Straying from my focus a bit

I have purposefully kept this blog focused on investments and economics, but I have been watching the socialist tide rising like so many others. I wanted to share one of the more thought-provoking quotes on democracy I'm aware of; just something to mull over again (or for the first time if this quote is new to you).

I first heard this quote in college and it has always struck a chord with me. I am a capitalist at heart, and think the best road to rising standards of living is to incentivize society's best and brightest to create, innovate, and take risk by allowing them to keep the vast majority of the rewards they generate. I'm not against safety nets, but I tend the think they are too generous in this country.

So here is the quote. I did a quick google search and it sounds like the author is unknown although it is usually attributed to Alexander Tytler.

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship."

I guess I'm not as fatalistic about our future as this quote suggests I should be, but I do think it is a real tendency and conflicts with my capitalist views expressed above. Of course, if we vote ourselves largesse from the public treasury, that requires higher taxes on the wealthy minority who get outvoted. Surprise, surprise; it is often that wealthy minority who are the innovators, creators, and risk takers in our society.

It occurs to me that the most powerful offsetting force is the desire of most people to have the possibility of becoming very successful and wealthy. A socialist should never allow the lottery because it exposes our willingness to sacrifice current benefits for the chance at great wealth. In the same way, I think many of us prefer less assistance from our government in return for getting to keep more of our gains if we manage to generate great wealth.

Finally, and I hate to even bring this up, but I am not opposed to the estate tax because I think it encourages the successful to use their wealth in their lifetime, which is good for the broader standard of living, and because I do not think a massive inheritance encourages innovation, creativity and risk-taking. I've gone back and forth on this issue over the years, but this is were I stand now.