One of my beefs against socialism, among numerous dislikes explored variously in these blogs, is the complete inability of those who lean to the left to understand economics.
I presume there is, somewhere in socialist heaven, a money tree that keeps on giving. Sadly, here on earth where we have to endure all the misfires, misjudgements and assorted blubbering moonbattery of the left, there is no money tree. But, and all lefties are overjoyed by this, there is taxation.
Something wrong with the world? Then tax someone. Don't like someone's thoughts? How about a handy tax? Polar bears dying? Hey, there's tax for that.
Ideally the left likes to tax the rich but if that isn't possible (after all if you do that you have to tax your own elite and 'leaders' who usually are wealthy, too, but please don't tell anyone) then the obvious answer is tax anyone and everyone. By all means dress it up as fairness and equality, but make sure everyone pays. Preferably pay again and again. This, in case you are wondering, gives socialists the cash to squander on light-headed, thought-free schemes and ill-considered 'social engineering' gestures which often, purely coincidentally, also helps their own elite get richer.
Pretty much win-win for the left and the left's millionaires with this scheme, very much lose-lose for society as a whole. But who cares about them when there is a political agenda to pursue?
All of which brings me to the Laffer Curve, and why socialists fail to understand money (except when they are helping themselves to other people's, of course.)
The Laffer Curve is a fairly straightforward diagram that reveals, as simple truths are happy to do, that if you forcibly reduce the number of people who can be taxed, the amount of tax gathered will fall. No shit, Sherlock? I hear you cry. Shit indeed as this is always news to socialist governments.
France did it recently with their caring, sharing new lefty bosses and found a good number of their wealthy citizens opted to no longer live in France to avoid paying higher taxes. Do'h!
The essential principal of Laffer is taxation income alters in response to changes in the rate of taxation. Basically, a government gets no tax income if there is no tax imposed, and at the other end of the scale they get no tax income if it reaches 100 per cent taxation. The reason? The 100 per cent tax payers cease to exist as they can't stay alive, or find a way to stop being taxed. Like living elsewhere.
Between those two points is a curve, which while disputed exactly what the shape of this curve is, the principle is that the more you tax people the less they have to spend on themselves. They also begin if they can to indulge in various tax evasion plans or, if you prefer, dishonesties to keep body and soul together. They stop spending and that cuts the income of other people who rely on money moving round.
For example, take the taxation levied at the petrol pump. Currently the UK government takes 64 per cent of each litre of petrol sold (slightly less for diesel and a lot less for LPG) and most drivers put up with it. It is deemed unfair by some but a balance has been struck, of sorts. Now let's say that the tax rate rises to some 75 per cent: petrol will be sold still but apart from the price rise in distribution of foodstuffs and other goods, a lot of people will start -- if they can -- cutting out 'fun' journeys like seaside trips or cinema and theatre visits or even visiting elderly relatives.
Less problem this as the Big State will always provide scads of people to nurse and aid the elderly. Oh wait, these helpers have to be paid from the public purse, right? And what's that, it costs money to do that? Who knew?
Fuel costs rise, road use declines, motoring related businesses suffer, but more importantly for the government (who try not to go where ordinary people have to go, like traffic jams) tax income falls. Our caring, sharing ruling classes now have a problem; if they raise the tax at the pump they theoretically get more money but fewer people buy the stuff. That could well mean a lot less money for all those exciting caring and sharing schemes like giving immigrants large free houses, for example.
But the Laffer curve bites at various points where a tipping balance is reached. What that level is, is a matter of debate. Some say that between 65 and 70 per cent is the optimum point of most tax revenue before decline kicks in, others pitch it lower. We also have to acknowledge that modern life isn't just at the petrol pump; there are a huge number of things to be taxed away from fuel duty.
I accept that getting all these different factors in balance is difficult, but the underlying thrust of all socialist governments is to tax the wealthy. Squeeze the rich, and make them pay for everything. Or rather, squeeze most of the rich and excuse the ones you like.
But if you are unaware of the Laffer curve effect you may be tempted to just tax people and impose financial burdens. I do accept that a lot of lefty drones get giddy at the thought of making the rich pay for all the left's excesses, but there aren't that many rich people to do it all. They get poorer, they run out of cash or they run away. After all, if you can afford a house in London you may well be able to afford a house in a warmer place with less tax. At some point socialist governments have to look at how they can fund their silly idealisms and making the rich become poor might not be the best idea ever.
Every rise in pressure on disposable income for ordinary people affects their ability to spread that wealth by using the money for goods and services they want. True, if you are left-leaning you think the Big State should do that. Choice and individual responsibility are uncomfortable ideas for socialism because then the people don't need them to oversee, demand, nanny or decide for people what's best.
A sort of Laffer curve kicks in too with things like minimum wage. The more you raise the minimum wage (double plus good indeed and a surefire vote winner) the more services and products cost, so people buy less. Or they demand more money themselves to pay for that 99p burger that has rocketed to £1.49, in which case they stop having fries with that as they queue longer because there are fewer staff behind the counter.
You see, economics is a very fluid subject, and as such not easy to grasp all the implications and effects. More akin to the dark arts than a simple 'look and see' exercise. It may explain why no two economists can agree and why a huge part of government is walking a sort of fiscal tightrope, or should be.
Every so often we vote in a socialist government who promise to spend, spend, spend and then when it flounders and debt rockets they slink away as all their heady plans fall apart. Two or three years later they are back saying we need to spend, spend, spend again and this time they have just the plan to make it work.
You can chart their chatter on a sort of Laffer curve: the longer they are out of office the more they raise the promises until even they begin to see that tipping point where fewer and fewer people are believing them.
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