The Forgotten Man; W. H. Chamberlin

The Forgotten Man WILLIAM HENRY CHAMBERLIN Graham Sumner, a professor at Yale, is the first use of the ex pression, "Forgotten Man," which Franklin D. Roosevelt employed in a much more demagogic context fifty years later. What Sumner had to say on this subject looms larger as prophecy than as a de scription of the economist's own time. For in 1883 there was no Federal income tax; the United States had not assumed military and economic burdens all around the world and Big Government, in the sinister modern sense, with its enormous demands on the re'sources of the taxpayers, did not exist. If Sumner were alive, he would probably be the first to recognize that the plight of his Forgotten Man is far worse today than it ,vas when he first used the ex pression. Here a little definition is in order. The Forgotten Man 105 106 THE J.1-'REEMAN February is the rare and discouraged breed of citizen who wants to pay his own way in the world, without benefit of .any crutches in the way of government aid.

He receives no handouts, but is required to help finance innumer able handouts to others, at home and abroad. Rapacious tax col lectors, Federal, state, local, al ways have their hands in his pockets. He is saddled with an ever-increasing load of exactions, a load that, if present trends are not sharply reversed, will one day break his back, with incalculable consequences for American society and economy. He is a producer, not a consumer of so-called social security. The Forgotten Man does not riot or demonstrate or strike. As his principal exploiters are bureaucrats at various levels, armed with the authority of gov ernmental power, he could not, unless he were willing to go to jail, employ the strike we.apon so be loved of industrial workers or ganized in monopolistic unions, of teachers, "welf are" dispensers, even, incredible as it sounds, of "welfare" recipients. Forget the Controls The Forgotten Man only wishes that the state would forget him to the extent of permitting him to contract out of its cumbersome, incredibly mismanaged bureauera tic nightmare of "social secur ity" and let him provide for his own rent, medical care, and re tirement needs. But this is a vain desire, as the steady and growing compulsory deductions from his income prove. No matter how dili gent he may be in his work or profession, tax laws, especially on the Federal level, are calculated to frustrate his effort to build up a competence for his old age and his family. One need only think of the steeply graduated charac ter of the Federal income tax and of such inequities as the double taxation (as individual and as corporation income) of earnings from dividends. Many states, in their income taxation, have copied the method of steep graduation.

The witty and perceptive French economist, Frederic Bas tiat, defined the state as "the great fiction, by which everyone hopes to live at the expense of everyone else." Today there might be a substitute definition: "an engine for pillaging the thrifty for the supposed benefit of the thriftless." And the worst, for the Forgotten Man, is probably still to come. The present raids on his pocketbook and gouges at his bank account, onerous though they are, would seem mild in retrospect if such schemes for dividing up the wealth as the guaranteed annual income, the so-called negative in1968 THE FORGOTTEN MAN 107 come tax, or the various proposals for paying tens of billions of "compensation" to a certain ethnic group in the population should go into effect. Direct and Indirect Taxes The Forgotten Man is caught between the hammer of inexorably rising taxation (with state and local grabs outpacing the Federal) and the anvil of visible inflation.

As a concrete example of the con tinuous encroachments of state and local tax authorities on the earnings and savings of citizens, consider the situation in the state 'where I live, the Commonwealth of Massachusetts, widely rechris tened Taxachusetts by its dis gruntled taxpayers. Corruption, mismanagement, and extravagance are old charac teristics of the state administra tion, especially under such notori ous political bosses as the twice jailed James Michael Curley, amusingly portrayed as "Skeff ington" in Edwin O'Connor's novel, Tthe Last Hurrah. The re gime of a more recent Governor, Foster Furcolo, produced a rich crop of scandals. Matters seemed to take a turn for the better with the election of a businessman, John A. Volpe, as Governor. There was substantial support for Volpe among the ha rassed taxpayers when he pressed for the raising of additional funds through a sales tax, decidedly preferable, from the individual taxpayer's standpoint, to the in troduction of a graduated income tax. Volpe fought off such pro posals and was vindicated in a ref erendum and by a smashing ma jority when he ran last year for re-election.

Many of the people who sup ported Volpe on the referendum and at the polls helieved that he would be satisfied with tapping one important new source of rev enue. They were also attracted by the frequent assertion, during the campaign for the sales tax, that its enactment would make it pos sible to reduce the extremely high rates of personal property tax throughout the state. ("Taxachu setts" is a leader among states in this form of exaction.) On both counts they have heen sorely disappointed. Volpe has proved himself only a politician, after all, with the politician's un controllable yen for spending tax payers' money. Safely reelected for a four year term, he has come to the legislature with a request for about $100 million dollars in additional revenue, to be financed through increases of the already high rates of state income tax. This burden is aggravated for anyone with investment savings because income from investment 108 THE FREEMAN February is taxed at about two and a half times the rate levied on salaries and wages.

Instead of the sales tax as an alternative to higher income taxes, Massachusetts taxpayers are hit fore and aft by increases in both. They have also been hit amid ships. The promised reduction in the rate of property tax has proved a cruel hoax, at least in Cambridge, the town where I live, and in some other communities as well. A cabal in the Cambridge city council ousted an admirable city manager who had combined efficient administration with a stable tax rate and installed a successor who could not restrain his eagerness to pile up the bur den on Cambridge home owners. Whereas the former city manager had kept the tax rate unchanged \vithout a share in the receipts of the sales tax, which had not gone into effect during his administra tion, his successor pushed through tax increases of 6 per cent and 15 per cent, while also enjoying the increment of a share in the proceeds of the sales tax.

So "Taxachusetts" runs true to form, and its unfortunate tax payers and home owners get three simultaneous solar plexus blows, through the sales tax, the increase in income tax (unless sufficient pressure can be brought on the legislature to vote this down), and through property taxes that have risen, not fallen, since the enact ment of the state sales tax. It does not stand alone; the same pattern, ,vith differing details, may be ob served throughout the nation. The Meek Inherit Burdens Part of the blame for the steady chipping away and erosion of the taxpayers' income and standard of living rests with the undue meek ness of the Forgotten Man. He is a law-abiding citizen and his im pulse, on getting an increased bill from the tax collector, is to pay up without even marching to city hall and hanging the mayor and members of the council in effigy. Indeed, it is a problem for a psychologist why organized union groups will sometimes commit every crime in the book, assault and battery, willful destruction of property, mayhem, even murder, in order to extort a higher income while the taxpayer meekly accepts dose after dose of diminished in come. The latter is surely a more serious grievance and one wonders what explosion would follow if an employer proposed the same work at reduced wages. That is what the state, through one agency or another, is continually imposing on the Forgotten Man, the taxpay er whom the politician despises as a cow to be milked dry, a sheeI to be shorn.

1968 THE FORGOTTEN MAN 109 How different was the reaction of early Americans to the imposi tion of what seem, in comparison with the present exactions, quite tri vial taxes on tea and stamps! One of the grievances of the colo nists against King George III is phrased as follows in the old-fash ioned, grave, and dignified lan guage of the Declaration of In dependence: He has erected a multitude of new Offices, and sent hither swarms of Officers to harass our People and eat out their substance. There is enough lawless violence in the United States now, without recommending violent extralegal forms of protest to the oppressed, pillaged, and exploited taxpayers. Besides, the Forgotten Man, as described by Sumner, is a sober, responsible citizen with a high re gard for public order. However, there are eminently legal forms of protest and resistance which have not been called into effect as often as they should have been.

"Don't Tread on Me" One obvious reason why tax payers are treated with contempt by free-spending politicians, eager to buy this or that bloc of votes at the price of other people's mon ey, is that they are completely un organized. A very healthy change would come over the picture if taxpayers in states and communi ties would organize and study with microscopic closeness the spending records of elected offi cials and legislators. Then they could punish at the polls every executive, every admin istrator, every legislator on the Federal, state, or local level who is identified with unnecessary high spending programs that involve higher taxes. Let them develop an elephant's memory and permanent ly blacklist every man and woman in public office who has been in the habit of raiding their pocketbooks with impunity. Let this strategy be applied consistently, ruthlessly, implacably, and the politician's in stinct for self-preservation will come into operation and bring about a sudden saving vision of the virtues of public economy.

Unless the Forgotten Men who never get any government hand outs but finance a good many to others, who are providers but not consumers of security, take some measures of financial self-defense and self-preservation, unless pres ent trends toward reckless spend ing at Federal, state, and local levels are checked, the taxpayer, more heavily loaded than any camel in a caravan, will find that he has no more earnings, or sav ings, to be taxed away. The Forgotten Man, who is so old-fashioned as to believe in the 110 THE FREEMAN February merit of thrift, is hard hit by in flation. During the nineteenth century the United States dollar, although it experienced ups and downs in purchasing power, re mained basically stable, buying approximately as much in 1900 as in 1800. This is emphatically not true as regards America's currency in the twentieth century; and the end of this story is not yet. In very recent experience, items large and small, newspapers, concert tickets, shoeshines, hair cuts, doctors' charges, hospital costs, food, furniture, have been changing in cost more or less rapidly, and always in one direc tion, upward.

The result has been very much that of clipping the coinage, a favorite inflationary device in the Middle Ages. Holders of bank books and insurance policies have seen the real value of their hold ings shrink. This development is not surprising, because politics has more and more dominated fi nancial policy, and all political pressures are inflationary. Legislation giving privileged status to trade unions has taken the risk out of striking. (Has any one heard of a maj or strike lost in recent years?) As might have been expected, some unions have abused this new-found power to extort wage settlements quite out of line with increased productivity, with resultant government spending and inflation to forestall unem ployment. Another cause of the rising cost of living and another blow at the taxpayer's pocketbook is the elaborate system devised for paying farmers more for produc ing less, or producing nothing at all.

Another obvious cause of in flation is the persistent refusal of either the legislative branch or the executive branch of the Federal government, despite much lip serv ice to the ideal, to make any seri 0us attempt to practice economy in public spending. Most private individuals could cheerfully spend a good deal more than they earn, but are obliged to adjust their spending to their incomes. Unbounded Government The root cause of many of our difficulties is that public admin istration, at the Federal, state, and municipal level, is under no such restraint. All too often public budgets are framed on the basis of spending without limit, and making up the difference by in flationary borrowing or by dip ping into the pocket of the tax payer for a new grab. That the high cost of govern ment is a matter of concern not only to the well-to-do but to people in the lower brackets is evident from an item recently published in 1968 THE FORGOTTEN MAN 111 Americans, who stand for integral freedom and realize that economic freedom is not the least important element in this ideal, came out for abolishing the graduated element in the Federal income tax, for dropping the minimum wage and for making participation in social security optional. And they gave cogent, detailed reasons for each of these stands.

They characterized taxing of income at different rates as a vi olation of the laws of justice and "an economic attack on the initia tive of individuals to use their own income as capital for maximization of future income and a penalty on those who are industrious and able." They rightly see in the minimum wage "a major cause of unemployment among the young, especially among minority groups." And they show that a 22-year-old worker, earning $6,600 or more will have paid the government $63,894 in social security taxes by the time he is 65 and could earn a much higher income than his so cial security pittance by investing this sum with normal prudence. The evils of excessive and ever increasing appropriation of the fruits of individual labor by the state and of inflation have reached crisis proportions. If the Forgot ten Man does not wish to become the Extinct Man, he should bestir himself for remedial action. ~ Salary (gross) Real property taxes Income tax withheld Social security tax withheld 56 144 Total taxes 498 1,346 Salary (net) 2,023 2,068 Considering the decline in the purchasing power of the dollar, Mrs. Burch has evidently been running fast without even being able to stay in the same place.

Even worse is the plight of elderly retired persons who cannot report a gain in gross salary. Reversing the Trend The plight of the Forgotten Man ,,,ho would like to stand on his own feet economically is bleak to day and will be bleaker tomorrow, unless the merry-go-round of ever higher public spending and ever higher taxation can be stopped or thrown into reverse. Perhaps there is consolation in the thought that, when an evil becomes intolerable, reform, brought on by public in dignation, cannot be far away. There is also cause for encour agement in the eminently sound economic resolutions adopted at the recent congress of Young Amer icans for Freedom. These young the San Francisco Examiner. A part-time typist, Mrs. Helen Burch, submitted the following break down of her earnings and taxes for the years 1958 and 1966: 1958 1966 $2,521 $3,414 340 681 102 521 Sovereignty WILLIAM PENN PATRICK SOVEREIGNTY is a very important word to us in H oliday Magic. The word is often misunderstood or forgotten completely by many of us today.