When the hammer swings too hard, it breaks the anvil

The National Review reports that yet another tax-the-rich initiative in California is "running into reality." I will take that phrase seriously, because reality has a way of collecting its debts whether or not the debtor acknowledges the invoice.

I was never an enemy of labor. A working population with purchasing power and reasonable security is the engine of a commercial republic — not an obstacle to it. But I was always an enemy of the proposition that you can legislate prosperity into existence without minding the productive machinery that generates it. When a movement accumulates so much political leverage that it no longer needs to persuade — only to mobilize — it tends to stop doing the harder work of economic reasoning. That is the trap California's labor coalition appears to have walked into, if the lead of this story is any guide.

Consider the structural problem. A state is not a nation. It cannot print currency, it cannot manage a central bank, and it cannot prevent capital — or employers — from relocating across a border that is merely a line on a map. I constructed the national financial architecture precisely because the states, acting alone, were too small and too rivalrous to sustain a sound commercial order. California is large, but it is not exempt from this logic. Every dollar of additional cost imposed on a California employer is a marginal argument for Arizona or Texas. This is inference on my part, not recollection of the specific initiative described — but it is inference grounded in durable principle.

None of this counsels indifference to inequality. A republic in which the gains of commerce flow entirely to a narrow few is not the republic I helped design. The question is method. A well-constructed tax, applied at the federal level with a broad base and predictable rules, does not drive capital across a border — because there is no border to cross. A state-level initiative, passed by a bare majority and written to maximize the headline rather than the revenue, is another matter entirely. It may yield less than promised, cost more than anticipated, and hand the opposition exactly the evidence it needs to argue that labor cannot govern.

My recommendation is plain: if organized labor in California wishes to secure lasting gains for working people, it must trade the initiative process for the harder discipline of legislative negotiation, broaden its coalition beyond its core membership, and make the economic case — not merely the moral one — for why its proposals grow the productive base rather than simply redistributing a shrinking one. The moral case is necessary. It is not sufficient. A movement that cannot answer the question "and then what happens to investment and employment?" will, sooner or later, answer it by example — and the example will not be flattering.