Taxing the Wealthy

[Marat]

Another problem with tax cuts going to the wealthy is that their capital is much more mobile than that of the middle and lower classes, whose money goes directly toward consumption, which is overwhelmingly domestic. The rich who will transfer much of their tax breaks to investment opportunities will naturally seek out the best returns worldwide, which are now found in developing economies such as China, India, and Brazil, not in the U.S., so the stimulus will be directed away from the American economy.

 

Since the effect of 30 years of tax cuts, starting with the Reagan administration, has been to increase the disparity between between the rich and the poor, where has all the supposed 'trickle down' effect gone, which was supposed to translate the profoundly anti-democratic effect of tax cuts for the rich into the democratic effect of benefits for everyone? The effect of continuing tax cuts for the rich over the last decade has been to make the rich richer while leaving wages for the American middle class stagnant, so if the democratic justification for tax cuts for the wealthy has failed to materialize up to now, why should we continue to suppose that it will become legitimate in the future?

 

My great-great grandfather voted for William McKinley rather than William Jennings Bryan because he thought that financial benefits for the wealthy would trickle down to the middle class, but the family is still waiting!

 

Why does everyone forget that the greatest boom in the American economy resulted from the GI Bill's massive infusion of cash into the hands of the poor and the middle class? After World War I there was a recession as the result of war production ceasing, but after World War II the GI Bill sparked a boom that lasted for a decade even against the natural trend to post-war recession. The last decade of tax cuts to the rich, in contrast, have been nowhere near as effective in stimulating the U.S. economy.

[Pangloss]

So where did all those new millionaires in the 1990s come from?

[iNow]

So where did all those new millionaires in the 1990s come from?

Your implication here is that they came from the Reagan tax cuts for the rich. That implication is wrong.

 

 

http://www.articlesbase.com/business-articles/the-next-millionaire-the-1990s-dramatic-increase-in-millionaires-765835.html

 

During the 1990’s the total number of millionaires dramatically increased due to low interest rates, a soaring stock market, low inflation, and a strong American dollar, thus creating the next millionaire on average three times per day. This vast increase in wealthy individuals occurred because the qualities previously mentioned came together to produce a market in which investment was both easy and usually highly profitable. With a multitude of easy investments available, even the average person found it unusually simple to make millions of dollars in profit.

 

Between the years of 1990 and 2001, when the World Trade Center was attacked and the stock market consequently plummeted, the total number of millionaires in the United States more than doubled from three million millionaires to over six million. The net worth of these wealthy individuals rose from thirteen trillion dollars to over forty trillion dollars – an almost three hundred percent increase. This happened primarily because of low interest rates.

Hey... Look at that... It was primarily low interest rates, not tax cuts.

 

Oh yeah... and the dot-com bubble:

 

 

Executives and employees who were paid with stock options instead of cash became instant millionaires when the company made its initial public offering; many invested their new wealth into yet more dot-coms.

[Pangloss]

Your implication here is that they came from the Reagan tax cuts for the rich. That implication is wrong.

 

Actually what I was wondering is where they came from. That's why I asked, you know, "where they came from".

 

Since the effect of 30 years of tax cuts, starting with the Reagan administration, has been to increase the disparity between between the rich and the poor, where has all the supposed 'trickle down' effect gone, which was supposed to translate the profoundly anti-democratic effect of tax cuts for the rich into the democratic effect of benefits for everyone? The effect of continuing tax cuts for the rich over the last decade has been to make the rich richer while leaving wages for the American middle class stagnant, so if the democratic justification for tax cuts for the wealthy has failed to materialize up to now, why should we continue to suppose that it will become legitimate in the future?

 

Between the years of 1990 and 2001, when the World Trade Center was attacked and the stock market consequently plummeted, the total number of millionaires in the United States more than doubled from three million millionaires to over six million.

 

Did the rich breed in very large numbers in the 1980s and 1990s and split their stock with their teenage children? Did three million poor people win the lottery? Did natives from Alpha Centauri discover planet Earth and invest in dot-coms?

 

NOW I'm implying something.

[Marat]

In theory, an increase in the number of millionaires doesn't necessarily imply that tax cuts are improving the economy, but only that the tax cuts are concentrating more of the total wealth of society, which could be stagnant or even falling, among the wealthier people: i.e., those in the $500,000-range are elevated to the million range.

 

Concentrating wealth among the rich always decreases the real wealth of society, whatever its effect on the total wealth of society measured in GNP. This is because money has a steeply decreasing value in generating human happiness as it is increasingly concentrated among those who are already rich. Thus while you could multiply the happiness of a beggar a trillion-fold by giving him $100,000, if you gave a hundred times that wealth to Bill Gates he would not even be able to experience its effect, since it would constitute such a tiny percentage of his wealth that it could not make him the least bit more happy. Thus any policy that makes the rich richer and the poor poorer amounts to a massive 'potlach' in which society simply destroys its wealth, measured in terms of its sole real value, which is its ability to produce human happiness. When this amounts to delivering substandard healthcare to the poor so that taxes can be kept low on the rich, which essentially amounts to buying vacation homes in Majorca for the rich at the cost of the inadequately treated cancer pain of the poor, the society becomes morally bankrupt, as the United States is now. Capitalists always complain about how wasteful and inefficient socialist economies are, but in their enormous waste of the happiness-generating capacity of wealth, capitalist societies far outstrip socialist economies in their wastefulness.

 

Also, the wealth differential in society also generates unnecessary human misery. Since the living standard at which people feel comfortable existing is set by the publicly perceived median lifestyle, as that median is shifted ever higher by concentrating wealth among the rich, more people in the lower middle and lower economic brackets are made more and more miserable.

 

In appreciation of the devastating effects of the maldistribution of wealth, economists have developed a ranking of nations according to the Gini Index, which measures inequality, and countries with low taxes on the rich, such as the U.S., always do very badly on this ranking.

[Pangloss]

First off, you mentioned the benefits of giving a beggar $100,000. There are 41 million people on food stamps. That's 4.1 trillion dollars. Do you advocate more/greater deficit spending as a solution to poverty in the US?

 

Finger-pointing is easy. Watch: Raise the definition of poverty to include 2 cars, a house and a Playstation and surprise! More poverty appears. Admit more immigrants than anybody else and surprise! More poverty appears. Some on the left even advocate an OPEN border! Why not? Plenty of conservatives around to blame the poverty level on.

 

See? Blaming poverty on ideological extremism is easy. Too easy.

[jackson33]

Concentrating wealth among the rich always decreases the real wealth of society, whatever its effect on the total wealth of society measured in GNP.[/Quote]

 

Marat; The wealthy of any Nation are the rich and the more that are wealthy, the greater the economy. With little or no wealth, their is nothing to build an economy with (excess funds) leaving the less wealthy with out opportunity.

 

Thus while you could multiply the happiness of a beggar a trillion-fold by giving him $100,000, if you gave a hundred times that wealth to Bill Gates he would not even be able to experience its effect, since it would constitute such a tiny percentage of his wealth that it could not make him the least bit more happy. Thus any policy that makes the rich richer and the poor poorer amounts to a massive 'potlach' in which society simply destroys its wealth, measured in terms of its sole real value, which is its ability to produce human happiness. When this amounts to delivering substandard healthcare to the poor so that taxes can be kept low on the rich, which essentially amounts to buying vacation homes in Majorca for the rich at the cost of the inadequately treated cancer pain of the poor, the society becomes morally bankrupt, as the United States is now. Capitalists always complain about how wasteful and inefficient socialist economies are, but in their enormous waste of the happiness-generating capacity of wealth, capitalist societies far outstrip socialist economies in their wastefulness. [/Quote]

 

I'll try this; If every person in any Nation held the same wealth and earned the same wage, where is the potential for any increase, come from? If that doesn't work, where would the incentive to work hard, succeed and create every job most people have relied on? Another minor point and one that seems to bother you; Do you honestly believe that every person, regardless of effort to educate themselves, play by the rules and contribute to society, should then in fact NOT be entitled to some rewards?

 

Anyway I'm pretty sure happiness and wealth are not conditioned on amounts and most less advantaged folks I know are quite happy, a whole lot happier than I suspect Tiger Woods or Al Gore are these day's.

 

First off, you mentioned the benefits of giving a beggar $100,000. There are 41 million people on food stamps. That's 4.1 trillion dollars. Do you advocate more/greater deficit spending as a solution to poverty in the US? [/Quote]

 

Pangloss; Interesting; Seem like just last year,2009 (oh! it was) when the National Debt was 12T$ the total cost for the War on Poverty was coincidentally 12T$ and in 2009 the total annual cost for the Federal and States first exceeded 1T$. What's disgusting is that President Johnson, felt the programs he got enacted would be Cost Neutral by the late 70's. We're now discussing a program, that will cost nothing, even said to save a trillion (HCB) and Government Auditing Agencies are suggesting a 2T$ addition to the deficit over 10 years and it has barely begun.

 

Marat; Is my last paragraph an example of "Socialist efficiency"?

[Marat]

Using the government to redistribute wealth from the rich to the poor need not in itself necessarily increase the deficit as long as those programs are adequately funded by increases in taxation on the rich and middle class.

 

Capital concentration is certainly necessary for building the enterprises that generate wealth. But if taxation levels were increased, the government could itself become a major agent for capital concentration and investment, such as in China, and there is no necessary reason why government-created wealth generating enterprises need not do the job as well as private ones do. The purely socialist French train system is magnificent compared to the privatized train systems in the U.S. and U.K., and government investment in creating the capital asset of a public healthcare system provides universal coverage at 10% of the GNP in Canada while America's private healthcare system costs 17% of its GNP to cover 86% of its population.

 

Of course it is true that people mainly work hard in capitalist cultures only if they get extra money for doing so, but in pre-capitalist cultures which gave primacy to values other than money, people worked hard to build the pyramids, create the Aztec Empire, and make Europe's cathedrals even without special financial rewards for harder or better work. In Amish communities today, neighbors build barns for those in their community lacking a barn, and they do this for no money at all, but just out of a sense of social solidary, since they are schooled from childhood in an ideology of communal rather than selfish values, and valorize friendship and kindness over personal gain. Even in capitalist cultures, everyone works as hard as he possibly can and takes risks beyond any financial compensation in response to the dire need of others in an emergecy, and it would be inconceivable that anyone would ask for a reward to rescue a child from a burning building. So motivation has other potential sources than money.

 

Even if we assume that monetary rewards are needed to make people work hard, surely Micheal Eisner never needed his salary of $300,000,000 a year to run Disney Enterprises. If we all received $40,000 a year, which is about average for America today, and those who worked very hard or very well could earn $2000 a year extra, the low base of comparison and the absence of any other options for material advancement would probably make that extra $2000 worth as much in people's eyes as an extra million today. Such a system of equal basic wages would also have the advantage that no one would have to suffer from poverty, at the 'cost' of no one being able to mistreat other people by using the advantages of private wealth against them.

 

Finally we have to ask how much poverty is truly deserved and how much is caused by circumstances over which people have little or no control? If I had been born into a poor family with a drug-addicted mother who worked as a prostitute, with eight brothers and sisters and no father, living in a rat-infested apartment with the heat turned off and no running water, how successful could I have been from such a starting point? Would I have even been able to grow up with the feeling that there was any use in learning to be ambitious or hard-working? If someone works titanically hard in a Columbian coal mine his entire life, how rich is he going to be from having displayed more self-discipline and expended more energy than any self-made millionaire? Since we can never rigorously assign praise or blame for anyone's prosperity, we can't say that anyone truly deserves to suffer the miseries of poverty.

[Pangloss]

Using the government to redistribute wealth from the rich to the poor need not in itself necessarily increase the deficit as long as those programs are adequately funded by increases in taxation on the rich and middle class.

 

It's sad the way the middle class always gets shafted in these things. They are the best of both words -- the hardest workers, the most aware, the least likely to support graft and corruption -- the very people you WANT on your side. And you want to pillage them to buy off a group of people many of whom would rather sit in front of their Playstation all day, and buy fast food and cola with their food stamps. IMO that middle class won't exist for very long. Why should it, once you've taken their motivation away? They might as well kick back and relax in front of their Playstations too.

 

And perhaps more importantly, I'm not at all convinced that throwing money at poverty CAN solve it. Handing someone money does not give them motivation, and it's only motivation that produces success and achievement.

 

I'm all about safety nets and helping hands, but you'll never sign me up for a pity argument, because there is a huge, HUGE difference between someone who got kicked out of their house because of a predatory lender and a blind robo-signing lawyer, and someone who sits around the house all day in front of a Playstation, getting fat off food stamps used to buy Oreos and Coca-Cola. There is no reason why I should care about the latter group, and if you take money from the middle class and give it to such people, you will have made a huge mistake.

 

 

Capital concentration

 

See, if you're talking about do-nothing CEOs making millions while their companies flounder, I am right there with ya. But you included the middle class above, so I really gotta wonder if what you really mean by "capital concentration" is "income earned through hard work".

 

 

The purely socialist French train system is magnificent compared to the privatized train systems in the U.S. and U.K.

 

This seems like an exaggeration to me. I don't know much about British Rail, but isn't it still underwritten/protected/something by the government? And I don't think AMTRAK could turn a profit on its own if they found a thousand-year supply of oil five feet under the tracks. It may not be a purely government organization, but it sure walks and talks like one.

 

And the French system isn't purely socialist. SCNF is owned by the government, but they've intentionally opened the system to competition. Not the sort of thing one does when everything is "magnificent". Interesting article on that here:

 

http://www.thetransportpolitic.com/2009/04/17/high-speed-rail-competition-between-trenitalia-and-sncf-coming-in-2010/

 

This next article talks about the benefits of competition in French rail service, which will (it is hoped) include lower costs to consumers.

 

http://www.thetransportpolitic.com/2009/12/29/with-competition-in-high-speed-operation-who-wins/

 

Interestingly, the changes were apparently mandated by European Union law. I guess the EU doesn't want a purely socialist system. Interesting.

 

 

in pre-capitalist cultures which gave primacy to values other than money, people worked hard to build the pyramids, create the Aztec Empire, and make Europe's cathedrals even without special financial rewards for harder or better work

 

The ones that did value money gave us something important as well. The Ancient Romans built the world's first superpower, a hemiphere-encompassing civilization spanning 2500 years, with inarguable contributions to law, architecture, technology, religion, art, literature, governance and language. When it fell they didn't call it the "dark ages" for nothing.

 

 

Even in capitalist cultures, everyone works as hard as he possibly can and takes risks beyond any financial compensation in response to the dire need of others in an emergecy, and it would be inconceivable that anyone would ask for a reward to rescue a child from a burning building. So motivation has other potential sources than money.

 

Absolutely. No doubt about it, IMO.

 

 

If we all received $40,000 a year, which is about average for America today, and those who worked very hard or very well could earn $2000 a year extra, the low base of comparison and the absence of any other options for material advancement would probably make that extra $2000 worth as much in people's eyes as an extra million today. Such a system of equal basic wages would also have the advantage that no one would have to suffer from poverty, at the 'cost' of no one being able to mistreat other people by using the advantages of private wealth against them.

 

I'm not opposed to raising minimum wage, but what I am opposed to is upsetting the apple cart over an ideological preference. Say we raise the minimum wage from 7 or 8 bucks an hour to 20. And a million small businesses go under tomorrow, or get soaked up by giant megacorps who then tell their lapdogs in congress to drop it back down to 7 or 8 bucks an hour, and then we're right back where we started. Or we're all in some sort of socialist utopian nightmare where we might as well sit at home and play games on our Playstations.

 

It's just more complicated than that. Sure, sometimes socialist-like reforms are needed, but at other times capitalism-like reforms are needed. The best answers will sometimes mean sliding the bar to the left, just as it will also sometimes have to move to the right. But the problem isn't low wages or poverty or capitalism-vs-socialism. The problem is corruption and complexity and abuse combined with a populace that doesn't care or isn't paying attention.

[Mr Skeptic]

OK, if we want to talk about motivation, how about this: a -50% tax on people earning below a certain amount (a negative tax, so they earn extra money whenever they earn money). Obviously it needs to be bracketed so that it is always better to earn more. This can be paid for by a small tax increase on people earning over $250,000/year. I think this would be extremely motivational for the poor people, since they'd get paid 50% more.

[D H]

If we all received $40,000 a year, which is about average for America today, and those who worked very hard or very well could earn $2000 a year extra, the low base of comparison and the absence of any other options for material advancement would probably make that extra $2000 worth as much in people's eyes as an extra million today. Such a system of equal basic wages would also have the advantage that no one would have to suffer from poverty, at the 'cost' of no one being able to mistreat other people by using the advantages of private wealth against them.

You. Must. Be. Kidding.

 

Given the choice of making $40,000 per year for sitting around and doing nothing versus $42,000 per year for working 60-80 hours a week or more (the typical work week of those do-nothing CEOs you so hate), what would most people choose?

 

Given the choice of making $40,000 per year for sitting around and doing nothing versus $42,000 per year for a menial job such as collecting the garbage of those $40,000 per year loungers or a working middle class job such as repairing the plumbing of those $40,000 per year loungers, what would most people choose?

 

The answer is simple of course: Almost everyone would choose to be a $40,000 per year lounger. Which of course would last all of a few minutes when there is no money coming back to the government to pay all those $40,000 per year loungers.

Edited October 8, 2010 by D H

[iNow]

you want to pillage them to buy off a group of people many of whom would rather sit in front of their Playstation all day, and buy fast food and cola with their food stamps. IMO that middle class won't exist for very long. Why should it, once you've taken their motivation away? They might as well kick back and relax in front of their Playstations too.

 

<...>

 

here is a huge, HUGE difference between someone who got kicked out of their house because of a predatory lender and a blind robo-signing lawyer, and someone who sits around the house all day in front of a Playstation, getting fat off food stamps used to buy Oreos and Coca-Cola. There is no reason why I should care about the latter group, and if you take money from the middle class and give it to such people, you will have made a huge mistake.

 

<...>

 

Or we're all in some sort of socialist utopian nightmare where we might as well sit at home and play games on our Playstations.

Your stance is sort of unrealistic. You rant and rave about people eating oreos and being on Playstations, and fail to acknowledge two critical points:

1) That benefits are temporary, and

2) People can only work if there are jobs available (which, as you probably know, jobs are scarce right now with more demand for them than supply)

 

 

http://writ.news.findlaw.com/buchanan/20100701.html

 

Measured unemployment is currently hovering just under 10%, with 15 million people unsuccessfully looking for work, on top of millions more who have understandably given up looking for jobs in the face of a depressed economy, and still more who are involuntarily working part time because they cannot find full-time jobs. The job market is so forbidding that there are five or six unemployed workers for every available job in the country. That ugly national picture is even worse in some regions, with unemployment in states like California and Michigan, and many others, well in excess of 10%.

 

It seems highly unlikely that the opponents of extending unemployment benefits were relying on economic arguments to decide how they would vote on the measure. The parties are in full-scale campaign mode, with the mid-term elections now barely four months away. Even so, for purposes of public relations, some politicians and their supporters in the punditocracy have offered a few arguments against extending benefits that at least have the gloss of economic reasoning. That reasoning, however, fails to hold up to serious inspection.

 

In this column, I will describe two arguments that have recently been offered to oppose extending long-term unemployment benefits. I will show that the reliability of those arguments is entirely contingent on economic conditions that simply do not exist, and that will not exist for years to come. Marshaling plausible economic arguments to support crass political decisions, it turns out, is not as easy as it seems.

 

<...>

 

There are two important factors that determine whether payments to unemployed workers will truly create long-term idleness, as some claim. The first is the relative generosity or miserliness of the benefits. If the government pays a person a paltry $1 per year while they are unemployed, then of course, no one will view this as such a "sweet deal" that they will never work again. On the other hand, a payment of $1 million per year might induce even the most industrious among us to stop working.

 

The question, therefore, is how high benefits can be, before they induce workers to remain idle. Some evidence has suggested that the wealthier European economies erred in the latter half of the Twentieth Century by being too generous in their unemployment benefits. The United States, however, has never provided levels of support that allow unemployed workers to maintain a decent lifestyle. Thus, American workers simply do not remain unemployed as a result of receiving government support that is a comfortable alternative to working.

 

The second important factor that determines the economic impact of unemployment benefits is their duration. Even if the government were to err by giving workers benefits that would be sufficient to support their lifestyles, those benefits can simply be allowed to expire, after a certain time, without renewal. Knowing that their benefits have an end date should encourage recipients to become workers again.

 

Again, however, the United States has never been a country that has provided long-term unemployment benefits as a matter of course; rather, those who receive benefits have always been able to see before them a time, in the very near future, when those benefits would end.

 

The situation in this country, therefore, is rather stark: We provide stingy unemployment benefits, and we cut them off quickly. Whatever else one might say about that policy, its supposed incentives only work if the economy is healthy enough to provide work to job seekers.

 

<...>

 

When there is a significant downturn in the economy, the idea that an unemployed worker has brought his situation upon himself -- as well as they idea that the person must simply be given enough incentive to stop relying on "the dole" and find work -- becomes absurd. The entire economy is in a nosedive, and there are no jobs to be found.

 

Long-term unemployment in the United States is now at historically high levels, and in many areas, for many people, there simply is no work to be found. In this situation, it would seem insane to suggest that the economic arguments that would have been relevant to a healthy economy are still operative. Yet there are still those who make that argument.

 

<...>

 

The U.S. economy is in its worst shape since the Great Depression. Suggesting that unless workers lose their scanty unemployment benefits, they will not go out and find a job is both bizarre and inhuman. Unfortunately, that is not the only misapplied economic argument in this debate.

 

<...>

 

Beyond the familiar argument over whether unemployment benefits create disincentives to work, another essential question is whether providing those benefits will help to turn the economy around. The major problem right now in the United States economy is that businesses cannot sell their goods, which means that they have no reason to hire any of the millions of willing, unemployed Americans who are suffering in this economy. The less money we spend, the worse matters become. And the worse matters become, the less we may spend.

 

When the government tries to stimulate spending, in an attempt to "prime the pump" and inspire businesses to set in motion a virtuous (as opposed to vicious) cycle of hiring, it is important to know how long the process will take before it shows results. Last year's debate about the so-called stimulus package, for example, included concerns that government spending projects were not "shovel-ready," meaning that the money would not be spent soon enough to help the economy. What was needed, we were told, was spending that would boost the economy right away.

 

It is difficult to imagine a more perfect solution to this problem than unemployment benefits. Laid-off workers -- especially the long-term unemployed who have long since used up any savings, and are even selling their property to survive -- desperately need money. As soon as the check comes in, the money will be spent. The businesses at which the money is spent will thus be encouraged to hire more workers, or at least not to lay off more workers.

 

 

 

 

---

 

Given the choice of making $40,000 per year for sitting around and doing nothing versus $42,000 per year for working 60-80 hours a week or more (the typical work week of those do-nothing CEOs you so hate), what would most people choose?

 

Given the choice of making $40,000 per year for sitting around and doing nothing versus $42,000 per year for a menial job such as collecting the garbage of those $40,000 per year loungers or a working middle class job such as repairing the plumbing of those $40,000 per year loungers, what would most people choose?

 

The answer is simple of course: Almost everyone would choose to be a $40,000 per year lounger.

Except, the numbers are not even close to $40K/year. The argument gets flipped a bit when we use a more realistic number:

 

 

http://jec.senate.gov/public/?a=Files.Serve&File_id=935ec1e7-45a0-461f-a265-bbba6d6d11de

 

Unemployment benefits are not particularly generous—average weekly benefits are just 74 percent of the poverty threshold for a family of four. So it is unlikely that extended unemployment benefits inhibit individuals’ job search efforts. Simply put, even a low-paying job is likely to provide more support than that offered by UI.

 

 

 

http://tbogg.firedoglake.com/2010/07/08/the-laughter-curve/

 

The average unemployment check in America is $293 which, when multiplied by fifty-two weeks, is $15,236 per year…

 

 

Yep... They sure are living high on the hog, aren't they? That’s how fat and lazy those unemployed sons-of-bitches are. They’d rather kick back and enjoy the 74%-of-poverty-level good life than actually try to find real work.

[Marat]

Obviously by the recommendation that 'everyone get $40,000 a year' I meant that 'everyone working' get that amount, which is about the average working income. To prevent people from simply doing nothing and reaping the benefits of the society as 'free riders' there could be sanctions other than poverty, such as the criminal law.

 

I agree that introducing any of the drastic changes I suggested as innovations within a generally capitalist economy would just create chaos, since for example many small businesses would go bankrupt if they suddently had to pay everyone $40,000 a year. But I was thinking of these recommendations as elements in a coherent reshaping of the economic logic of the entire society.

 

The American GNP is now around $17 trillion a year. If every person received $40,000 a year in income from that total, wages for all 300,000,000 Americans would cost $12 trillion, leaving $5 trillion for infrastructure and capital investment. Now $40,000 a year for everyone, including children, those presently unemployed, and retirees, would represent a huge increase in the total wages now paid for the nation, so we could safely reduce this to perhaps $20,000 per capita to ensure that families would still have roughly the same income, on average, that they now do. This flexibility would allow more space for necessary capital investments in military hardware, industry, research and development, etc.

 

This redistribution could obviously only be effected by having what would amount to a 100% tax rate, with the government then allocating all the money generated by the economy equally. Money distributed by the government can be allocated according to real human need rather than according to greed, selfishness, and lust for luxuries, which are the interests absorbing money in the private economy, so with the government controlling all money we could have a society with decent healthcare, basic housing, basic transportation, and decent education for everyone, instead of some people living in dumpsters and eating their meals from garbage pails outside of restaurants, while others go on luxury golfing holidays in Bermuda. Since resources would be allocated to address the basic needs of all in preference to luxuries for some, the infinitely greater importance of satisfying basic needs to satisfying the desire for luxuries would mean that the society could purchase much more happiness per dollar of wealth created than it now does, thus making us effectively richer.

[Pangloss]

OK, if we want to talk about motivation, how about this: a -50% tax on people earning below a certain amount (a negative tax, so they earn extra money whenever they earn money). Obviously it needs to be bracketed so that it is always better to earn more. This can be paid for by a small tax increase on people earning over $250,000/year. I think this would be extremely motivational for the poor people, since they'd get paid 50% more.

 

Interesting. Certainly avoids the potential problem of slackers getting free cash. Unfortunately even with brackets it might have an impact on upward mobility. Every time you move up in salary, you get a pay cut.

 

Wouldn't a flat tax accomplish the same goal? You work more, you earn more. You earn more, you pay more. Simple, direct, motivating, and fair. Throw in a floor at the so-called poverty line (they pay nothing), and then set the percentage at whatever it takes to balance the budget based on the remaining 85% of the working, taxpaying base. Tax inheritance the same rate.

 

 

People can only work if there are jobs available (which, as you probably know, jobs are scarce right now with more demand for them than supply)

 

I agree; I support safety nets and temporary relief measures.

 

 

I agree that introducing any of the drastic changes I suggested as innovations within a generally capitalist economy would just create chaos, since for example many small businesses would go bankrupt if they suddently had to pay everyone $40,000 a year. But I was thinking of these recommendations as elements in a coherent reshaping of the economic logic of the entire society.

 

Fair enough; thanks for expanding on this point.

 

Obviously we don't agree on redistribution but I think you put a lot of thought into your argument and lay it out honestly, and I respect that. You and I just don't see the universe the same way. (grin) I'll just leave it at that.

[jackson33]

Marat; Refreshing, your post #8, no swearing, no name calling and direct rebuttal to comments....

 

Using the government to redistribute wealth from the rich to the poor need not in itself necessarily increase the deficit as long as those programs are adequately funded by increases in taxation on the rich and middle class.[/Quote]

 

Excluding the fact 95% of you daily activity is governed by your State or local Government, cost of the Federal Government (near 4T$ 2010) represents over a quarter of the US GDP (2010 est 14.6T$), not to mention at least 1.6T$ (2010) over what has been collected. Any additional expense in the foreseeable future, will have to come from borrowed or printed money, creating interest or inflation. Said another way IMO, taking from one person will go to the everyday cost of the Federal and distribution will be from borrowed funds.

 

Capital concentration is certainly necessary for building the enterprises that generate wealth. But if taxation levels were increased, the government could itself become a major agent for capital concentration and investment, such as in China, and there is no necessary reason why government-created wealth generating enterprises need not do the job as well as private ones do.[/Quote]

 

A Corporation, by nature and for purpose is to generate a profit. People voluntarily invest their wealth (stocks) in hope of receiving some reward (dividends/higher stock value). Management is long term and directed to those goals. Government on the other hand is time limited and concerned with being elected in a the next cycle (2-4-6 years) and cannot compete in efficiency with the private market, on an equal playing field.

 

Examples; Fanny/Freddy, were privatized in the late 70's, but maintained total control (regulation) over their activity. We could argue the possible cause for the 2008 "Financial "Crisis", but factually about 100B$ was lost by those in the private sector who chose to purchase those stocks. The US Postal Service, in 2010 will lose about 8B$ alone and has created deficit obligation (retirement packages) for themselves and the Federal Government, well into the future and growing daily. Fed Ex and UPS, on the other hand are showing a profit and liable to cover any future cost to the limits of their success.

 

China, by the way is a Monarchy and has a continuous government, has 1.6T people, mo

 

 

 

The purely socialist French train system is magnificent compared to the privatized train systems in the U.S. and U.K., and government investment in creating the capital asset of a public healthcare system provides universal coverage at 10% of the GNP in Canada while America's private healthcare system costs 17% of its GNP to cover 86% of its population.[/Quote]

 

While the French train system is relatively new but did show a profit last year, I'm not sure local services in the US are any less profitable or efficient. However Amtrak is a disaster and trying to increase service (new lines) will only add to the 32.00 per passenger trip subsidy already being paid.

 

I'm really not interested in rehashing US Health Care verses any particular other system. I happen to believe it's the best in the world, certainly for 310M people. As for 86% of the people, no one is refused medical attention in the US, on demand. Any Hospital, Clinic or other Medical Facility to receive Medicaid/Medicare payment, must treat any other person.

 

Of course it is true that people mainly work hard in capitalist cultures only if they get extra money for doing so, but in pre-capitalist cultures which gave primacy to values other than money, people worked hard to build the pyramids, create the Aztec Empire, and make Europe's cathedrals even without special financial rewards for harder or better work.[/Quote]

 

In "pre-capitalist" or more appropriate "Democracies" societies, people were born into what they were intended to do, one side called serfdom, slavery and the other the aristocracy class, then bred, trained and educated accordingly, frankly that's a poor analogy for "Social Justice", However today we strive primarily to give any person, equal opportunity to "achieve", regardless the environment they were born into. As those that built the pyramids, many people have been born into the current equal, the "dependency class" never attempting to advance. Those that have and their are plenty (80% of millionaires today, are self made) and tens of million middle class, would have not achieved without the opportunities offered by capitalism, under some form of a democracy.To even try and remove the incentives involved, taking from them to make the dependent folks equal in value only, would be an injustice to everything the modern world stands for....

 

In Amish communities today, neighbors build barns for those in their community lacking a barn, and they do this for no money at all, but just out of a sense of social solidary, since they are schooled from childhood in an ideology of communal rather than selfish values, and valorize friendship and kindness over personal gain. Even in capitalist cultures, everyone works as hard as he possibly can and takes risks beyond any financial compensation in response to the dire need of others in an emergecy, and it would be inconceivable that anyone would ask for a reward to rescue a child from a burning building. So motivation has other potential sources than money.[/Quote]

 

Whether achievement/accomplishment is driven by religion or for personal gain (sometimes both), the goals are the same. But charity is only a result of some success over others, if a beggar myself, I could hardly help a person short of making their house payment, medical bills or whatever.

 

Finally we have to ask how much poverty is truly deserved and how much is caused by circumstances over which people have little or no control? [/Quote]

 

Marat, I assume you were born in the US, but you or I could have just as easily have been born to an African Couple. Here the so called "poverty level" is about 28T$ (Family of four), with a life expectancy of 78-79 and so many means to achieve I couldn't list, where in Africa, most of the folks live on 10-50 US dollars per year, have life expectancies of 40-50 years and absolutely no possibility to succeed to any level of any American. So long as an incentive or opportunity exist for any American (this discussion) exist, any person born or that will be born can become the next Gates/Buffett or President of the US.

[padren]

Obviously by the recommendation that 'everyone get $40,000 a year' I meant that 'everyone working' get that amount, which is about the average working income. To prevent people from simply doing nothing and reaping the benefits of the society as 'free riders' there could be sanctions other than poverty, such as the criminal law.

This literally cannot work. We have a huge number of people who work in fields they may or may not succeed in, but are willing to live on next to nothing for the chance. Not everyone who wants to be an actor or actress, a musician, an artist, or a writer is going to be successful. Many won't even be very good. Some will be, but won't be recognized in their lifetime.

 

Now if someone wants to spend their time trying to make it as a writer while living on what little they can make do with, that's their business and I wish them all the best. If society had to pay them $40,000 a year whether they succeed or fail then the quality of their work and chances for success becomes my problem. It becomes a State matter, and that is untenable. If the state was responsible for "evaluating" if a risky venture (such as the professions above) were viable for the individual, we'd have a pretty bland literary and artistic culture. Yet, if the State had to decide how the People's Money would be distributed to unproven artists, they would be negligent not to.

 

I honestly believe the free market is the only mechanism organic enough to provide this sort of vetting process.

 

I agree that introducing any of the drastic changes I suggested as innovations within a generally capitalist economy would just create chaos, since for example many small businesses would go bankrupt if they suddently had to pay everyone $40,000 a year. But I was thinking of these recommendations as elements in a coherent reshaping of the economic logic of the entire society.

I have less decades to live on this planet than I have fingers. How is it "just" that even a majority-mob of people could hijack those years of my life for their own social engineering dreamscape? Forcing someone into a wealth distribution plan that benefits them is just as bad as forcing them into one that hurts them because the operative word there isn't "benefit" or "harm" but "force" which unreasonably limits freedom of choice.

 

There's a fine line between compelling people to comply with a system they don't like in the face of a major catastrophe, but it's a whole other thing just to do it because more people would might be better off than before.

 

The American GNP is now around $17 trillion a year. If every person received $40,000 a year in income from that total, wages for all 300,000,000 Americans would cost $12 trillion, leaving $5 trillion for infrastructure and capital investment. Now $40,000 a year for everyone, including children, those presently unemployed, and retirees, would represent a huge increase in the total wages now paid for the nation, so we could safely reduce this to perhaps $20,000 per capita to ensure that families would still have roughly the same income, on average, that they now do. This flexibility would allow more space for necessary capital investments in military hardware, industry, research and development, etc.

How much do you think a pint of beer would sell for if everyone had $40,000 a year coming in? Anyone with a profit motive could charge far more than current prices because people could afford it, since they really want their beer. Of course, the bar owner may want to lower prices because he makes $40,000 regardless and running in the red just means more people come in and it becomes more popular. Or the bar owner may raise prices substantially to attract a more distinguished clientele, and even if he gets only 3 customers a day he makes $40,000.

 

Or the State has to step in, set all the prices for beer, fight with breweries who make different qualities of beer, and "somehow" keep everything "fair" for everyone. The point is once you remove any natural value to the dollar, the numbers you throw around cease to mean anything: $5 trillion won't mean the same thing in terms of beer-buying-power. The numbers become almost meaningless.

 

It's not possible.

 

This redistribution could obviously only be effected by having what would amount to a 100% tax rate, with the government then allocating all the money generated by the economy equally. Money distributed by the government can be allocated according to real human need rather than according to greed, selfishness, and lust for luxuries, which are the interests absorbing money in the private economy, so with the government controlling all money we could have a society with decent healthcare, basic housing, basic transportation, and decent education for everyone, instead of some people living in dumpsters and eating their meals from garbage pails outside of restaurants, while others go on luxury golfing holidays in Bermuda. Since resources would be allocated to address the basic needs of all in preference to luxuries for some, the infinitely greater importance of satisfying basic needs to satisfying the desire for luxuries would mean that the society could purchase much more happiness per dollar of wealth created than it now does, thus making us effectively richer.

That's basically taking a good premise and going so far with it that it becomes an incredibly bad idea. We live in a society where we have an unprecedented capacity to generate enough revenue that we can afford major luxuries. It is perfectly reasonable, under a "free market" mentality, to see that a lot of that wealth comes at the expense of uninvolved third parties.

We make a killing in the shipping transport industry, and kids suffer greater incidents of asthma due to pollution that (if the costs were factored and attributed to our shipping company) would seriously eat into the company's bottom line.

Those aren't generally the result of evil or greed - they are the unexpected side effects new technologies and unforeseen consequences. Companies are reluctant to accept all such "adverse effect claims" because there are those who still believe short wave radios cause cancer and only wrist-worn magnets can protect you from them. So there is a lag time between the detection of the issue, the study and evaluation of the impact, and efforts to either clean fuel additives or tax dirty fuels so the costs are properly distributed, instead of being saddled on the sick children and their parents who never share in the company's profits. Sometimes this lag-time is extended due to stonewalling and outright corruption - but that is a corruption issue, not a wealth distribution issue. The mechanism for appropriate wealth distribution is already there.

 

Just as an aside, if it is a corruption issue, which is caused by human nature, why should it be necessary to re-invent the wheel in a manner that does not even address human nature and corruption? I'm sure there's a Yakov Smirnoff joke in there somewhere.

 

So we make money, we get rich, we can afford luxuries, and we know that (A) it wouldn't be possible if not for a lot of poor people and (B) that there will be costs we are not aware of to others that are not net-benefiting from our wealth. That to me, justifies a healthy income-tax to support the infrastructure, education and purchasing power of my clientele and programs for those in need. However, to completely remove individual self-determination from a society is completely over the top.

 

 

 

Lastly, why is it that so much of the discussion about poverty revolving around whether a person has a steady supply of money? Do we need a new word for the "self-sufficiently challenged" that are made visible through poverty? What do we do with people who blow their $40,000 so fast they end up begging for food? For those who's only crime is trying to help out a nice Nigerian prince?

 

There are a lot of reasons to be less than self-sufficient: poor skill training/lack of education, failure to take advantage of education, poor risk assessment, entitlement bias, poor impulse control, psychological issues, mental illness, addiction, a failure to understand even the most basic principles of birth control, physical illness or disability, and of course greedy rich people.

 

Wealth redistribution only addresses one: greedy rich people.

 

I am all for programs that help people get what they need to become self sufficient or help through the rough times we all caused that cost them their self-sufficiency but the issue goes far far deeper than just whether or not someone gets handed $40,000 every year. I do believe that whenever the screws get tightened all round, it's the people with means that usually avoid the brunt of it, and those who can't who get saddled, and I do think this leads to a genuine equality problem. However, it's not possible to just solve it by throwing money around. I support a degree of throwing money around as triage, but it sure isn't a solution.

Edited October 8, 2010 by padren

[D H]

This redistribution could obviously only be effected by having what would amount to a 100% tax rate

Nobody would work once they reached the 100% marginal rate.

 

thus making us effectively richer.

No. Thus making everyone dirt poor. Your redistribution might work for a few months. That money would quickly be spent and then there would be no more. No more goods, no more internet to play on, no more food.

 

No jobs.

 

 

 

 

[Marat]

Although theoretically the sick in urgent need of medical attention can get care in the U.S. even if they can't afford it, they don't really get 'real' medical care at all. Instead they are just dumped in a county hospital with Caribbean-trained fake 'M.D.s' delivering care under the highly implausible excuse that they are acting under the supervision of a real doctor who is in fact away from the hospital all day playing golf. This ultimately makes the maldistribution of wealth amount to killing poor people with substandard medical care so that taxes can be kept low on the rich.

 

Just because earlier economies which operated without greed as a motivator were also non-democratic doesn't mean that modern economies with alternative motivations would also have to be non-democratic.

 

It has been correctly objected that people would have to be directed into and out of work for which they were properly suided in a socialist economy, just as they are today in a capitalist economy. But whether a person is shifted in and out of jobs and career paths by market forces, such as happens in capitalist economies, or by a socialist command economy's decisions, shouldn't make any difference to the workers affected, since the result is the same.

 

Since the plan for paying everyone essentially the same wage for working (with small compensations for disgusting, non-rewarding, difficult, or dangerous work) would have to be part of a command economy, we wouldn't have to worry about economic subsystems, such as capitalist beer store owners setting their own prices, creating internal frictions for the economy.

 

There are plenty of adverse side-effects of greed in the economy today. When a company to increase profits closes down a plant and throws thousands of workers out of a job, knowing that there is no substitute employment near where these workers have rooted their lives psychologically and socially, that is a clear case of pure personal greed by the company owners hurting other people in a way that is made possible only by capitalism.

 

The basic thesis of science is that everything is causally conditioned and that nothing occurs causelessly. But only if there were truly uncaused behavior would there be human free will, or the ability to blame anyone for anything he did or he was. But since free will is contrary to the basic premise of natural science, and only free will makes blame possible, we cannot interpret poor people as responsible for their poverty, but we have to interpret their poverty as caused by the external forces of social science.

[iNow]

The basic thesis of science is that everything is causally conditioned and that nothing occurs causelessly.

No, actually. It's not. The basic thesis is that there is a method we can follow to better model the universe in which we exist. The basic thesis is that all claims should be falsifiable, and that when falsified, claims should be rejected. The basic thesis is that we remain open to possibilities, and that we try to refine our understanding of nature, ready to reject anything which is demonstrated false or inaccurate. The basic thesis is that every hypothesis must be subjected to scrutiny and challenge, and only those which survive the challenges be accepted, but even then only tentatively so.

 

More specific to your posts, you appear to be arguing for pure socialism. You are arguing an ideal, and ideal is not ever a valid descriptor for the reality in which we exist. We can strive toward ideals, but must simultaneously be practical and acknowledge that reality hardly ever allows itself to be accurately described using said ideals.

 

Pure socialism and pure capitalism have repeatedly proven purely untenable throughout history. We must find a balance... an intermediate mix... an eclectic hybrid of these models... and the effectiveness of that mix is contingent solely upon the society in which it is implemented and the population to which its dynamics are being applied.

 

Your ideas are all well and good in text books, but hardly tenable in the real world. I do hope you realize that.

[Marat]

When we talk about 'the basic thesis of natural science' we can begin at varying levels of generality, and you have offered a higher one than I was talking about. But no natural scientist, finding himself confronted by the problem of explaining why a rock rolled down a hill, would ever regard it as a reasonable hypothesis to say, "Because the rock just felt like it and decided to roll down out of its own free will." But why not? That account would fit the data and explain the motion. The reason such an explanation would not even come into view is that it is a basic, working hypothesis of all natural science that everything acts by a cause outside of it, or, as Sir Isaac Newton put it, "The motions are as the forces" -- i.e., a moving particle has to have its motion explained by an external force acting on it.

 

When we turn to humans, however, we find that we do posit uncaused actions from pure free will. But this is really just an ideal construct developed in order to make it possible to praise or blame people for what they do, since it is putatively the result of 'their own free self-determination.' A natural scientific view of people, however, would have to say, as the sciences of humans -- psychology, sociology, anthropology, economics, etc. -- do, that the things people do are the result of the external social forces acting upon them, not of their own intrinsic freedom. To say that anything acts by its own intrinsice freedom is the error of hylozoism, which was always considered the antithesis of scientific explanation. By 'external forces acting on people' I include everything outside what is theoretically supposed to be their ideal, inner source of free self-determination, so physical forces within the human body, such as excessive adrenalin, brain tumors, low testosterone, etc., would all count as external to the artificial construct of morality known as 'the free self.'

[iNow]

sorry... thread mix up. post deleted.

Edited October 9, 2010 by iNow

[Pangloss]

When we talk about 'the basic thesis of natural science' we can begin at varying levels of generality, and you have offered a higher one than I was talking about. But no natural scientist, finding himself confronted by the problem of explaining why a rock rolled down a hill, would ever regard it as a reasonable hypothesis to say, "Because the rock just felt like it and decided to roll down out of its own free will." But why not? That account would fit the data and explain the motion. The reason such an explanation would not even come into view is that it is a basic, working hypothesis of all natural science that everything acts by a cause outside of it, or, as Sir Isaac Newton put it, "The motions are as the forces" -- i.e., a moving particle has to have its motion explained by an external force acting on it.

 

When we turn to humans, however, we find that we do posit uncaused actions from pure free will. But this is really just an ideal construct developed in order to make it possible to praise or blame people for what they do, since it is putatively the result of 'their own free self-determination.' A natural scientific view of people, however, would have to say, as the sciences of humans -- psychology, sociology, anthropology, economics, etc. -- do, that the things people do are the result of the external social forces acting upon them, not of their own intrinsic freedom. To say that anything acts by its own intrinsice freedom is the error of hylozoism, which was always considered the antithesis of scientific explanation. By 'external forces acting on people' I include everything outside what is theoretically supposed to be their ideal, inner source of free self-determination, so physical forces within the human body, such as excessive adrenalin, brain tumors, low testosterone, etc., would all count as external to the artificial construct of morality known as 'the free self.'

 

I don't understand how any of this answers iNow's excellent (implied) question to you. Can you be more specific and less... verbose? It's interesting, and I don't mean to be rude, but it seems like you're trying to hide in rhetoric here. Maybe I'm wrong? Here's what he said, again, in case you missed it:

 

Pure socialism and pure capitalism have repeatedly proven purely untenable throughout history. We must find a balance... an intermediate mix... an eclectic hybrid of these models... and the effectiveness of that mix is contingent solely upon the society in which it is implemented and the population to which its dynamics are being applied.

 

Do you agree or disagree with this statement? It's cool with me either way but I don't understand your previous reply.

[Marat]

My previous reply was only to his initial statement in the post before that, which was discussing what is the basic premise of natural science and whether it should include the assertion that 'all events have to be causally explained, and nothing can be self-caused.' The reason we were discussing that was because he had said that some of the poor were that way because of their own fault in terms of their laziness or lack of ambition, and I was arguing against it that since everything has to be explained by external causes, the fact that some humans are lazy shoud not be explained because they are blameworthy for having exercised their own free will to be that way, but only because their social environments had caused them to be that way.

 

With respect to the previous statement of his that you quote, I would offer the following response: We know that at least moderate versions of socialism, such as that practised in Norway, Sweden, and Denmark, can work effectively in modern societies. The failure of more extreme versions of socialism, such as those practised in Maoist China, the Soviet Union, or Erich Honnecker's East Germany, cannot be separated from the extraneous variable that these socialist systems were all engrafted onto societies which had all been in one way or the other failed states before their socialist experiments. It is quite likely that the totalitarian or inefficiently structured social forms, cultural dispositions, and popular attitudes just persisted to ruin the newer socialist systems just as they had ruined their respective predecessors. Japan could argue persuasively to the League of Nations, when they were accused of having violated the sovereignty of China in 1932, that China was so chaotic and ineffective as a state that it was in effect not a state at all, but only a geographical expression. Tsarist Russia before the Soviet take-over had the per capita GNP of Portugal, which is today the poorest country in Western Europe. And because the invading Soviets never uprooted the Nazi culture they found when they moved into Eastern Germany in 1945, historians characterized Communist East Germany as essentially just a totalitarian persistence of Nazi Germany into the modern world.

 

Since wealth is vastly more efficient in producing human happiness when it is more evenly distributed so as to answer the basic needs of all rather than service the demands for luxury of the few, it seems that efforts should be made to put that obvious, a priori principle into practise. This may prove technically difficult, but the advantage evident in that initial principle is so great that it would be a pity to give up on it prematurely just because of some failed attempts in the past.

[iNow]

The reason we were discussing that was because he had said that some of the poor were that way because of their own fault in terms of their laziness or lack of ambition[

Look again.

I've never said anything even coming close to resembling that.

 

You REALLY need to work on reading comprehension before you hit that submit button.

 

 

Since wealth is vastly more efficient in producing human happiness when it is more evenly distributed so as to answer the basic needs of all rather than service the demands for luxury of the few, it seems that efforts should be made to put that obvious, a priori principle into practise.

This, too, is false. Wealth is "vastly more efficient in producing human happiness" when it is given to those who lack it. Those who have it already, and even those who are self-sufficient and not suffering, do not tend to have any measurable increase in happiness as a result of greater wealth. It's only those in the "lacking" category who show measurable change in measures of happiness when wealth is given.

 

In addition to working on your comprehension, ability to accurately interpret the points of others, and argument from ideal state instead of realistic ones, I would encourage you to also attempt to validate your premises prior to forming conclusions from them.

[Pangloss]

We know that at least moderate versions of socialism, such as that practised in Norway, Sweden, and Denmark, can work effectively in modern societies. The failure of more extreme versions of socialism, such as those practised in Maoist China, the Soviet Union, or Erich Honnecker's East Germany, cannot be separated from ... (etc)

 

If your argument is that we don't know that pure socialism can't work because it's never been honestly tried, fair enough, but the same can be said for pure capitalism.

 

I'm afraid I also can't agree that "wealth is vastly more efficient in producing human happiness when it is more evenly distributed".