Property and Prosperity
“The right of property is the guardian of every other right, and to deprive the people of this is, in fact, to deprive them of their liberty.” –Arthur Lee
The eighth commandment says, “Do not steal.” The underlying inference is that property is a natural right. In other words, property precedes the commandment and is inherent in our enduring moral order and natural law. We were created to own property in its various forms, whether it be homes, land, possessions, our reputation, or our ideas. It is the expectation of the Creator of rights that we respect and honor property, our own and our neighbor’s. We are not to steal our neighbor’s property or covet it (the 10th commandment). In fact, we are to respect our neighbor’s property as if it were our own. These principles also apply to government.
In the United States, our property rights have been historically secure. In fact, we take them for granted. Most Americans don’t give a second thought to the fact that we can buy and have clear title to a home, a piece of land, a business, or an automobile, or that we can leverage (use it for collateral) our property to start a business, or purchase other forms of property.
Because property and prosperity are inextricably linked, the fifth amendment to the United States Constitution protects this fundamental right of property. It says: no person shall be “deprived of life, liberty, or property without due process of law, nor shall private property be taken for public use without just compensation.” This is also enshrined in our Montana constitution: Article 2, section 17 states “no person shall be deprived of life, liberty, or property without due process of law.” Section 29 states, “private property shall not be taken or damaged for public use without just compensation.”
These emphatic protections of property in our federal and state constitutions are critical to our security, independence, and well-being. Arguably, they are more important to our security and liberty than even the 2nd amendment.
It is no surprise, then, that the prosperity (and poverty) of nations is directly linked to the security of property rights. This is made clear in the Fraser Institute’s Survey of Economic Freedom. In fact, the Fraser Institute says this about property rights: “Protection of persons and their rightfully acquired property is a central element of both economic freedom and civil society. Indeed, it is the most important function of government.” (1) Thankfully, the United States ranks number 5 on that list. However, because a country is democratic and free, does not mean it will stay free. As Reagan said, “freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same.”
We are one generation away from the loss of our fundamental property rights. This is primarily due to our ignorance of the value of those rights and therefore our propensity to take them for granted. Secondly, our property rights are in jeopardy because politicians of our day are suggesting that it is morally wrong for the top 10% to have more wealth than the bottom 90%. They insist that this inequity must be corrected by government. Bernie Sanders goes so far as to suggest that “there should be no billionaires,” and “billionaires should not exist.” Sadly, our base natures of greed and envy are prone to accept this argument at face value. Sanders and others suggest the system is rigged against the economic bottom and government needs to fix this by raising taxes on the wealthy and redistributing American wealth from those who have more of it to those who have less of it.
Before we start voting for wealth redistribution via transfer taxes from those who have created more wealth to those who have created less, we should look carefully at the cost of these ideas to all Americans.
First, let us consider who the top 1% are by looking at the 10 richest people in the world.
What 9 of 10 of these individuals have in common is that their wealth is first generation and they are entrepreneurs. Seven are Americans. They made their fortunes in their lifetimes. It was not inherited. They started at the bottom of the economic ladder with an idea (property) and an education, although several were college dropouts, and made their billions the American way.
Michael Bloomberg was an eagle scout. He had great parents, went to college, worked hard, and made his fortune in finance by revolutionizing how financial data is processed and made available to financial advisors and institutions. His great break came when he was laid off in 1981. We all know the story of Bill Gates, a college dropout who, like many small business owners, started Microsoft in his garage. Larry Ellison, founder of Oracle, was born to an unwed mother, placed for adoption, and dropped out of college (twice). After nearly going bankrupt in 1990, his business survived, and you know the rest. Jeff Bozos founded Amazon in his garage. He was a college graduate with a degree in electrical engineering. He told initial investors there was a 70% chance of losing their money and nearly did go bankrupt in 2002. However, Amazon survived. Warren Buffet’s parents forced him to go to college. His first business was selling golf balls and stamps. His first investments came from his paper route. His companies now employ 360,000 people. Mark Zuckerberg was a Harvard dropout. Educated in private schools and the son of supportive parents, he founded Facebook in his dorm room. Larry Page and Sergey Brin, both children of supportive parents, founded Google in a friend’s garage. Both were highly educated in computer science, although Page, whose parents were both computer scientists, dropped out of his PhD studies at Stanford to start Google.
What these men had in common were supportive parents, a good education (at least up to college), initiative, a willingness to take a risk, and a country that respected property rights. Their ideas were protected, their ability to access and use their capital (property) was free, and taxes were moderate. Each of our lives are dramatically impacted by what they created. The companies represented by the 9 above currently employ 1.43 million people. If you add Apple to the list, (Steve Jobs founded Apple in a garage and is now deceased), the number of jobs is over 2 million. It is not just the employees and consumers who benefit. Had a person invested $10,000 in Apple stock in 1997, their investment would now be worth $6.3 million. All Americans have benefited from these entrepreneurs. Because these men created wealth, others have jobs, wealth, technology, and higher standards of living. All Americans are beneficiaries of the liberty these men had to build wealth from their ideas (property).
What we must take away, is that the top and the bottom deciles of wealth and income are always changing in America. Many that were at the economic bottom a generation ago are in the top deciles today. Age has a lot to do with this. Obviously, few make it to the 1%, but it is the American free-market that allows the top 50% to come from the bottom 50%. I started with nothing. Most of you reading this started with nothing. The bottom and top of our economy is always moving up and down.
Ask yourself, is the bottom 20% of America living better than they were 25, 50, or 100 years ago? The answer is yes. Do they live better than the rest of the world? Absolutely. Does the world live better because of the top 1% of Americans? Yes. Are the top 1% of Americans of the next generation known? No. If America stays free, the large share of the top 25% of America a generation from now will come from the bottom 25% today.
The reality is that the ideology of the Socialist Democrat is flawed. They presume that we are inept, that we can’t move off the economic bottom without their help. They believe their plans are infallible, moral, and wise. They foist on us the idea that government will benevolently take and give. This is folly and dangerous. Who decides when one’s creativity has created too much wealth? Is a billion too much or is that number a million dollars? Why should we give the legislature power to decide when we are all equal enough? Fredric Bastiat said it best: “it is not true that the legislator has absolute power over our persons and property. The existence of persons and property preceded the existence of the legislator, and his function is only to guarantee their safety.” (2) When we allow government to go beyond its basic mission to protect our life, liberty and property, its power becomes arbitrary, capricious, and dangerous. It becomes our master and we become its slaves.
Sanders is a self-described socialist, and is endorsed by the Democratic Socialists of America. The following is a sampling of some of his ideas: Medicare for all, including free healthcare, dental, vision, long term care, and medicine. The cost is $3.4 trillion a year. Free college education and elimination of $1.6 trillion of student debt. The green new deal would cost $16 trillion over 10 years. Andrew Yang wants to give $12,000 a year to all American adults at a cost of $2.8 trillion a year. These ideas take and give something for nothing, paid for by those giving up something for nothing.
Karl Marx in his Communist Manifesto said, “the theory of the Communists may be summed up in a single sentence: Abolition of private property.” (3) This is the direction wealth transfer schemes are taking us.
Can we really pay for all the proposed spending by just taxing the rich? The Sanders agenda would require about $50 trillion over ten years to implement. The current federal budget is $4.5 trillion with about $3.5 trillion in revenue. We currently have a $23 trillion debt and counting (this does not count $50 trillion of unfunded liabilities). You can see this in real time here. You need $5 trillion to implement the socialist agenda of the Socialist Democrats. You need one trillion to cover the current deficit. Therefore, you need $6 trillion per year to balance and another $3.5 trillion for current spending. The total need is $9.5 trillion. Consider this 2018 data from the tax foundation:
- The total adjusted gross income of the top 10% of income earners is $4.7 trillion. Take it all and you just cover current spending.
- The total adjusted gross income of the top 50% of income earners is $8.9 trillion. Take it all and you are still short.
- All adjusted gross income in the US is $10.1 trillion. It will take it all.
Currently, all individual taxpayers combined pay about $2.6 trillion in income and payroll taxes. The bulk of the remaining revenue comes from corporate and excise taxes and borrowing. The top 10% of American taxpayers pay 70% of all US income taxes (with 46% of the income), the top 50% pay 97% of all taxes. The bottom 50% pay 3% of all taxes. It doesn’t take long to see that there simply is not enough money to pay for the utopian fantasies of the left without dramatically increasing taxes on ALL Americans. The US economy produces about $21 trillion. The plan of Sanders requires nearly 50% of that. Taking this production destroys the economy, crushes businesses, and drives tax revenues into the ground. This is the path Cuba and Venezuela have taken to their own destruction. Property is destroyed. People starve. The politically elite, like Vladimir Putin, the richest man in the world by some accounts, become the new 1% and the rest of us are on the bottom.
The rhetoric that we don’t need to tax the middle class is false. The current Sanders/Warren plan is to raise payroll taxes 4% on employees and 7.5% on employers. Think of the self-employed as many small business owners are. They already pay 15% payroll taxes. If you add the 11.5% above, (self-employed pay both sides of the payroll tax), you have a 26.5% payroll tax. This would push total tax rates up to about 60-80% on high income earners, a crushing blow killing jobs and consumer spending. This hurts all of us by destroying jobs.
Finally, socialist candidates like to point to Scandinavian countries to support their wealth transfer schemes to support welfarism. They won’t tell you that in countries like Denmark, middle income families ($75,000 income) are in a 60% bracket (15% in the US), pay a 25% national sales tax (a VAT tax) on everything including food (0% in the US), and would pay a 100% tax on a car, so a $30,000 car costs $60,000. (4) Forget that new car, dude! In reality, Nordic countries are beginning to move away from welfarism and are lowering taxes.
We teach our children to respect property. Don’t deface it; respect it. Don’t steal, don’t be jealous. We educate them to aspire to own property for their future security and to provide for their families. All this applies to government. After the legalized theft schemes of the social elite are implemented and fail, more government power will be consolidated to tighten the noose. It is a consistent theme in government that the solution to a failed government program is a government program that spends more money. All socialist-Communist failures end badly. NAZI (National Socialist German Workers’ Party) Germany, The Soviet Union, China, North Korea, and Pol Pot’s reign of terror together account for 100 million dead. Freedom and socialism cannot co-exist. This is reality, not fantasy.
It is simple, there is no free lunch. There is no something for nothing. Your dad was right.
Tom McGillvray
1. Executive Summary Economic Freedom of the World 2019 Annual Report
2. Bastiat’s ‘The Law’, page 78
3. The Communist Manifesto Chapter 2
4. Rand Paul, The Case Against Socialism page 97