Communism vs. Freedom

Fidel Castro recently opined to a visiting American journalist that Cuba's communist economic model doesn't work. I know what you're thinking: What a shock! Even a casual observer of the 20th century and the fall of the Soviet Union should be able to surmise that given enough time communism and all of its variants will inevitably always and everywhere fail.

The main problem with wealth redistribution, other than it being a fancy term for government-sanctioned theft and thus morally reprehensible, is that it encourages mediocrity. The US, with its progressive tax rates and myriad welfare programs, is a good case study. In America you are punished for excellence; the more you earn, the more the government takes from you. What's the incentive for you to work hard and to take risks if the government is just going to take away the fruits of your labor?

On the opposite end of the spectrum, most of the country's welfare programs are means tested, meaning that if you make above a certain threshold you are ineligible to receive a government subsidy. On one hand there is some logic in means testing as you need some way to quantify who is most deserving of a subsidy. On the other hand, it incentivizes underachieving as people are careful not to earn too much money for fear of losing their government handout. This keeps people just comfortable enough to get by but too poor to ever really advance their station in life.

President Obama and many on the left would like to allow the Bush tax cuts to expire. The wealthy aren't "paying their fair share," whatever that means. The harsh reality is that the wealthy create jobs. There's an old saying that "no poor person ever gave me a job," and this certainly rings true in my own personal experiences. However, let's examine for a second what happens when we allow people, regardless of income level, to keep more of their own money.

Nobody socks away money under a mattress anymore, so really there are only a few plausible scenarios these days as to what a person will do with their money. 1) The person spends their money on goods and services that they want, thus providing clear signs to the market regarding which goods and services should be produced. 2) The person invests their money in some interest-bearing venture that suits their affinity for risk. This similarly sends clear signals to the market as to which ventures should be pursued. 3) The person saves their money. All three of these scenarios cause the economy to grow. Even simply "doing nothing" with money and placing it in a bank account spurs economic growth as it allows banks to loan out the money to market participants.

We will never eliminate inequality in the world; the best that we can is to try to mitigate injustice. Many are in favor of progressive tax rates because they feel that flat tax rates disproportionately affect the poor. My response to that is that if you don't like where you are financially then go out, work hard, and make more money. There are very few things that government is actually good at doing, and charity isn't one of them; there is every incentive for the government to be wasteful as they are spending "someone else's money."

When it comes to money and how people spend it, there's a fourth option that I didn't include above and that is that people have the option to donate to charity. Americans collectively are by far the most charitable people in the world. It's time for government to simply get out of the way. After all, rewarding mediocrity is not what made the US the greatest country in the history of the world.