And when do you anticipate that the wealthy and powerful will cease to struggle for more “goodies”? Or is it only the “have nots” who are creating this unseemly display? Makes sense, I suppose, that the “haves” are fairly content with the status quo, and are less motivated to provoke nasty struggles. We should all take a moment to thank them for their calm restraint and civic politesse!
I guess I’ve always thought the bible gave good advice on the topic…
Exodus 23
I’ll not argue that “the rich” don’t provide much to the economic engine of the country. That’s just silly and, in fact, very few people actually make that argument. Yes, yes…THEIR capital (caps preserved), their risk. It seems to me that it’s a red herring that just causes “battle lines” to be solidified.
I’m curious about some underlying ideas, though. There are basically two sources from which my question stems: (1) from what little I remember from Econ 101, there is an economic multiplier at work in spending and (2) the meme I had drummed into me growing up that “the growth of the strong middle class in the '50s was responsible for the U.S. becoming an economic powerhouse”.
It seems to me that the combination of these might form the basis for an argument about wealth (re)distribution. That is, in more concrete terms, the idea that 1000 people who are each “worth” (quotes dropped henceforth) $100K yields a stronger economy than 10 people who are worth $9M each, while the other 990 people are only worth (just over) $10K. Essentially, I guess what it comes down to is trade volume; my conjecture would be that there is a curve that maximizes the effect of the economic multipler. As the relative wealth becomes more concentrated into a smaller percentage of people, the total effect of the multiplier drops, thus yielding a less strong economy than is otherwise possible.
I can think of a number of reasons this might be so. Two examples: (1) an even wealth distribution leads to an increased “keep up with the Jones’s” pressure (more people spend more just to “compete” with their neighbors and so increase the volume of trade) or (2) an uneven wealth distribution permits less total “luxury” spending (fewer people can afford non-necessities and so trade volume drops; this is predicated on the notion that necessity items exhibit less of a multiplier effect, which may be incorrect).
Unfortunately, as my “Econ 101” statement referred to, I don’t know enough economic theory to work this through. So I’m throwing it out there in hopes that it’s not just plain stupid. Even if it is flat out stupid, I’d appreciate a quick rundown as to why (assuming a quick explanation is feasible).
It’s not so much a matter of dishonesty as of inbuilt advantages that the wealthy can use to keep and extend the advantages that their abilities/whatever (a LOT of people do inherit wealth, y’know). It’s not breaking any laws, but it can eventually amount to an insuperable barrier for those who aren’t born wealthy.
You would be right, except that the pie hasn’t really grown enough to keep up with expenses. You’ll recall my cite earlier about the cost of important things: housing, education, medical care, etc., rising at a much faster rate than the income of the middle class? That means that the middle class are losing ground, while the rich gain ground thanks to their increasingly large share of the pie. This is a bad thing, Shodan. Bad, bad, bad.
When people are envying that third weeks’ vacation in Bimini because they only get one weeks’ vacation in Daytona, or they’re envying the summer house on the lake because they only have one home, that’s superficial envy. When people are envying others because they can get medical care, as I do, and when people envy others because they have a place to live, as others do, well, that’s just fucking WRONG.
No, it’s not stupid, you’ve got things exactly right. Now watch the conservatives and libertarians start talking about trickle down and such. They want you to believe you’re wrong, because it’s very much in their interests, but you are not wrong.
Well, thank you for the vote of confidence. I almost didn’t post it, but then thought that it was only my ignorance holding me back. Best way to resolve that is to enter the discussion.
Two questions: (1) what is the difference between “trickle down” and an “economic multiplier”? (2) If it’s exactly right, why isn’t this argument more prevalent?
Never. That’s why I favor a system of government that doesn’t allow that happen in the first place. That’s why, even with the present system we have, I’m happy to close any and all loopholes in the tax code-- even the ones that favor my economic situation.
Right now it seems mainly to be Edwards, and that’s who I was talking about. As much as I dislike people (from whatever class) lobbying the government for special goodies, I dislike even more the politicians who egg them on.
Whatever rocks your boat. I’m not envious of “the rich”, so I couldn’t care less whether anyone thanked them or whether they wanted to be thanked.
There is a political reason also, which we don’t think of much here since we’ve grown in the past. Say there is a 10/990 split as in your example. A few thing can happen. In a democracy, the 990 will vote to redistribute income, and the redistribution might not be economically optimal, whatever that point is. (An example of that is a 90% tax rate.) Second, the rich, seeing this, can use their power to set up a government where the 990 effectively don’t get a vote. Third, the 990 will get so pissed off by the situation that they will seize the money from the 10. That’s happened also.
The best outcome is for the rich to more or less voluntarily redistribute income (using tax laws) to move the situation to a more stable state. That’s what the New Deal was all about. That’s what people like Edwards are doing. One can make a moral argument also, but you don’t have to.
I’m not sure what any of this has to do with class warfare, except for preventing real class warfare. Class warfare seems to be the economic version of “politically incorrect” - don’t say certain things because it is class warfare, not because they aren’t true.
Right. I tell you that the pie has grown, but I’ve taken all the new growth and some of what you had before, but don’t complain because the pie has grown.
That 60% of capital gains tax is paid by the richest means nothing unless we know how much of the pot of capital gains is possessed by the rich, and what percentage this is of the full tax bill. Say capital gains taxes are the same for all, as a percentage. A cut in the taxes would not change the relative percentage of the tax paid by the rich. However, if the rich got a much greater percentage of their income from capital gains than the middle class, the cut would reduce their tax burden relative to the middle class. They get a bigger slice of the pie, and people like you say that no one should complain because everyone’s taxes are lower.
And yet, as I mentioned, a substantial majority of millionaires made their money and did not inherit it.So apparently we have not reached that level of insuperability quite yet.
If that one is too tough to tackle, perhaps you could explain how it becomes progressively more difficult for me to become rich as others do the same. I would think that increased wealth would make for greater spending and investment, and thus greater opportunity for all. Did you have a cite to the contrary? I’m thinnking of some evidence that millionaires are getting rarer and rarer in the US and around the world. (I bet you are going to have trouble with that one. (he said knowingly)
And yet, the
It would depend on what you meant by “less strong”, of course.
But I am not clear on how you think that having a large number of people spend the same amount as a smaller number improves the economy. Are you assuming that the larger number of spenders is going to spend more and save/invest less (of the same amount)? This is even disregarding economies of scale.
The short version of my question is, why does an increase in trade volume help if the amount of value exchanged does not change? I am assuming here that your assumption of the economy as a zero-sum game is correct - it isn’t, but pretend for the sake of the argument that it is.
So, holding everything else constant, how is a thousand people spending $100K better than 10 people spending $9 million and 990 spending $10K? Or is there some other factor you aren’t mentioning?
Regards,
Shodan
No, not everyone’s - only those who are paying the taxes.
That’s why, as I mentioned earlier, John Edwards is an idiot. Those who earn capital gains tend to be the ones who pay capital gains taxes. It is rather difficult to give a tax break on a tax you don’t pay. The rich pay an amount of capital gains tax that is higher than the lower classes, because the lower classes don’t earn capital gains.
It’s rather like complaining that I am not paying my fair share of the sales tax because I am spending too much money.
Which is why these kind of discussons tend to boil down to people insisting that tax breaks are unfairly to the advantage of those who mostly pay the tax. This seems to be what Edwards was saying, but, as mentioned, he is a liberal, and therefore an economic dolt.
Regards,
Shodan
Please excuse me, but I cut out the first part of your response. As valid as it is, it seems to be more an outline of methods of wealth redistribution, rather than being targetted at an argument for redistribution.
And that’s very much to the point. Assuming self-interest rules, the “best” outcome for the rich is to redistribute the least amount of (their) income; just enough to not foment open revolt (that is, maintain a social “stable state”). I should think, though, that that is mostly likely not the “best” economy, at least not by the measure of trade volume (and I’m certainly open to hearing about other metrics).
A note to all: I’m most assuredly not saying that the U.S. is heading towards open revolt, nor am I even advocating for wealth (re)distribution. Rather, I’m simply asking for information/theory that either supports or undercuts the argument.
Agreed. The term is a bit over the top and disrupts debate. Perhaps my question should its own thread (GQ? IMHO? GD?), one with less inflammatory rhetoric.
A couple of issues I have with the OP right off the bat:
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Let’s say you agree with the premise that anyone of “truly good will” has to side with the lower classes in a conflict. I think that there can be considerable disagreement on what it means to “side” with them. For example, you may believe that the best thing that can be done overall for the lower classes is to stimulate the economy, to create jobs. If tax cuts for the middle or upper classes will accomplish this, is that not “siding” for the lower classes?
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I don’t necessarily buy that members of the the upper classes are by definition “exploiters” of the lower classes. Is it exploitative to give people jobs?
Unless I’m reading this wrong, capital gains taxes aren’t the same for all, seems like the wealthy pay at a higher rate on long term, and everybody pays at their income tax rate for short term.
Charities and foundations are more than just a magnanimous gesture. They can make money for the giver.
This relates to my question. I’m not so sure that “increased wealth” necessarily leads to “greater opportunity for all”. Certainly, I’d agree that “increased wealth for all leads to greater opportunity for all”. I 'd also agree that “increased wealth for some leads to greater opportunity for some”. You see the point, right?
I blockquoted your whole response because I’m going to address things in reverse order.
First, the “factor” is the “economic multiplier”. The thought is that a greater volume of trade allows the multiplier to be in effect more often than a lesser volume of trade would. In other words, there is something like a positive feedback loop (perhaps that’s an incorrect usage of the term; I’m happy to attempt clarification).
If that loop exists (and it’s not clear to me that it does), then that means that the economy cannot be a zero sum game. I’m not sure from whence that arose, but take heart that I’m not claiming it. In fact, my question is pretty much predicated on the economy being non-zero-sum. My conjecture is that, due to the multiplier effect (ME from here on out, as I’m already tired of typing it out each time), the amount of value exchanged does change, even if the (initial) total worth of individuals is the same in either of my proposed scenarios. I gave two examples for why this might be the case.
Yes, I’m thinking that a larger number of people with less disparity among their worth will spend more. This is not to say that the total amount of money changes, but simply that it will be exchanged a greater number of times. Each exchange would add to the overall economy via the ME. I’m not sure where economies of scale plays into this; one thought is that by having more people able to afford more items, those items might be produced more cheaply. I’m sure that’s not what you meant, though.
Finally, “less strong” gets to the crux of the question/argument. Paraphrasing, some argue that “the pie is getting bigger, even though the income gap is widening”. I’m wondering if the relative “size of the pie” might be even bigger (i.e., the economy would be stronger) with a smaller income gap. The reason that might be so is the ME combined with a greater trade volume. It seems plausible to me.
Did that clarify things?
[ Moderating ]
My, my. Isn’t THIS thread off to a great start?
I seriously hope that everyone’s bile ducts have been cleared and that there will be a lot less bile flooding into this thread.
And, while the rule is and remains, “attack the argument, not the poster,” the number of times that “arguments” have been dismissed as stupid or fecal or that named and unnamed persons have been called stupid (presumably on the grounds that they do not post here, despite the fact that they were called stupid for holding opinions congruent with opinions expressed by posters), has now reached critical mass.
In this thread, we do not need to see any more statements regarding stupidity, lest we lead our fellow posters into intemperate responses.
Everyone remains free to express their opinion (suitably supported by citations, of course), that one view or another is in error, but the insults allegedly directed toward arguments (or directed toward non-posters representing the views of posters) are now off limits in this thread.
Behave yourselves.
[ /Moderating ]
I’d just also like to add that telling me someone socio-economic class tells me absolutely nothing about their moral goodness or badness. I prefer to treat people as individuals, and praise those who are doing things I think are good as well as criticize those who I think are not. We have a progressive income tax structure in our society (the US, that is), which supports the idea that those who make more are somehow getting more from our society. Fine. So let’s vote on those things that we want from our government, and lets make sure that we all chip in. We exempt certain low-income people from paying income taxes, and I’m OK with that. But most of us do pay taxes, so most of us have a stake in determining what services we want. If people are getting something for nothing, though, there’s no limit to what they may ask for.
Someone mentioned capital gains upthread, and I’m perfectly fine with taxing those gains as ordinary income (adjusted for inflation). Income is income, and you can make enough money in business without the government giving you some kind of handout in the form of preferential tax treatment. It should come as no surprise that whenever you tax one activity differently than another activity, you’re going to generate resentment between the people who engage in those different activities.
I’m curious – according to Duke of Rat’s quote, tax on long term capital gains is 15%. I assume that “the lower classes” do not benefit from capital gains (as has been said, it’s not THEIR capital that drives the economy). I also assume that 15% tax on capital gains is less than the tax that would be levied if that profit were considered income.
In other words, those who cannot afford capital assets cannot get this lower tax rate (relative to their income tax). Those who can afford such assets receive the profit but only pay a partial tax amount on that income.
Do I have that right or am I missing something?
Shodan – on re-reading my last post, it sounded a bit snarky (particularly the THEIR in caps). I’m sorry if it came across that way; I’m honestly asking if I have the capital gains thing right (anyone, not just you).
Of course, if I do, I’m also wondering what the justification for the differing rates is. (Assuming there is one, other than “wealth preserving wealth”.)