The Wall Street Journal: America Looks More Like Europe All the Time
Article by Josef Joffe in The Wall Street Journal
America is the land of “predatory capitalism,” German chancellor Helmut Schmidt liked to say. Most Europeans who celebrate social justice and the caring state would agree. But if the Europeans weren’t so leery of America, they would clap their hands in delight at the $3.5 trillion spending package and the $1.2 trillion infrastructure cornucopia working their way through Congress.
President Biden’s tax plans might soon make Europe look like a capitalist heaven by comparison.
He wants to raise the long-term capital-gains tax from just below 24% to above 43%. Switzerland has no such tax. In Britain, inventor of the welfare state, it is 20% and in Germany 26%.
On income tax, the U.S. may soon top the scale. Mr. Biden wants a top marginal income-tax rate of just below 40%. Add state and local income taxes, like California’s 13.3% for top earners, and wealthy U.S. taxpayers could pay more than their European counterparts.
The New York Times got it right: The Biden budget promises to “reshape the government’s role in the economy.” Don’t worry about the bill. A 10-year Treasury note nominally fetches about 1.25%, but at 5% inflation, the net yield falls below zero.
Servicing a mountain of public debt with depreciating dollars is a steal. These days, profligacy is a virtue, not a vice. Why fret? It is a free ride, as long as central banks keep pumping no-cost money.
Somebody always pays. The laws of economics still apply. Why is inflation climbing on both sides of the Atlantic? The same adage: too much money chasing too few goods.
The middle class will pay the bill. Inflation eats up savings, though the rich evade the trap by investing in assets like stocks, art and real estate, whose rising prices are rocketing past the inflation rate.
For precisely this reason, all governments love Bidenomics. Inflation is the best way to make the public debt melt away and keep the floodgates open. The downside? Devalued dollars make the masses poorer and more dependent on the government.
The old ideological divide between left and right is waning. Progressives like Joe Biden and conservatives like Angela Merkel, Boris Johnson and Donald Trump all want to flood their countries with trillions in cash. On fiscal policy, the twain has met.
Such munificence burdens the future. As government expands and hands out more goodies, it also ......
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