporting taxable incomes of $300,000 a year or more fell from well over a thousand to fewer than three hundred by 1921.

Were the rich all getting poorer? Not at all. They were investing huge sums of money in tax-exempt securities. The amount of money invested in tax-exempt securities was larger than the federal budget, and nearly half as large as the national debt.

This was not unique to the United States or to that era. After the British government raised their income tax on the top income earners in 2010, they discovered that they collected less tax revenue than before. Other countries have had similar experiences. Apparently the rich are not all fools, after all.

In today’s globalized world economy, the rich can simply invest their money in countries where tax rates are lower.

So, if you cannot rely on “the rich” to pick up the slack, what can you rely on? Lies.

Nothing is easier for a politician than promising government benefits that cannot be delivered. Pensions such as Social Security are perfect for this role. The promises that are made are for money to be paid many years from now — and somebody else will be in power then, left with the job of figuring out what to say and do when the money runs out and the riots start.

There are all sorts of ways of postponing the day of reckoning. The government can refuse to pay what it costs to get things done. Cutting what doctors are paid for treating Medicare patients is one obvious example.

That of course leads some doctors to refuse to take on new Medicare patients. But this process takes time to really make its full impact felt — and elections are held in the short run. This is another growing problem that can be left for someone else to try to cope with in future years.

Increasing amounts of paperwork for doctors in welfare states with government-run medical care, and reduced payments to those doctors, in order to stave off the day of bankruptcy, mean that the medical profession is likely to attract fewer of the brightest young people who have other occupations available to them — paying more money and having fewer hassles. But this too is a long-run problem — and elections are still held in the short run.

Eventually, all these long-run problems can catch up with the wonderful-sounding lies that are the lifeblood of welfare state politics. But there can be a lot of elections between now and eventually — and those who are good at political lies can win a lot of those elections.

As the day of reckoning approaches, there are a number of ways of seeming to overcome the crisis. If the government is running out of money, it can print more money. That does not make the country any richer, but it quietly transfers part of the value of existing money from people’s savings and income to the government, whose newly printed money is worth just as much as the money that people worked for and saved.

Printing more money means inflation — and inflation is a quiet lie, by which a government can keep its promises on paper, but with money worth much less than when the promises were made.

Is it so surprising voters with unrealistic hopes elect politicians who lie about being able to fulfill those hopes.



6 Comments (+add yours?)

  1. Lidia17
    May 24, 2012 @ 05:00:55

    “What is amazing is the implicit assumption that “the rich” are all such complete fools that they will do nothing to prevent their money from being taxed away. History shows otherwise.”

    In fact! They hire people like Thomas Sowell to defend them, among other things.

    Sorry Syrin. My RWNJ sister gave me one of his books and I found it so poorly written I couldn’t even follow it. I quit at the part where he said that people were better off laboring under the impression that the sun revolved around the Earth (yes, he was serious). To Sowell, a little knowledge on the part of “the masses” is a bad thing for the rich. And Tom? It’s THE RICH, not “the rich” in air quotes, as though they are fictitious unicorns.

    Obscenely rich people are walking away with everything, and it’s happening at a faster pace than at any time in history. They don’t have to come house to house and club us and drag us away in chains anymore; they’ve automated their methods and work largely in the abstract, but the results are the same: full-bore extraction and liquidation of whatever isn’t nailed down. Privatization, monetization, enclosure and asset-stripping of everything shared, public or that gives value to human life. Poison our water so they can sell us bottled water. Infect the world with GMO crops so that it’s too late to stem the contamination.

    In the context of our dire predicament, Sowell’s “lie back and think of England while you are raped by your betters” message is beyond offensive.


    • WakeUpAmerica
      May 27, 2012 @ 06:45:33

      I’m curious as to who he thinks are honest politicians. Would that be Koch brothers candidates or as I like to call them, Kochsuckers or Kochroaches(remember that is pronounced with a long O)?


  2. Lidia17
    May 24, 2012 @ 05:26:48

    P.S. Serendipitously, over at naked capitalism (the blog) they just posted about this very subject:

    Sowell is also lying about the paperwork burden of “welfare states with government-run medical care”. I live in one of those countries, Italy, and there is virtually no paperwork. I have a national health care card which I show, and they provide service! Depending on the type/severity of service, there may be a co-payment. There is no billing whatsoever, it’s just not previewed. I showed this to an American insurer acquaintance and she blanched. They know they are parasites feeding off the body of the sick, and Sowell knows he is defending the indefensible.

    And lying.



    • Kate (@AKRNHSNC)
      May 25, 2012 @ 16:49:22

      I’m a Registered Nurse Practitioner but due to physical limitations from back surgery am no longer to work in the nursing field. I started a medical billing firm several years ago and have to laugh at Sowell’s idea that the paperwork burden is associated with government-run medical care. I do far more work on a regular basis in order for my clients to get the payment due them from individual insurance companies. Medicare payments are not difficult to receive IF they are filed promptly and with all information provided. The turnaround time from filing to payment is almost always less than 30 days whereas I’ve had outstanding accounts with some firms that are as old as six months despite the proper information being provided. Much of it is due to incompetence on the receiving end where I’ll be lucky to find someone with more than a high school education. When trying to get a claim paid for emergency surgery, I spent three hours going back and forth, faxing the necessary information despite their requests changing after each fax was sent, and then I came to find out that the person I was dealing with was clueless and couldn’t understand the requirements had been met (i.e. the person had a fractured patella, therefore needed surgery to repair the same)

      The medical care in our country is excellent IF you have the financial means to pay for it. So many people are under the impression that they have great insurance, especially since they are paying a ridiculous amount of money in premiums on a monthly basis, but they quickly find out, if they become ill, that their are so many stipulations to each policy that allow insurance companies to leave much uncovered. We NEED government run healthcare for everyone, Medicare for all, and those wealthy people who can afford to pay more can go to those physicians who will set up their practice to cater to the rich.


    • Lidia17
      May 28, 2012 @ 05:28:21

      I re-read this and was embarrassed to see that i had written “no paperwork”. There’s obviously plenty of internal paperwork, but there’s none to do with billing. To see the primary care doctor, you just show up during office hours: first come, first served. Even specialists often may not have even a single secretary, and no doctors have all the administrative/support staff seen in US medical offices, most of whom are occupied with billing and records.


  3. lbts
    May 26, 2012 @ 07:01:29

    Having worked on Wall St. for more than 3 decades, I got a good laugh out of Sowell’s article. He hasn’t a clue as to how our financial system operates, but that doesn’t stop him from mangling the subject with half truths in order to justify and satisfy his political philosophy of the moment. This is Dunning-Kruger in all its glory.

    The only thing Sowell was remotely close on was inflation. Please note that I used the word “remotely.”

    We have a saying in the finance industry: “Do your own due diligence.” It’s a mantra that largely goes unheeded.


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