Emmanuel Saez is an expert.
A PhD economist from UC Berkeley, Saez has devoted his entire career to diligent research in a complex and dynamic field. He has numerous publications and citations under his belt, and his “h-index” (which tracks research productivity) is off the charts.
So when Saez came out in support of California’s proposed wealth tax on billionaires, it must have been from a position of rational, grounded analysis.
Clearly he considered the potential costs versus benefits and carefully weighed the risks. Then, only after painstaking analysis, he concluded that a ‘one time’ 5% tax on the state’s billionaires was sensible policy that would enhance long-term prosperity in the state.
Except that’s not what happened. And, to be clear, Saez didn’t just support the billionaire tax—he helped to write it.
Saez has been a key figure in pitching the tax to voters, selling it as a necessary, single dose, emergency measure. One time. Not a permanent feature of the tax code.
But a few days ago, Saez stood on a debate stage and admitted to the audience that he had been lying to them for months.
Contrary to everything he had said before, he finally acknowledged that “I don’t think it’s going to be a one-time tax,” and, “I’m not there to pretend that it’s once and never again.”
At a separate interview when asked whether a wealth tax would drive the most productive people out of the state, his response was three words: “So be it.”
(At least he used three full words; Seattle mayor Katie Wilson’s answer to the same question about wealthy people fleeing her city’s aggressive taxation was simply, “bye!”)
It’s difficult to characterize this as anything other than a severe mental derangement.
America needs to be competitive, now more than ever. President Trump just spent the past few days in China where, for the first time ever, it appeared like the two superpowers were on equal footing.
Xi Jinping even pontificated aloud about the ‘Thucydides Trap’, a geopolitical theory (with plenty of historical examples) where rising powers and declining powers go to war.
Xi obviously likes this analogy because he views China as the rising power and the US as the declining power. But this assessment is far too simplistic.
The US certainly has enormous challenges. But so does China. And some of China’s are unsolvable.
America’s fiscal burden is fixable.
If Congress gets serious about cutting both spending and the regulatory burden, US GDP growth would significantly outpace nominal debt growth. The critically important debt-to-GDP ratio would fall. Borrowing costs would fall, bringing mortgage rates down with them. Oh yeah— and inflation would drop too.
China has its own mountain of debt— at the consumer and provincial level. But their even more important problem is a demographic time bomb brought on by decades of a “one child” policy.
Unfortunately for China, they cannot go back in time and create more people to fill the void.
So ultimately this game of thrones is America’s to lose. Winning requires changing course and making responsible decisions. Losing means Inspired Idiots continue making terrible decisions guided by deranged ideology rather than factual analysis.
Which brings me back to Professor Saez.
If you asked any rational policymaker, “Would it be beneficial for a state to lose a substantial portion of its tax base?” the answer would be a resounding “NO.” It is mathematically impossible to credibly make that argument.
And even if an ‘expert’ like the Professor were to try, they would at least have to heavily caveat their conclusion by stating the obvious risks and uncertainties involved.
But that’s precisely the problem: these people aren’t objective researchers and policymakers; they’re irrationally evangelical. They view their ideas as fully righteous and self-evident, with zero degree of uncertainty.
California had a giant deficit before they started chasing away their wealthiest citizens and businesses. Now it’s going to be far worse.
Businesses and billionaires alike have been leaving for years, not to mention countless others who are fed up and have had enough.
It’s also interesting how experts like the professor only focus on taxes. They rarely consider how effectively it is spent.
Consider that California voters approved a rail bond in 2008 on the promise that trains would be running by 2020.
The state has since spent roughly $14 billion on the project, yet not a single foot of working track has been laid in the seventeen years since. Zero passenger miles.
The California High-Speed Rail Authority’s own Draft 2026 Business Plan now puts the full-system cost at $231 billion by 2045.
That’s about as much as NASA spent, adjusted for inflation, for the entire Apollo program, and more than the current Artemis program.
Every audit comes back the same way: nobody can tell you where the money went. The failure never produces accountability. And the answer is always to spend more.
Unfortunately there is no more money to spend. So the experts have churned out a wealth tax proposal which makes the state even less competitive… and will drive away the very people they aim to tax.
This is not the type of objective thinking that is going to bring America back from the brink. Yet it is exactly the kind of thinking that voters continue to reward.
America’s trajectory will not change until voters demand it. Will that happen in time? Perhaps.
There are plenty of signs of optimism that people all over the world are starting to wake up; the recent humiliating defeat of Britain’s Labour Party is just one example. So we can certainly hope that the tide will turn before it’s too late.
But, as we used to say in the military, hope is not a course of action. And that’s why it makes so much sense to have a Plan B.
