Millionaires who want to pay higher taxes

[Canard DuJour]

I should add, there are a couple other problems with the "saving is bad for the overall economy" theory besides those already noted upthread. In the first place, you're overstating the case. When Keynes stated the paradox of thrift, he wrote:

For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums.​

But this doesn't imply "Saving is bad for the overall economy"; it only implies "Saving can be bad for the overall economy". "What if everyone did that?" is an argument form with serious limitations. After all, not everyone is doing that. It's commonplace for the optimum amount of something to be an intermediate amount, rather than an extreme all or nothing. The question is not "Is saving good or bad?", but rather "Is the current level of saving too low, too high, or just right?". So you can't show it would better for the rich to have less money just by a general argument that they save more and saving is bad. You'd need data showing that the current overall saving level is too high.

And in the second place, Keynes not only presented the paradox of thrift as a problem; he also presented a solution. If the public is saving too much and spending too little and that's driving the economy into recession, the government can compensate with deficit spending. And, governments being what they are, we can generally count on them to do that. So it isn't "Saving is bad for the overall economy". It's "Saving would be bad for the overall economy if we had a comparably thrifty government." Whoop de do. Bicycle-making would be bad for the economy if we were all rainbow-barfing unicorns.

That does actually imply that net saving - absent a whacking trade surplus like Germany's - is indeed bad for "the overall economy" where "the overall economy" means something like a nation.

 

[PyramidHead]

In every society since we invented agriculture, no individual person can consume as much as they are capable of producing in the same amount of time. There will always be a surplus. The political economy of a society is the determination of who controls that surplus, who distributes it, who makes the decisions about how it is allocated, and who the recipients of it are in relationship to the producers of it.

 

[laughing dog]

And in the second place, Keynes not only presented the paradox of thrift as a problem; he also presented a solution. If the public is saving too much and spending too little and that's driving the economy into recession, the government can compensate with deficit spending. And, governments being what they are, we can generally count on them to do that. So it isn't "Saving is bad for the overall economy". It's "Saving would be bad for the overall economy if we had a comparably thrifty government." Whoop de do. Bicycle-making would be bad for the economy if we were all rainbow-barfing unicorns.

No, it is as you pointed out that "Saving may be bad enough for the overall economy for the government to engage in deficit spending". But, if you have some kneejerk irrational aversion on government deficit spending, "Saving may be bad enough for the overall economy for the government to engage in additional deficit spending".

 

[lpetrich]

The Paradox of Thrift is a case of the Tragedy of the Commons: individualized benefits with shared costs.

Avoiding paying taxes is also a case of the Tragedy of the Commons. It is not enough to be personally responsible when doing so gives an advantage to freeloaders.

 

[Bomb#20]

The Paradox of Thrift is a case of the Tragedy of the Commons: individualized benefits with shared costs.

If that's true, well, the Tragedy of the Commons is only a tragedy when the commons is being overused. Is there data showing too many people have too much money stuffed in their mattresses?

 

[Loren Pechtel]

The allocation of resources is an engineering problem. The allocation of reources via the distribution of money is a political problem. Money isn't a scarce resource.

Economics is increasingly about the allocation of surpluses with an artificial scarcity of money.

You're making the mistake of thinking money is a resource in the first place.

Money is neither plentiful nor scarce, it is simply a unit of accounting. What's plentiful or scarce is what that money can buy--and if money buys it it's at least reasonably scarce in an economic context.

 

[Loren Pechtel]

I should add, there are a couple other problems with the "saving is bad for the overall economy" theory besides those already noted upthread. In the first place, you're overstating the case. When Keynes stated the paradox of thrift, he wrote:

For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums.​

But this doesn't imply "Saving is bad for the overall economy"; it only implies "Saving can be bad for the overall economy". "What if everyone did that?" is an argument form with serious limitations. After all, not everyone is doing that. It's commonplace for the optimum amount of something to be an intermediate amount, rather than an extreme all or nothing. The question is not "Is saving good or bad?", but rather "Is the current level of saving too low, too high, or just right?". So you can't show it would better for the rich to have less money just by a general argument that they save more and saving is bad. You'd need data showing that the current overall saving level is too high.

Actually, we do have an example of savings is bad--China. They are still undergoing a big shift in their economy and demographics, they have far more people piling up savings (and at a tremendous rate) than spending down their savings. Space rents for something like .1%/month of market value rather than the more normal ~1%/month. That's going to create a hell of a mess.

In a stable society this isn't a problem, people save in their earning years and spend it down in their retirement years. Some money is passed to the next generation but that next generation rarely does well with it.

 

[Loren Pechtel]

The ultra-rich are the only people really enjoying the full fruits of modern America. The only people not falling behind.

The vast majority are sinking in quicksand. The cost of living rises continually. The cost of rent and child care and food rises continually.

The cost of college has skyrocketed over the last decades.

And wages have been stagnant for most since the 1970's.

This is a deception by the left. Hourly wages have been stagnant, but the good jobs these days are salaried.

There was the golden age of American capitalism, in the 1950's and 60's when a general level of wealth was created by union activity, but most today are sinking lower and lower from that peak every generation.

There was a "golden age" when the shit was pushed down onto the non-whites and non-Americans. The former ended with the civil rights movement, the latter ended as the rest of the world industrialized.

 

[Canard DuJour]

The allocation of resources is an engineering problem. The allocation of reources via the distribution of money is a political problem. Money isn't a scarce resource.

Economics is increasingly about the allocation of surpluses with an artificial scarcity of money.

You're making the mistake of thinking money is a resource in the first place.

I've no idea why you think so.

Money is neither plentiful nor scarce, it is simply a unit of accounting.

Yup.

What's plentiful or scarce is what that money can buy--and if money buys it it's at least reasonably scarce in an economic context.

However, it is also possible to produce at below capacity by restricting the supply of money as if it were a resource. That's what conservative govts do in order to restrict or cut provision of public goods which we have the real resources to provide, but they dislike on principle.

 

[Canard DuJour]

I should add, there are a couple other problems with the "saving is bad for the overall economy" theory besides those already noted upthread. In the first place, you're overstating the case. When Keynes stated the paradox of thrift, he wrote:

For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums.​

But this doesn't imply "Saving is bad for the overall economy"; it only implies "Saving can be bad for the overall economy". "What if everyone did that?" is an argument form with serious limitations. After all, not everyone is doing that. It's commonplace for the optimum amount of something to be an intermediate amount, rather than an extreme all or nothing. The question is not "Is saving good or bad?", but rather "Is the current level of saving too low, too high, or just right?". So you can't show it would better for the rich to have less money just by a general argument that they save more and saving is bad. You'd need data showing that the current overall saving level is too high.

And in the second place, Keynes not only presented the paradox of thrift as a problem; he also presented a solution. If the public is saving too much and spending too little and that's driving the economy into recession, the government can compensate with deficit spending. And, governments being what they are, we can generally count on them to do that. So it isn't "Saving is bad for the overall economy". It's "Saving would be bad for the overall economy if we had a comparably thrifty government." Whoop de do. Bicycle-making would be bad for the economy if we were all rainbow-barfing unicorns.

That does actually imply that net saving - absent a whacking trade surplus like Germany's - is indeed bad for "the overall economy" where "the overall economy" means something like a nation.

..or, put another way, there isn't really any such thing as "saving" for "the overall economy"

If a household or firm cuts spending, its income doesn't go down, so it thereafter accumulates savings. If the overall economy* cuts spending, its income goes down proportionally. Because in the the overall economy - unlike in a firm or household - each transaction has a both a buyer and a seller, so aggregate spending = aggregate income**. It's the difference between an organism and an ecosystem.

* (net or aggregate, not "everybody")
** (+/- foreign sector)

That's why the govt trying to cut spending at the same time as the private sector -austerity- doesn't work. Growth and revenues fall; deficits might even increase.

It's also why high levels of inequality are bad. Growth tends to be slower and less consistent (as even the IMF now admits). Not that wealth is zero-sum, but that less inequality would be positive-sum.

 

[SimpleDon]

Dismal was not responding directly to me, he was responding to Bomb#20 response to me. My post responding to Bomb#20 is taking me a long time to write, so I thought that I would post this before I do my response to Bomb#20. Here is the link to Bomb#20's post, put here for completeness. ​

But that doesn't require higher marginal rates on some than on others. <<massive snip>>

While you are correct, the whole “paradox of thrift” is based on flawed economics at its heart. They will tell you in Economics 101 that the purpose of an economy is to allocate finite resources to human wants and needs.

Each’s wants and needs are personal, subjective and contextual. If an individual’s utility curves tell him “the best use of my money is to stuff it in my mattress” economics cannot determine he would be better off if we forced him to spend it on a flat screen TV or in an Asian massage parlor. The fact that him spending it in an Asian massage parlor would create more Asian massage parlor jobs does not mean it’s better for the economy. The purpose of the economy is not to create jobs; it’s to allocate resources to wants and needs.

While what you say is true you are ducking the entire argument.

Yes, the entire economy is made up of all of the individual transactions for a range of different reasons, but the sum of all of the decisions whether to spend or to save has a very much different impact on the overall economy then it does on an individual. This is why it is a paradox.

Thrift is a good for the individual, but it is bad for the economy as a whole, the macroeconomy. Money saved is not spent. This is a tautology, a statement that is true because of its form, in this case, because of the definition of the two words, not spending means that you are saving, not saving can only happen if you are spending (or you are destroying the money, which is also removing the money from the economy.) Like it or not the macroeconomy depends on spending and the consumption of the industrial product, which can only happen if consumers have the money which comes from wages.

Bomb#20 didn't base his argument on the pursuit of individual utility; he based on the rather common misconception that the banks loan the deposits in the bank to borrowers.

Keynes had the habit of cherry picking those rules of economics that helped make his point and suspending those that did not.

This statement is off of the mark regarding any economist. The so-called rules of economics were written by economists who had no intention of carving them into stone. The classical economists who started the study of economics were trying to apply the scientific method to the study of the economy. They had the very reasonable expectation that their findings were only a start to the process and that these findings would be thrown into history's trash-bin as better, more accurate insights were gained. Most would have been stunned and angry that their writings were being treated as fundamental truths about economics two and a half centuries after they wrote them. This would be much more the case when they saw how the industrial revolution changed the economy.

I understand that some people need the intellectual protection of fundamentalism. We see it in religion but also in politics where people in the US frequently praise the wisdom of the founding fathers by leaving us the brilliant fundamental law in the Constitution. That everything would be alright if we just governed according to original intent, determined presumably by conjuring up the spirits of the founding fathers too, as an example, ask them their opinion of a fine point of trademark law for computer games.

The reason that the Constitution has served us so well for so long is specifically that the Constitution isn't fundamental law, that it was the product of many compromises and as such it is vague and ambiguous, allowing generation after generation to interpret the document as they need to.

But fundamentalism is misplaced in the study of economics. The idea that the classical economists or anyone after them including Keynes discovered inviolable rules of economics is laughable.

Keynes certainly didn't feel that he had developed the last word in the study of economics. Keynes' book, The General Theory of Employment, Interest, and Money was written as an outline to guide people who came after him in further studies to continue this most important work. They did, and many of their insights contradicted Keynes himself.

What Keynes and the economists who followed him realized was that the industrial revolution by producing a previously unheard of economic surplus had changed what had been the "rules" of economics. That the largely mercantilist, agrarian and artisan economy that the classical economists described was gone. That the supply side constrained economy that they represented was now a demand-side constrained economy.

This change is easy to see, the supply of the farming economy was land and the constraint the classical economists saw was the limited amount of land suitable for agriculture in England. After the industrial revolution supply became the production facilities and capital machinery. But these things only require money and in a country with bank created money, the economy creates any money that is needed for any worthwhile investment.

But what Keynes and the economists who followed him discovered about the modern industrial economy stunned a tiny but powerful group, the wealthy, because these insights very much diminished their role in the economy. This diminished role meant that not only were the wealthy less important to the economy but that their potential for earning income would decrease with their lesser role.

So they struck back and with the help of the economists like Friedrich Hayek and Milton Friedman they resurrected the classical economists and installed them as the fundamental foundation of the inviolable and natural "rules" of an alternate economics to the more realistic economics of Keynes and his followers.

They conflated this lack of realism by the introduction of the goal of the fantasy of the government-less, self-regulating free market. This was less the goal of the classical economists who saw the government as less of threat and the only solution to the much greater threat of private companies becoming monopolies or forming cartels.

The fantasy free market was the goal of the classical liberals of the 1830's England and of the neoclassical economists in the 1870's to the turn of the century like Marshall, Wicks, etc. The very same economics that gave us World War I and the Great Depression, the economics that Keynes was first trying to defend until he realized that it was wrong.

What these "rules" lacked in application to the industrial economy and in theoretical and historical support they more than made up for in the raw impact of the financial support from the wealthy. It is the wealthy who fund the chairs of economics in the universities, who fund economic research and who hire the economics graduates from the universities so that over time this alternate economics overcame the reality.

I think that these are the rules that you are talking about.

 

[Lumpenproletariat]

When you make more money, there is only two things that you can do with that money. You can spend it or you can save it. ... when you save it that money doesn't have any impact in the economy. It doesn't pay for products or services that will pay someone else's wages, and it doesn't encourage businesses to invest in their own business to make more profits. This is the paradox of thrift that saving is good for the individual but bad for the overall economy.

I should add, there are a couple other problems with the "saving is bad for the overall economy" theory besides those already noted upthread. In the first place, you're overstating the case. When Keynes stated the paradox of thrift, he wrote:

For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums.​

But this doesn't imply "Saving is bad for the overall economy"; it only implies "Saving can be bad for the overall economy". "What if everyone did that?" is an argument form with serious limitations. After all, not everyone is doing that.

But suppose "everyone" did do it. Or, vast numbers start saving, suddenly, so savings soars, and spending plunges. Would it be a disaster, if done to the extreme? And the answer is "No." Because all that would happen is that deflation would occur, unusually low rate, below zero. So money would have to be pumped into circulation to compensate, to keep the price level from plunging.

It has never happened, so there was no need to "print" the needed money, but if it should happen, money would have to be "printed" to beef up the money in circulation, so the inflation rate would not suddenly plunge down.

It's commonplace for the optimum amount of something to be an intermediate amount, rather than an extreme all or nothing. The question is not "Is saving good or bad?", but rather "Is the current level of saving too low, too high, or just right?".

There isn't any objective answer to this, based on the proper amount of saving, or spending. What would be the principle of economics proclaiming what is the proper level of spending or saving?

 

[laughing dog]

There isn't any objective answer to this, based on the proper amount of saving, or spending. What would be the principle of economics proclaiming what is the proper level of spending or saving?

There is the  Golden_Rule_savings_rate if economic growth is the goal.

 

[PyramidHead]

Nobody should wait for millionaires to give us permission to tax them. Actually, if they are asking to be taxed higher, we should immediately be suspicious about whatever tax proposal they are advocating, and consider making it high enough so that they no longer advocate it.

 

[southernhybrid]

Nobody should wait for millionaires to give us permission to tax them. Actually, if they are asking to be taxed higher, we should immediately be suspicious about whatever tax proposal they are advocating, and consider making it high enough so that they no longer advocate it.

I tend to disagree. It's much easier to accomplish change, when those who the change impacts the most are also in favor of the change. The Patriotic Millionaires realize that when the ultra wealthy don't pay enough taxes it can have very negative results for everyone, eventually including themselves. Forcing people to change is much harder than convincing them that the change is not only in the best interest of others, but is also in their best interests.

Movements are always more successful when the originators of a movement are able to influence others to join in the movement.

I think it's fantastic that some millionaires are starting their own movement. Will it work? Only time will tell, but it will be much easier to raise taxes on the wealthy if most of the wealthiest are in agreement. Of course, not all ultra wealthy people will join this movement, just like not all veterans supported the anti war movement, but if enough make enough noise, there is a greater chance of success.

We might be able to raise taxes on the wealthiest without their permission, as you put it, but it will be much easier to do it with their cooperation. I'm dead center middle class, but I'm also not in agreement with anything that mandates all of us having the same amount of wealth. Countries that rely on a mixed economic system, ( capitalism mixed with democratic socialism ), such as Norway, Sweden, etc. have happier people, but they also have high concentrations of wealthy people as well.

I know plenty of poor people who are very happy with their lives, but most of them do rely on at least on government program that enables them to have enough food and a roof over their heads. This, of course is much harder to do in areas where the cost of living is extremely high, ie. New York City, San Francisco etc. That is another problem which needs to be addressed.

What I find rather disappointing are those who don't think that millionaires have the right to influence their peers to pay higher taxes. There will always be some very greedy people who don't feel they should contribute more to the country that has enabled their success, but I applaud those who are both willing to support the needs of their country by paying more taxes as well as those who are smart enough to realize that the extremes of wealth that we currently have aren't compatible with future economic growth.

 

[Lumpenproletariat]

There isn't any objective answer to this, based on the proper amount of saving, or spending. What would be the principle of economics proclaiming what is the proper level of spending or saving?

There is the  Golden_Rule_savings_rate if economic growth is the goal.

"Economic growth" -- e.g., more bridges to nowhere, wall-to-wall factories, etc. -- is not the goal. Some "growth" is good, other "growth" is waste. "The goal" has to be something good only, not waste.

 

[PyramidHead]

Nobody should wait for millionaires to give us permission to tax them. Actually, if they are asking to be taxed higher, we should immediately be suspicious about whatever tax proposal they are advocating, and consider making it high enough so that they no longer advocate it.

I tend to disagree. It's much easier to accomplish change, when those who the change impacts the most are also in favor of the change. The Patriotic Millionaires realize that when the ultra wealthy don't pay enough taxes it can have very negative results for everyone, eventually including themselves. Forcing people to change is much harder than convincing them that the change is not only in the best interest of others, but is also in their best interests.

As long as we continue to entertain the fiction that rich people are our friends and deserve to set the parameters of how we reclaim the wealth they steal from us, any reform that is passed will quickly be reversed when the next crop of less friendly rich people decide they want to steal more again. You're looking at this as a discussion about table manners and not a class war. If we've reached the point where millionaires are starting to feel the negative consequences of billionaires not being taxed high enough, we've waited far too long.

Movements are always more successful when the originators of a movement are able to influence others to join in the movement.

I don't want people whose money was appropriated from the work of others to join my movement to define how much the workers should get back. The people I want to join the movement are the majority who they stole it from.

I think it's fantastic that some millionaires are starting their own movement. Will it work? Only time will tell, but it will be much easier to raise taxes on the wealthy if most of the wealthiest are in agreement. Of course, not all ultra wealthy people will join this movement, just like not all veterans supported the anti war movement, but if enough make enough noise, there is a greater chance of success.

Success. Yeah, the US really stopped doing war thanks to those veterans supporting the anti-war movement, didn't they? Maybe if we stopped treating veterans as heroic by definition and stopped expecting or even wanting their buy-in for an end to imperialism, we would actually make more than a dent in the military machine.

We might be able to raise taxes on the wealthiest without their permission, as you put it, but it will be much easier to do it with their cooperation. I'm dead center middle class, but I'm also not in agreement with anything that mandates all of us having the same amount of wealth. Countries that rely on a mixed economic system, ( capitalism mixed with democratic socialism ), such as Norway, Sweden, etc. have happier people, but they also have high concentrations of wealthy people as well.

This is not a solution in the long run, as those countries are undergoing a shift back to the right. The United States had the same history, the same happy people and cooperative wealthy, and now it's all being dismantled piece by piece. These reforms never stick as long as there's capitalism at the base, no matter how much social democracy you sprinkle on top.

I know plenty of poor people who are very happy with their lives, but most of them do rely on at least on government program that enables them to have enough food and a roof over their heads. This, of course is much harder to do in areas where the cost of living is extremely high, ie. New York City, San Francisco etc. That is another problem which needs to be addressed.

What I find rather disappointing are those who don't think that millionaires have the right to influence their peers to pay higher taxes. There will always be some very greedy people who don't feel they should contribute more to the country that has enabled their success, but I applaud those who are both willing to support the needs of their country by paying more taxes as well as those who are smart enough to realize that the extremes of wealth that we currently have aren't compatible with future economic growth.

Well, I don't applaud them, and I wouldn't have applauded slave owners who argued for better treatment of slaves because widespread injuries and illnesses were becoming incompatible with future economic growth.

 

[southernhybrid]

Well, you are certainly entitled to your own opinion PH, just as I am mine. I've already stated how I feel. No more needs to be said.

Comparing slave owners to millionaires? No. Not even close. My own brother in law is a millionaire, and he would fight to keep his taxes low, but he doesn't deserve to be compared to slave owners. He'd probably retire and close down his dental practice if his taxes were raised by much. What would that accomplish? He's motivated by money, as are many people in high paying professions. That's just a fact.

It's not capitalism that has turned people further right. It's a lot of other things that have nothing to do with this thread. Social issues are a big reason why the US has gone further right. That's why greedy assholes like Trump use things like guns, abortion, religion etc. to lure poorly informed, people into supporting them. But, how about we discuss those issues in another thread.

 

[PyramidHead]

Well, you are certainly entitled to your own opinion PH, just as I am mine. I've already stated how I feel. No more needs to be said.

Comparing slave owners to millionaires? No. Not even close. My own brother in law is a millionaire, and he would fight to keep his taxes low, but he doesn't deserve to be compared to slave owners. He'd probably retire and close down his dental practice if his taxes were raised by much. What would that accomplish? He's motivated by money, as are many people in high paying professions. That's just a fact.

It's not capitalism that has turned people further right. It's a lot of other things that have nothing to do with this thread. Social issues are a big reason why the US has gone further right. That's why greedy assholes like Trump use things like guns, abortion, religion etc. to lure poorly informed, people into supporting them. But, how about we discuss those issues in another thread.

Sure, we can do that. My only point in making the slavery analogy is to indicate that there is a structural component at play that goes beyond individual responsibility. In the same way that a rich business owner would have to close down if his taxes were too high, a slave owner would have to close his plantation if the slaves were given too much freedom. I don't say that to tarnish either as immoral, but to show that their reliance on a certain aspect of the economic system doesn't justify its existence.

 

[Canard DuJour]

Rich people are often good at framing issues as if money grows on rich people.

Extremely top heavy income (or wealth) distributions tend to shrink the size of the economic pie. The 1% (or, more accurately, 0.1%) at current levels of inequality are an economic burden. Not white knights who will alleviate it with their tax-paying beneficence.