Posted on 11/29/2006 11:13:22 AM PST by .cnI redruM
A fall campaign pledge of the Democrats was to “make our economy fairer.” And if by “fair” they intend to make us marginally less productive, but more “equal” in terms of lower economic opportunity, their plan is eminently workable.
At the heart of the Democrats’ fairness program is the desire to reduce the wealth gap between the rich and poor. According to a front-page story in last Tuesday’s Wall Street Journal, “the gap between winners and losers in the American economy has widened over the last 20 years.” But this might seem odd given the events of the latest campaign season.
The ten biggest fortunes in the U.S. are public fortunes in the sense that they are due to the rise of public-company stock owned by the ten richest people in the country. What’s odd is that given the chance to reform Social Security, and give Americans the option to direct their FICA dollars into private accounts that would include public-company stocks, the Democrats passed, instead using their opposition to bludgeon reformist Republicans at the ballot box.
It’s mostly lost on Democrats that access to the stock market is the best and fairest equalizer of wealth. They also don’t get the fact that other than Warren Buffett, none of the ten richest members of the 2006 Forbes 400 could claim that distinction when the magazine first began tracking the rich in 1982. “Rich” is thankfully a fluid adjective in the U.S., and so long as it is, hand wringing over gaps in wealth is foolhardy and counterproductive.
First up on the Democrats’ equality agenda is a hike in the minimum wage. The Democrats implicitly acknowledge a relationship between job losses and artificial wage increases in only pushing for a 38 percent increment in the minimum wage to $7.15 an hour. Indeed, if they really believe their own rhetoric about the innocuous nature of forced wage hikes, why not raise the wage to $10 or $15 an hour?
In truth, the Democrats apparently know what we all instinctively understand about economic activity occurring on the margin. A 38 percent wage hike wouldn’t kill too many jobs precisely because most workers already make more than the minimum wage. Unfortunately, for an agenda that is bent on helping the less fortunate, any wage floor means that the marginal, least qualified worker will be left behind by legislation that raises the cost of labor.
A similar dynamic is at work with the Democrats’ tax agenda. While many Democrats would be happy to see the 2003 tax cuts expire in the name of equality, none would dare argue for the pre-Reagan top rate of 70 percent. At the core, Democrats acknowledge what supply-siders have been saying all along about taxes: The marginal incentive to work and produce is reduced when each dollar of income is taxed more.
The “seen” in any tax equation is the willingness of people to work despite penalties on their production. So while it’s fair to say higher taxes won’t totally collapse economic activity, it’s also true that workers on the margin will choose leisure over productive activity as their taxes rise. (Witness France.) The wealth gap might shrink if the Bush tax cuts expire, but it will do so at the expense of GDP. How the latter helps the downtrodden constituency within the Democratic party is one of life’s mysteries.
The Journal article noted that another “favorite Democratic target is the lower tax rate — a maximum of 15% — on capital gains and dividends.” This one is particularly interesting given the desire of former Clinton economic advisor Gene Sperling to create “universal 401(k)” plans.
Leaving aside the question of where Sperling and other Democrats were when Republicans sought to create the ultimate “universal 401(k)” through voluntary Social Security accounts, it should be remembered that taxes on capital gains and dividends are taxes on investment. As taxes increase on both, the marginal incentive to risk capital on investment is reduced. In short, the Democrats would introduce a forced savings plan with one hand, all while reducing the attractiveness of the assets within those savings plans with the other.
The late columnist Warren Brookes once wrote that envy “is the single most impoverishing attitude of thought.” Sadly, the Democratic economic agenda is rooted in envy and zero-sum thinking; it’s a philosophy that falsely suggests one man’s success is another man’s failure.
Brookes also noted that “We are all blessed by the genius of relatively few.” Rather than use their legislative majority to harm the “rich,” the Democrats should embrace the genius of the pro-growth minority. While the wealth gap will surely grow, we’ll all be better off as a result.
Yes, it's open to one and all- you, your Aunt Mary, your pal Pedro- everyone. Do a little homework, set up some DRIPS and let 'em ride.
I can make the economy more fair: When they raise my taxes, I'll quit working, and appear to the tax man more like the poor.
This guy misses one with the 401(K) example. Distributions of 401(K)'s are taxed at ordinary income rates (and may include penalties for early distributions), not capital gain rates (one of the trade-offs for tax deferal). Otherwise he makes some sound points.
One thing I learned from a very good Professor. High taxes control the people. When people have less control over their own money, the government can easily control them. If taxes are raised on corporations, corporations raise the price for their goods. The people will pay again when purchasing those goods. As for the poor, we will always have the poor. Always have, always will....nothing will change that.
He didn't say anything about the tax rate on 401Ks. His point is that Dems attack the lower rate on capital gains and dividends, lower rates that make stocks more valuable, at the same time they want more "little people" to invest in stocks.
Do you have any suggestions or just vague hints of class envy?
"one of the qualities of a democracy is equality between individuals"
Not so. The function of a democracy is to allow freedom of individuals to participate equally in the political arena. Has nothing to do with economic arena.
"it is affecting all of us"
I don't care if one person has a lot more than me. In a free society, I can work with proper incentives to become rich as well as I may desire. You make the common mistake of thinking wealth is a big pie. Wealth can be created in many ways by some or many of us.
That may indeed be true, but there is a reason for that. In my personal experience, if I apply myself and do my job I get rewarded. My pay has tripled in 6 years, because I have improved at what I do.
I don't expect society to care of me. I go into the game expecting them to try and screw me over. I take care of myself and suggest that others do likewise.
The one intelligent thing Oprah! ever had to say was that luck was where opportunity met preparation. We cannot expect anyone else to do it for us. It will never be fair until you grab it by the Jimmies and make it be fair.
There now, you try to finish up elementary school, and try to go further.
"Fairer" my left butt cheek. The heck with tea, next tax revolt I'm tossing legislators into the Harbor.
Top 5% is only a $166,000 household income. Why does that $166,000 household affect those making less?
Remember one of the qualities of a democracy is equality between individuals,
How is taxing that rich family at 35% equal to charging a poor family 10% on their income?
and with money playing the largest role in who gets elected in this country that means political power is moving to the top in our society
That's why John Kerry won in 2004, he was the richest candidate.
We aren't a "democracy". We are a Republic. My mine is mine, not yours. Enforcing either the current oligarchy, or on the other hand the socialist utopoia you describe, is equally as wrong.
Don't be too sure about that. You'd be surprised at just how low a figure the top 5% of income earners, is. I know that I was.
If I remember right, it was somewhere around $125,000/year for married couples....I'm sure that the numbers are somewhere on the IRS's website.
Anyhoo, I always get a kick out of liberals that rail on about the evil rich top 5% (or 10%, or whatever), without knowing how close they themselves are to that particular class.
I'll cc. you on what I told the other guy on post 11. It seems to address your points fairly well...
"The one intelligent thing Oprah! ever had to say was that luck was where opportunity met preparation. We cannot expect anyone else to do it for us. It will never be fair until you grab it by the Jimmies and make it be fair."
Your quoting "political power is moving to the top"
And, we should point out the theory which says that many of the people who have the most come from families that worked the hardest and smartest. They are better choices to run our political system than some lazy, ignorant bum selected off a downtown street or some high-school dropout on drugs. Look what happened when those guys voted in this last election...
Thanks for the numbers, I was digging for them. I still think that's low, in comparison to the way people talk about 'the rich'. Heck, there are some parts of the country where that people would be hard pressed to get by on that salary.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.