You’ve clearly never been in a real factory in your life. Especially one not running anywhere near optimal capacity.
To repeat what I said in the other thread, something consumed must be produced but something produced does not have to be consumed.
Seasonal swimming pool membership.
Any sort of lessons.
Professional services (I’m thinking lawyers on retainer, here).
Custom houses.
Concert tickets.
I buy lots of things without them actually being produced, yet.
Even more powerful is the idea that consumers, in aggregate, can be counted on to have demand for things before there is a product, e.g. pre-orders for the latest iPhone.
This idea is very good. Demand in created by the middle. The upper echelons are just packing their profit dollars in their mattresses or in off-shore accounts.
I support the plan.
Which is a better idea- Paris Hilton buying one $3,000 pair of shoes or 100 regular folks buying 100 $30 pairs of shoes?
I guess technically its “paid for” not “consumed,” but I think from the point of view of manufacturer’s risk, they are the same thing.
That’s a little over board isn’t it. Yes, you are 100% correct that something has to be produced before it is consumed. the corollary being a lack of buyers means you lose money. World is littered with the likes of Edsel, Delorean, Betamax and others.
For the very rich we’re talking about, personal consumption isn’t going to change if their tax rates change. What changes is investment.
You can certainly argue that a bunch of middle class people buying stuff is better than Paris Hilton buying really expensive stuff. It’s a little harder to argue that Elon Musk should have had his wealth taxed away so other people could consume more, since if he had there would be no Paypal, no Tesla Motors, and no SpaceX.
If you look at what the ultra-rich today are doing with their money, it gets a little harder to claim that they shouldn’t have that money in the first place. Paul Allen helped finance the largest telescope array in history. Jeff Bezos is using his fortune to build a new smaller space shuttle, build the Seattle Center for Innovation, donate $15 million to the Princeton Neuroscience Institute, invest in fusion research, help fund startups like AirBnB, Uber, Makerbot, Rethink Robotics, and many more. Bezos’s money recently saved the Washington Post. Recently he funded an expensive expedition to recover one of the F-1 engines from the Saturn V that sent Apollo 11 to the moon and save it for posterity.
The new generations of billionaires are not the conservative old money types of yesteryear. Many of them are tech entrepreneurs, engineers, and scientists. Many of them are liberals, and give huge amounts of money to liberal causes. Without George Soros there would be no Media Matters or Center for American Progress. They are spending their money on innovation and scientific research that government can’t be bothered with.
Charles Simonyi is another example of the breed. He’s one of the wealthiest people around, and he has a Ph.D in computer science. He was the person responsible for building Microsoft Excel and Microsoft Word, two of the most successful software applications in history. What’s he been using his money for? Well, he’s been to the space station twice, which helped fund Russia’s space program. He’d provided funding for 3 chaired professorships at Princeton, Oxford, and Stanford. The Oxford chair was first held by Richard Dawkins.
Simonyi has created a $75 million dollar fund to help Seattle arts, he’s helped fund Julliard and the Metropolitan Museum of Art.
Sergei Brin of Google is using his billions to fund research into life extension, artificial intelligence, alternative energy, renewable energy, space tourism, and many other things.
I could go on, and on. Some of the most exciting developments in science and technology are being funded right out of the pockets of today’s billionaires. And yet, if you confiscated all their money and gave it to the U.S. federal government, it wouldn’t make a dent. It would just get chopped up and vanish into the maw of big government and we would be much poorer for not having all the things that the accumulation of private capital has brought us.
Again, venture capital built silicon valley. It built the genetics industry, and it’s building the nanotech and robotics industries. Private firms that don’t have an immediate product to sell (i.e. research and development still necessary) require venture capital because traditional sources like banks won’t lend money to speculative ventures. Take away all the venture capital, and you would destroy the most innovative areas of the economy. We would be totally reliant on the government to fund such things, and that would be a disaster.
It’s easy to justify confiscating wealth if your example of the rich is Paris Hilton. It’s a little harder to justify dismantling the Gates Foundation or sacrificing the creation of SpaceX and Paypal so that the government can have an extra couple of days of funding. or so that it can be thrown at the economy willy-nilly as part of a ‘stimulus’.
I didn’t see any proposal to “tax away” anyone’s wealth. No one proposed that the ultra wealthy “shouldn’t have the money in the first place”, etc.
A 4% increase in capital gains is not a “confiscation of wealth” and would not have made any difference in the actions of anyone you listed as an example of wealthy people doing good things.
To be fair to Sam, you did give us a binary choice. If Paris Hilton can’t buy her $3,000 shoes, it would appear that someone did tax away all her wealth.
I didn’t say Paris Hilton ‘couldn’t’ buy $3,000 shoes. I asked which is better for the economy; Paris Hilton buying one pair of expensive shoes or many people buying many pairs of less expensive shoes.
Ugh. That’s NOT what you said. If you want to rephrase, fine. But we can read what you said, and you didn’t say anything about one or the other being better “for the economy”-- you asked what was a better “idea”, and you gave us two choices. Don’t blame the reader for taking you at your word.
Anyway, my point was that Sam was reacting to your post and I read it the same way he did. I’m not surprised he reacted the way he did.
Obama’s proposal would increase capital gains from 24 to 28% for couples who earn more than $500,000 and then only on gains above $200,000. (Not earned income, only capital gains above $200,000 and with a $500,000 exemption for personal residences.)
This seems to hardly be a burden and is certainly not ‘taking away one’s wealth’. The generous benefactors above would not be harmed either since charitable contributions would not be counted either.
Great. We know that now. From reading your first post, not so much.
When more than one person reads your post a certain way, look at yourself, not them, if they seem to be getting the wrong idea.
That is all.
Which is better for the economy? I’m not sure. I think they’re both good, but I’d probably say the transaction that generated the most profit. I’m looking at what subsequent transactions might happen as consequence of the initial one(s). I know the expected answer is the 100 pairs of shoes, but I can see arguments for both.
Why is the highest profit the best for the economy?
Name something a company has produced without identifying consumers for it.
Name a company that hired personnel without having work for them to do.
Name a company that expanded their capacity without customers wanting more of their stuff than they can already produce.
Name an investor that invested in a business without knowing the business had customers wanting to buy their wares.
I’m starting my own business, and I’m constantly thinking about demand for my product. Customers, how do I inform them about my product, what do they want, what will they pay. I’m not investing my money into this business for any reason other than I expect people to start giving me money after I open.
Sure, a higher tax rate means higher hurdles for investment, but it also means a change in demand. The whole point of the higher tax rate is to get money into the hands of consumers who will spend it. Ignore the demand effect, and you’re accounting for the negatives, ignoring the positives, and acting surprised that the financials suck.
Google Glass? 
OK, the Edsel. 
The iPad. Market research had shown that there was no demand for tablet computers, but Jobs bet the company on it anyway.
The iPad is a good example of why it’s silly to talk about whether supply or demand comes first. The relationship is much more complicated than that. Products can create demand by creating value where none existed before. Capital investment doesn’t just respond to demand; it responds to information that says it will return a profit commensurate with the risk.
Facebook invested 2.5 billion dollars in Oculus VR, to support a product that currently has no market. It’s a purely speculative play. The Internet era has been full of ventures like that. Many failed, but the successes changed the world. All due to the existence of copious amounts of private capital.
The other way in which the supply side creates demand is through capital investment that improves quality or lowers costs.
The principle remains the same: Whether 4% or 100%, taxes on capital growth inhibit investment, starting with the riskiest ventures, which are often the ones with the biggest upside for growth.
Why would he bet the company on a product that nobody was going to buy? Seems pretty stupid. Pumping billions of dollars into a product that you didn’t think people were going to pay for.
One might suspect that Jobs thought people would love the product, and buy the shit out of it, despite what market research had shown.
Facebook is speculating. Speculating, what? Speculating that something is going to happen, that something being demand for a product based on the technology.
Google isn’t making a self driving car for the lulz. They know that when the tech works, it’s going to change the world, and Google will be in a great position to tap into the demand for the product.
The point was that the product was created before the demand existed. No one was clamoring for a tablet computer; Jobs bet that he could create demand with an innovative new product.
If you think this is a process of just meeting identified, unfulfilled demand, remember the Segway. It was going to revolutionize transportation - Until it didn’t. That’s why projects like this or the iPad are risky.