Last night I started to pick apart the article one paragraph at a time, but by the time I was two-thirds through I realized I'd be asking too much of my busy readers. Most of you appreciate brevity, and my essay was going to be anything but brief. Plus, I've said it all before. So I'll just comment on a few of the article's paragraphs, and follow with a couple of earlier essays on the topic:
The gulf between the richest 1 percent and the rest of America is the widest it's been since the Roaring '20s.
In other words: The richest 1 percent have been reporting a lot of income lately.
The very wealthiest Americans earned more than 19 percent of the country's household income last year---the biggest share since 1928, the year before the great stock market crash. And the top 10 percent captured a record 48.2 percent of total earnings last year.
In other words: The very wealthiest Americans earned 19% of the total income reported by U.S. citizens last year. The biggest percentage since 1928. The top 10% earned 48.2 percent of total reported income.
To characterize the total income earned by individuals as "the country's household income"---that is to be "shared" among the people---is wholly fallacious and incites class-warfare. Income is generated by the efforts of individuals, and is to be (ideally) allocated by those who earn it. Not divvied up by bureaucrats.
Berkeley's Emmanuel Saez, said the incomes of the richest Americans surged last year in part because they cashed in stock holdings to avoid higher capital gains taxes that took effect in January.
In other words: A pending increase in taxes inspired wealthy individuals to prematurely sell long-term assets, thus realizing much higher incomes in 2012 than they otherwise would have. And, therefore, the Federal government collected substantially more in tax revenue for 2012 than it otherwise would have.
The richest Americans were hit hard by the financial crisis. Their incomes fell more than 36 percent in the Great Recession of 2007-09 as stock prices plummeted. Incomes for the bottom 99 percent fell just 11.6 percent, according to the analysis.
In other words: Investors' incomes suffer the impact of recessions to a greater extent than does the income of non-investors.
But since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent.
In other words: Investors realize greater increases in their incomes during expansions (at least initially) than do non-investors.
So what's the answer? During recessions virtually everyone loses, during expansions everyone gains. Risk-takers take bigger hits on the downside and realize greater gains on the upside. So are we to somehow change the whole risk-reward relationship? And if we somehow lessen the take of the risk-takers, wouldn't, therefore, less risk be taken? Less risk-taking would mean less investment. Less investment would mean fewer job opportunities for the very folks we'd pretend to be helping. Could it in fact be that---due to policy-induced uncertainty---there's less risk-taking (there's record cash on corporate balance sheets) occurring today than there otherwise would be: hence our stubbornly high unemployment rate? Should we really be fretting over the income gains of risk-takers?
The Pie 10/27/2011
"The top 1% has doubled its share of national income." So says (citing a Congressional Budget Office report) California congressman Brad Sherman. Our President, in virtually every speech, disses the "wealthy" (or, let's say, disses our system that he claims favors the "wealthy"). Even Presidential hopeful Mitt Romney finds political expediency, albeit treads lightly, in discounting the "wealthy" while promising a better world for the "middle class".
You'd think, per the rhetoric, that "national income" is some number that exists in and of itself. As if it's some already-baked pie to be sliced up and divvied amongst the masses.
Folks, don't let this malarkey infect your thinking. There is no "national income", our nation doesn't produce income---we do. This notion that the upper 1% have somehow sliced a bigger space into the pie pan is utterly ludicrous. If indeed the CBO report is accurate (the vantage point, or angle, if you will, is critical [which we'll explore in a future post]); that, as a percentage of total income produced by the total population, the 1% own a greater percentage than in years past, it simply means that the 1% profitably produced more of whatever they produce at a price the world was willing to pay.
I.e., it simply means that the 1% made the pie larger. Go hard after the 1% and I assure you, we'll be eating less pie in the future.
Who Needs 12 Flavors of Yogurt Anyway? 4/25/11
As the debate rages on over deficits and debt-limits, and due to feedback I've received from recent posts on the subject, let's briefly revisit the popular idea that increasing taxes on the wealthy, particularly (for this essay's sake) the mega-wealthy, might serve a constructive economic end.
note; I have no special affinity for the super-rich (i.e., billionaires), I don't know any, I don't always agree with their politics, and I absolutely believe they should pay their taxes. I will confess however that in the case of a few tech-geniuses who come to mind - as I here type on a feather-light wireless keyboard linked to a paper-thin notebook (all for less than a thousand U.S. bucks) - I so appreciate how they exploited every opportunity to pursue their separate interests...
The case for raising taxes on ten-figure Americans rests in the notion that they're flush with ever-increasing idle cash to the tune of tens, if not hundreds, of millions that should be disgorged from their estates and allocated elsewhere (for the greater good) by the government.
Now contrary to populist opinion, Bill and Melinda, while they can easily afford to pay higher income taxes, are not hoarding rubber-banded stacks of green pieces of paper behind some revolving bookcase or in a wall safe hidden behind a portrait of Great Grandpappy Gates. Nor are the far-stretching digits and commas representing their bank account balance balanced with the inventory of rubber-banded stacks of green pieces of paper locked away in their bank's vault. Nope, their tax-worthy fortune is in fact sitting in plain view.
It's in that new office complex going up on Main Street, it's in your neighbor's house, it's in the dozen frozen yogurt dispensers at the corner Yodigity, it funded your niece's tuition to Stanford and it's stopped at the red light in front of you. I.e., it's been efficiently distributed throughout the economy. Which begs the question; is it truly in our collective best interest for the likes of the Gateses (even if they themselves believe it is) to pay higher taxes?
Now, the wealth-redistribution advocates do not at all appreciate that sentiment. They contend that, on balance, the economy will not take a hit if we simply transfer a few digits and commas from all the top-earners' bank accounts to the U.S. Treasury. That while construction plans would be cancelled, the neighbor's mortgage rate would be higher (or they'd be someone else's neighbor in a less attractive neighborhood), your niece would do just fine at Chico State, and who needs twelve flavors of yogurt anyway, overall consumption will remain stable. It's just that our politicians will handle the resource allocation, as opposed to the private sector.
And, on that, I rest my case....