Sacrificing Liberty for Equality of Outcome in the Obama Administration

The Obama Administration is at it again, looking for a way to make things “fair”. This time the administration’s idea of fair is to put a cap on how much money retirees receive from their investments. Roughly $205,000 a year is determined by the administration to be enough for you to retire on regardless of how much you’ve actually accumulated. The Obama Administration is looking to put a cap on tax preferred accounts like IRA’s in order to generate more revenue and make the tax code “fair.” There are three criticisms against this plan that I would like to highlight. First, this plan ignores the reality of markets. Second, it compromises liberty for the unattainable goal of absolute equality in outcome. Third, it improperly addresses the revenue/expenditure problem at the national level.

Money flows to desirable and profitable areas--eventually. If one area becomes undesirable, money will simply go somewhere else. If the government puts a squeeze on wealthy individuals these individuals will find somewhere else to put their money—perhaps offshore. Those people who were savvy enough to accumulate and save $3 million—the administration’s proposed cap—are savvy enough to move it somewhere else. There are plenty of countries that would love to have American dollars in their banks if the U.S. becomes inhospitable to the wealthy. This would have a deleterious effect on our banking and finance industries as U.S. citizens would be forced to look overseas for a place to park their investment dollars.

If we are to consider James Madison to have ever had any political wisdom, it would have been when he wrote in Federalist #10, “[b]ut the most common and durable source of factions has been the various and unequal distribution of property…The regulation of these various and interfering interests forms the principal task of modern legislation, and involves the spirit of party and faction the necessary and ordinary operations of the government.” There has been and always will be unequal wealth distribution. If we want to end political conflict that results from inequality, then we must make sure everyone has the same amount of money. But to do this the government would have to deny each individual’s liberty as it is through individual liberty—because each individual has different abilities and characteristics—that an unequal distribution of property ownership arises. Madison’s response to this solution is that, “[l]iberty is to faction what air is to fire, an ailment without which it instantly expires. But it could not be less folly to abolish liberty, which is essential to political life, because it nourishes faction, than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency.” Forced equality of outcome is inimical to liberty and reality.

Finally, the government should stop looking for ways to raise money and start looking for more ways to slash spending. Revenue is not a problem. If the government cannot find a way to make do with the billions it collects each year in taxes, then it has a spending problem not a taxing problem. Putting such a closed-minded emphasis on the revenue side of the ledger will only encourage a continuation of the irresponsible spending habits that drove us into this mess.

$205,000 is a good annual income and one that most of us would be happy to have. But that doesn’t give the government the authority to tell you how much is enough for you to live on. First retirees then workers. At some point this pursuit of equality at the expense of liberty must stop—and right now seems like as good a point as any.