Oct 02 2009

Hating the rich

Category: Uncategorizedharmonicminer @ 10:08 am

In a display of absolutely stunning ignorance about how the world works, the way economies work, and the nature of wealth cretion, here is Les Leopold claiming that The Forbes 400 Shows Why Our Nation Is Falling Apart

Collectively, those 400 have $1.57 trillion in wealth. It’s hard to get your mind around a number like that. The way I do it is to imagine that we were still living during the great radical Eisenhower era of the 1950s when marginal income tax rates hit 91 percent. Taxes were high back in the 1950s because people understood that constraining wild extremes of wealth would make our country stronger and prevent another depression. (Well, what did those old fogies know?)

Had we kept those high progressive taxes in place, instead of removing them, especially during the Reagan era, the Forbes 400 might each be worth “only” $100 million instead of $3.9 billion each. So let’s imagine that the rest of their wealth, about $1.53 trillion, were available for the public good.

What does $1.53 trillion buy?

It’s more than enough to insure the uninsured for the next twenty years or more.

It’s more than enough to create a Manhattan Project to solve global warming by developing renewable energy and a green, sustainable manufacturing sector.

And here’s my favorite: It’s more than enough to endow every public college and university in the country so that all of our children could gain access to higher education for free, forever!

Just ignoring all the other stupidity and economic ignorance in these assertions, does Leopold actually believe that if these wealth-creators had been taxed at 1950s rates then that 1.53 trillion would have been spent on any of the things he lists?

The fact is that the government had hugely more money than that over those decades…  and much of the money the government DID have came from these very rich people, in the form of taxes they did pay.  The history says that when taxes were cut, revenue to the government in tax receipts went UP, because people took more risks in investing the capital they had, risks which paid off, on average.  The government had MORE money than it would have had with high tax rates.  And the government chose to spend its money on entitlement programs that helped get statist politicians re-elected, not innovative research that would have floated all boats.  The money went to programs which largely subsidized and incentivized bad behavior, and made people feel like they had a right to it in the bargain.

Leopold seems not to grasp that if that 1.53 trillion was turned into liquid cash to fund his utopian fantasies, then millions of people, who are employed because that money is INVESTED, would be instantly out of work.  These rich folk don’t have their money in a mattress somewhere.  They want to make a profit, so they put it to work.  It’s the capital that makes it possible for any of us to be more than subsistence farmers.  And if that 1.53 trillion had never been in private hands, it’s likely that Leopold would have been typing his idiotic opinions on an equivalent to the 1985 Commodore 64….  which would have been invented just last year, and would cost $5000, and be affordable only to those same rich folk.  Maybe he should review the track record of micro-computer innovation in the Soviet Union.  It should take about 3 seconds to cover the history, which is essentially simple theft of western innovation, because they had none locally.  I wonder how Leopold would feel about typing his drivel on a Mark II Royal typewriter?

Of course, I suppose it’s unreasonable to expect Huffington Post to give a platform to an economist who actually understands these things.  Will they ever give a regular column to Thomas Sowell?

Only in your dreams.