Shaking Down the Rich Is Bad for Democracy

[Muda69]

https://www.nationalreview.com/2019/11/shaking-down-rich-bad-for-democracy-elizabeth-warren/

Quote

Forget whether the math works. (It doesn’t.) Expecting billionaires to pay for all the nice things is bad for democracy.

One of the more exhausting rituals of presidential campaign season is the effort to make every new proposal “add up.” Sure, it’s better that politicians try to come up with a plan to pay for their wish lists. The problem is that the explanations are often a disguise that make the impossible seem possible, even practical. Fake budgets are the tribute that pandering pays to pragmatism.

You could confiscate the wealth of every billionaire and centimillionaire in the country and it wouldn’t come close to paying for Medicare for All or the Green New Deal.

But let’s pretend that the fantastical (albeit unconstitutional) wealth tax Elizabeth Warren has proposed would work like she claims. Let’s also stipulate that the wealthy wouldn’t respond by hiding their wealth, moving out of the country, or cutting back in the sort of investments the government is utterly incapable of replicating. Let’s even concede for argument’s sake that Warren could get her plan through Congress and the courts.

Would that be good for the country?

Warren sees the rich as a natural resource that can be mined for its wealth indefinitely. Well, we have a lot of examples of countries that depend on natural resources to pay for everything. Saudi Arabia comes to mind. Oil revenues pay for almost everything. The problem with such societies is what political scientists and economists call “the resource curse” or “the paradox of plenty.”

It works like this: When the government doesn’t need the tax dollars of a middle class, the middle class has less political power. Virtually everywhere democracy has taken root, starting with England and Holland, it has done so because the middle class demanded representation in return for taxation. That was the heart of the whole “no taxation without representation” thing that led to the American Revolution.

The curse has an economic component as well. The countries that rely on natural resources tend to be poorer because they are less economically dynamic. Think resource-poor Switzerland versus resource-rich Venezuela. Exactly why this widely observed phenomenon works this way is debated, but part of it is surely that the existing stakeholders are hostile toward economic innovation. Another factor: When the state supports you, the incentive to support yourself — never mind be an entrepreneur — is dulled.

But the more important part is the democratic disincentive. Think of the old golden rule: Whoever has the gold makes the rules. (This insight apparently comes from noted philosopher Johnny Hart, the cartoonist behind “The Wizard of Id,” who coined it in 1965). When the bulk of tax revenues come from the people, or at least from the middle class, the government heeds the middle class. When all of the money comes from the aristocracy, as it did prior to the rise of democratic capitalism, the aristocracy made the rules. When it comes from the rich — aka “the donor class,” the “One Percent,” etc. — the rich care a lot more about the rule-making.

Today, the top 1 percent make roughly 20 percent of the money in this country and pay almost 40 percent of federal taxes. Meanwhile, 60 percent of U.S. households receive more money from the treasury than they pay into it. But Warren insists it’s the rich who aren’t paying “their fair share.”

Is it any wonder that our political system is so heavily influenced by the top 1 percent? Is it any wonder that the top 1 percent feel so incentivized to get involved in politics? The more skin you have in the game, the more you care about the game.

The left used to understand this. For generations they opposed means-testing Social Security because they wanted it to be a broad American entitlement, not a form of welfare.

Americans are practical. When told that the rich can pay for cool stuff, they say “go for it.” When asked if they want the cool stuff so badly that they’d be willing to pay more themselves, they’re much stingier.

The danger of promising that the rich can pay for everything is multifaceted. First, it’s not true. Second, you don’t have to be a student of public choice theory to understand that the more Washington behaves as if it’s true, the more the wealthy will intervene in our politics. And third, the more citizens believe that a small group of undeserving wealthy people are denying them nice things, the uglier our politics will become.

This pipe dream of the "rich" paying for all the democratic socialist's Utopian programs needs to stop.

[Irishman]

In theory, you are correct. Here is a problem that has been around for years, but seems to be FAR more frequent over the last decade and change. 
https://www.newsweek.com/sears-bankruptcy-stock-kmart-closing-filing-stores-pensions-judge-1262217

I have brought this up before as well. WalMart has recorded record profits over the last several years. Executives are getting huge bonuses, and more than half of their store employees had their hours cut to 30 hours a week. There are plenty of examples of similar actions across the country.m

I have long said that I do not believe in forced minimum wages. The theory that it will end up costing us more is correct, but it will ultimately hurt the employees most; all the while increasing the amount of profit the companies haul in, and increasing the insane bonuses executives are getting. What is equally as sad, on the surface, is that courts are approving these types of bonuses as companies go through bankruptcy. Any of our legal experts care to chime in why it is allowed? 

[Bobref]

10 hours ago, Irishman said:

What is equally as sad, on the surface, is that courts are approving these types of bonuses as companies go through bankruptcy. Any of our legal experts care to chime in why it is allowed? 

I can’t really comment authoritatively on bankruptcy law, since I know just enough about it to be dangerous. But I suspect it is because large bankruptcy reorganizations are designed to allow these entities to continue to do business while they restructure debt, revamp operations, etc., in an effort to maintain solvency. In other words, try to continue to do business. Therefore, executives of companies undergoing bankruptcy reorganization are compensated on the same scale as comparable executives in other businesses, i.e., very highly.

I think the real question is how can the high salaries and other perks these executives pull down be justified generally? The answer is as simple as it is hard to swallow (for some), and it boils down to basic principles of economics — just like most questions like this do.

In a capitalist society, the highest compensation goes to those that have skills that are (1) in demand, and (2) are scarce. I have this discussion frequently with people who ask why a job that is so important (teacher, cop, soldier) is compensated at such a low level, when other jobs that we can get along without (entertainer, professional athlete) are compensated so highly. The answer lies in the old law of supply and demand. The number of people who can supply the skills of teacher, cop and soldier is very high. But the number of people who can play professional football, or entertain millions on the silver screen, is relatively low. 

So it is with executive compensation. The number of people with the skills to run a multi billion dollar, multinational enterprise like Disney or American Airlines is very, very small. So, their compensation is very, very great.  But there are millions and millions of people who could become teachers, soldiers, or cops. It’s just basic economics.

[Muda69]

By Dante's reaction to Bobref's logical and concise explanation I take he believe he himself has the skills to be the CEO of Wal-Mart, Disney, or American Airlines. Or at the very least the compensation for CEO's at such corporation should be more on par with those of teachers, soldiers, or LEO's.   A gigantic race to the bottom.

 

 

[Bobref]

21 minutes ago, Muda69 said:

By Dante's reaction to Bobref's logical and concise explanation I take he believe he himself has the skills to be the CEO of Wal-Mart, Disney, or American Airlines.

That may be the funniest thing I’ve ever read on the GID. I’m a big believer in self confidence. But even Dante can’t possibly think that. ... Can he?

[Irishman]

3 hours ago, Bobref said:

I can’t really comment authoritatively on bankruptcy law, since I know just enough about it to be dangerous. But I suspect it is because large bankruptcy reorganizations are designed to allow these entities to continue to do business while they restructure debt, revamp operations, etc., in an effort to maintain solvency. In other words, try to continue to do business. Therefore, executives of companies undergoing bankruptcy reorganization are compensated on the same scale as comparable executives in other businesses, i.e., very highly.

I think the real question is how can the high salaries and other perks these executives pull down be justified generally? The answer is as simple as it is hard to swallow (for some), and it boils down to basic principles of economics — just like most questions like this do.

In a capitalist society, the highest compensation goes to those that have skills that are (1) in demand, and (2) are scarce. I have this discussion frequently with people who ask why a job that is so important (teacher, cop, soldier) is compensated at such a low level, when other jobs that we can get along without (entertainer, professional athlete) are compensated so highly. The answer lies in the old law of supply and demand. The number of people who can supply the skills of teacher, cop and soldier is very high. But the number of people who can play professional football, or entertain millions on the silver screen, is relatively low. 

So it is with executive compensation. The number of people with the skills to run a multi billion dollar, multinational enterprise like Disney or American Airlines is very, very small. So, their compensation is very, very great.  But there are millions and millions of people who could become teachers, soldiers, or cops. It’s just basic economics.

Thanks for that explanation Bob. I would then contend, that if companies are cutting thousands of jobs, or drastically cutting hours back, are they really good at what they do? While WalMart did record record profits in recent years, the argument could be made they did it on the backs of many of the employees they cut or lowered the hours for. There are also plenty of examples of companies that are run very poorly and yet executives are hauling in huge bonuses. A company that is going through bankruptcy has not been run well, so a judgment could be made that the executives are not worthy of such large bonuses. 

[Bobref]

1 minute ago, Irishman said:

Thanks for that explanation Bob. I would then contend, that if companies are cutting thousands of jobs, or drastically cutting hours back, are they really good at what they do? While WalMart did record record profits in recent years, the argument could be made they did it on the backs of many of the employees they cut or lowered the hours for. There are also plenty of examples of companies that are run very poorly and yet executives are hauling in huge bonuses. A company that is going through bankruptcy has not been run well, so a judgment could be made that the executives are not worthy of such large bonuses. 

All good points, that merely illustrate that executive compensation, like all other compensation decisions, should be left up to the marketplace to decide.

[DanteEstonia]

On 11/14/2019 at 5:37 AM, Bobref said:

That may be the funniest thing I’ve ever read on the GID. I’m a big believer in self confidence. But even Dante can’t possibly think that. ... Can he?

 

On 11/14/2019 at 5:14 AM, Muda69 said:

By Dante's reaction to Bobref's logical and concise explanation I take he believe he himself has the skills to be the CEO of Wal-Mart, Disney, or American Airlines. Or at the very least the compensation for CEO's at such corporation should be more on par with those of teachers, soldiers, or LEO's.   A gigantic race to the bottom.

 

 

I’m mostly dismayed at the disrespect for teachers, soldiers, and LEOs; particularly considering @Bobref‘s daughter is a teacher, the military isn’t making quota for recruits, LVMPD officers make $100k per year.

[Bobref]

3 hours ago, DanteEstonia said:

 

I’m mostly dismayed at the disrespect for teachers, soldiers, and LEOs; particularly considering @Bobref‘s daughter is a teacher, the military isn’t making quota for recruits, LVMPD officers make $100k per year.

Being realistic is not disrespect. Facts are facts.

[DanteEstonia]

17 minutes ago, Bobref said:

Being realistic is not disrespect. Facts are facts.

All of these professions have shortages; maybe the skills they take are rare, and the justification for low pay is non-existent.

[Bobref]

3 minutes ago, DanteEstonia said:

All of these professions have shortages; maybe the skills they take are rare, and the justification for low pay is non-existent.

Never have I seen someone who so persistently doesn’t get it. Except when it’s screwed up by people who think like you, the market is self-regulating. If someone’s  pay is low, it’s because that’s the value the market places on what they do, according to the immutable laws of economics. It’s like what Bill Parcells said about the NFL: “You are what your record says you are.”

[DanteEstonia]

2 hours ago, Bobref said:

Never have I seen someone who so persistently doesn’t get it. Except when it’s screwed up by people who think like you, the market is self-regulating. If someone’s  pay is low, it’s because that’s the value the market places on what they do, according to the immutable laws of economics. It’s like what Bill Parcells said about the NFL: “You are what your record says you are.”

Wasn’t your original thesis about how many people could do the job?