“Tax the Rich!”

When there is no news of The Controversy between evolution and creationism, we have to turn to other subjects. But in doing so we stay somewhat on topic by dealing with our larger concern — preserving the values of the Enlightenment, upon which our civilization depends.

Therefore, dear reader, we beg your indulgence as we post yet another Curmudgeonly rant about politics. Go ahead, skip it if you like and wait for something more on topic. We’ll understand. It’s not easy for your Curmudgeon, being virtually the only Republican on the sane side of the evolution-creationism debate. Anyway, you’ve been warned, so here it comes.

Do you want to tax the rich? Do you really want to go after those fat cats with their corporate jets to make sure they pay their “fair share” so that we’ll finally have some “social justice”? Okay then, let’s play with your most fervent fantasy and see how it works out. But be warned, this won’t be a mindless romantic exercise starring you as the heroic and glorious benefactor of the grateful poor — we’re going to use actual numbers.

Speaking of numbers, let’s be sure we understand them. In American terminology:

• a billion is a thousand million, written 109. It’s got nine zeros, thus a billion dollars is $1,000,000,000.

• a trillion is a thousand billion, written 1012. It’s got 12 zeros, thus a trillion dollars is $1,000,000,000,000.

That means that for every trillion of tax revenue to be extracted from the super rich, the government needs to grab a billion from each of a thousand billionaires. No problem, right? Besides, some of those guys have a lot more than a billion. This should be easy! Well, actually there is a problem, because there aren’t very many of those people.

Let’s consider Warren Buffett. He’s worth about $50 billion. Fine. That’s a good place to begin. Grab it. Grab it all! Good start! Now you need to grab only $950 billion more from some other fat cats and then you’ve got your first trillion. Hey hey — you’re on a roll!

But how far can you go this way? Let’s look at last year’s Forbes listing of the 400 richest people in the US. The top 25 have $10 billion or more, and it’s only the top 50 who have $5 billion or more. Most of the people on the list have “only” $1 or $2 billion. Consistent with that, this Wikipedia article, Billionaire, says that in early 2011: “The United States had 413 billionaires with a total net worth of $1.5 trillion.”

Let’s use that figure of $1.5 trillion. It’s about the size of this year’s deficit in federal spending — well, it’s close. The total accumulated debt is far higher, of course; and the so-called unfunded debt is even larger. We’ll get to that. But you’ve got to start somewhere, so let’s begin with this year’s federal budget deficit.

Imagine that the government decided to balance the budget by confiscating that $1.5 trillion from those fat cats — after all, you want social justice, right? We’ll ignore the fact that your “Big Grab” won’t be easy. The rich aren’t stupid. It’s obvious that while Congress debated such a bill, markets would be crashing as they sold their assets, funds would be transferred out of the country, and the targeted rich folks would be packing up and leaving as rapidly as they could. Were the bill to be passed, it’s not difficult to imagine that the anticipated $1.5 trillion wouldn’t be collected.

Well, as an emergency measure, while they’re debating the bill the feds could close the stock markets, halt money transfers, and outlaw international departures, but we won’t dwell on that. It would ruin your fantasy to think of your government constructing its own version of the Berlin Wall, so we won’t go there. But if the “Big Grab” is to be accomplished, such measures would certainly be necessary.

Assuming no draconian emergency controls, and allowing drastic sell-offs, money transfers and hasty departures, not only would the expected revenue not materialize, there would be unpleasant side effects. There might be a number of Timothy McVeigh types springing up, and it’s not inconceivable that there would be serious resistance to confiscation, perhaps amounting to some kind of civil war. But let’s not dwell on extremist scenarios; this isn’t that kind of blog. Besides, we agreed to ignore the necessity of harsh governmental behavior, so we’ll also ignore unpleasant citizen reactions.

This is your fantasy, so let’s assume that the confiscation bill becomes law and the rich meekly comply. (We know things definitely wouldn’t work out that way, but we’ll play along for a while.) Okay, you’ve got the dough. Now what?

Well, now you can boast that you’ve balanced the budget this year. That’s wonderful, but the government hasn’t solved its debt problem. The Heritage Foundation estimates that the federal government’s debt, including unfunded liabilities for “entitlements” is about $61.6 trillion.

Do you grasp that number? It’s more than the combined wealth of a thousand Warren Buffetts, and there’s only one of him. Broken down by program, it looks like this:

• Medicare: $24.8 trillion
• Social Security: $21.4 trillion
• Federal debt: $9.4 trillion
• Military retirement/disability benefits: $3.6 trillion
• Federal employee retirement benefits: $2 trillion

Not only that, but because almost everyone with significant assets will have been essentially impoverished (if they haven’t fled the country), the income tax collected from then on will be considerably less than before. As you can see here: Who Pays Income Taxes?, the top 10% now pay 70% of all income taxes collected. The top 5% pay almost 60%, and the top 1% pay almost 40%. You may imagine that they’re not paying their “fair share,” but they’re carrying virtually the whole load. And after your brilliant policy is put into effect, they won’t be around any more. Whatcha gonna do then?

When the goose that lays those golden eggs flies away, you may be able to grab a few eggs that were left behind, but that’s a one-time windfall. The goose will be gone. So think about it. Although you may daydream yourself into ecstasy with visions of wringing Warren Buffet’s neck and grabbing his $50 billion, it’s a very stupid and destructive government policy. So stop dreaming about it.

[For our somewhat related political rants, see US Budget: 40 Years in the Wilderness, and also Curmudgeon Solves the U.S. Budget Crisis, and also The Curmudgeon’s Health Care Reform Plan, and also The Curmudgeon’s Plan To Save The World.]

Copyright © 2011. The Sensuous Curmudgeon. All rights reserved.

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63 responses to ““Tax the Rich!”

  1. You are absolutely right, the country will be much better off if the middle class disappears and the gap between the richest and the poorest is maximized.

  2. No one has suggested anything close to your hypothetical tax the rich situation you have stretched beyond belief. No one wants to grab a billion from every super rich person. The fact is that all that is being asked is that the Bush tax cuts for the super rich be rescinded and a small increase in those making over 250,000 per year along with spending cuts since it was deregulation of Wall Street by Bush that caused the recession. A sensible balanced approach.

  3. Following that I propose that anyone that can not get a job, and leave unemployment benefit, in 1 months time should be shot. Thereby within 1 month you have cured unemployment and cut drastically back on Government spending on “entitlements”. Seems a perfect solution and not at all over the top, like your own helpful example.

  4. SC, Tex Arty is right. No one has ever proposed taking everything away from the wealthy. The argument is a rather minor one – that is, return to the rates that were in effect in the 90’s, when the economy was cooking. Rich people then seemed just fine with it. I don’t recall a mass exodus.

    The tax increase would bring in a little extra money that would give the government a little room to maneuver in their efforts to make the right cuts in order to achieve their targets. It’s not going to do much to address the huge, third-world-like income gap in this country.

    Tax reform is also a source of more revenue through the elimination of no-longer-necessary tax breaks and subsidies, which is essentially another type of government spending. Even some Tea Party republicans consider tax reform acceptable, since it is a form of spending cut.

    There isn’t enough tax revenue to be gained by any measure of reform or increase to balance the budget and pay back the deficit – both parties understand that the great bulk of the contribution will be through cuts in spending. The “no tax increases under any circumstances” stance by the Tea Party republicans and the pledge signers is just another example of irrational ideology by people who have either never had an economics class, or don’t understand how our government is funded.

    By the way, the social security trust fund obligation is an actuarial figure, based on assumptions about future tax revenues and estimated payments (mortality, population statistics, etc.). The trust fund invests its annual surplus (yes, it still runs a surplus) in government bonds, which represent some portion of the $14 trillion government debt. One fix might be to invest in more corporate bonds and other financial instruments and not in government bonds, which would yield more income for the fund and put that money in circulation in the economy (depriving the actual government access to that money, also, of course.) Since congress can alter the terms of social security at any time when the fund ceases to run a surplus, the present estimate of future liability is not debt in the same sense as the $14 trillion debt.

    Medicare is a thornier issue. The program needs major restructuring, as does health care in general. It does not have debt in the normal sense of the word, the numbers quoted (and they can be very big numbers) usually represent the shortfall between revenues and expenditures extrapolated into the future under various cost growth scenarios. However, congress has complete control over this – they could cancel the program tomorrow if the political will were there. Medicare is a future spending issue, not a debt issue. It’s misleading to include it in a rack-up of total debt.

  5. Tomato Addict

    You are absolutely right, the country will be much better off if the middle class disappears and the gap between the richest and the poorest is maximized.

    Which could also spark a civil war, and I don’t think I am fantasizing.
    I’m not sure this can be fixed with any sort of changes to taxation though. We need an economy to enable a strong middle class, and we have already lost a huge portion of our manufacturing industry. We can’t just tax/not-tax middle class jobs into existence.

    What I fail to hear (except from Mr. Buffet) are positive suggestions for how much the rich should pay. Just how much tax would be fair? How much necessary? How much too-much?

    Also, is it just me, or does it seem that most of the whining about too-high taxes on the rich is coming from people who are not rich and don’t have to pay those too-high taxes?

  6. Does anyone care to explain the difference between taxes and tax rates? Does anyone have an analysis showing that a tax rate increase will increase revenues collected? Does anyone seriously believe that if we increase tax revenue, the deficit will go down rather than give politicians more opportunities to “invest” our money with their favored contributors?

  7. I am not even after taxes increases as such. I just wish they stop the endless rounds of tax cuts, we are still in trouble so lets cut taxes again. Seems both sides are stuck in a simple mantra of raise taxes or cut taxes because it makes a good sound bite and they do not really look deeper into than that.

  8. OK, so the answer to my first question is, “No.”

  9. One operative definition of “a balanced approach” is putting one foot outside the rails, and one foot inside the rails, as speeding freight train bears down on you at high speed.

  10. I think SC was trying to show that there is not enough wealth in the nation to cover the damn interest on the debt, much less the actual debt.
    Of course, obtuse thinking brings reactionary statements without ever bothering to even comprehend the problem.
    Spending money one does not have is the problem. If you say fine, tax some higher income earners then we have some more room to maneuver you are delusional. Any increase in revenue will be treated as a reflexive increase in spending.

    Oh, those evil Bush tax cuts for the rich. I pull in a little under 100k and those evil rich bastard tax cuts let me keep 350 additional of my OWN FREAKIN MONEY.
    Money I saved for the future our government is doing its damnedest to stifle. Also I spend it on retail products, food and hiring laborers. You know, trickle down.

  11. satchmodog says:

    I think SC was trying to show that there is not enough wealth in the nation to cover the damn interest on the debt, much less the actual debt.

    It’s nice to see that someone understood me. Was my writing that obscure?

  12. @Ed:The argument is a rather minor one – that is, return to the rates that were in effect in the 90′s, when the economy was cooking. Rich people then seemed just fine with it. I don’t recall a mass exodus.

    Can we return to the levels of government spending we had then? In 2000 Federal spending was $1.8 trillion. In 2010 it was $3.6 trillion. I don’t recall old people being thrown into the snow, and houses burning due lack of firefighters, etc in 2000. Why is it unreasonable to expect the government to limit its spending to its revenues–why is the only solution you admit is to try to increase taxes?

    @Tomato Addict:Also, is it just me, or does it seem that most of the whining about too-high taxes on the rich is coming from people who are not rich and don’t have to pay those too-high taxes?

    Because it always STARTS with the rich, but it doesn’t end with them. (In 1918 only 5% of US househlods paid income tax.) As SC demonstrated, the rich don’t have enough money to match what the government intends to spend. The government, conseuqently, will dig way down into the middle class to get that money–JUST LIKE IN EUROPE, which has all the social programs you approve of, and taxes the middle class heavily to pay for them–because they’re the ones, in the aggregate, with most of the money.

  13. Incidentally, aren’t “the Bush tax cuts” now the Obama tax cuts? He did, after all, sign them into law.

  14. You have nothing to worry about…. Ag Sec’y Vilsack announced a couple days ago that Food Stamps — yes, FOOD STAMPS — produce $1.84 in economic benefits for each dollar of Food Stamps being spent.

    By this logic, it follows that we can impose a 75% tax on Food Stamp economic benefits, producing 32 cents to run the government, plus ANOTHER DOLLAR OF FOOD STAMPS!

    Previously, the administration told us the same 1.84 multiplier applied to Unemployment Payments.

    The Solution to our fiscal problems is at hand: all we need is for everyone to quit their jobs, go on food stamps, collect unemployment, and tax the benefits. It’s perpetual motion! In no time at all, we’ll be rich beyond our wildest dreams, our debt will be paid off, and everyone will be well fed.

    Who says there’s no free lunch?

  15. @SC:Assuming no draconian emergency controls, and allowing drastic sell-offs, money transfers and hasty departures,

    Something left out of your analysis: the rich are selling their assets off to WHOM? Who on earth would be crazy enough to try to buy something when the government is confiscating wealth? The assets owned by the rich in your scenario would be literally worthless: the market has been destroyed, property rights are extinguished, there is no way to put a “value” on something that people are unable to own or purchase.

    What will happen, of course, is that the nomenklatura get the use of everything which thay have seized in the name of “the people”. Because “the people” can’t enjoy a yacht or a Benz or a McMansion, there’s too many people. Rich people are now poor, dead, or fled. And government officials are the ones swanning about in fancy cars with staff and servants, just like in every other place where this has been tried.

    http://en.wikipedia.org/wiki/Dacha

    After the Bolshevik revolution of 1917, most dachas were nationalized. Some were converted into vacation homes for the working class, while others, usually of better quality, were distributed among the prominent functionaries of the Communist Party and the newly emerged cultural and scientific elite. All but a few dachas remained the property of the state and the right to use them was usually revoked when a dacha occupant was dismissed or fell out of favor with the rulers of the state. Joseph Stalin’s favourite Dacha was in Gagra, Abkhazia. The construction of new dachas was restricted until the late 1940s and required the special approval of the Communist Party leadership.

    What capitalism and free enterprise are replaced with, invariably, is a system where no one can get anything without fawning on someone with power-the norm of human history. A rich man, or a poor man for that matter, sells me something because it is in his interest to sell it to me, and I think it is in my interest to buy it (or I sell to him). We both feel better off (while loudly complaining of having been cheated, I’m sure) because we voluntary traded something we had for something we wanted more. If that had not been true, the exchange would not have taken place. Are both necessarily satisfied? No. Of course I wanted to sell for more and he wanted to buy for less. But we voluntarily came to an agreement we could both live with.

    But when the government gives you a thing, it has first taken that thing from someone else–someone who didn’t have as much juice as you.

    For me, the free market is fundamentally a moral imperative. it’s not so much about “working” better, though it does for most things that people actually want (as opposed to saying that they want). It’s the fact that the alternative is a system where you get things only by flattering people who have power.

    Warren Buffet, despite what he said in his editorial, feels the same way. He has been able to donate as much money as he liked to the Federal government. He has also been free to change his token salary from Berkeshire Hathaway to a realistic figure that would match other CEOs and pay far more in taxes if he wished. Instead, he chose to give the money away, to groups like Planned Parenthood and the Gates Foundation, instead of to the government.

    Warren Buffet has done this math, and knows perfectly well that the government can’t get all its money from “soaking the rich”. He knows perfectly well that when you get people to agree that the rich need to be soaked, then they have no defense when you argue that THEY are the rich. As the old joke goes, we know what you ARE, we’re just haggling over the price.

    Today the “rich” are those making $250,000. Tomorrow it will be $100,000 and next week it will be $50,000. There is always somebody who has less than you who can argue that he needs it more.

  16. By the way, median household income in the US in 2009 was about $50,000.

    50% of households made less than this, in other words.

    Are ANY of us posting here on the low side of this number? (As a single grad student I was, but not since I married). No? You’re the rich, and your turn to be soaked will come.

  17. @Gabe: Can we return to the levels of government spending we had then?

    That would be a good thing (adjusted for inflation). Great idea. Lets get out of the wars we are waging, fix medicare, and we should be reasonably close.

    It’s sort of exasperating in these debates to read that some view revenue increases as an alternative to spending cuts, even though that has not been proposed by either party. The choices are (1) cut spending significantly AND increase revenues, or (2) cut spending significantly ONLY. The option to solve the debt issue just with tax increases is not up for consideration – it’s not possible, and no one in office thinks it is. So why do we debate that? It’s an entertaining thought to imagine how much wealth we would have to take from the extremely rich, but it’s irrelevant to the real world. Spending cuts are the most significant measure in all options discussed – by far.

    Perhaps we should call them “Obama’s two-year extension of the Bush tax cuts”, but that’s a bit unwieldy.

  18. SC, I’d describe myself as a “disillusioned moderate Republican”, and as such I agree with the core of your argument. I don’t agree with the structure, though. By raising confiscation you’re buttressing your (otherwise correct, IMHO) point with a straw man the size of the Empire State Building. This undermines its credibility with almost anyone with views to the left of the center of gravity* of the current GOP presidential pack — which I’d submit is at least a plurality of the country.

    I don’t see a consensus in American society for either a nakedly redistributionist social democracy, something lots of Democrats conveniently overlook, or for an approach that fetishizes the “rich” into economic super-citizens. There are constituencies for both approaches, but that’s not the same thing. In a narrowly-divided country, I don’t see how adhering to one extreme is going to be anything but a recipe for more gridlock and increasingly polarized — and thus unproductive — rhetoric.

    * (Memo to Rick Perry: Don’t worry, gravity is also just a “theory”.)

  19. Absolutely not. Example: Democrats led by President Bill Clinton produced the greatest surplus in our country’s history gave it to the Republicans led by President George W. Bush who cut taxes to the rich and caused the greatest deficit in our country’s history ending in a terrible recession then passed it bacj to the Democrats led by President Barack Obama. Ironically, the surplus, that Clinton accumulated and passed on to Bush, was intended to repair Social Security, Medicare and reduce the deficit… not to increase spending. Major issues in today’s efforts to reduce the deficit.

  20. Tex, you’ve conveniently rewritten history. The economic boom of the ’90s came at a time when there was a government split- Congress was Republican, the president was Democrat. Gridlock. Government shutdowns. That’s what inspired people like me who would like constitutional government to try to direct our votes toward preventing one party rule, which has been disastrous (e.g., the first part of the Bush presidency, the first part of the Obama presidency).

    Bush did NOT cut taxes for the rich. Nor did Obama when he signed similar legislation. Tax rates and taxes are two different things. Tax revenues increased after the rate cuts. Spending, however, wildly increased, far beyond the amounts of revenue increases that followed rate cuts.

  21. Gabriel Hanna says:

    Something left out of your analysis: the rich are selling their assets off to WHOM? Who on earth would be crazy enough to try to buy something when the government is confiscating wealth?

    It would eventually reach that point, but probably not all at once. When there’s only fear of the Big Grab, but not the reality, there will still be buyers looking for bargains. You could see that happening, for example, if someone runs for President on a Big Grab platform, and poll numbers show that he has a good chance of being elected (or re-elected), and both houses of Congress will be in control of his Big Grab party. That’s when the markets start to crash.

  22. SJR says:

    By raising confiscation you’re buttressing your (otherwise correct, IMHO) point with a straw man the size of the Empire State Building.

    It illustrates the principle. The point is that “if this goes on …”

    I don’t see a consensus in American society for either a nakedly redistributionist social democracy

    Consensus? No. But there’s a very strong streak of it, especially in academia and the media, and we know it’s concentrated in one political party. They’re not only wrong (all the evidence of history shows them to be in error), they’re crazed. It’s like creationists, really, but far more dangerous. I have no hesitation in stating my absolute opposition to the concept. But they have political muscle because the unions support them — labor leaders are whores for anyone who buys their support. A dockside trollop has far more integrity than the head of an American labor union.

  23. Your opinions and your facts are yours alone not factual history of record.
    Bush in fact did cut taxes for the rich.
    Here are factual excerpts from Wikipedia but there are many other factual accounts of the Bush tax cuts.
    “The economic policy of the George W. Bush administration was a combination of tax cuts, expenditures for fighting two wars, and a free-market ideology intended to de-emphasize the role of government in the private sector. He advocated the ownership society, premised on the concepts of individual accountability, less government, and the owning of property.
    During his first term (2001–2005), he sought and obtained Congressional approval for tax cuts: the Economic Growth and Tax Relief Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. These acts decreased all tax rates, reduced the capital gains tax, increased the child tax credit and eliminated the so-called “marriage penalty”, and were set to expire in 2011.
    The last two years of his presidency were characterized by the worsening subprime mortgage crisis, which resulted in dramatic government intervention to bailout damaged financial institutions and a weakening economy.
    The U.S. national debt grew significantly from 2001 to 2008, both in dollars terms and relative to the size of the economy (GDP),[1] due to a combination of tax cuts and wars in both Afghanistan and Iraq. Budgeted spending under President Bush averaged 19.9% of GDP, similar to his predecessor President Bill Clinton, although tax receipts were lower at 17.9% versus 19.1%.[2]”

  24. To me this taxation argument is irrelevant. You can quarrel all you want about taxes or cutbacks we’re just not going to grow like we are accustomed to and the American middle-class will soon be an endangered species. American business has found it easier to out source their job costs, pollution issues and compliance challenges overseas to some third world nation where the costs and standards are lower than in the USA. And if they need someone to bail them out overseas they can always hire some American kids for the cheap in the military because the kids can’t find any other work stateside anymore.

    Over the past two decades the sectors that promised to create jobs that would replace the lost manufacturing jobs, service and technology, have been outsourced to India. The manufacturing jobs, of course, went to China. In the meantime we have been reduced to third world status by exporting raw materials to China. The Chinese do their part by buying our now downgraded Treasury bonds.

    It’s really that simple, no jobs, no growth as long as American corporations are allowed to shelter their profits overseas. The housing bubble, like the Internet bubble before it, artificially hid the lack of job growth. Frankly, I doubt the financial markets are capable of conjuring up another bubble to mask the true pain of job loss for the middle class. Worse, Obama doesn’t get it nor do the Republicans.

  25. WB is a rent seeker. And a hypocrite- he can give the government whatever money he wants to. And he can convince his friends to donate. It won’t even put a tiny dent in the debt, as SC has correctly pointed out. Tax revenues from the top 10% of earners INCREASED during the Bush years. I know it’s a really hard concept and ruins the Democrat talking points, but nonetheless, I’ll say it again: Tax rates and taxes are not the same thing.

    Bush being described as a free market advocate is hilarious. Under him, government size, scope, power, and reach increased faster than ever before in our history. Obama has taken Bush’s policies and gone even further. I never thought I’d see a worse president than Bush, but I was wrong about that.

  26. SY says:

    WB is a rent seeker. And a hypocrite- he can give the government whatever money he wants to.

    Obviously he doesn’t want to. The only way to make sense of his complaining is to interpret it as saying that his secretary’s tax rates should be no higher than what he pays on his capital gains. That’s fine with me.

  27. Ok, starting tomorrow the Sensuous Curmudgeon and an army of clones take office as President, Vice-President, Speaker of the House, the rest of Congress AND the Supreme Court. What will you do in the first 100 days of YOUR administration?

  28. skmarshall asks: “What will you do in the first 100 days of YOUR administration?”

    Day one: Tell all Obama appointees to go home. Don’t pass Go, don’t collect $200.
    Day two: Pardon all who have been charged with violating any regulations issued by the Obama administration.
    Day three: Grant waivers to the entire country regarding Obama-care.
    Day four: Submit list of cabinet posts, federal departments and regulatory agencies to Congress for elimination.
    Day five: Announce bounty to be paid for illegal aliens delivered to the border (in good condition) for immediate repatriation.
    Day six: Announce sale of all federally-owned land.
    Day seven: Rest. (Ladies Night at the White House!)

  29. Great to know that you’re happy to extinguish the middle class that (I assume) you belong to, Curmie…

    😡

  30. LRA says: “Great to know that you’re happy to extinguish the middle class”

    Could you help me out and explain how you figured that?

  31. I’d like to see that Day 4 list. TSA? Department of Agriculture? Department of Labor? Department of Education? DEA? BATF?

    Repeal of Patriot Act would be high on my list…

  32. Well, Curmie, you seem to support policies that only lead to the widening of the wealth gap here in the US.

    You are very invested in protecting the mega-rich– to the detriment of the middle and lower classes.

  33. SY says: “I’d like to see that Day 4 list.”

    All those you mentioned would be on the list. I’d have to think about the Patriot Act a bit, because I don’t know much about it.

  34. Specifics, LRA. I need specifics.

  35. http://academic.udayton.edu/race/06hrights/georegions/northamerica/china03.htm

    http://www.cbsnews.com/stories/2008/10/21/business/main4535488.shtml

    http://www.economist.com/node/17959590

    In the last 30 years, our middle class has shrunk and our rich and poor classes have grown. It is unacceptable in a so-called “democracy” that values “equality”.

    😡

  36. LRA says:

    In the last 30 years, our middle class has shrunk and our rich and poor classes have grown.

    Can you guess why? Have you ever talked to a business owner who made the decision to manufacture overseas? I have. They do it reluctantly, but they see it as necessary. There are many reasons — lower taxes, less regulation, no swarms of bureaucrats, no unions, no merit-less litigation, etc. This country has a very hostile business climate. Passing 1,000-page bills, adding thousands of regulations, and adding hundreds of thousands of bureaucrats to the government doesn’t improve the situation.

  37. I sure am glad the power of the free market cleaned up the Cuyahoga River. I’ll just tip back a Burning River Pale Ale and cheer you on as you defund the EPA.

  38. I’d second SC’s comment about regulation. Labor cost and tax burdens aren’t the only things that can deter business activity and thus wealth creation. Recently ran into someone who ran a marketing firm, who noted long and eloquently that, despite being a woman running a small business (isn’t that a protected category somewhere?) she was being hammered by all sorts of compliance, health and safety issues, et cetera. Every one of the regulations she mentioned was nothing I’d take exception to on its own — no sane person is in favor of making workplaces more dangerous or throwing in some extra industrial by-products along with your water table. But the cumulative impact was killing her.

    For a slightly less anecdotal take, there was an interesting Economist article about insane professional licensing in the U.S. a couple of months ago — http://www.economist.com/node/18678963 — which shows how what might seem like reasonable ideas to protect consumers seem to easily shade into hosing them by reducing competition.

    The flip side to globalization is that rich countries tend to have much higher productivity than poor ones. So you can still have manufacturing, for instance, if there aren’t other factors dragging that down. Germany is nobody’s idea of a libertarian paradise, but they’ve managed to preserve a vibrant base of small and medium manufacturing companies — many of them globally competitive exporters. You have to nurture that stuff though.

  39. There’s no free market:

    http://www.physorg.com/news/2011-08-powerful-corporations-world.html

    Click to access 1107.5728v1.pdf

    This is why we need a global regulatory scheme. To even the playing field everywhere.

  40. LRA says:

    There’s no free market: … This is why we need a global regulatory scheme. To even the playing field everywhere.

    If I may restate that: “There’s no free market: … This is why we need a global regulatory scheme. To even the playing field everywhere make sure there never is one, anywhere.”

  41. Wow, our economy, liberty, and opportunity controlled by an elite, organized along the lines of the UN perhaps? Or hey, make it democratic? So that the more-than-half of the world which believes that women, blacks, gays, and Jews are inferior creatures can vote to exclude them from economic activity? What could possibly go wrong?

  42. So now we’re back to “furriners are takin our JERBS!”

    That’s all the outcry against outsourcing is. That’s all it ever HAS been. It’s like no one learned anything in the the last three hundred years.

    Smash the machines, they’re takin’ our JERBS!
    Ban the imports, their takin’ our JERBS!
    Stop the outsourcing, it’s takin our JERBS!

    How has unemplyment not reached 100% with all these JERBS that have been taken? The slide rule technicians, the buggy-whip craftsmen, all gone and no new JERBS have ever taken their place.

    What was it Tex Arty, Ed, and Tomato Addict said about you setting up strawmen, SC?

    Standards of living continue their rise. Even with a bad economy now, people have access to goods and services at prices they could never have afforded twenty years ago. As stuff gets cheaper to produce, more capital is available to produce new jobs. It’s not hard to grasp and it has ALWAYS been true. Yet so many here who pride themselves on their education remain mired in ignorant and magical thinking about economics–like rich people have pots of money they are just hiding under their beds and if we take that money we can all be rich, or that foreigners take our JERBS and we get no benefit thereby which leads to new jobs.

    Bastiat pointed it all out long ago. He lived in vain.

  43. A modest proposal: Ban email. Then we all have to pay private couriers to take our messages. That will create jobs, right?

    Ban construction equipment, replace them with shovels. That will create jobs, right?

    Abolish corporations and their “economies of scale”, we want no truck with that nonsense. We only want stuff that took a year to make one at a time. That will make us prosperous, right? Create lots of jobs?

    Cut out all the middlemen. We place no value on specialized knowledge of where to find the things we want to buy, or the ability to buy them in bulk at a discount, we’ll figure it all out for ourselves and spend a great deal of time trying to figure out where we’ll get our goods and services from, and we’ll pay high prices because we only buy what we ourselves need at one time.

    When everyone pays more in time and money for less stuff, only then will we have prosperity. Jesus wept.

  44. Gabriel Hanna says: “Bastiat pointed it all out long ago. He lived in vain.”

    And I blog in vain. But I persevere.

    Somehow the fantasy survives that burdening American business with so many regulations that they find themselves with more “compliance” people on the payroll than engineers, and slamming them with lawsuits over snail darters and bogus claims that their products cause birth defects (Hi, John Edwards!) or maybe toenail fungus, so that their insurance costs go through the roof, and then even more lawsuits if they don’t have the proper percentage of dwarves on the payroll — so that they’re hiring more lawyers than salesmen — none of that has any effect on the willingness of business to invest in the US. No, it’s all the foreigners’ fault. So grow the government and tax the rich! That’ll expand the middle class and make us all prosperous.

  45. Somehow the fantasy survives that burdening American business with so many regulations that they find themselves with more “compliance” people on the payroll than engineers

    And of course TEH CORPOASHUNZ!1!!!11!!eleventy!!! can afford high compliance costs; they pass the costs on to consumers and gain market share at the expense of smaller companies who can’t afford a staff that specializes in compliance.

    If you sell ten widgets in a year, you can only afford to pay people who make widgets. If you sell ten million, you can afford to pay a lot of people who don’t make widgets. That’s the “economy of scale” again; your costs per unit are lower and so you have surplus money per unit. That would enable you to sell under your smaller competitors, or it would allow you to spend money on compliance that they can’t afford, driving them out of business, while your price stays the same or increases.

    In the first case consumers win, getting something cheaper, but in the second case they lose. Because corporations cannot be made to sell under the price it costs them to make something, all their costs are borne by consumers ultimately, whatever their profits are. (Though if LRA got her way no doubt they WOULD be made to operate at a loss.)

    Of course you and I will now be accused of being against any and all possible regulations, and at the same time be accused of setting up strawman positions that no rational person would ever seriously advocate.

  46. Gabe wrote:

    Ban construction equipment, replace them with shovels. That will create jobs, right?

    There’s an apocryphal story about an economist who was observing a huge public works project digging a massive ditch. He was curious that no heavy earth moving equipment was being used to dig — just an army of laborers with shovels. So he asked the government apparatchik in charge of the project why they didn’t us earth moving equipment. The man replied: “This is a JOBS program — earth moving equipment would defeat the purpose!”

    To which the economist replied: “If the object is to employ as many people as possible, why not equip the laborers with spoons instead of shovels?”

  47. The point is not that we should have no regulations. It’s that we must carefully consider both the overt and hidden costs of regulations and decide if the costs to society as a whole are worth the benefits to society as a whole. Money spent on compliance is money NOT being spent on producing things that people want and need.

    And things that people want and need are the only measure of wealth that matters. If the numbers printed on our bank statements made us wealthy, then Zimbabwe would be the richest country in the world. Progressives nowadays have defined “poverty” to mean “the 20% with the least money”, which means that no matter how well people live 20% of us must always be “poor”, no matter how many flat screen TVs and iPods they have.

    http://www.heritage.org/research/reports/2004/01/understanding-poverty-in-america

    The following are facts about persons defined as “poor” by the Census Bureau, taken from various government reports:

    Forty six percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a threebedroom house with oneandahalf baths, a garage, and a porch or patio.

    Seventy six percent of poor households have air conditioning. By contrast, 30 years ago, only 36 percent of the entire U.S. population enjoyed air conditioning.

    Only 6 percent of poor households are overcrowded. More than two thirds have more than two rooms per person.

    The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)

    Nearly three quarters of poor households own a car; 30 percent own two or more cars.

    Ninety seven percent of poor households have a color television; over half own two or more color televisions.

    Seventy eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.

    Seventy three percent own microwave ovens, more than half have a stereo, and a third have an automatic dishwasher.

    As a group, America’s poor are far from being chronically undernourished. The average consumption of protein, vitamins, and minerals is virtually the same for poor and middle class children and, in most cases, is well above recommended norms. Poor children actually consume more meat than do higher income children and have average protein intakes 100 percent above recommended levels. Most poor children today are, in fact, supernourished and grow up to be, on average, one inch taller and 10 pounds heavier that the GIs who stormed the beaches of Normandy in World War II.

    But the machines/foreigners/imports took their JERBS!!!! How is that possible? We all should have starved except for 50 fat cats sitting on their huge piles of gold fondling Persian cats and squinting at each other through their monocles.

  48. http://campaign2012.washingtonexaminer.com/blogs/beltway-confidential/where-have-all-millionaires-gone

    The chart, based on 2009 IRS figures, shows that the number of taxpayers reporting annual income over $1 million fell 39 percent between 2007 and 2009; the number of super-wealthy individuals making over $10 million annually plunged 55 percent.

    The carnage wasn’t confined to millionaires. The number of taxpayers earning over $200,000 per year also decreased by 612,000 – or 13 percent.

    That’s the other thing economic illiterates don’t recognize: the incomes of the wealthy are much more dependent on the swings of the economy than the poor or the middle class.

    And when that happens what happens to tax revenue?

    In 2007, those making above $200,000 (but less than $1 million) paid $610 billion in federal income taxes. In 2009, it was only $434 billion – leading to a 29 percent decrease in government revenue.

    Same for the 408,394 millionaires who paid $420 billion in taxes in 2007. Just two years later, their numbers had been dramatically reduced, and the revenue the U.S. government collected from them likewise decreased to $232 billion.

    Since the top 5 percent of taxpayers paid 58.7 percent of all federal income taxes in 2008, the vanishing of millionaires is bad news for everybody.

    So the obvious solution is to take even more away from what they have left. Oh, that’s a WINNER.

  49. Yes, Gabriel Hanna, I read (in its entirety, some time ago) and love the Heritage Foundation Report. It made me feel so much better about my own position. I found that I am not really poor because I have a refrigerator. Not only that, but I have three whole rooms….all to myself and, my very own bathroom that I don’t have to share with my neighbors! How dare I think (not complain, mind you, just think) that I’m poor?

  50. @Ellie: Your place sounds bigger than mine. Do other people who have less, have the moral right to force you to share?

    And if I did have more rooms than you, how would that make you poorer than you were if I didn’t? It’s not like I came to your house in the night and carted one off, is it?

    Do you have an argument not based in envy?

    People in the US, even poor people, are not poor in comparison to the rest of the world and they are not as poor as they were thirty or fifty years ago. Do you remember when only middle-class people could afford cable and color tvs? I do. Do you remember when you had to rent your phone from the the phone company, and long-distance was so expensive that people used it only for family emergencies and at holidays? I do. Do you remember when only lawyers and doctors had cell phones?

    You are richer every year, in ways you don’t appreciate, but you think it’s unfair if someone else might have more? Really?

  51. I believe I see what the problem is here. You may have what I would call tunnel vision, you see only what you want to see. You are so far above poverty that it is beyond your intellectual ability to understand the plight of the handicapped, the homeless, the honest, hardworking people who lost their job because of the recession brought on by Wall Street and Seniors who cannot afford the ever rising cost of life saving medications.

    I agree there are those who claim falsely to be poor but they are insignificant in numbers compared to the truly poor people in this country and it is unfair to place them in the same category of the thousands who are in desperate need of financial assistance and critical medical necessities.

  52. Gabriel Hanna…I don’t see envy in my response at all. I see an eye rolling criticism of the Heritage Foundation’s report. The general tone is that because America’s poor do not live in mud huts, they are not really poor. Poverty doesn’t necessarily mean outdoor plumbing and starvation. I really did point out that I was not complaining. Life is what it is for me and that’s that. That doesn’t mean I have to take everything in that the HF has to offer and swallow it whole.

  53. Tex Arty says

    the thousands who are in desperate need of financial assistance and critical medical necessities.

    No one wants to prevent you from helping them. Just don’t hurt anyone else while claiming your special sensitivity as a pretext for doing so.

  54. @Tex Arty:You are so far above poverty…

    I grew up in a poor family, was one of the first in my family to get a college degree and the only Ph.D. It is only this year that I made over $24,000 for the first time. I worked all kinds of jobs to put myself through school and some years I couldnt afford to go. I supported myself for several years on minimum wage jobs. I’ve been a cashier at a grocery store, on the freight crew at a gorcery store, washed dishes, worked in a deli, cooked the overnight shift at Denny’s.

    I went to high school in a rural area largely populated by migrant workers.

    Is this all you have left–“people who dont agree with me dont understand what it is to be poor”?

  55. @Tex Arty:Let me rush to clarify that the “poverty” my family experienced, even at its worst, is the sort of poverty described by the Heritage Foundation I quoted above. We weren’t sharecroppers in the Thirties or Dickensian orphans selling oranges in the street.

    In this country, all you have to do to avoid poverty is finish high school, stay out of jail, and not get knocked up as a teenager. Not everyone who suffers one of these things does so because of their own failing. And there are people who get sick and disabled. But the number of people in this country who experience real deprivation is a very small fraction of the total. That is not where the bulk of the money is going that the Federal government is spending, though they’d certainly like you to believe that.

    For example, the “sick and disabled” includes not just the blind and deaf but alcoholics and drug abusers. Some of those things are not like the others. In Washington State, where I grew up, alcoholics can go to college for free under vocational rehabilitation programs. Just like “the poor”, according to the government, includes people with flat screen TVs who own a home.

    SC pointed out that taking ALL the money of ALL the rich people does not close the gap in the budget. NOT ONE OF YOU could refute that math–all you could say was “no one’s talking about doing that”. Taking more things away from rich people is not only wrong, it is impossible for it to bring in enough money to do all the things you think the government should do with it. We’re not arguing against “taxing the rich” because we hate the poor–though your own intellectual poverty keeps you from imagining any other reason. It is because a) it is wrong and b) it would not work.

    The “middle class” that LRA claims to love so much, and is apparently so dependent on the government, is the one that will end up footing these bills. Math is a harsh mistress.

    But it doesn’t matter how much you love and sympathize with “the poor”–giving away other people’s things does not make you a good person. Giving away your own things might.

  56. Gabriel Hanna wrote:

    So now we’re back to “furriners are takin our JERBS!”

    Yeah, you’re right. I must have had a nightmare when I dreamt about the factory owner that cried on the phone to me because he was being forced by Walmart and my own company to outsource to China or lose his business altogether! I must have been stoned when one my manager returning from an overseas visit told me about the Chinese factories were the workers defecated in the stairwell because they had no bathrooms or the workers who wore no goggles while welding Sear’s Craftsmen compressors. And I must been doing acid as I watched teams of my coworkers getting laid off at my software company to be functionally replaced by new teams in India.

    Oh and thank god for Rupert Murdoch and Fox News for setting me straight!

  57. @Erik:And I must been doing acid as I watched teams of my coworkers getting laid off at my software company to be functionally replaced by new teams in India.

    Did I say that no one anywhere ever lost a job to a foreigner? Can you not read?

    People lose their jobs to foreigners, they lose their jobs to automation and other efficiencies ALL THE TIME. OF COURSE THEY DO. Every time those software guys sent each other an email they cost an office clerical worker his job. Did they clamor for email to be banned in their company so the company can put more office workers on the payroll? In fact, their software production itself was putting other people out of work by making some process somewhere require less labor! Did that thought ever give you any qualms?

    In the end, the loss of those jobs leads to the creation of new jobs, because money that was tied into to producing goods and services is now free to produce others in ADDITION to what it was already producing. Does it suck for people who lose their job? Yes. What’s your alternative? Force the rest of us to pay for inefficiency, for higher prices on everything, to prop up people who want to keep their jobs? Are we going to go back to medieval guilds of craftsmen and thereby become prosperous? Are we going to cut off our foreign trade and thereby become prosperous? (Let’s look at countries with no trade: hmm, North Korea.)

    Your alternative is to ban email, ban construction equipment, ban any improvement or efficiency that would cost someone a job, if you go down that road you have no argument against any of these things. And by adding up all those minuses, how does society come out with a plus?

  58. @Erik: Bastiat had your number long ago. “Furriners are takin’ our JERBS” was as stupid a reason to oppose trade as it is now:

    “What is their objection to free trade? They charge it with encouraging foreigners who are more skillful than we are, or who live under more advantageous economic conditions than we do, to produce things that, in the absence of free trade, we should produce ourselves. In short, they accuse it of injuring domestic labor.

    But then, should they not, for the same reason object to machinery of every kind, since, in enabling us to accomplish, by means of physical instruments, what, in their absence, we should have to do with our bare hands, it necessarily hurts human labor?

    In effect, is not the foreign worker who lives under more advantageous economic conditions than the French worker a veritable economic machine that crushes him by its competition? And, in like manner, is not a machine that performs a particular operation at lower cost than a certain number of workers a veritable foreign competitor that hamstrings them by its rivalry?

    If, therefore, it is expedient to protect domestic labor from the competition of foreign labor, it is no less expedient to protect human labor from the competition of mechanical labor.

    Therefore, whoever supports the protectionist system, should, in all consistency, not stop at interdicting the entry of foreign products; he should also outlaw the products of the shuttle and the plow.”

    The software industry whose outsourcing to India you lament “killed jobs” , many jobs, by providing efficiency. If people like you had their way, your friends who got laid off would never have had software jobs to begin with.

  59. The class envy/zero-sum approach is clear — subsidize the buggy whip industry to protect it from the job destruction caused by those evil horseless carriages!

    And for those who advocate confiscating wealth from those who have more of it, to be redistributed to those unfortunates who have less of it, I ask: by what moral/ethical principle does someone have a superior claim to the fruit of someone’s labor than the the person who earned the fruit of their labor?

    And If you subscribe to such a principle, please tell me why we should not also apply the assume principle in college to grade point average — why should smart people who earn high grades not be forced to share them with students who have poor grades grades?

    And if you think that is a good idea, tell me why, when you were in college, you didn’t go to the dean and voluntarily offer to share some of your high grades with the less fortunate and needy students on campus?

    If you have a nice new car, we shouldn’t you be forced to lend it to the less fortunate people who can only afford jalopies? Poor people have a right to a Ferrari once in while, don’t they? The fact that many of them have lousy driving records and smash up most of the vehicles they own surely should be no consideration, right?

    And more to the point, if you have an attractive spouse, why shouldn’t you be forced to share her/him with other less fortunate people who aren’t as attractive, and who can’t get sexually gratified as often as you do?

    After all, all I’m suggesting is a little compromise, right?

  60. @Eric John Bertel:

    When was the last time you consciously sought out locally-made socks (or whatever) and paid over the odds so someone with a high school education two towns down could have a nice union retirement plan at their textile mill? If you did that more than once, good on you. But that’s not typical behavior.

    The Wal-Mart/Honda/Bangalore effect works both ways — they kill lots of small-scale Main Street businesses, and local factories that fall behind (or make the survivors find new and innovative ways to compete that they can’t match, but never mind that). And no, I can’t imagine how miserable the experience is if you or your family depended on one of those places for a living. But they and the brutal competition they represent also directly or indirectly raise the standard of living of lots of folks. You get lower prices, higher quality, and the other benefits of competition — but it’s not and will never be without a cost.

    So if you could choose to do away with outsourcing/offshoring, which one of the reciprocal benefits would you also sacrifice?

  61. Since I’m fired up, one last comment. I think part of the problem with “globalization” is built into how we perceive things. The narrative is simple: “Our” workers get laid off and “they” benefit over in wherever the jobs moved, the further away the better for purposes of raising outrage. It’s classic in-group vs. out-group thinking. (You know, the kind that works so well with things like religion and race.)

    When a factory shuts down, the losses are concentrated and thus visible, especially if you know and like the people on the receiving end. The pain is taken out visibly, up-front. (One word: “Detroit”.) The benefits are a lot more diffuse. What’s the value of the breakdowns I didn’t have during the 20 years after I ditched my craptastic American car? Or the peace of mind from a Toyota* that just seemed to start pretty much regardless of the weather?

    * Built in Kentucky by Americans — oops — guess I’m off the anti-globalization talking points again…I hate it when that happens.

  62. Robert Murphy

    Yes, Yes!… Why, oh why, do we pay taxes, hmmm? I mean, just to have bloody parking restrictions- and BUGGERY-UGLY traffic wardens, and BOLLOCKY-pedestrian-BLOODY-crossings?… and those railings outside shops windows, making it so difficult so you can’t even get in them! I mean, I know they’re there to stop stupid people running into the street and killing themselves! But we’re not all stupid! We don’t all need nurse-maiding. I mean, why not just have a Stupidity Tax? Just tax the stupid people!