The Cypriot Parliament rejected Tuesday a plan that would impose a one-time "tax" on savings, putting some minds at rest but failing to ease the crisis. The news was greeted with cheers by the crowds who had gathered outside the national legislature in anticipation of the vote but, with the banks still closed, what will happen next is anybody's guess.
Faced with the obligation to bail out yet another country the European Union tried to force the confiscation of money held in Cypriot banks as a partial remediation of the current financial crisis—perhaps setting up a dry run for what they may try and do in Spain or Greece later this year.
All this should be a "canary in the coal mine" for savers and investors in the United States. Though there are currently no plans to do so, the urge to impose a one time "tax" on American savings accounts or 401(k) retirement accounts must have the liberals twitching in anticipation. The idea that so many people and so many corporations are sitting on so much money when the government doesn't have enough to function without record deficits and a $17 trillion debt is probably too much for them to bear.
Slowly but surely we have seen the walls that once limited what government could do pulled down. Retroactive tax increases are now permitted. U.S. residents can be taxed as punishment for private services they choose not to purchase. Can confiscation of assets with due process, in the name of the greater national good be far behind—even though such a move would violate the constitutional protections we all currently enjoy?
The welfare state is out of control and cannot pay its bills. It is writing checks it literally cannot cash, having to take out IOU after IOU to get the markets functioning. At some point, unless the spending problem that Barack Obama likes to say doesn't exist is addressed, the central bank is going to break. At that point all bets are off. Franklin D. Roosevelt was able to dramatically expand the power of the executive branch and the federal government during the Great Depression because Congress was willing to give him those powers as it was a time of national emergency. Does anyone truly believe that the 47 percent of Americans who don't pay any federal income tax will rise up in anger if a portion of the assets of those who do are taken as part of a one time tax if the system of social services completely goes off the rails at some future date?
Those who love liberty and who believe in property rights would do well to lay down markers now. No Cyprus for us. The government must act now, and President Obama must lead the nation down the path toward lower spending and greater economic growth. To stay on the current course would be foolish, especially since the liberals have already spent, several times over, the money they think they might derive from the kind of tax increase the Senate Democrats' budget proposal anticipates. Even the bipartisan Simpson-Bowles proposal, which many people still believe is the blueprint for fiscal reform, is based on a permanent 5 percent increase in federal spending as a percentage of U.S. Gross Domestic Product and would be, according to some estimates, a $6 trillion tax increase. With no growth in the economy to speak of, no new wealth being created, that's a bill that cannot be paid—even with borrowed money.
Time is getting short. Congress needs to start producing some progrowth options for the president to consider while Obama needs to put some ideas of his own on the table. If they don't, it may be time to move the money back into the mattress.