What a field day for the heat
A thousand people in the street
Singing songs and carrying signs
Mostly saying, "hooray for our side"

Tuesday, August 16, 2011

Once more

Okay, so, I've been reading some commentary on Warren Buffet's op-ed on "Stop Coddling the Super-Rich." Take for example, this piece of propaganda disguising itself as "sensible argument."

There's a whole bunch wrong in Jeffrey Miron's response, including the including the intentional confusing of the super-rich and those who own homes. But it's mostly a main contention for libertarians of the Cato Institute type that "Focusing on the super-rich also fosters a counterproductive attitude toward material success." Which, that line is really, "Pay no attention to the man behind the curtain."

Now Mr. Miron mixes in a few things that poll well, like people being against bail-outs for banks, but then equates that to making loans to the auto industry to help them get over a rough patch. He thinks the later is bad because it picks and chooses winners when we should just let those "bad" companies fail. I want you to think about that. What would this economy be like if GM and Chrysler failed? Remember what happened when Lehman Brothers failed? Yeah, stock market panic. What would have happened if just GM failed? Think the disruptions of the supply chain from the Japanese tsunami were a problem? That would be nothing as the parts suppliers major customer vanished. And who would be left standing making autos in this country? Ford, Toyota and Honda (along with some minor players). Millions more on unemployment. And now, 2 years later, both GM and Chrysler are doing well (GM more than Chrysler), so that actually turned out to be a Good Bet™.

But then Mr. Miron gets to, "Buffet asserts that taxing capital income has never deterred anyone from investing. Well, then he has never discussed the issue with me or many of my friends."

I want you to think about that. What he's saying is that because the tax rate on his investment gains would go from 15% (maybe) to being counted as regular income (25%-33% total, because it would also include State and Local taxes then) that they won't invest. Or, "I don't want to make a million dollars because you'll be taking $250,000 in taxes, so I'll stick with my $7.50/hr McJob. Would you like fries with that?"

That's his argument. Frankly, if that is your mindset, you shouldn't be investing because you don't have the mental capacity to judge risk properly, let alone cross the street without a light. And, no, I'm not being hyperbolic here. Mr. Miron wants you to believe that bald faced lie he just made. Either he's brain dead or he's lying, and I can't believe the Cato Institute would hire a moron as a consultant.

That, friends, is class warfare.

Don't think so, how about this next paragraph. "More importantly, taxing investment returns plays a huge role in what kinds of investments occur… These tax-induced distortions in investment choices then reduce economic growth. High U.S. taxation on capital income drives investment overseas. So raising capital tax rates will not make the super-rich pay their 'fair' share; it will encourage capital flight, driving factories and innovation abroad. The rich will still get their high returns, but U.S. workers will have fewer jobs and lower wages."

First up, we already have those distortions. Can you spot them? No, because we distort the market in ways to help encourage what we mostly want. There's no evidence, whatsoever, to support his claim that it reduces economic growth. Also, that claim is counter what investment is meant to do (maximize return by either productively enhancements or scale). And we now have a decades worth of experiments with "lower tax rates = higher revenues because the rich no longer hide their money or refuse to pay taxes." It didn't work. Revenues haven't increased (except by inflation and GDP growth, ie. higher employment and coming out of recessions). And lowering capital gains taxes didn't bring any new money into this country. No higher revenues. Why? Because the argument is complete bullshit. But it plays well to people who wouldn't risk $1000 on the market because they might lose it all. Understand that $1k is pocket change compared to the sums and people we're talking about.

Then we get to the great canard, "We'll take our little red ball and go away." Really? Where? Europe with it's socialized medicine? Japan with it's socialized medicine? Somewhere that has no real economic engine that has shielding from US taxes but also knocks you out of making a return on investments, not to mention bribery to keep what money you do have? Factories and innovation have been going abroad for the past three decades. Adjusting tax rates won't change that. What he's counting on here is your fear of the rich. "Think you have it bad now?" he's saying. "Attack out positions and we'll make it worse."

And then don't miss the not-subtle threat in that last sentence. And I hate to break it to you, we already have fewer jobs and lower wages. What he wants us to do is to preserve his own special status. Not for our good, but for his.

Dear Mr. Miron. Please, sir, just fucking go Gault all ready and leave the adults to discuss matters. Holding your breath until you get your way really shouldn't have worked since you were 2. Although you look real cute turning blue like that. Have fun paying European or Asian tax rates. Or don't forget to carry a few hundred for walking around money and make sure your abduction insurance is paid up, because that's what's left. Not to mention already paying some of the lowest tax rates in the world.


David Klecha said...

I've been thinking about a series of posts on what I perceive as basic economics that a lot of folks seem to be missing out on. I mean, it's understandable that there's some sense among the public that some things are intuitive and some things are counter-intuitive... but that uncertainty seems to have allowed the top 1% to manipulate a segment of public opinion into getting those things exactly backwards, to their benefit.

It should be intuitive that money spent on the lower tiers of the income pyramid impacts the economy more directly: more people have more money to buy more stuff, and buying that stuff drives the economy. That's all the economy was 200 years ago. It's kind of counter-intuitive to realize that the wealthy won't spend their excess, and even when they "invest" it are mostly just gambling with it on commodity futures and currency speculation and securities and not actually creating any jobs with it.

It's like I want to sit the whole world down for an economics lesson, but the whole world is worse than any junior high class at the end of the day.

Steve Buchheit said...

Dave, yes, the people who do actually know have been playing the majority of the populace for suckers.

I think it would be interesting to compare and contrast what people did with their Bush Refund Advances (did it twice) and what they're doing with the SS Tax holiday. IIRC, with the the advances most people paid off debt. I wonder what most people are doing with their extra money (about the same amount, but doled out more slowly).

There's also a series on NPR's Morning Edition on retirement, and how, basically, most people will never be able to afford it. http://www.npr.org/2011/08/16/139666513/401-k-owners-hope-markets-play-nice