Yesterday, Elizabeth Warren made the modest proposal that if Elon Musk would just submit to her ultra-super-duper-tax then she could provide free childcare for every young American child.
How benevolent of her.
Setting aside the idea of government-funded childcare—that's a whole other newsletter—and just focusing on the economics of what she said reveals something important about how little most Americans actually understand about money and, more importantly, why that ignorance is so politically useful to the people exploiting it.
When SpaceX went public last week, Musk's net worth crossed a trillion dollars, and he became the first-ever trillionaire.
The coverage was predictably unhinged.
A trillion dollars! One man! The inequality!
What people were picturing, apparently, was some vault somewhere with a trillion dollars in it, and Elon swimming through gold coins like Scrooge McDuck. As if he was physically hoarding piles of cash that could otherwise be distributed to people who needed it.
That's the mental image driving the outrage. Of course, that mental image is completely wrong.
Musk doesn't have a trillion dollars. He has ownership stakes in companies—SpaceX, Tesla, xAI, and others—that the market currently values at a trillion dollars in aggregate. That number goes up when the companies perform well and it goes down when they don't.
It is not a pile of cash, and you cannot tax it into childcare without either forcing him to sell the companies (which would collapse the value of everyone else's stake in them, including the 4,000 SpaceX employees who just became millionaires) or doing the kind of mark-to-market wealth taxation that economists across the ideological spectrum have spent decades explaining doesn't actually work the way politicians claim it will.
Of course Senator Warren knows this.
Her proposal isn't really a financial plan anyway—it's a carefully crafted story about who the bad guys are.
It works because most people have never been taught the most basic distinction in personal finance: the difference between wealth and income, between a balance sheet and a bank account, between owning something valuable and having cash you could hand to someone.
When you don't know those things, "tax the trillionaire to pay for childcare" sounds like the most obvious common-sense policy in the world.
The math, of course, is fake, but the feeling is real, and feelings win elections.
Of course the part they’re counting on you not noticing is that the politicians running this particular play—the "he has too much, let's take it" play—have become genuinely, verifiably wealthy through government “service.”
They come into office with modest means and leave with millions, not because they built anything, created value for anyone, employed people or solved problems or took financial risks that paid off, but because they sat at the intersection of regulation and money for long enough that some of it stuck to them.
That is the actual mechanism by which political power produces personal wealth, and it has nothing to do with voluntary exchange or market value or building companies that put satellites in orbit and make cafeteria workers into millionaires.
The brilliant evil of the trick is that the people running it have successfully convinced a significant portion of the population that the villain is the guy who made the rockets.
I don't know how you fix this at the level of national politics. I don’t think there is a fix.
But I know how you fix it at the level of a family, and it starts earlier than most parents think.
A kid who grows up with a foundational understanding of the difference between net worth and cash on hand, between creating value and extracting it, and between a voluntary transaction and a coerced one is a kid who is immune to the Warren/Sanders way of thinking. Not because they're a Republican or a libertarian or whatever, but because the socialist schtick requires a specific kind of financial illiteracy to land, and kids who know better carry the immunity it provides into adulthood.
That's why we’ve spent the last decade creating resources to help parents raise financially literate kids.
The Tuttle Twins and the Miraculous Pencil is about how in an economy, people work together in harmony to produce helpful products that improve everyone’s lives. The Creature from Jekyll Island teaches the history of money, and how shady banksters and government elites put a system in place in the early 1900’s that still steals our savings.
We even have an entire economics curriculum for kids ages 5, all the way up to high school (with special content to help parents brush up before they teach!).
When families talk about real things, the lessons learned form a foundational worldview that is unshakable. The public education system is going to keep churning out kids who believe that socialism is virtuous and that other people having money means that something must have somehow been taken from them.
That means it’s up to parents to teach the truth before someone else gets to their sons and daughters with the Scrooge McDuck version instead of the, “Look what he did! How can you replicate it?” version.
— Connor
