WASHINGTON, June 8, 2014 — Historically Americans never settled for mediocre. Not only did we want to excel, we wanted to be the very best at virtually everything. In a surprisingly short time since our conception, we accomplished the goal of being number one in everything from economy to innovation to patents to Nobel Prize winners to military power.
Then things changed. Now we are settling for mediocre. What happened?
America’s past success has been stunning. Our nation was created in the late 1700’s and by the early 1900’s, we were a dominant force in the world; we innovated more, produced more and fought harder than any other country.
We showed the world that having a freedom-oriented society with a freely elected Democratic system of government and a free-market economy would lead to tremendous growth and a much higher standard of living for all citizens.
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One reason Americans have always striven to be the best is that we had the freedom to do so and we were able to reap the rewards of our efforts. We also knew there were costs incurred and we, as the individuals who reaped the rewards, were personally responsible to insure that these costs were paid.
Fortunately, the majority of Americans feel that all of us should have as much opportunity to find the road we wish to travel. We have made education a public good, so that the government will make sure all children have access to at least a high school education. After that, the individual must pay her own way, although the government will lend whatever is needed to attend whatever school is desired.
With that access to education, all Americans should be able to pursue their self-interest. And for about 200 years, Americans did just that. As some individuals found much success, the entire country prospered. With each major achievement new higher goals were set. We fought in wars to bring peace to the world then developed technology to maintain our superior position in combat, while minimizing the risk to human life. We won the race to explore space by putting a human on the moon, landing equipment on Mars and building an orbiting space station with a fleet of re-usable Shuttles to service them.
Our economy blossomed. We easily produced more goods and services than any country in the world. Most new innovative products came from the U.S. We invented the internet, which has radically changed people’s lives. These accomplishments were a result of Americans being free to choose their road in life, while accepting the costs and reaping the rewards.
But, as was the promise six years ago, America has fundamentally changed. Because those who have achieved great individual success have reaped great individual reward, and because this reward is so much larger than the reward reaped by those who, for whatever reason, do not contribute, income inequality becomes an issue. The popular proposal to correct this inequality is to take away large amounts from those who have earned it and give it to those who have not.
This is accomplished by raising the tax rates for the highest achievers on income and perhaps wealth, and then giving the money to those who did not earn by paying to them welfare, or food stamps or unemployment benefits or subsidies to buy health insurance or disability payments or other social programs. The tendency of this income and perhaps wealth re-distribution, is to reduce income inequality but it also significantly reduce incentives to strive to become the best.
Those who earn the income will tend to contribute less. After all why should an individual who already contributes significantly to the economy, work harder? If tax rates are raised to 70% or 80% that means out of every dollar the achiever earns, she may keep only twenty cents. She will reason that it is not worth the effort to supply labor nor it is worth taking risk with capital.
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This policy also destroys incentives to work for people receiving aid. Because the incentives are somewhat generous and because the lack of skills would keep earned income in the marketplace relatively low, there is little incentive to contribute. The result is people start to believe that no matter what they try to accomplish, they will end up somewhere near the middle. So people stop striving to be the best.
Instead people become mediocre. And so Americans are becoming mediocre.