Big Government elites (like President Obama in the 2008 campaign) tell us that one of the functions of government is to “spread the wealth.” They say this as though “rich” people were sticking fortunes worth of inherited money into their mattresses, pulling it out of circulation of the general economy, and specifically keeping it out of the hands of the poor and middle class. They talk about wealth as though it is money that is stuck somewhere and they have to pry it loose.
Of course, there is always the issue of: “Who made it YOUR business to take wealth from people who earned it to give it to those who haven’t?” So many people have written about the moral bankruptcy of government “spreading the wealth” that I will not go into that aspect.
The truth is: Wealth spreads itself around. It doesn’t need the help of government. Government taking wealth so that IT can spread the wealth actually reduces wealth and opportunity to attain it.
How does wealth spread itself around?
- People spend their money. The more money people have, the more they tend to spend. Businesses are created (or are kept in business) and people are employed and paid as a result of people with money spending that money. The “rich” spend more money than the poor, oddly enough, and on a greater variety of things, which spreads the money around and even gives the poor opportunity for jobs and to get on the road to getting rich themselves.
- Businesses compete for the money people spend. This drives prices down and brings quality up. “Wealth” cannot be measured simply by income. It’s also a measure of lifestyle and the availability of things that enhance comfort, safety, etc., plus how much you can get for your money. The general wealth created by businesses competing for the money people spend on various things is illustrated by such things as food and automobiles. We are all “wealthier” in terms of what is available to us because grocery stores are in competition (providing better prices on quality food in larger varieties). Anyone who wants transportation is wealthier because car manufacturers are competing for our dollars by providing better quality cars that last longer at reasonable prices. The “poor” may not be able to afford a new car, but the used car they can afford is better than what they would’ve had in the past (if they had anything). Businesses competing for clothing dollars have also created a situation where there are more low priced options, and the situation also exists that the abundance at the top of the market results in incredible value at the bottom of the market (if you don’t believe me, head to your local Salvation Army and look at the quality and quantity of used clothing for sale). Computers are another great example: speed and quality have gone up as prices have gone down. The abundance of new faster and lower priced computers has made still functional used computers dirt cheap (and sometimes free). Wi-fi hotspots allow people to get on the ‘net for free… This access to technology and information constitutes a lot of wealth and opportunity. It is the result of businesses competing (for individuals’ dollars, not because of government command).
- People with money put it in banks (not under the mattress). This makes the money available to loan to others to start businesses, buy homes, cars, etc. It spreads the wealth by making that money work for others.
- People with money invest it. Obviously, investment in other businesses provides capital for hiring more workers (ka-ching! for the new hire), expanding the business (ka-ching! for the new hires), doing R&D (ka-ching! for the new hire and for anyone who benefits from the new or better products).
- People with money risk it. They risk it financing start-ups. I wish MORE people did this and that the government made taking small risks (with big potential rewards) more available to people farther down the income scale, but it is “the rich” who finance new businesses.
- People with money start new businesses of their own. This creates jobs.
- Small business owners who are successful (a large portion of “the rich”) use their money to expand their businesses (hiring more people).
- People with money give to charity and support community projects.
It’s not difficult to catch the drift here. Money is used. It is circulated. It is spread around. Wealth (which is not merely the number of dollars one has) is created as this money is used, circulated, and spread around, and as businesses compete for it by lowering their prices and increasing their quality.
When the government taxes money away, people spend less, invest less, save less, etc. When taxes on businesses go up, or the cost of complying with regulations goes up, businesses don’t expand, don’t hire new workers (or cut jobs), don’t spend money on R&D that will keep them competitive in the future or allow for expansion, and they cease to be as creative and competitive. New competition and wealth producing products and services practically disappear. In other words, when government takes money from people to “spread it around,” the natural spreading around of wealth that creates more wealth is crippled. Government should not, and does not have to be, in the business of “spreading wealth around.”