# The Rich Are Better Stewards of Money Than the Poor **URL:** \ **Category:** Great Debates\ **Created:** [July 20, 2010, 1:03pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340 "2010-07-20T13:03:44Z")\ **Posts on this page:** 20\ **Page:** 6
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [July 21, 2010, 5:01pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/101 "2010-07-21T17:01:05Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Missed edit window. > > It’s not accurate, but $[1.8 trillion seems to be a fair estimate](http://www.politifact.com/truth-o-meter/statements/2009/jun/24/paul-krugman/bush-tax-cuts-health-care-probably/). That’s 12%. From your cite: _“The 2001 and 2003 tax cuts added about $1.7 trillion to deficits between 2001 and 2008.”_ My cite went through 2010. Not sure how that math works out but gets us current and makes the $2.5 trillion number more reasonable. ---
**Author:** ![Finagle](https://avatars.discourse-cdn.com/v4/letter/f/b19c9b/32.png) [@Finagle](https://boards.straightdope.com/u/Finagle)\ **Post date:** [July 21, 2010, 5:21pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/102 "2010-07-21T17:21:43Z")
Does it really matter? It seems as though no matter who you give the money to, it’s going to flow outside the US borders. Give it to the poor (in the form of tax rebates or stimuli or whatever) and they buy consumer goods that are made overseas. Give it to the rich (via tax cuts) and they invest in off-shore production and facilities (as well as fancy, foreign, cars). So no matter what you do, you’re going to stimulate an economy – just not ours. Seems if you want a long-term fix, you have to create incentives to create local jobs and locally made products, and I’m not seeing any policies being put in place to do that. ---
**Author:** ![Dick\_Dastardly](https://avatars.discourse-cdn.com/v4/letter/d/c4cdca/32.png) [@Dick\_Dastardly](https://boards.straightdope.com/u/Dick_Dastardly)\ **Post date:** [July 22, 2010, 12:35am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/103 "2010-07-22T00:35:13Z")
> [@Sam\_Stone](#): > > You say the 50’s and 60’s were great, and that proves that 70% tax brackets work okay. > > You also claim that the deficits that have been see n in recent decades are due to tax cuts. > > But of course, this can be flipped around on you : In 1950, federal government spending was 15% of GDP. Today, federal government spending is 25% of GDP. > > If federal government spending had been held to the same percentage of GDP as it was in 1950, the government would be running huge surpluses right now at current tax rates (1.4 trillion less spending in this year alone, plus elimination of interest payments). > > Furthermore, if you look at [this chart](http://www.usgovernmentspending.com/downchart_gs.php?year=1950_2010&view=1&expand=&units=p&fy=fy11&chart=F0-fed&bar=0&stack=1&size=m&title=&state=US&color=c&local=s) of government spending as a percentage of GDP, you’ll see that Reagan’s deficits were caused by spikes in spending, and Clinton’s surpluses were caused by a large drop in government spending. > > When Bush was elected in 2000, total federal spending was back down to 18 percent of GDP. When Bush left office, it was back up to 22%. That difference accounts for about 580 billion dollars a year. In other words, had George Bush just held government to the same size as a percentage of GDP that it had been when he took office, he also would have finished his two terms with a surplus. > > Here’s a chart of [government revenue](http://www.usgovernmentrevenue.com/downchart_gr.php?year=1950_2010&view=1&expand=&units=p&fy=fy11&chart=F0-fed&bar=1&stack=1&size=m&title=&state=US&color=c&local=s) over the same period. Notice that it’s almost a straight line that has varied betwen 16 and 20% of GDP. > > So we have a situation in which GDP has been growing well for 60 years, and government has been taking a relatively consistent slice of GDP each year to pay for itself, and thus government revenue has been increasing with GDP in a sustainable fashion. > > At the same time, government spending has been rising at a rate much higher than the rate of GDP growth, and thereby consuming an ever-increasing share of GDP. > > And you’re telling me this is a revenue problem, and not a spending problem? > > Also notice that in the long run, the cuts in tax rates did not affect government revenue very much. It looks to me like the variations in government revenue come because of variations in the business cycle. Revenue dropped in years in which there were recessions. It grew during years of high economic growth. The fact that revenue has been this constant despite some rather large changes in taxes over the years suggests to me that there are offsetting effects. Higher tax rates don’t result in as much revenue as you’d think, and lower rates don’t cost as much as you’d think. > > It also suggests to me that it would be very, very hard to close the budget gap with tax increases. Even during the Clinton surpluses, government revenue was still only about 20% of GDP. Trying to get federal revenues up to 25% looks to be very difficult. Even the Bush tax cuts coupled with a recession only resulted in a revenue drop of about 2% of GDP. > > The U.S. has a spending problem, not a revenue problem. If you want to say it’s a revenue problem, then you need to extract about 10% of GDP more in taxes out of the public, when American tax revenue has not fluctuated by more than 3% of GDP in the past 60 years. Try doing that without cratering the economy. You’re probably looking at a 20% VAT to make that work. You can’t do it with higher income taxes - there isn’t enough income to tax unless you start taxing the entire middle class more. > > In either case, you’d be taking America not back to a time before the Bush tax cuts, but to an era of bigger government and higher taxation than its ever seen. The Bush tax cuts by themselves make up by far the largest chunk of the projected deficit over the next ten years. Get the economy growing again and end the two wars and there’d be a negligible deficit, literally less than $100 billion a year, and that’s at current spending levels. In the long term the entire deficit ballgame is healthcare. Find a way to cut healthcare costs, say by bringing in a universal healthcare system, and there is no long term deficit problem. And you just can’t help yourself with tax cuts and revenue, can you? It’s like some weird fetish you’ve got, like you’re impervious to facts and evidence. I’m sure in the last thread we did, one still bouncing around, you accepted that tax cuts cause drops in revenue. You’ve definitely accepted it before. You saw graphs posted in the last thread that show the big revenue drops below trend caused by the Reagan/Bush tax cuts. Yet all it takes is somebody starting a new thread and you’re back to square one again. And of course the 2% number is nonsense and it gets sillier from there. ---
**Author:** ![psikeyhackr](https://avatars.discourse-cdn.com/v4/letter/p/97f17d/32.png) [@psikeyhackr](https://boards.straightdope.com/u/psikeyhackr)\ **Post date:** [July 22, 2010, 12:51am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/104 "2010-07-22T00:51:55Z")
> [@Voyager](#): > > I’m not an accountant, but I worked for some one summer, and I’m unaware that success on the CPA exam is a factor of how fast you can add. Hell, I have a high resolution display and a super-duper graphics chip, but it still doesn’t mean I can draw worth a damn. The purpose of the computer is to take the tedium out of the accounting. But the user has to know what NET WORTH is. The computer never will. psik ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [July 22, 2010, 3:11am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/105 "2010-07-22T03:11:31Z")
> [@Sam\_Stone](#): > > But outside of the special conditions of this recession, my point is that economy growth does not come by taxing people and using the money to stimulate demand. In fact, that doesn’t even work in a recession. You have to _borrow_ the money and spend it. If you tax it and spend it, there is no net stimulus. Taxing people and spending the money on infrastructure, scientific R&D, education, etc. can all boost productivity of the workforce while reducing the cost of doing business. Take one society and give a trillion in supply side tax cuts, then take a second civilization and invest that trillion in public infrastructure and the second civilization will be better off. Chinese laborers are pricing themselves out of the market with ever increasing wages. They now make about $300/month while laborers in other nations only ask for $50/month or so. But Chinese laborers have more education, China has better infrastructure, and the government is more stable, none of which can be done w/o investments. So employers still set up shop in China. People who get rich get rich in part due to luck, timing, connections, and various other factors that have nothing to do with their talent at growing the economy or creating jobs. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 22, 2010, 3:53am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/106 "2010-07-22T03:53:33Z")
> [@Wesley\_Clark](#): > > Taxing people and spending the money on infrastructure, scientific R&D, education, etc. can all boost productivity of the workforce while reducing the cost of doing business. This is only true if you can demonstrate that there is a lack of infrastructure, and that this lack is causing productivity losses greater than the productivity loss that would occur by taxing the money out of the economy. You have no made that case. I’ve never seen anyone make that case. If you’ve got a cite to a good study which quantifies loss of productivity due to lack of infrastructure and which does a cost-benefit analysis of that balanced against the cost of the the taxes, I’d love to see it. > [@](#): > > Take one society and give a trillion in supply side tax cuts, then take a second civilization and invest that trillion in public infrastructure and the second civilization will be better off. You say that like it’s self-evident. But it’s not. Japan has built a hell of a lot of infrastructure in the last ten years, and it’s not doing them any good. You have an underlying bias in all your assertions - that society left to itself is incapable of organizing in ways that are efficient, and that more government always means better organization. There is no data to support this. If you have some, present it. > [@](#): > > Chinese laborers are pricing themselves out of the market with ever increasing wages. They now make about $300/month while laborers in other nations only ask for $50/month or so. But Chinese laborers have more education, China has better infrastructure, and the government is more stable, none of which can be done w/o investments. So employers still set up shop in China. Exactly. In fact, Chinese laborers are getting more money _because_ they now have more education, better infrastructure, etc. This is the argument I have been making for a decade on this board against those who constantly complain about ‘sweatshops’. Sweatshops are the first rung on the ladder of prosperity. They bring foreign investment and markets, which drives infrastructure growth, education, and all the rest. Eventually, the workers benefit. That’s the way it’s supposed to work. Eventually, Chinese laborers will come up to first world standards, then they too will have to learn to compete against low-cost labor from other countries. But they’ll be able to just like we can, because their labor will be magnified by the capital investment that has been made in their infrastructure and factories. > [@](#): > > People who get rich get rich in part due to luck, timing, connections, and various other factors that have nothing to do with their talent at growing the economy or creating jobs. This is an utter load of crap. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 22, 2010, 4:18am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/107 "2010-07-22T04:18:03Z")
> [@Dick\_Dastardly](#): > > The Bush tax cuts by themselves make up by far the largest chunk of the projected deficit over the next ten years. No, the projected deficit is the result of the gap between revenues and spending. You can close it by either raising revenues or cutting spending. The government isn’t ‘owed’ Bush’s tax cuts. It wasn’t a giveaway. The money belongs to the people. If your spending outstrips your revenue, it’s not an automatic assumption that the people owe the government money. Maybe the government is just too damned big. > [@](#): > > Get the economy growing again and end the two wars and there’d be a negligible deficit, literally less than $100 billion a year, and that’s at current spending levels. Got some numbers to back that up? Since government spending has been growing faster than the rate of GDP growth for 60 years, and since government spending is set to explode as entitlements grow out of hand, I find that hard to swallow. Please show your work. > [@](#): > > In the long term the entire deficit ballgame is healthcare. Find a way to cut healthcare costs, say by bringing in a universal healthcare system, and there is no long term deficit problem. Again, you take it as a given that universal healthcare, as implemented in the United States, will suddenly cause health care spending to stop being a problem. This ignores the fact that health care spending is ballooning in just about all countries. > [@](#): > > And you just can’t help yourself with tax cuts and revenue, can you? It’s like some weird fetish you’ve got, like you’re impervious to facts and evidence. I’m sure in the last thread we did, one still bouncing around, you accepted that tax cuts cause drops in revenue. You’ve definitely accepted it before. You saw graphs posted in the last thread that show the big revenue drops below trend caused by the Reagan/Bush tax cuts. Yet all it takes is somebody starting a new thread and you’re back to square one again. Would you read what I said before jerking your knee? I never said that tax cuts don’t cause a drop in revenue. I said that it appears they cause LESS of a drop than a static analysis would suggest, and that raising causes causes less of a revenue increase than a static analysis would suggest. This is not controversial. I don’t think you’ll find many economists who won’t admit that tax increases carry some deadweight loss that causes their revenue to be less than a static model shows, and that tax cuts cause some additional economic output that causes their losses to be somewhat less than a static model would indicate. How much more or less, I don’t know. I’m sure it depends on the situation. I’d also remind you that the Obama administration used dynamic scoring in their own budgets. > [@](#): > > And of course the 2% number is nonsense and it gets sillier from there. It is not nonsense, and I’d like you to show your work. You can SEE the effect just by looking at the graphs I posted. Federal revenue has not varied by more than 6% of GDP since 1950. That’s a fact. Not only that, but the guys above you proved it. Whack-A-Mole posted data which said, "“The 2001 and 2003 tax cuts added about $1.7 trillion to deficits between 2001 and 2008.” Feel free to work the math on that. Oh hell, I’ll do it for you. GDP is roughly 14.5 trillion dollars. 1.7 trillion dollars is about 12% of GDP. Divide that by 7 years, and you get…1.7% of GDP per year. Since I included losses due to the tax cuts (you did notice that I agreed that the bush tax cuts caused a revenue loss, right?), and I also included losses due to the recession, it looks like my numbers are pretty damned close. If you look at [this graph](http://www.usgovernmentrevenue.com/downchart_gr.php?year=2000_2010&view=1&expand=&units=p&fy=fy11&chart=F0-fed_G0-total&bar=1&stack=1&size=m&title=&state=US&color=c&local=s) You can see that the lowest revenue point for Bush was in 2004, when it was about 4% of GDP lower than the peak in 2000. By 2007, revenue had recovered to where it was only about 1% less than the 2000 peak. The average loss in those years is about 2% of GDP per year, of which some was due to the recession. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [July 22, 2010, 12:09pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/108 "2010-07-22T12:09:58Z")
> [@Sam\_Stone](#): > > This is an utter load of crap. Not even in part? Luck, timing, and connections play absolutely no part in how the rich got where they are? No part at at all? Your credibility is going down faster than a GOP congressman in an airport bathroom. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [July 22, 2010, 1:32pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/109 "2010-07-22T13:32:09Z")
> [@Wesley\_Clark](#): > > People who get rich get rich in part due to luck, timing, connections, and various other factors that have nothing to do with their talent at growing the economy or creating jobs. > [@Sam\_Stone](#): > > This is an utter load of crap. Except that one of the currently popular ways to get rich is to destroy jobs, _viz_: 1. buy company; 2. lay off workers until company is operating with skeleton crew; 3. sell company before clients all fuck off and gutted company stops being profitable. Oh, and, of course: 1. profit! ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 22, 2010, 5:59pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/110 "2010-07-22T17:59:29Z")
> [@Fear\_Itself](#): > > Not even in part? Luck, timing, and connections play absolutely no part in how the rich got where they are? No part at at all? Your credibility is going down faster than a GOP congressman in an airport bathroom. Luck is not a predominating factor. If you take a cross section of people who have risen to wealthy status from the middle class or below, you will generally find that they got where they are because of the decisions they made and the work they did. I know lefties like to point out that rich people get better educations, are more likely to get good jobs because they can afford to look the part, and all that, but in the end you have to prove your ability and bring value if you expect to be rewarded in our salary. Unless you can get one of those cushy white-collar government union jobs, I guess. I also think that even when people get ‘lucky breaks’, you’ll find that most people have lucky breaks come their way from time to time, but they aren’t in a position to take advantage of them or have the skills to recognize them or have the work ethic to take advantage of them. Frankly, the notion that luck plays a significant role in wealth outcome is an insult to the people who work their asses off to get to a position of wealth and authority. Because usually, that’s what you have to do to get to a position of wealth and authority. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 22, 2010, 6:04pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/111 "2010-07-22T18:04:58Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Except that one of the currently popular ways to get rich is to destroy jobs, _viz_: > > 1. buy company; > > 2. lay off workers until company is operating with skeleton crew; > > 3. sell company before clients all fuck off and gutted company stops being profitable. > > Oh, and, of course: > > 1. profit! Ah, education through watching “Wall Street”. This is just the left-wing stereotype of how people get rich. In my experience, when companies lay people off like that, it’s because the only alternative is going out of business, or going to a position where profit turns into losses. No one likes laying off workers. And transparent tactics like laying off workers to make the bottom line work better aren’t going to fly with anyone in the real world who’s looking to buy a company. Business people can certainly make mistakes or be evil and greedy, and occasionally you’d find stunts like this. But it’s not the norm. It’s not common. But the left likes to showcase the few cases like that which happen and pretend that it’s the normative behavior for business. It’s not. How many of you guys in this thread have worked in management for a business? How many of you have run your own business? How many of you have worked in a position of significant responsibility in a large business? I’ve done all of these things, and I’ve never seen the behavior you guys think is common. And of all the people I know who have risen to leadership positions in large companies (and I know a few), not a single one got there by any means other than being consistently the smartest or hardest working guy in the room. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [July 22, 2010, 7:55pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/112 "2010-07-22T19:55:22Z")
> [@Sam\_Stone](#): > > Luck is not a predominating factor. But that is not what Wesley Clark said now, is it? He said “People who get rich get rich _ **in part** _ due to luck, timing, connections…” He said nothing about it being a predominating factor. The fact is, success requires many things, including hard work, preparation, willingness to take risks and good fortune. If you remove any one of those, success becomes less likely. If you think you accomplished everything you have achieved by dint of hard work and preparation alone, I guess that makes you a smarter guy than [Warren Buffett](http://www.getrichslowly.org/blog/2010/03/31/warren-buffett-on-the-lottery-of-birth/): > [@](#): > > It’s 24 hours before your birth, and a genie appears to you. He tells you that you can set the rules for the world you’re about to enter — economic, social, political — the whole enchilada. Sounds great, right? What’s the catch? > > Before you enter the world, you will pick one ball from a barrel of 6.8 billion (the number of people on the planet). That ball will determine your gender, race, nationality, natural abilities, and health — whether you are born rich or poor, sick or able-bodied, brilliant or below average, American or Zimbabwean. > > This is what Buffett calls the ovarian lottery. As he explained to a group of University of Florida students, “You’re going to get one ball out of there, and that is the most important thing that’s ever going to happen to you in your life.” > > According to the world’s third-richest man, that’s a good perspective to have when setting the rules for our world. We should be designing a society that, as Buffett says, “doesn’t leave behind someone who accidentally got the wrong ball and is not well-wired for this particular system.” He points out that he is designed for the American system — and he was lucky to be born into it. He can allocate capital, and he lives in a place and at a time when those skills are well rewarded. (His pal Bill Gates is quick to point out that if Buffett had been born in an earlier time, he’d be some animal’s lunch because the Oracle of Omaha can’t run fast or climb trees.) > When Buffett talks about this lottery, he often concludes by asking: > If you could put your ball back, and they took out, at random, a hundred other balls, and you had to pick one of those, would you put your ball back in? Now, of those hundred balls … roughly five of them will be American. … Half of them are going to be below-average intelligence, half will be above. Do you want to put your ball back? Most of you, I think, will not. … What you’re saying is, “I’m in the luckiest 1% of the world right now.” It is unseemly for the man born on third base to claim he hit a triple. ---
**Author:** ![Normal\_Phase](https://avatars.discourse-cdn.com/v4/letter/n/5f9b8f/32.png) [@Normal\_Phase](https://boards.straightdope.com/u/Normal_Phase)\ **Post date:** [July 22, 2010, 8:04pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/113 "2010-07-22T20:04:31Z")
> [@Sam\_Stone](#): > > Ah, education through watching “Wall Street”. This is just the left-wing stereotype of how people get rich. > > In my experience, when companies lay people off like that, it’s because the only alternative is going out of business, or going to a position where profit turns into losses. No one likes laying off workers. And transparent tactics like laying off workers to make the bottom line work better aren’t going to fly with anyone in the real world who’s looking to buy a company. That is a complete lie. Take my husband’s company as an example – it’s at point #3 in that list you so easily dismiss. He worked for Wyeth Pharmaceuticals. Sold to Pfizer. Pfizer promised major layoffs, but they were committed to keeping the huge plant he works at functional (half the economy of our suburban county, not even exaggerating), oh they had great plans. Less than a year later and teh entire plant is to be closed in the next year or so. Ten thousand jobs gone. From a company that was doing just fine, thank you before the buy-out – never mind it had bought into the whole layoffs make us stronger (to our shareholders) line that you say would automatically disqualify a company from purchase – it certainly wasn’t within a year or two of closing entirely. The site was the company’s most important research and production center. I take it back; I don’t even know that I can call it a lie. You just don’t know what you’re talking about. The earlier poster with his list very much did. The rich are destroying us. ---
**Author:** ![Sateryn76](https://avatars.discourse-cdn.com/v4/letter/s/a88e4f/32.png) [@Sateryn76](https://boards.straightdope.com/u/Sateryn76)\ **Post date:** [July 22, 2010, 8:56pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/114 "2010-07-22T20:56:26Z")
> [@Normal\_Phase](#): > > That is a complete lie. Take my husband’s company as an example – it’s at point #3 in that list you so easily dismiss. He worked for Wyeth Pharmaceuticals. Sold to Pfizer. Pfizer promised major layoffs, but they were committed to keeping the huge plant he works at functional (half the economy of our suburban county, not even exaggerating), oh they had great plans. Less than a year later and teh entire plant is to be closed in the next year or so. Ten thousand jobs gone. From a company that was doing just fine, thank you before the buy-out – never mind it had bought into the whole layoffs make us stronger (to our shareholders) line that you say would automatically disqualify a company from purchase – it certainly wasn’t within a year or two of closing entirely. The site was the company’s most important research and production center. > > I take it back; I don’t even know that I can call it a lie. You just don’t know what you’re talking about. The earlier poster with his list very much did. The rich are destroying us. Who’s us? Not me - I left my job last month and am currently setting up the bookkeeping process for my one-woman business. I am working hard to make my money, because I know I’m not going to get it from someone else. I’m sorry your husband got laid off, and I am very familiar with the impact a huge corporation can have on a region - I live in a steel region, and we’ve been on the rocks for years. But, overall, you or your husband or me or my region is nothing special. The decisions made to cut those jobs were made to improve the company, and those decisions generally result in someone else in a different region getting “lucky” and finding a good job, or a another town getting a whole slew of jobs. And yes, some of those jobs are in India or China or Brazil, but if the human animal is equal, who cares where the jobs go, right? The fact is, if someone gave me $25,000 right now, I would use that money to build my business and create jobs. If they gave it to Joe Blow, he may pay down his mortgage or buy crack or whatever. Which outcome is better? I am not rich, but I have drive and determination and I am hungry for success. What would be great is if we could come up with a test for those characteristics and funnel the money that way. But since we can’t, I don’t see the problem with assuming that a far greater percent of the “rich” would be the best at multiplying that money for everyone. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 22, 2010, 9:10pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/115 "2010-07-22T21:10:48Z")
> [@Normal\_Phase](#): > > That is a complete lie. Take my husband’s company as an example – it’s at point #3 in that list you so easily dismiss. He worked for Wyeth Pharmaceuticals. Sold to Pfizer. Pfizer promised major layoffs, but they were committed to keeping the huge plant he works at functional (half the economy of our suburban county, not even exaggerating), oh they had great plans. Less than a year later and teh entire plant is to be closed in the next year or so. Ten thousand jobs gone. From a company that was doing just fine, thank you before the buy-out – never mind it had bought into the whole layoffs make us stronger (to our shareholders) line that you say would automatically disqualify a company from purchase – it certainly wasn’t within a year or two of closing entirely. The site was the company’s most important research and production center. > > I take it back; I don’t even know that I can call it a lie. You just don’t know what you’re talking about. The earlier poster with his list very much did. The rich are destroying us. Listen, I know what I’m talking about. I worked for a company that was bought out by a bigger one. I work for a company that buys up smaller ones quite regularly. When I had my own company, I had offers to buy it from me. I’ve been through the process of company valuation and I know the kinds of decisions that are made. It’s absolutely true that companies can be purchased and mismanaged. I’ve seen it. It’s absolutely true that companies get purchased and then suffer layoffs. One of the things that can make a company attractive is that buyer can lay people off in ways that the old owner was unable or unwilling to do. Sometimes a company is purchased because one of its divisions is extremely desirable for the buying company, but the other divisions or offices aren’t really useful to the buying company. So it will buy the other company to get the division it needs, and sell off the rest of even shut down offices that now represent duplication of effort or are poorly aligned with the business goals of the company. What I objected to is the notion that businesses routinely lay off people in a cynical ploy to make their cost structure look better than it is in order to make a sale. I’ve never seen that. I’ve seen businesses try to over-value their workers. I’ve seen them try to minimize things like their liability or the flaws in their products. Usually, a competent team will spot this stuff, but not always. So mergers carry that kind of risk. You have a simplistic view of this stuff. Your experience is limited to the bad experience your husband had when forces beyond his control shut him down through no fault of his own. I feel for you, and for him. Stuff happens. But I’m willing to bet you that Pfizer and Wyeth had what looked to them to be sound reasons for the merger, and maybe their decision to close that factory was correct given the economic conditions and the goals of the merger. Or maybe they just screwed the pooch and made mistakes that led to the closing of the office. Businesses are still run by humans, and they make errors in judgment. But by and large, this is exactly the kind of ‘creative destruction’ that makes capitalism work so well. One of the biggest problems with government is that it can be virtually impossible to shut down an agency that isn’t meeting its goals or to close down a school district if the demographics change and there’s an oversupply of schools or bureaucrats in a region. That’s because ultimately government is funded through force and has the power to defer pain almost indefinitely (at the expense of economic efficiency), while businesses must deal with the cold reality of the marketplace or die. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 22, 2010, 9:28pm UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/116 "2010-07-22T21:28:44Z")
> [@Fear\_Itself](#): > > But that is not what Wesley Clark said now, is it? He said “People who get rich get rich _ **in part** _ due to luck, timing, connections…” He said nothing about it being a predominating factor. The fact is, success requires many things, including hard work, preparation, willingness to take risks and good fortune. If you remove any one of those, success becomes less likely. If you think you accomplished everything you have achieved by dint of hard work and preparation alone, I guess that makes you a smarter guy than [Warren Buffett](http://www.getrichslowly.org/blog/2010/03/31/warren-buffett-on-the-lottery-of-birth/):It is unseemly for the man born on third base to claim he hit a triple. Clearly the context in which he said it implied that it’s a significant factor. And of course if you want to include things like the country you were born in, the fact that you were born with the normal number of toes and fingers and a decent brain, the ‘luck’ of not getting hit by a car and not being born to an alcoholic mother who left you with the legacy of her pregnant drinking binges, then yes, lots of luck is involved. I was born in a wealthy country of 22 million people in a world of 6.8 billion. Wow, was I lucky. But while it’s important to remember this in terms of not taking things for granted and in having sympathy for people born in Calcutta or Ho Chi Minh City, it’s not something you can do anything about, and it’s not the differentiator between people of different statuses who share the same general background. The real question is, if you’re an American and you see a richer American, is your impulse to think, “That guy’s just lucky”, or “Anyone could do that if they just had the luck and connections that guy has”, or is your impulse to think, “Hey, I wonder what that guy does that I’m not doing? Is he smarter? Does he work harder? Does he save more? Does he control his impulses better than I do? Did he choose a better career?” The odds are that the real differences come down to the last factors rather than luck, and it’s not really even close. Furthermore, it’s much more productive to focus on the questions that give you insight into how to make your life better than to fool yourself into thinking that the other person just got lucky. There’s not much you can learn from that belief, other than cynicism and defeatism. Anyway, in my experience ‘luck’ is mostly viewed in the rear-view mirror. I know a guy who was the luckiest person I’d ever seen - he had golden opportunity after golden opportunity put in front of him, but he never managed to execute anything well enough to turn those opportunities into real advancement in life. He was too angry, too impulsive, and too willing to blame others when things went bad. So they usually did. On the other hand, I got a great job when a guy who I had been doing tech support for just offered it to me out of the blue. My friends told me I was lucky. But the fact of the matter is that I got the job because I impressed him. I put in extra work for him, I was honest with him, and I never got annoyed or mad when he came to me with silly problems. So I put myself in a position where I could take advantage of ‘luck’. Or as Robert Heinlein said, “There is no such thing as luck. There are only differences in the ability to deal with a statistical universe.” It’s not strictly true, but it’s a more useful philosophy to live by than, “You can’t get ahead unless you get lucky or know someone.” - A refrain I heard a hell of lot back when we lived in a project filled with welfare recipients. ---
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [July 23, 2010, 1:31am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/117 "2010-07-23T01:31:44Z")
> [@Sam\_Stone](#): > > You’ve just re-stated Bastiat’s broken windows fallacy. If I smash your window out, I’ve just created a job for the window repairman. He uses the income earned to buy other stuff, and everyone wins! Let’s all run out and start smashing windows. > > The essence of the fallacy is to ignore _opportunity cost_. Money spent on smokes and booze is money not spent building a new power station or investing in research that makes our goods better and cheaper. > > Current consumption is just that - consumption. It’s us spending the spoils of our our productivity. But before you can spend it, you have to actually have that productivity. And the only way to get more productivity is to invest in things that make you more productive. The only way to invest in things that make you more productive is to save some of your resources and not just blow it all on current desires. > > It is if we did it by stimulating consumption. If half the economy makes stuff for the other to consume, then economic growth stops. Economic growth depends on us improving our productive capacity. That requires capital investment, which requires savings, which requires that some people defer current consumption for the promise of even greater future consumption. Encouraging everyone to spend everything they have on whatever they want is a really crappy way to run an economy. > > Companies need to borrow money to invest. Very few companies can finance all R&D and new capital projects through current sales. And much of our productive innovation comes from _new_ companies. Entrepreneurship. New companies by definition have no current sales they can use to finance their startup. They need to borrow money. In some cases, it might be a loan from a rich uncle. In others, it might be venture capital. In some cases, it might be self-provided money from a partnership or a wealthy entrepreneur financing his own idea. Usually, it’s not coming from a bank. Unless the person has other assets to provide for collateral (assets built up through savings or good decision-making), the bank won’t be interested. > > The upshot of this is that a large percentage of our innovation and dynamism comes from the funding of rich people. > > Of course they do, and of course I would. And the data clearly shows that the rich invest far more, both in total amount and in terms of percentage of income, than do the poor. This is really not debatable. > > Gee, I’d probably hire a professional accountant or money manager and have my money invested professionally by someone who really knows what he’s doing. Or, I’d use the money to start a business. Or, I’d look for some guy with a great idea and a shortage of capital, and invest in him. This is what rich people actually do. Your scenario is your negative stereotype of what you think rich people do. > > No, but I thnk the startup money invested in Apple and Microsoft did a lot more for the economy than the equivalent amount of money spent on lotto tickets, smokes and booze. I think the venture capital that helped start up eBay and Federal Express did a lot more for us than we’d get by spending money smashing windows and replacing them. And I think those large, aggressively priced grocery chains wouldn’t even exist if rich people hadn’t invested the money to start them up in the first place. > > You’re right. You’re being a dick. My personal feelings and desires are irrelevant to the discussion. > > For the record, I grew up in relative poverty (I had a single mother, worked minimum wage to put myself through school from age 14 up), and I’ve felt this way my entire life. Believe it or not, there are still some of us who believe in personal freedom and small government and making our own way in life without the benevolent smothering care of the nanny state - even if that’s against our personal financial interest. To me, I’ve always thought that the true greedy people were those who demand the wealth of others so they can be protected from the consequences of their own actions. But then, I’m just being a dick. It seems like we have been going backwards in terms of making better quality goods and being more productive as a society then. Outsourcing has only decreased productivity in terms of what we get for our money. I have a fridge with parts made in china that did not last 5 years, while I have a 30 year old one in the basement for soda, beer etc that is still going strong. It looks like the business’s rely on this demand side policy so we can throw away stuff and have to buy another one in 5 years. How is that helping us be more productive by consuming more materials and filling up the landfills while were at it? It would be much cheaper as well to have a high quality fridge then a cheap one that breaks down after 5 years. (5 years vs 30 years) The only ones I see benefiting are those that outsource and rely on cheap labor at the expense of the consumer and their dollars. ---
**Author:** ![Revenant\_Threshold](https://avatars.discourse-cdn.com/v4/letter/r/f1d935/32.png) [@Revenant\_Threshold](https://boards.straightdope.com/u/Revenant_Threshold)\ **Post date:** [July 23, 2010, 2:04am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/118 "2010-07-23T02:04:47Z")
> [@Sam\_Stone](#): > > Anyway, in my experience ‘luck’ is mostly viewed in the rear-view mirror. I know a guy who was the luckiest person I’d ever seen - he had golden opportunity after golden opportunity put in front of him, but he never managed to execute anything well enough to turn those opportunities into real advancement in life. He was too angry, too impulsive, and too willing to blame others when things went bad. So they usually did. I think generally this is probably the key. Luck happens to you because you’re in a situation where that’s possible, which is to an extent under your control. You’re at the whim of opportunities arriving, but you can get yourself into a state so that if and when those opportunities arrive, you’re best placed to take full advantage of them. Of course, I say that as an unemployed person, so i’d take my business sense with more than a grain of salt. 😉 ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [July 23, 2010, 2:26am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/119 "2010-07-23T02:26:44Z")
So good things happen to good people, and bad things happen to bad people. If you work hard, prepare youself, take prudent risks and control your impluses (?), success is guaranteed 100% of the time, because there is no element of serendipity involved. If you don’t succeed, it is because you didn’t follow the rules, which are infallible. ---
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [July 23, 2010, 2:31am UTC](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340/120 "2010-07-23T02:31:38Z")
> [@Normal\_Phase](#): > > That is a complete lie. Take my husband’s company as an example – it’s at point #3 in that list you so easily dismiss. He worked for Wyeth Pharmaceuticals. Sold to Pfizer. Pfizer promised major layoffs, but they were committed to keeping the huge plant he works at functional (half the economy of our suburban county, not even exaggerating), oh they had great plans. Less than a year later and teh entire plant is to be closed in the next year or so. Ten thousand jobs gone. From a company that was doing just fine, thank you before the buy-out – never mind it had bought into the whole layoffs make us stronger (to our shareholders) line that you say would automatically disqualify a company from purchase – it certainly wasn’t within a year or two of closing entirely. The site was the company’s most important research and production center. > > I take it back; I don’t even know that I can call it a lie. You just don’t know what you’re talking about. The earlier poster with his list very much did. The rich are destroying us. This reminds me of Astroworld amusement park in Houston. The park was making Six Flags money but they decided to bulldoze it because they could get more money selling the land the park was on. So, many jobs were destroyed in the process all in the name of mo money. The park was bulldozed in 2005 and still sits barren today due to the economy. Fortunately, the CEO and a lot of other members were fired. [Previous page](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340.md?page=5) [Next page](https://boards.straightdope.com/t/the-rich-are-better-stewards-of-money-than-the-poor/547340.md?page=7)