The Angry Rich
nytimes.com
nytimes.com
"I've spent my entire life working to build wealth. I've sacrificed and it's paid off. Now I'd like to use my wealth in the way I see fit. Whether that's spending it, saving it, investing it or giving it away, it should be my decision, not a government planner's decision."
Again, right or wrong, that is how the rich view the situation when they are facing increased taxes and dilution of their wealth through inflation. Whether you agree with it or not, it's not hard to understand.
Krugman believes that the government can, and will, spend money in a way that benefits society as a whole more than the people who earned it would if they were allowed to keep it. The rich disagree.
Take Ben Stein for instance. The guy is pissed off. And yet, he was born to a presidential advisor and had quite the head start in life. He'll never see it that way mind you. But I'm pretty sure his own father would disagree with his latest rants. Don't take my word for it, read this:
http://www.progressive-economics.ca/2006/06/09/adam-smith-di...
[T]he people who wear the Adam Smith tie are not doing so to honorliterary genius. They are doing so to make a statement of their devotion to the idea of free markets and limited government. What stands out in WofN, however, is that their patron saint was not pure or doctrinaireabout this idea. He viewed government intervention in the market with great skepticism. He regarded his exposition of the virtues of the free market as his main contribution to policy, and the purpose for which his economic analysis was developed.
Yet he was prepared to accept or propose qualifications to that policy in the specific cases where he judged that their net effect would be beneficial and would not undermine the basically free character of the system. He did not wear the Adam Smith necktie.
These cases were numerous, and some of them are surprising. I give here a list, certainly incomplete, largely derived from Viner’s article on Smith written for the sesquicentennial of the WofN. (The parentheses are mine.)
The government could legitimately do the following:
– Protect the merchant marine and give bounties to defense-related manufacturing industries.
– Impose tariffs on imports in order to bargain for reduction of tariffs by other countries.
– Punish, and take steps to prevent, dishonesty, violence and fraud. (Does this include the SEC, and would prevention of violence justify measures to assist ghetto youth?)
– Establish indicators of quality of goods, such as the sterling mark for silver. (Does this justify the Food and Drug Administration, the Federal Trade Commission and the Consumer Product Safety Commission?)
– Require employers to pay wages in cash rather than in kind. (Could the government conversely require employers to pay part of wages in the form of health benefits?)
– Regulate banking.
– Provide public goods, such as highways, harbors, bridges and canals. (What about railways, airlines?)
– Run the post office. (Also telephone, the information highway?)
– Grant patents and copyrights.
– Give a temporary monopoly to a trading company developing commerce in new and risky regions. (Is this industrial policy, managed trade?)
– Require children to have a certain level of education.
– Provide protection against communicable diseases.
– Require the streets to be kept clean. (Environmentalism?)
– Set a ceiling on interest rates.
– Impose discriminatory taxation to deter improper or luxurious behavior.
Statistically, the rich are getting richer. The middle class are the ones who should be angry as they are the demographic who have suffered the most economically in recent decades.
This political cartoon nicely counters the rich's complaints about tax burden:
I would attribute the recent anger of the rich, and their tea party proxies, more to greed than rational self-interest. I see the present greed as irrational because it creates the potential of political blowback that will likely imperil the greedy in the long term.
It's pretty hard to argue that the lower classes are getting poorer when you compare what we had 50 or 100 years ago with what we have now: our houses are bigger, they have plumbing and electricity, they're filled with God knows how many gadgets and appliances, cars outnumber people, sugary and fatty foods that used to be considered luxuries are eaten in excess even in (or especially in) the lower classes.
We're definitely better off. If the middle classes are suffering it's because their own prosperity meant they never learnt to live within their means.
These people are basically being told that they've hit their limit. Society has hit it's limit. They have been reaching for the American dream, and by everyone else's standards they've achieved it. But they think, as society's golden children, that they shouldn't have to make any sacrifices on their journey (while asking everyone else to sacrifice to bail them out).
That's really what it is. They're being told they can't have everything, and they are apoplectic about it, and are taking it out on the bearer of that message. It's kind of a sad temper tantrum. Unfortunately it may drag America back into the mire from which Culture Warriors like Sarah Palin and Bill O'Reilly plan their verbal asymmetric warfare.
The really galling part about all of this nonsense (at least when it comes to bankers) is the notion that they weren't complicit in creating the situation that we're in, that requires everyone to cut back. This isn't something that's being done to them. This is a direct result of the consequences that our society chose to do, two wars, massive tax cuts to the wealthy, all deficit spending. This has a good explanation: http://delong.typepad.com/sdj/2010/09/in-which-mr-deling-res...
Inflation means that can buy less with each dollar they have.
When the government adds to the currency without adding any actual value, usually by printing money, they're "inflating" the amount of currency available and actually making every existing dollar/pound worth less. It affects everyone, rich or poor.
It's a way of taxing without actually increasing taxes, and to my original point, rich people don't like it.
Except the government tends to heavily subsidize the rich. I'd be happy to get rid of taxes, earmarks, bailouts, pork, etc. I don't expect that to happen without the aid of a collapse, though.
The need of our economic system to keep people consuming creates advertising indoctrination that pulls our attention away from what really satisfies: Day to day relationships with other people and the details of our life. Excess wealth is more a matter of aggressively possessing things that other people don't have than enjoying those things for themselves. It leads to an empty narcissism that leaves the rich unsatisfied and without empathy for the victims of their greed. And frustrated and angry and in search of scapegoats.
The post I was replying to was trying to insinuate that having "excess wealth" leads to being unhappy and therefore (in the context of the OP) it is ok to tax the rich more because it will make them happier in the end. And that is a bullshit reason for taxing someone.
1) Efficiency concerns: decentralized allocation of capital versus political allocation of capital
2) Business cycle concerns: raising taxes in a recession was one of the things done during the Great Depression, and there's a reason it lasted 12 years.
3) Fairness concerns: The rich already give about half their income to government (depending on the state and the method by which they earn their income). How much is too much?
4) Revenue concerns: the income of the rich is highly volatile, and so is the revenue of a country that depends on heavily progressive taxation.
5) Long term economic growth concerns: Capital is more mobile than ever, and people will prefer to invest in countries with lower taxes, ceteris paribus.
6) The Laffer Curve: it has an inflection point.
I'm not saying the anti-taxers are right, but any honest commentator should acknowledge that some arguments exist on the other side. But in Krugman's world, people only disagree with him because of personality flaws (angry, selfish, myopic, stupid, etc.). I can't stand the man's smug self-righteousness which he keeps regardless of how mainstream or controversial his opinion on the topic at hand. The man sold his soul to democratic socialism a long time ago to the point he pretends that no other valid worldview exists.
I can't think of a single economics columnist who is more partisan or who treats his opponents with less regard.
In particular, this article scans like a college newspaper op-ed. It is a simple Rah Rah piece for his side. It could have been written by a campus Marxist group. "Look at the poor rich folks, struggling to pay for their private schools and limosines". Gosh Mr. Krugman, with such incisive commentary I can see why you got that Nobel.
And of course he forgets to mention that most rich people vote Democrat, so his entire argument that the rich are "angry" is questionable to start with.
> most rich people vote Democrat, so his entire argument [...] is questionable to start with.
Not even close to correct. Gender, age and state of residence are good proxies for voting patterns, but none is better than wealth/income. The rich, as a class, support republican candidates. The basic rule is that rich states vote Democrat, rich people vote Republican.
Keep in mind that I am merely stating that an argument exists, an not making it per se. I am questioning Krugman's rhetorical strategy of assuming that no reasonable disagreement exists.
The only data I can find puts people making over $125,000 as 46% Democrat and 51% Republican in 2004[1]. Of course, this was before the banner Democratic years of 2006 and 2008 when Barack Obama beat McCain in campaign contributions 3 to 1 among employees of large Wall Street banks.
So you're right, it more even than I thought. Rich people probably went Democrat in 2008 and may swing Republican again in what is shaping up to be a huge year for team GOP.
[1]Ugly google link:http://www.google.com/url?sa=t&source=web&cd=2&s...
[2]-http://www.opensecrets.org/pres08/contrib.php?cycle=2008&...
-http://www.opensecrets.org/pres08/contrib.php?cycle=2008&...
The authors of the book Red State, Blue State have all the data you need to answer this question, and they helpfully blog various tidbits and state breakdowns on various issues like this.
While the couple earning that in the Bay Area may be doing it hard, the difference between that and the lifestyle of the poor is immense.
There is a fairly thick layer (my bet is at least 35% of the population) of middle class people between your Californians on $125k and hopelessly hardscrabble folk on the breadline.
Edit: it looks like it might be a little higher percentage, actually, if we extrapolate from old data from the 2000 census http://ccsre.stanford.edu/reports/report_13.pdf
I'm pretty sure among you and Krugman, you're a hack.
I'd be hard-pressed (as would you) to concoct a "poor" person's tax return with an average rate of roughly 30-40%.
"... consisting of people who feel that things to which they are entitled are being taken away."
If I am rich in America, chances are that either I, or my family before me, earned the money in the most effective free market known. I'm not saying it's perfect, but it's the best we've got. The assertion that I should be able to keep what I have earned is not entitlement. Entitlement is the assertion that I have a right to something, without regard for effort or trade.
I am entitled to keep what I have earned. Taking my earnings is a moral wrong. There is no two ways about it. It is no more right to take a dollar from a man who has a hundred of them than it is to take a dollar from a man who has one.
Just to be clear, you are stating your moral opinion. There is nothing inherent about these opinions. Just like my opinion that if you are rich you have likely benefited disproportionately from and made use of the structures of society that made it possible for you to get rich, and as such it's perfectly reasonable to ask you to contribute from your wealth to the upkeep of society is also just an opinion.
And speaking of moral wrongs, what about the moral obligation to help people those who are less fortunate?
Most of your tax money either goes to propping up a bloated military-industrial complex, maintaining bases overseas, counterterrorism ops, foreign aid to oppressive regimes, etc etc.
If you're a pro-tax liberal you're probably against high defense spending, but you're perfectly happy to keep funding it with your tax dollars.
Just food for thought.
EDIT: If you want to quibble, the majority of discretionary spending is military(not counting Social Security/Medicare). Since that's where your income tax dollars go, it's a reasonable argument to make.
http://en.wikipedia.org/wiki/United_States_federal_budget
http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY... (FY 2009 per the actual graphic, despite the file name)
One of the things that amaze/frustrate me about the US taxes is that noone ever suggests that maybe the military budget could be cut by 50% or so...
And remember, we don't just pay federal income taxes. We also pay state incomes tax (most states), sales tax (most states and locales), property tax, item taxes (like luxury taxes), FICA tax, etc...
While I'm sure a LOT of money goes to the military, I'm not sure I believe it is most of it.
It shows military and security spending as 63% of the 2011 budget(895 billion).
The discussion here seems mostly about the income tax, so I'm focusing on that. I'm not morally opposed to paying taxes to live in a civilized society. I AM opposed to two thirds of my money being spent on instruments of death and building up the American war machine.
If you look at non-discretionary spending as well, you'll see that it's like.. less than 20% of the money spent.
Have you ever, once in your life, met someone who identified as a "pro-tax liberal"?
Didn't think so.
I'm a "pro balanced budget" liberal, and that meant that throughout the Bush years I was saying "Hey, we're gonna have to pay for these tax cuts eventually", while simultaneously saying "Hey, let's cut defense and homeland security spending because at least 1/2 of it is BS that doesn't make us safer."
Not like I love the idea of paying more taxes, or of quote "big government" - I just give basic arithmetic a lot of respect.
I believe there is a famous quote about that.
Even if it wasn't, no moral obligation is being satisfied when such "help" is forcibly extracted.
Further, it can be convincingly argued that such forcible extraction and wasteful reallocation of wealth reduces many people's capacity and willingness to voluntarily help those less fortunate.
Society isn't some uniform, monolithic thing that exists in own right, that we either choose to participate in or not. Society is the product of actual relationships among real people. They don't depend upon external institutions as a precondition of cooperating toward mutual benefit, but establish those institutions as a consequence of doing so.
Everything we call 'society' is the result of people making the choice to interact with each other. From there, communities arise, customs emerge, and economies develop. But every tax, regulation, divisive political program, and every faction seeking to impose its narrow agenda on everyone at once just have the effect of raising the stakes of participating in society. They give people more to lose and more to fear in openly relating to others; people become less likely to form stable networks of trust and more likely to become isolated, disconnected, and paranoid.
When we so stridently pursue policies intended to 'upkeep' an abstract, taken-for-granted concept of society, we risk undermining the basis on which real, actual societies function.
How about enforcement of contracts, roads, and currency, to name the first three that came to mind?
But every tax, regulation, divisive political program, and every faction seeking to impose its narrow agenda on everyone at once just have the effect of raising the stakes of participating in society. They give people more to lose and more to fear in openly relating to others; people become less likely to form stable networks of trust and more likely to become isolated, disconnected, and paranoid.
I have no idea where you came up with this. It's empirically falsified just by looking at which of the populations of low-tax, laissez-faire America and high-tax, social democrat Western Europe is the most disconnected and paranoid...
The question of contract enforcement is more interesting. I would entirely agree that law is a necessary mechanism, without which the few 'bad apples' in society would spoil the rest. But I think it's important to note that if breaches of contract - that is, failure of people to maintain their voluntary arrangements in good faith - were the general case rather than outliers, no amount of law could prevent society from failing. The judicial process is a tool we can use as a fallback solution to protect those arrangements we freely create with others. But it should be clearly distinguished from the regulatory mentality which seeks to prescriptively define those relationships in advance, and compel adherence to a set of prepackaged social models without specific regard to the preferences and expectations of the individuals in each case. The regulatory model designs the overarching system around the outlier failure conditions rather than permitting the flexibility that optimizes the general case. Law is appropriately the brake pedal, not the gas.
I'd disagree with your perceptions of America as being particularly disconnected and paranoid - Americans are stereotypically confident and optimistic - although I think that individualism and cultural pluralism in America might often lead to more paranoia about social policies that seek universal solutions to complex problems. There may be a reason why the social democratic model seems to work most effectively in the cultures where 'Jante law' is most evident.
You were able to earn that money because:
1. You most likely live in a relatively free society most likely operating under the rule of law.
2. You were able to achieve what you did by "standing on the shoulders of giants".
3. You're most likely the recipient of an education provided by society that gave you the tools and opportunity to succeed.
Now, if society says that "Because we've helped you be so successful, it behooves you to contribute X percentage of your earnings back to society.", is that so wrong?
You have a moral responsibility to leave the world the same or better than you entered it. This concept seems to be lost in a sea of selfishness today...
The argument is which is the superior method for making the world better. On one side you have Krugman who believes you should tax the rich and let the government spend the wealth the rich accumulated to improve conditions for everyone.
On the other side you people who think that if you allow people to spend, save and invest their money as they choose, society will come out better in the end.
Side A likes to portray side B as selfish, greedy bastards and side B likes to portray side A as communists thieves. Really though, if you take the actual objectives of both sides I would argue they're generally noble.
There is still the matter of who is actually right. That is where the real argument is.
And I think you've seen some of this in statements from people like the lieutenant governor of South Carolina, when he said, "My grandmother was not a highly educated woman, but she told me as a small child to quit feeding stray animals. You know why? Because they breed. You’re facilitating the problem if you give an animal or a person ample food supply. They will reproduce, especially ones that don’t think too much further than that. And so what you’ve got to do is you’ve got to curtail that type of behavior. They don’t know any better."
Their belief isn't one that they can make the world a better place. But rather of actual superiority (hence they shouldn't be forced to give resources to inferior people). This I do think is a fundamental difference.
On one hand you have Keynesians who want to screw the rich out of envy and spite and have no concern for the poor, or even worse, actually want to oppress the poor to keep them as their constituents.
On the other hand, you have, like in your example, capitalists who think of the poor as an inferior species to be ignored, or worse, eliminated.
Neither side is immune.
I mean think about this. We're talking about an increase of 4% in the marginal tax rate for those making above $250k/year. A rational argument would be to look at the impact of where these tax dollars go versus what the wealthy might do with it. In itself this should be a very innocuous discussion. But look at what we have.
This is not about the best way to make the world a better place. But I do think it is more about "who _deserves_ to have resources".
Of course greed and self-interest is part of the motivation for making those arguments, but most free market economists and supporters truly believe that by allowing the rich to keep their wealth that all of society will benefit. Rich, poor, everyone.
You may disagree, lots of people do since at face value it is counter-intuitive, but my point is just that a lot, probably the majority of free market supporters, actually do have the benefit of all of society in mind. They'd say that the 4% increase in marginal tax rate would actually be detrimental to the poor. Again, you may have excellent arguments for why it is better for the government to take and spend that money, but they have logical counter-arguments.
In Reagan's era they would pitch trickle down as how everyone benefits from these tax cuts. The actual stated goal was to make life better for everyone, but starting from the top.
The current stated goal from the right is that the rich deserve the money, and the poor do NOT deserve. Not that the tax cuts will have some side benefit to the poor. Rather that we need to keep the money out of the hands of the poor. This is why the constantly use the code word "welfare" when talking to their base.
Again, there is a very rational argument to be had here. In fact, I think a rational argument would be a very boring one for most people in the US. But I think the reason that everyone is up in arms is not due to their passion for capitalism. But rather I think there's a fundamental belief that there are certain groups of people unworthy of _their_ money.
- Taking actions that result in rich people having more money is more likely to result in them saving or investing it, and not in them going out and spending it right now.
- Taking actions that result in someone who is just scraping by having more money is more likely to result in them spending that money right now.
If the goal is to get the economy moving again, I tend to think the latter solution is a better one in this instance.
Also, public works are a great thing to spend on - we're going to have to do it eventually, labor is really cheap right now, and it's better to fix before it breaks and more people die because of broken gas lines or collapsing bridges....
Ummmm. What do you think that saving and investing are?
Surely the rich guy isn't saving by stashing the money under his mattress, or he wouldn't have gotten rich in the first place.
Perhaps he's putting the money in the bank, in which case it's going to be used to underwrite someone's mortgage, or something like that.
Perhaps he's investing it in the stock market. But support of equities means that he's financing business, which is just another way of saying that he's helping to create jobs.
someone who is just scraping by having more money is more likely to result in them spending that money right now
Assuming that's true, what comes of it. I picture that person going out and buying a nice new HDTV from Sony, and much of that money going to Japan rather than sticking around in America.
Obviously I've picked my examples to tilt in one direction. But it ought to illustrate that what many people seem to believe is obvious common sense is far from that, and perhaps even, counter-intuitively, turns out the opposite.
After the IPO (and other secondary offerings), "the market" usually doesn't drive a corporation's funding. Companies can make some small out of money from releasing new stock, but not counting things like bond issuances (ie, borrowing from people or banks), they don't benefit from people playing the market.
That HDTV was probably built in China, not Japan. Even so, a lot of that money stays behind, in the distribution and retail channel. Someone's got to drive the trucks from the ports to the stores, for example.
Perhaps Krugman is simplifying for those of us who don't have degrees in economics, but he's suggested multiple times that rich people who "save" their money somehow take that capital out of circulation.
Sure, we can argue about particulars of how the government chooses to allocate those "takings." I wish my government would spend less on its military, for instance. Other people might wish it to spend less on social welfare programs. But neither of us can honestly use absolute language like "Taking my earnings is a moral wrong. There is no two ways about it." Arguing that states cannot tax is arguing that states cannot exist.
My apologies if you are an honest defendant of some form of anarchism, but I feel like using such absolutist language to discuss a proposed three percent increase in the top marginal tax rate seems incongruous. It feels like you have the intent of inspiring knee-jerk emotions instead of rational discourse. It's fishy.
How do you determine the line between what one has earned vs. what one may have been granted via a series of societal issues?
The general prosperity of society is built up by an uncountable number of these successes and rewards. Hand-wringing about whether your own contribution would be possible absent all the prior contributions is putting the cart before the horse. You aren't illicitly skimming profits from society, you're making valuable contributions in your own right.
did you "earn" the particular set of aptitudes and interests that made you a "high earner" at this juncture in history? i'm pretty sure you were just lucky in that respect.
you mention "or my family before me" - it takes quite a particular set of beliefs to say that you are entitled to what your ancestors earned.
what if you inherit tremendous wealth from ancestors who "earned" it through tremendous injustice (slavery, exploiting addiction, etc.)? even if you go on to leverage that wealth legitimately, how do you compare your earnings against those of someone who started out differently.
I see a lot of that attitude, that because I was born smart is why I have the job I do now. I wasn't born smart. That information didn't start out in my brain. I spent a lot of Saturdays as a kid at the library, reading non-fiction. I spend a lot of time now, reading non-fiction. In other words, I study.
I have a career coach, that helps me make plans to accomplish my goals. A lot of work went into this 'born success'. I think it's only perceived that way because others don't want to see that they can do it, too.
So cut the crap.
This looks to me like nothing but shouting him down because you disagree with what he's got to say. In a case like this, I think you ought to win the battle through superior logic and rhetoric, not just by voting him down so nobody sees his thoughts.
And given how extraordinary the claim is, there's not a single argument to support it. It seems like the definition of trolling. A well-reasoned argument for why we should either have no taxes or an extremely regressive tax system would be welcome, but I see nothing of the sort in that post.
It sounds now like what you want is not a reminder that there is a valid and consistent moral theory that supports this idea (just as there are alternate theories that arrive at different conclusions). And to be perfectly blunt, this is all that Krugman has done: voice one alternate theory, with no concrete support whatsoever (and that from a Nobel prize-winning economist!).
It seems you're looking for nothing but political punditry. But to me, we should start with a moral code, and then work out how well we're tracking that code. You seem to want the opposite: calculate an answer, and then find a moral code that fits it.
Likewise, your position that taxation in the US is wrong is an extraordinary claim, even with a pithy saying. Most conservatives would agree that some taxes are necessary.
With that said, there's probably nothing that stops you from buying an island and enjoying all fhe fruits of labor you can create outside of the global economy. If you don't want to enjoy any investment that the state has made (past, present, and future), you can remove yourself from the state.
But you're arguing that in the US any taxes are wrong, period. End of argument. That's an extraordinary claim in my book. And looks exactly like the form that trolling usually takes.
If you scan back up the thread, you'll see that I haven't made any such claim. My statement was that this is a valid moral theory, and can't be dismissed out-of-hand (as you are continuing to do).
That is, I haven't argued in agreement to the poster above, I've just called you (and others) out because you've shouted him down with negative votes, without actually addressing his viewpoint.
Now that I think about it, this just might be the heart of what Krugman was referring to. If people are so dismissive of these concerns, then it should hardly be surprising that others having these values are left angry and frustrated.
I'm not sure what a "valid" moral theory is. What I do know is that he made a claim that no reasonable person that I know would agree with. And provided no evidence to back it up. This is trolling. When you say that Wiles proof of Fermat's Last Theorem is wrong, with no evidence, that is trolling. When you say Ruby is strictly superior to any other programming language, with no evidence, that is trolling. When you say that taxes are morally wrong, with no argument for it, that is trolling.
And trolling gets people downvoted. That's my argument against you. :-)
How is that an extraordinary claim?? I personally believe that it's so self-evident and obvious, that to argue otherwise would be the extraordinary position.
Alot of the wealth in the top 1% of Americans these days was earned by people who in one way or another got rich by timing their entry and exit from the scam properly. An honest assessment of wealth creation since 1980 could come to no other conclusion. The scam was so big that they might not be morally accountable in a personal sense for doing wrong. But do these people deserve to keep their earnings, even as the extent of the scam becomes clear to the rest of us?
The reality is that money is not earned in a vacuum. We all depend on others to make our living somehow, even self-employed solo founders. If society cannot bear to give so much to the wealthiest 1 in 1000 any longer, do they have a right to collapse the whole economy in defense of their profits?
They did this for no other editorials. After reading this column, I finally understand why.
Pensioners should be the angry people, they will see their pension be lower each year (and nowadays it is extremely difficult to pay for food with an average pension) just to help government to reduce its deficit. They don't have lobbies and this year is not time for election so put more weight on the back of poor old people this is just the face of justice.