Social Contract

The left is talking about social contract. The idea is that the rich didn't really earn their money alone. They earned it partly because they relied on workers and the government. So they should to give a lot more of the money to the government than they already do and the government will distribute the funds to the workers in the form of welfare payments.

Unfortunately, this argument works for the non-rich, too. They have houses and cars. They got these in part because there is a government and because there are rich people. Therefore, they need to give a lot more of their wealth to the government which will give it to the rich. Indeed, the argument is more robust when it runs in this direction because the non-rich contribute very little to tax revenue while the rich account for almost all of it. The argument, if sound, shows that the rich are exploiters of the non-rich and the non-rich are freeloaders. Indeed, it shows that both groups should pay far more in taxes than they do now.

So, the argument isn't sound. What went wrong? The argument is based on the idea that since an individual earns wealth in a social group, if it's a lot he owes more of that wealth to the group than he has already paid back to it. Always more. He always owes more. What's "a lot"? Who knows. The poor have houses, HVAC and cars. That's a lot. The premise is barely cogent, let alone a good basis for an argument. But when uttered emotionally by candidate the U.S. Senate such as Elizabeth Warren, it inspires voters. I'm sure she will win because Massachusetts residents will be moved by her emoting. In the hands of Gates and others it has inspired youngsters to "occupy" Wall Street and gripe about rich bankers, global warming and genetically engineered food. It's poppycock.

What would a good social contract require? Its justice would require that every adult who can work pay the same absolute amount in taxes. Since everyone is equal and everyone commonly enjoys the protections of government, everyone should pay the same absolute amount. Not only is progressive taxation unfair to the rich, but even a flat tax is unfair. The amounts paid in taxes by each individual should be absolutely the same.

There are two caveats to this principle. First, we may require a government that is too costly to be born if we stick closely to this principle of taxation. So, we may need to increase the tax requirements on the wealthy just enough to support a functioning government. This is a just caveat if we cannot in fact have a society without these increased payments. Second, a good social contract requires that when innocents fall into dire straits through no fault of their own, their fellows - family, members of their community, or the government as an instrument of the latter - come to their aid when it is reasonable to do so. Yet, this caveat may itself have a caveat that charity should not be entrusted to the government but left in private hands. So, this caveat does not by itself support the view that a good social contract requires a welfare state.

In any event, a reasonable concept of social contract implies limits on governmental power. When you have an unreasonable concept of social contract, you tend to overlook the wisdom of these limits.