Thursday, March 31, 2011

Abolish Taxes and Make Everything Cheap!

In The Gondoliers, or, The King of Barataria, Messrs. Gilbert and Sullivan took on social reformers who thought government so powerful that all you had to do (if you were in power) was to command a thing and it would be done. To very briefly summarize the plot, the Grand Inquisitor of Spain (filling the role of the character who gets ridiculed by the others in every G&S production for making sense) goes to Venice to see if he can locate the long-lost son of the recently deceased King of the Island of Barataria (a made-up land that G&S didn't make up — it's from Don Quixote). He finds two possible kings: young men plying the trade of gondolier. Unable to tell which is which, he appoints them co-kings, with full authority.

To make a long story short, it turns out that both of the gondoliers are republican revolutionaries. When the Grand Inquisitor pays them a visit to see how things are going, he is astonished to find that everyone is of equal rank, and everything is divided equally, and that the two co-kings are well on their way to making their stated goal of abolishing taxes and making everything cheap a reality.

Wisely, the Grand Inquisitor doesn't launch into a long lecture on political economy and why you can't just make everyone equal and keep dividing things up to ensure equality. Instead, he sings a song, concluding with, "When everyone is somebody, then no one's anybody."

Of course, had he been inclined to lecture, the Grand Inquisitor might have called in an American, Henry C. Adams, to explain why it is such a very bad idea to abolish taxes and try to circumvent the laws of supply and demand. We'll hold off on supply and demand (maybe next week), but Adams's reasoning as to why abolishing taxes is a really bad idea should cause a little alarm even today, especially in light of the gigantic deficit:

"As self-government was secured through a struggle for mastery over the public purse, so must it be maintained through the exercise by the people of complete control over public expenditure. Money is the vital principle of the body politic; the public treasury is the heart of the state; control over public supplies means control over public affairs. Any method of procedure, therefore, by which a public servant can veil the true meaning of his acts, or which allows the government to enter upon any great enterprise without bringing the fact fairly to the knowledge of the public, must work against the realization of the constitutional idea. This is exactly the state of affairs introduced by a free use of public credit. Under ordinary circumstances, popular attention can not be drawn to public acts, except they touch the pocket of the voters through an increase in taxes; and it follows that a government whose expenditures are met by resort to loans may, for a time, administer affairs independently of those who must finally settle the account." (Henry C. Adams, Public Debts, An Essay in the Science of Finance. New York: D. Appleton and Company, 1898, 22-23.)

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