James Anderson writes from Washington: President Barack Obama is in favour of redistribution. Mitt Romney is opposed to it.
Redistribution of what, you may ask. Wealth, of course. Democrats are the blue collar party. However, unemployment is now higher than in 2008. The number in work is lower than when President Obama took office. There are 2.5 million more living in poverty than four years ago. Those on food stamps have jumped from 32 million in 2008 to 47 million today. The average middle class family has seen its household annual income drop by almost $4,000 under Obama. On the other hand, the rich and super rich have increased their assets substantially under the present President. What has gone wrong?
The President says the national debt, which now stands at $16 trillion, is not a problem in the short term. This is because foreigners are still willing to lend America money. However it will become a problem in the long term. In other words, that will be someone else’s problem.
Middle class voters will decide the upcoming election. However there are fewer and fewer of them. A small proportion has moved up to the rich group. This has happened in states such as North Dakota because of the oil wealth. However there are not enough states like this. More have dropped into the income group of workers. They are the most unhappy with the trend the US economy is taking.
The President has a solution. The time has come to redistribute national wealth. This means evening out the incomes of the population. The Republicans call this socialism. It is. The task of the Democrats, if Obama is re-elected, will be to move some of the assets of the wealthy to the rest of the population. Republicans are totally opposed to this. They are in favour of higher taxes but only to cut the government deficit. They would also like to see less state spending.
At present about 47 per cent of Americans do not pay income tax. But 27 per cent do pay payroll taxes. That leaves 20 per cent who pay no form of tax at all. With unemployment rising, the number of those paying tax will drop.
There seems to be a mood swing in America. More people are coming round to the idea that personal wealth should be redistributed. It will benefit the less well off. They stand to gain. If a wealth tax is introduced what will the rich do? Move their money out of America, of course. The rich and super rich already have substantial proportions of their assets offshore. They will move liquid assets abroad quickly. Fixed assets will have to be sold at knock down prices. Better to take a hit than pass the money to Washington.
David Cameron annoyed President François Hollande by saying that French citizens, fleeing the swingeing tax rates on the rich, would be very welcome in London. The London property market has experienced an upsurge of French buyers as a result of the President’s tax policy. A flood of American money would hit London if Obama goes ahead with redistribution.
However the long term consequences for the US economy would be dire. There would be no incentive to work hard and become rich. That wealth would be taken away and given to those who had not worked hard.
A sea change may be occurring in America. The land of entrepreneurship and the sky’s the limit for wealth may turn into a dull, socialist society whose ambition is to have everyone on the same income. China then will be the most dynamic capitalist economy in the world. America should think twice about redistributing wealth.