Tax the Rich More

The idea of cutting taxes on the rich, so they will have more money, so they will ‘create jobs’ and hire more people, is nonsense.  Why would they hire more people, to make money, when they already get the money with the tax cuts? And why would they hire anybody, if the people have no money, and are already in debt?  If the people have no money, they can’t buy anything. (O, sure, they could go deeper in debt.)  So the rich can’t sell the people anything, so there is no reason to hire anyone to sell them anything, nor is there any reason to hire anyone to make anything to sell.

What can you rely on the rich to do?  You can rely on the rich to try and take money from other people. 

So the way to get the rich to hire someone is to get the money to the people.  Then the rich will hire that someone to take that money from the people.  The rich will hire someone to make things, and others sell those things to the people, to get their money.

But getting money to the people is inflationary, you say.  Well, take the money from the rich in the first place.  Tax the rich. Tax the rich more.  

Letting the rich have all the wealth is not in anyone's interest, not even the interests of the rich themselves. With the rich having all the wealth, the interests of the people and the rich diverge.  No longer is the promise of advancement plausible to the people.  No longer do the people see the benefits to contributing to a society which has taken everything they had, and left them effective slaves. Only compulsion will continue to secure their grudging labor, and this will not be enough to sustain the commonwealth, which is itself the foundation of all private wealth.  And without its foundation, private wealth will dissolve. 

The rich have more power when they are less wealthy, for then their society is richer, and more powerful, and they can protect, and project, their interests into the world more fully.

Income Growth During the Latest Expansion

Check this out:

Got this graph from mashable.com: http://mashable.com/2014/09/25/this-really-depressing-graph-about-the-u-s-economy-is-turning-heads/

The article is titled “This Really Depressing Graph about the Economy is Turning Heads.”  Which it should.  I share it here with you.  The source is Pavlina Tcherneva, who is an economist at Bard College, in Annandale-on-Hudson, New York, and the Levy Economics Institute, a think tank associated with the college, using data from Piketty and Saez.  Basically it shows the wealthy’s control of the economy increasing until now the growth of their wealth and income is obtained by plundering the rest of the economy, which is to say us, the rest of the people.  The graph charts increase in income, but you better believe the rich are getting richer, at our expense, we are getting poorer.  Not much of a recovery, this latest, when it is gotten for a few by preying on the many.

Thanks, Yahoo, for the pointer, on Sept. 25, 2014. 

Winners and Losers in Free Trade.

It is often said, in the justifications of free trade, that there are more winners than losers.  But this is not quite what is actually the consequence of free trade.  It is more correct to say that there is more winning than losing, but this is not at all the same thing.  The winning may be concentrated among a few, while the losing could be distributed among many, in which case there would be more losers than winners.  Further, the losers could be among the less wealthy, and thus less able to afford their losses.  Is this what we are seeing in the new global economy?  The rich winning, and getting very rich, while many others are losing, and hurting? 

The Party of the Rich has Triumphed in its Spead of Disinformation

The party of the rich has triumphed in its spread of disinformation. Check out this poll by Bob Livingston,  “Poll Results: Higher Taxes for the Rich or More Drastic Spending Cuts,” at personalliberty.com:

http://personalliberty.com/poll-results-higher-taxes-for-the-rich-or-more-drastic-spending-cuts/?eiid=

Of course, Bob is somewhat to the Right of Center, as are his readers and the responders to his poll. See Q5.  But, among his responders: 60% think that higher taxes on the rich will hurt the economy, and only 23% voted to increase taxes on the  richest Americans.  76% voted the government should make significant spending cuts to try to reduce the deficit. 

As for where those budget cuts should come from, 0% voted for cuts in Social Security, Medicare or Medicaid, (except for the 18% who voted ‘All of the above.’)  22% voted for cuts to Foreign aid, which is an insignificant portion of the budget.  A bit of disinformation there.  27%, (the largest,) voted  for the elimination of Federal Agencies (the EPA, Dept of Education, etc.  You know, things to do with our future, and Justice, the Treasury, including the IRS, etc., things to do with running the day to day stuff.)  Only 7% voted for cuts in the Dept of  Defense, despite its legendary wastefulness. 

For a more realistic perspective on what can and cannot be done, check out the NY Times ‘Budget Puzzle’, from Nov 13, 2010: http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

But the real bottom line, of course, is the coddling of the rich. Getting 60% thinking that increasing taxes on the rich will hurt the economy, against all historical evidence, including the evidence of their own experience.   Taxes on the rich haven’t been lower in most of these readers’ lifetimes, and when during those lifetimes has the economy ever been in such sorry shape? This is surely one of history’s great triumphs of propaganda.  Getting a sizeable percentage of the population to think against their own interests, to identify with those who exploit them, and to imagine their interests align with those who, over the past 30 years or so, have taken over 15% of their income, (http://anamecon.blogspot.com/2010/10/what-income-of-top-1-means-to-rest-of.html ) and a greater percent of their wealth, is astounding.

It is also a triumph over logic:  What the rich do not pay in taxes, the rest of the people will have to. What the rich do not pay for defense, or for the common wealth of the people that is the government, the rest of the people will have to. Further, who does the government borrow from?   The rich.  So the rich are giving their money to the government anyhow, but when it is borrowed, they expect it paid back, eventually.  With interest.  And where does that money come from?  The people. 

And who’s services will get cut?  Not the rich’s.  The people’s.  When Education, Health and Human Services, Energy, all get cut, who will be the poorer?  Not the rich.  You can bet the rich will have the money to grease the palms of Congressmen to keep their places at the public trough warm and well stocked. 

And who will be at the front lines when the payrolls of government are slashed?  The Wall Street banker?  Or the Main Street small businessman, who depends on government wage earners, and other government expenditures, directly or indirectly, for a part of his business. 

Links on the rich, taxes, education 11-04-26

Here are some links:

http://www.altweeklies.com/aan/9-things-the-rich-dont-want-you-to-know-about-taxes/Story?oid=3971382

Progressive taxes are unfair?

http://crookedtimber.org/2011/04/25/the-flip-side-of-noble-lie-side-economics/#more-19786

James Kroeger's comments offer an interesting argument: The rich are no richer even though they're richer. Because they're richer they drive the price of everything rich people like up, so there's no real gain in it for them. He argues therefore, that a (proper) progressive system, without loopholes, doesn't change the actual purchasing power of anybody. I don't think it is quite true, because the flip side of the argument is the poor are no poorer even though they're poorer. Because they're poorer the price of everything they need goes down, so there's no real loss to them. Mmm... Something else is going on... Still, worth the read.


This is a review of Hacker and Pierson’s book “Winner-Take-All Politics”

http://www.economist.com/blogs/democracyinamerica/2010/09/hacker_and_pierson_inequality

Here’s a fun little tax toy, but not to be taken too seriously, as nobody who makes $10 Million pays 36.3% of his income on taxes. (As we have shown elsewhere, http://anamecon.blogspot.com/2010/10/what-income-of-top-1-means-to-rest-of.html the rich pay on average about 17%.)

http://www.wheredidmytaxdollarsgo.com/

This is a piece on the financial problems besetting the nation’s public universities, particularly discussing the University of California.

http://realignmentproject.wordpress.com/2009/07/23/the-balance-wheel-of-social-machinery-universal-public-higher-education/

Part of the problem here, which I mentioned somewhere else, is the equalization of factor prices due to free trade, which eventually propagates throughout an entire economy. However, those sectors of an economy more exposed to international competition ‘equalize’ faster, most labor in particular. This implies that those sectors more insulated from international competition rise relative to the exposed sectors. (The exposed sectors are, in real terms, declining. Since this does not appear so much nominally to be the case, a great deal must be accounted for by hidden inflation. We should not be surprised then, at the steady increase in gasoline prices.) This accounts for part of the relative rise in costs of public education in particular, and government in general, as the tax base is eroded by declining wages, which are converging to the wages of developing countries, like China.

How economists can consider this a good thing entirely escapes me. Well, not entirely. This also accounts for part of the relative rise in health care costs. It also helps account for some of the housing bubble, the price collapse due to lack of demand due to decreased earnings by labor.

Who do you owe - An answer.

Well, look what we came across:

http://www.oftwominds.com/blogjuly10/con-of-decade07-10.html

Not easy to navigate to Part II: Go to bottom of page, click on 'blog,'
then down that page to the list of entries for July.

Who do you owe?

There is much ado about debt, these days. The debt. Like it is owed to space aliens or something. It's not. It's some people 'owing' to other people. Lots of 'owing,' these days, which is why it is a 'problem.' This owing is kept track of in something called money, so it's some people owing lots of money to other people. The probelm is made worse by soemthing called 'interest,' which is the arrangement where, if you owe money for any length of time, then you owe more money. So if you owe money, and you don't pay it back, you owe more money, and MORE money, and MORE MONEY and, and...

Well, we'll get into that some other time. First, we ask the questions. And the first question we ask is, who owes what to whom? Which is really three questions, so let's first ask who is the money owed to. There are numerous possibilities. We can eliminate space aliens. We can also eliminate the poor. If they were owed the money, they would be rich. How about the middle class? No, they seem to be drowning in debt. How about our government. But we all know it's up to its ears in debt. Of course, there are also rich governments, who seem to be owed a lot of money. But that much? No.

So who does that leave us? Hmm? The rich. But we've got to be talking the really rich. Even the median of the top quintile, for which I have data (2004) owes $167K, though net worth of $318K. The really rich seem to be owed all that money.

And we've also answered the question of who owes. The poor, the middle class, and the government.

But what do they owe? Lots of money. Debt to GDP is at about 380%, of which 290% is
privately owed. So GDP ~$14T x 3.8 = $53T/300M people = $177K per capita, as of 2008. $354K per worker. Now $42K per capita of that is the public debt, so $354K - $84K = $270K per worker is the private debt. Now the interest on the public debt is (now) 0%, sort of, and let's figure the interest on the private debt to average out to 6%, which is probably low, since AAA bonds are yielding a little over 5% interest. So $16.2K in interest. $16,200. Interest per worker. That's all going where? The company store? Sixteen tons?

Take a step back: 6% on 290% of the GDP means $2.44T or 17% of the GDP goes to interest payments, aka debt service. Non wonder demand is somewhat contracted. And the interest on the US debt is not really 0%, so we probably should add a percent or two.

Just by the way $53T is slightly more than the value of all the assets in the US.

Now of course, this isn't owed one person to another, this is all owed to banks. $16.2K to the banks. But apparently many banks aren't doing all that well, so who do the banks owe? Well, they 'owe' their owners, they owe their bondholders, and they owe their depositors. Now their depositors aren't getting much in the way of interest. So all the interest must be going to the bondholders, and the owners. But if the banks are still in trouble, that means it must be the bondholeres who are getting all the money. Owners are just making up their losses, recapitalizing their balance sheets. (Are they? And who does own the banks?) Bondholders must just love this deflation we're having.

Well, we've spun our wheels a little bit here, and it's hard to find out who owns what. But if you own a lot, you're probably owed a lot. And you're rich.

So if you owe, you owe probably owe the rich. Or maybe some pension fund. Another possibility, among others.

The Interests of the Wealthy

When the wealthy seize control of government, the wealthy cannot help but destroy the society which supports them.

In the short term, it is in the separate interests of the wealthy to corrupt the system to their benefit. That is, they will seek their own benefits ahead of the people's, first by becoming the instruments of government policy, then by bending government policy to their interests. They will cooperate with each other to do this, and secure advantage over the people. Securing advantage, they will plunder the wealth of the people. This is what (most of) the national debt is. It is what the people 'owe' the rich. Instead of paying taxes, wealthy 'loan' the money to the government, which it then has to pay back. The wealthy have used their power to cause this.

In securing their separate interests, they will cooperate in gaining favors. They will trade for votes. This is not 'zero sum' as regular trade is, but each party gains, and both their influence on, and burden on, government and the people, will expand. That is, through the instrument of government, they each acquire disproportionate wealth. And since all resources are competed for, others, the people, are at a disadvantage. The system becomes rigged.

But then they will compete, they must compete, to secure advantage over each other, and further advantage over the people. The government becomes an instrument of their competition, as they compete for its favors. Those who do not compete will be at a competitive disadvantage.

So all the wealthy are forced to compete against each other. They will compete to cause the government to pursue purposes to their own separate ends,which is the very definition of corruption. These interests, the benefit of the wealthy, harm the system, and the people, necessarily, by the law of externality: Those costs which can be externalized, will be. Thus the costs of the benefits to the wealthy will be laid upon the people, until the wealth f the people is exhausted. We are seeing this happening in the present 'recession.'

But the welfare of the people is essential to the welfare of the wealthy, and where it is destroyed, so is their own welfare. If the destroy the income flow of the people, they destroy their own income flow as well.

A poor society has few rich people. Neither has it much power to project, or even protect its interests.

In the long term, an uncorrupted government serves the interests of the wealthy better. A government can only remain uncorrupted to such degree as the influence of the wealthy is limited.

The people have been losing the competition for their government. They have persistently elected the servants of the rich to office. Now the system is rigged in the favor of the wealthy. Not good.

Cross posted as comment to angrybearblog.com: Maule and Pappas on progressive taxation and the decreasing burden on the rich