The poor rich
Robert Samuelson is afraid for the wealthy. He needn’t be. But he should be more honest with his writing.
Liberals have triumphed politically; soaking the rich has become more acceptable. But conservatives may have won the intellectual argument; making the rich poorer doesn’t make everyone else richer.
Okay, first, Barack Obama has talked about rolling back the Bush tax cuts on those who make more than $250,000 a year. That’s a mere four percent. Try not to drown me in that river you’re crying, but it isn’t like the rich were doing badly in the 1990s, is it?
Secondly, we aren’t talking about making everyone else richer. We’re talking about actually paying for the services we are demanding out government provide. If we take a bit from the rich to cut our deficit, that means we create less money and that fights inflation. That actually does make everyone richer because the money they have in their hand – and in their bank accounts – actually is worth more than if we spared those poor little rich kids and foisted the cost of today’s government off on our kids.
Unfortunately, the mine has less gold. All the financial turmoil has left the wealthy — however they are defined — much less wealthy. Stock ownership is highly concentrated. In 2001, the richest 1 percent owned 34 percent of stocks and mutual funds, estimates economist Edward N. Wolff of New York University. Let’s see. Since the market’s high in October 2007, stocks are down (through Oct. 31) 38 percent, or $7.5 trillion, reports Wilshire Associates.
Yep. Those people who were invested heavily in the stock market lost the most. But you know what? They still own a whole bunch of the accumulated wealth of Wall Street. The difference is that, to take an example from Sojourner Truth, one person has a measure of a pint and the guy holding a whole freaking gallon wants us to pass him by because he spilled a quart elsewhere.
Judged only by economic inequality, the financial crisis is a godsend. It will probably narrow the gap — though still vast — between the rich and everybody else. But what good will that do? Economic inequality also declined in the Great Depression. The country wasn’t better off. By and large, the poor aren’t poor because the rich are rich. They’re usually poor for their own reasons: family breakdown, low skills, destructive personal habits and plain bad luck.
Well, there you have it. You’re the one responsible for not being a billionaire. If only you were’t such a suckass person, perhaps you would worry about soaking the rich, too.
Except that all that money that the wealthy gain comes from somewhere. Just like the paychecks that the poor get come from somewhere. Conservatives love to point out that the rich create jobs, but they forget to point out that the poor fill those jobs. And they like to gloss over the implicit power relationship of any massive employer versus a single employee.
But the redistributionist argument is at best a half-truth. The larger truth is that much of the income of the rich and well-to-do comes from what they do. If they stop doing it, then the income and wealth vanish. No one gets it. It can’t be redistributed because it doesn’t exist. Everyone’s poorer.
Yeah, the gears of the world will stop, Ayn Rand. I have no problem saying that the rich actually have to do something to get more money. The question is whether what they get is commensurate with what they provide. All too often, they give too little to the folks below so they can save up more treasure for themselves. If you think that’s their right, then take a look at that part just above about “implicit power relationship”.
And I don’t think any rich person is going to stop whatever they are doing because of a tax hike of less than five percent. Hell, I doubt a tax hike of fifty percent would do it. After all, it was as recently as 1980 when the marginal tax rate in the US was seventy percent and we didn’t have any shortage of people trying to get rich back then.
Americans legitimately resent Wall Street types who profited from dubious investment strategies that aggravated today’s crisis. And government properly redistributes income to reduce hardship and poverty. But that’s different from attempting to deduce and engineer some optimal distribution of income. Government can’t do that and shouldn’t try. Scapegoating and punishing all of the rich won’t do us any good if the resulting taxes dull investment and risk-taking, discouraging economic growth that benefits everyone.
First, it isn’t just that they “profited from dubious investment strategies”. It’s that they ruined the lives of millions so they could pad their year-end bonuses when they already were getting paid astronomical salaries. It isn’t that “profit motive” is bad – it’s when “profit motive” becomes “endless greed that destroys wantonly” that we have a problem.
Second, no one – no one – has talked about “some optimal distribution of income”. We have asked the rich to come around and pay their fair share. Yes, they pay a lot anyway. So what? They are the ones with money. Should we, instead, tax the poorest among us the rest of the way into death? Would that be more acceptable?
As far as dulling investment, risk-taking, and economic growth – low taxes are part of the equation that brought us to the precipice. Again, we didn’t hurt for investment, risk-taking, or economic growth for the entire rest of our history. There is no reason to believe that we would do so with the very modest tax hikes that have been discussed.
But I suppose that wouldn’t make a very exicting newspaper column.
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