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Edited by Mrph1 on Nov 30th 2023 at 11:03:59 AM
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Somalia has known this fact for years.
@Tomu: For a CEO making $1 million gross, you have to look at the big picture. If his company employs 500 people, then 10 employees is a big deal. But you also have to look at other incentives like stock, dividends, and the like.
Further, most of the big bucks aren't made by manufacturing CEO's (save for the few lucky ones); it's financial executives who rake in the dough. The same people who were the architects of the housing market crash and went begging to Washington for bailouts when their house of cards toppled. The ones who literally cannot understand why people wouldn't like them.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"I guess my point is, even if CE Os are making excessive cash, that doesn't necessarily mean that reigning in that will solve all the world's problems.
Still, if workers were paid more they'd spend more, so that'd support employment. People at the top spend a lower percentage of their income.
I remember that the ex-British Chancellor Alistair Darling once gave a talk at my school. He summed up why governments can't act like individuals when it comes to fiscal policies very well (I'm paraphrasing his parable here):
Modern developed economies run on one thing: credit.
I, as an individual, spend money I don't have (my authorized overdraft is roughly $1000). Let's say I put it towards an Xbox 360, Wireless, Cable, and a new telly. My cash input will go towards the profit margins of Microsoft, whoever made the telly, wireless router and the cable company plus all the manufacturers of the components. This money will go towards paying their workers' wages, which their workers will spend on more things (which will go towards paying the wages of the builders/providers of them etc etc). Meanwhile, I fail to meet my overdraft repayments. As compensation, the bank repossesses the 360, telly, and wireless (being a bank, they'd probably let me keep now useless cable subscription). They then sell these things on to cover most of the cost of the loan, and allowing them to lend money to more responsible clients without too much difficulty. Hopefully, the new clients will spend it in ways that will produce profit for the economy - as start-up capital for a business, for example. However, if everyone failed to meet their payments, then the bank would soon run out of money. Then, there would be no more start-up capital for businesses etc. If everyone stopped taking out loans, the banks would make no profit, as they would not be able to charge interest. If the banks have no profit, they won't be willing to take the risk inherent in lending, so again - no start up capital.
Now take the principles I talked about in the first paragraph, and apply them to the way a government spends its money - think about, say, a Nimitz-class aircraft carrier. The government takes out a loan, enriching the bank. The carrier entails the purchase of steel, electronics, assembly skills, fuel, nuclear reactors, weapons systems, aircraft, bedding, the food to feed its complement, the wages paid to the crew, the medical supplies, the uniforms, the steam catapult, the deck, the glass for plane canopies and deck windows, the satellite cable subscriptions, paper for the in-house newspaper...the list goes on. The government, in spending lots of money, creates hundreds of thousands of new profit opportunities across the economy. Perhaps a US seaman can only pay back his mortgage because of his pay for serving on it? Perhaps some bright young thing with a revolutionary new radar design can start up his new company because the USN buys his system? People get paid, money gets spent, the banks get their loans back, make a profit, and so can give more loans to more people who will spend more money paying more wages and stimulating more growth.
In a time of economic hardship, the very worst thing a government can do is to start cutting excessively. The time for "austerity" is when the private sector can drive growth on its own power (for instance, the government buying a new aircraft carrier example works just as well for, say, British Airways ordering ten new A380s). In times of crisis, the government should drive the economy by spending, thus generating money.
Obviously, I've hugely over-simplified things (whole books have been written on this), but the general gist is that, where and when the private sector is willing and financially able to drive growth and employ, it should do so - no-one needs Social Security when they are employed, after all. But when the shit hits the proverbial fan, the government should step in and, basically, give the economy a bit of a kick-start - only the government can do this, because only the government has the resources to direct the flow of money on a national scale. The government can raise the most money by taxing the highest earners, relying on the combined power of the less-heavily taxed lower earners to make up for the loss in financial power suffered by the richest (and economies following this model are some of the strongest in the world - look at Germany, which is largely driven by smaller businesses, despite the big names).
Its simple really. Unfortunately, many modern politicans cut their teeth on Friedman and Greenspan, whose economic policies simply are not up to the job - they never anticipated this. They are ideologically wedded to "self-reliance" and "individual responsibility", two things which simply don't serve an economy well in a crisis, and which have never been of any fucking use to the most vulnerable of society, who in many cases are locked in a spiral of poverty which prevents them contributing to the economy or placing themselves in a position to do so.
What we need now are Krugman and Keynes. If we had Attlee in Number 10 and FDR in the White House, this crisis would be easily dealt with.
Schild und Schwert der ParteiI personally don't think income tax shouldn't be higher than 50%; if you can't even keep half of what you've earned, then you lose more than you gain.
Of course, this is due to lack of faith in government services. Theoretically, if you have great faith in government, even with a 100% tax rate, you would pay that tax because you are contributing to services that benefit you in some way. The more you pay, the better the services are, and the more you get out of it. So increasing taxes should be coupled with increasing quality of those services as well as their credentials.
@Tomu: Right. You have the micro and macro picture. Micro is the specter of CEO's making 1000 times what their employees do. That's reprehensible but not necessarily catastrophic for the economy. Macro is the problem of the wealthy taking an increasingly large share of the pie and hoarding it jealously.
@Trivialis: That boogeyman of "government waste" is one of the nasty little forms of Chewbacca Defense that conservatives like to throw out, as if free market enterprises are somehow magically more efficient (hint: they aren't).
Nevertheless, reputable nonpartisan studies have analyzed tax policy, including the disincentive effect, and found that 70% is the "sweet spot" for the top marginal rate. It's the point with the highest multiplier before you start discouraging people from aspiring to make money.
In practice, tax rates should be adjusted to the economy. Raise them when you need to reduce deficits and lower them when you have a sufficient surplus. But those are supply-side constraints; in a demand constraint the important factor is that government spending close the output gap so the economy can recover to full utilization. If raising tax rates on the wealthy will work towards that goal, great, do it!
edited 7th Dec '12 2:39:27 PM by Fighteer
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"I'm not talking about efficiency, but more about cost-benefit.
If you think government is complete garbage, then any tax is a loss. So obviously beyond 50% tax, you lose more than you keep in income. And I can understand that.
But if you think government directly gives you something, then even 100% tax means the more you earn, the greater you benefit.
@Midgetsnowman: I recognize that, of course. I was merely drawing a distinction between two different modes of thinking. The micro scenario leads directly to the macro scenario.
@Trivialis: The thing is that economic cost-benefit isn't a matter of opinion. People thinking that economics is a matter of ideology rather than facts is what's gotten us into this mess in the first place. The problem is that a large portion of our government also thinks that economics is a matter of ideology and so now we're stuck debating whether 2+2=3 or 2+2=5. "Viewers, what do you think?"
edited 7th Dec '12 2:46:39 PM by Fighteer
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"Oh, well... honestly it's hard to sell to a rich guy that he's going to get back all of that 70% of his income he's giving up in net value. In absolute truth, he probably isn't going to see a 100% return, even considering multipliers, and I'm not sure if trying to convince him of that is even remotely feasible. Taxes are inherently redistributive and always have been.
The point is that society as a whole benefits, and he depends on society for his wealth. If he doesn't care about society and just wants to act like a privileged rich guy, well, too bad.
The story of the United States since the 70's is that we forgot about the "society as a whole" thing. We decided at some point that we'd solved the problems of poverty and instability and started letting the mystique of the wealthy infiltrate society again, just like it did before the 1920's. Now we are reaping the result.
edited 7th Dec '12 2:57:12 PM by Fighteer
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"The argument to make is that %30 percent of his current wealth is worth more in a society with lots of employment and where the middle and lower classes have disposable income and free time to spare than %100 percent of his current wealth is worth in a society where the roads are crumbling and most people are starving and uneducated.
Share it so that people can get into this conversation, 'cause we're not the only ones who think like this.@ Fighteer:
In theory — Governments might not change the tax rates to suit the economy, due to what I'm calling the "Eiffel Tower Effect", where something temporary becomes permanent. Before long, there'll be in effect a 98% income tax rate.
...and one other thing about "Poor People & Rich People" thing. People are people, after all — how many Poor and Middle-Class people would act like a stereotypical Rich Person if given the money and the chance?
Or a fear you'd lose the money, perhaps, and turn to saving as much as you can?
edited 7th Dec '12 3:39:40 PM by Greenmantle
Keep Rolling OnMost, if not all. Money corrupts. It turns good people into bad people. It weeds out the selfless and promotes the selfish and the greedy. It discriminates against those without, keeping them from having the things they need, and makes those with it into monsters. The rich become people obsessed with getting more money for the sake of more money, and the poor can barely get enough to stay afloat. It's the sad reality that it takes money to make money and those with money find an easier time making more money while earning it less and less. The top 1% earn almost none of the money they make, while those at the bottom earn far more than they are given.
It is often said that money is the root of all evil. Few things are more accurate. Money drives us to war. Money drives us to oppression. Money drives us to hate and discriminate. Boeing is planning on refusing to recognize legally married gay couples. This isn't because they hate gays. This isn't because they don't believe in gay marriage. This is because recognizing gay marriage would lose them money.
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edited 7th Dec '12 5:24:17 PM by DeviantBraeburn
Everything is Possible. But some things are more Probable than others. JEBAGEDDON 2016Bill Clinton: I 'was impeached.'
edited 7th Dec '12 5:39:53 PM by OhnoaBear
"The marvel is not that the Bear posts well, but that the Bear posts at all."@Fighteer: That really is the big sticking point for a lot of people, though. A 70% tax rate on billionaires is pretty much Robin Hood redistribution, and the money is spent in ways that don't even ultimately benefit the billionaires. While I know you're not very sympathetic to this attitude, it's worth bearing in mind that if you ask the .1% to put 70% of their marginal income into empowering the lower classes, you're asking them to spend in ways that weaken their ability to make more money.
It's a trifle silly to bash someone, or some group, for being "narcissistic" when they object to being the victims of democracy, even if the damage done to them by it is far less than the benefit given to the lower and middle classes.
deathpigeon: The phrase is "The LOVE of money is the root of all evil." Not "money is the root of all evil." Please get it right; money itself cannot corrupt you. It's just a tool we use to accomplish our other goals. I'm... not even sure where that Boeing thing came from; if you're referring to the company then they can't ignore any law that says they have to recognize gay marriage. Not that it's come to that yet, since the SC hasn't met on it yet.
I'd also like to point out that FDR did whatever it was necessary to get us a 90% tax rate, and that was what helped us, along with WW 2. And the tax remained quite high up until the eighties hit and greed became the acceptable thing. We, as a country, did pretty damn well with a high tax rate, so I'm guessing the conservative attacks on education are partially to obscure little historical facts like that.
edited 7th Dec '12 8:07:47 PM by AceofSpades
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That's the phrase used in the Bible, but not the phrase I am going with. I am going with the commonly used phrase "Money is the root of all evil." I mean, quite frankly, that's the phrase I prefer, and I don't really care about the Bible. It's also not just the love of it that causes all the evil. Fear of it's loss can cause much evil. As can the envy of the money of others. As can the inherent power difference between the rich and poor that money creates.
Also, the Boeing thing was an example of something that's actually happening that helped illustrate my point.
edited 7th Dec '12 8:18:18 PM by deathpigeon
