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"Spreading the Wealth" Allows for Creativity
Joe the Plumber came. Joe the Plumber as symbol served and has now left the building. What remains is the last ditch argument that by mentioning "spreading the wealth" on two occasions, seven years apart, Obama is a socialist. Based on stated policy objectives, the idea that Obama is a socialist is not a well founded argument, it is nothing but innuendo. Oabma is no more a socialist than Teddy Roosevelt who presided over the formal legislation creating the progressive tax. And by making this accusation, as David Sirota has pointed out, McCain makes these final days of the election a referendum on conservatism as a philosophy.
Both McCain and Obama have proposals for fixing what Americans find the central issue of this election at this time, the economy going off script. Both candidates are ideologically driven in diametrically opposed directions. McCain proposes even more tax cuts for the rich to stimulate the economy through investment, 'trickle down'. Obama proposes what is now being called 'trickle up', tax cuts for the middle class at the expense of the rich. As they are perfect juxtapositions, one or the other of these proposals must be dead wrong.
The problem at hand is, over and above the banking/credit crisis, that the public is strapped, broke and getting broker. Their jobs are paying less and less year over year, slowly, relentlessly drained by unacknowledged inflation. It is literally true that most Americans can't afford any more taxes without serious erosion of their standard of living. Of the two proposals to solve the problem most on their minds, their ends meeting, which proposal is better, Obama's or McCain's?
McCain says lowering taxes on capital gains, increasing the dependent deduction and renewing the Bush 43 tax cuts will do the trick. Small business will save the day by creating jobs. The thing that is missing from that equation is whether or not there will be a reason to create those jobs. Any sane businessmen will not hire if there is no evident increase in demand for his product. If he has more orders than he can fill he hires, otherwise not. And that is the flaw. Putting money in the hands of business or investors as a means to stimulate the economy is putting the cart before the horse. It also increases the deficit, increasing the net real tax burden for the public at all income levels in the name of a flawed concept.
Obama's plan is simple and direct, restore taxes to Clinton levels for the wealthy and use that to relieve the Reagan era tax hikes on the middle class and poor. It is revenue neutral, not increasing the deficit, admittedly just treading water on the cost of government. What it does do is increase the buying power of the middle class. The poor will not directly benefit from this plan, only indirectly, but surely. What it will do is increase demand for products and services in the private sector. So the net effect on small business will be more business and they will then be in a position to create jobs.
This seems to be a difficult concept for small businessmen and Joe the Plumber. The math is really simple though. Do you benefit more from paying less tax on your earnings of over $250,000 a year or more from 250 Obama enabled customers buying $1,000 of your product a year? Do you want your business to grow or just hang on to 4% more income above $250,000/year?
That is the meaning of 'spreading the wealth' cowboy. If more people have more money then more business is done and that 4% increase in taxes comes right back to you. If you are in the forefront of innovation, more comes to you. Far from discouraging innovation, 'spreading the wealth' enables the market to reward creativity.
The mechanics of the economy are complex but only in accounting for detail. The tidal forces of an economy are quite simple. Consumers are the heart, body and soul of an economy. Either or both of government or private enterprise are the brain. When the body starves the brain it can't function and when the brain starves the body they both die. Simple as that.
Private enterprise is better at some things and government is better at others. One thing in particular that private enterprise is not good at is recognizing when it is necessary to raise wages or pay taxes in order to keep the customers buying. On his own, a businessman's motive is to keep salaries low to max out profits. This is good for the one business but is bad for other businesses, as his employees can't buy as much from others. It is a circular firing squad of cost cutting pressure that no businessman can be expected to even understand let alone mitigate by raising wages. That is where responsible government must intervene. Only government can mandate wage scales or create conditions favorable to labor collective bargaining and thus break the suicidal tendencies of business to ruin each other through cutting wages.
In general government is better at seeing to the common good, as is mandated by the Constitution, than is business. Business is better at seeing to efficiencies of production and distribution where their profit motive is not at odds with the public interest.
The dread redistribution of wealth is no more onerous than getting an oil change when it is due. In order to keep the economy functioning some money has to end up in the hands of the public. Otherwise there would be no market for anything. The car will break down. As we have seen.
McCain resorting to socialism as a fear tactic puts at risk the very concept that socialism is to be feared. It reframes the election as a question of whether or not conservatism is any more than a idiosyncratic obsession of a few rich people and delusional small business owners. It puts the niggardly ways of the right in stark contrast to the broader picture of a society in which all would prefer to live.
The idea that socialism is a thief of your possessions and that capitalism is not is at issue now. Either economic philosophy relies on the good character of men to function properly. The Constitution charters the common welfare as a primary task of government. There is no charter for business but profit. It is therefore the task of government to see that the profit charter is conducted in compliance to the common good. Is it therefore true that a charter of the Constitution is socialism? Actually it is not applicable. Socialism was not conceived of by the Framers. All they had in mind was oversight of the welfare of the people and the country, and if by 'socializing' the production of airplanes during WWII or mandating wage price controls during the Nixon era oil shocks, the government was socialist, then well they were and it was probably the right thing to do.
McCain and the conservatives will lose this argument of conservatism versus socialism if it is in the public eye, if not next Tuesday, soon and for another three generations. That is why Republicans have not run on it in the past and why they have focused on 'other' issues. McCain may be doing his country one last service, maybe for less honorable reasons this time but perhaps his most valuable service to date.
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Why haven't the democrat's asked this question?
If reducing taxes creates so many jobs, how come we're losing them so fast?
I wish McCain had to answer that one question.
Would the opposite of "spreading the wealth" be "concentrating the wealth in fewer hands" or "spreading the poverty"? I can't figure that one out.
I looked at census data from 1947 to 2007.
Percent of total family income
1947 2007 Difference
Bottom 20% of families 5 4.1 -.9
Next to bottom 20% 11.9 9.7 -2.2
Middle 20% 17.0 15.7 -1.7
Next to top 20% 23.1 23.3 +.2
Top 20% 43.0 47.3 +4.3
Top 5% 17.5 20.1 +2.6
The top 5% and the middle 20% used to be about equal. Over the last 60 years, our tax and employment policies have taken from bottom 60% and given it to the top 20, especially the top 5.
This is a consistent trend.
Keeping in mind that all tax policy is wealth redistribution, we need to decide if we're going to keep this trend or try to reverse it.
Valuable post.
-----------------------------------------------1947------ 2007 Difference
Bottom 20% of families---------------- 5 ----------4.1 ---- -.9
Next to bottom 20% --------------------11.9 -------9.7 -- -2.2
Middle 20%------------------------------- 17.0----- 15.7--- -1.7
Next to top 20% --------------------------23.1----- 23.3 ---+.2
Top 20%-----------------------------------43.0------ 47.3--- +4.3
Top 5%------------------------------------- 17.5----- 20.1--- +2.6
I should have known the table wouldn't show up. I hope this is better.
See Stephen Herrington's Profile
Here is some Wiki data on the subject.
http://en.wikipedia.org/wiki/Gini_coefficient
Scroll down for the charting of select countries chart of income disparities.
Here are the real stats from the IRS you guys remember them the people that do the taxes!!!
The top 1% pay over a third, 34.27% of all income taxes. (Up from 2003: 33.71%) The top 5% pay 54.36% of all income taxes (Up from 2002: 53.80%). The top 10% pay 65.84% (Up from 2002: 65.73%). The top 25% pay 83.88% (Down from 2002: 83.90%). The top 50% pay 96.54% (Up from 2002: 96.50%). The bottom 50%? They pay a paltry 3.46% of all income taxes (Down from 2002: 3.50%). The top 1% is paying nearly ten times the federal income taxes than the bottom 50%! And who earns what? The top 1% earns 16.77% of all income (2002: 16.12%). The top 5% earns 31.18% of all the income (2002: 30.55%). The top 10% earns 42.36% of all the income (2002: 41.77%); the top 25% earns 64.86% of all the income (2002: 64.37%) , and the top 50% earns 86.01% (2002: 85.77%) of all the income.
See Stephen Herrington's Profile
The bottom 50% have been indexed out of paying any taxes through law passed in the Reagan tax cuts of 1981. Law whereby the cost of living is used to adjust up the income brackets to reflect the truer value of currency offered in compensation.
Your point reflects two competing arguments. On the one hand the more well to do are shouldering more of the tax burden and that government recognizes that the poor can't shoulder any of it because, and this is very important, wages are so low that they have not kept up with inflation. So make your choice, higher wages or higher taxes on the wealthy.
it really doesn't matter where the quibbling puts the threshlds because someone has to pay some taxes because this hasn't been working , everyone is broke except the rich who got richer and something has to change and that means You. I'm not interested in any comparisons to Herbert Hoover and the Depression because that was then and this is now: Herbert Hoover didn't wreck the world economy by raising taxes; the world economy was wrecked because it was premised on raping the German economy and when the gravy train ride was over the Germans were lean and mean and used to doing with nothing and you were not.
Everyone is so broke that these two guys raised some 800 million??
I'm glad that you call it "strengthening" the economy. I think that "growing" the economy is the wrong focus right now and not even atainable in the near future. But I think we can strengthen it. And Obama's tax re-apportionment will go a long way to doing that.
Thanks for explaining the difference between the tax plans so clearly.
Do you guys not think that if you tax the big companies that you will fill it in your pocket at the store? I know what you are going to say so I will say it for you", "I am going to pay taxes so I'll just keep paying them". Ladies and gentlemen look up the real stats on IRS.gov and they fill you in on who pays the taxes and who the "Lucky Ducklings" are. You cannot take the middle class out from paying taxes without putting social security in a bind and hurting wealth. So in short Obama will be a tax raise not a tax cut! Who is going to pay for these great programs? Think about this for a moment! Im sure that American buisnesses will not pay for all of these things alone without making us pay for it at the store, pump,college, and retirement for you. We are talking about small and large buisness here and maybe not small buisness if Obama has his hand in it.
lets think about this for two moments: if taxes are raised then someone will pay them and things will cost more with taxes added on and all so what ? so the government can pay for things to try to stimulate the economy and improve the living conditions of struggling people? Do we really need that when what we've been doing hasn't been working and we can do it some more?
Socialism (noun):
"A theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole."
So let's look at this practically. If you are rich, and all your cronies, relatives, business partners and political friends are ensuring that "wealth" is ONLY shared between your community of rich people, is that not it's own type of socialism?
Example: If George Bush can be semi-intelligent but still go to Yale, brag about making 'Cs' and then get $30M to buy an oil company, what's that? And then when he runs that into the ground, gets MORE money to purchase the Texas Rangers, what's that?
If Cheney runs a company, then becomes VP, and that company gets BILLIONS in no-bid contracts, what's that?
Socialism by any other name is, well ... socialism!
Bradley
Question?
Are we talking about ,"GOVERNMENT SOCIALISM" or "INDIVIDUAL SOCIALISM", there is a big difference when the government as a whole can create a much bigger difference in our lives as a whole?
Great idea, let's spread the wealth.
Please send me your paycheck and I'll become creative.
Being an preditor in the forrest has its weakness. What do you do when the pray is exhausted. You kill each other. That is the crossroads we are at. You are either willing to show concern for the general walfare or you sink the boat far all.
that Viking won't row
yoohoo.. oh yoohoo! this Viking is getting a blister.
First it was 250. Now Biden says 150. Once it starts, no one knows where it will end.
I got it the first time: under 150k you get a tax cut; 150k-250k no change; over 250k tax back up to where it was before Bush destroyed the Economy. You don't want people to think McCain is a continuation of Bush, do you? Because he says he wouldn't change the damage Bush did.
That is inconsistant with what Obama's own tax calculator says on his website.
Pop in $150-200k in his tax calculator . . .
http://taxcut.barackobama.com/
Let me know what it says and then get back to me when you decide no one knows what his policies really are.
Bush, Bush, Bush. I say Dodd, Dodd, Dodd and Frank, Frank, Frank.
Biden is not the presidential candidate. The proposal made by Senator Obama is on the web for all to examine. It has not changed.
Where does anything stop. Nothing continues in the same direction for ever. Not even the notion that competition and greed is the greatest motivator for the creation of wealth.
New words are required. Cold-War rhetoric is handicapping the ability of the US to step into the 21st century. 'Patronage' is a perhaps less negatively-charged word and much more limited (as a progressive-tax system is) than 'spreading-the-wealth' and all that implies(which is not actually intended). I would also suggest 'Substantive-Mentoring' for the esoteric and 'Meat-and-Potato Investment' for Joe Six-Pack. 'Spreading-the Wealth' has too much baggage.
"The math is really simple though. Do you benefit more from paying less tax on your earnings of over $250,000 a year or more from 250 Obama enabled customers buying $1,000 of your product a year? Do you want your business to grow or just hang on to 4% more income above $250,000/year?"
The math isn't really so simple. Those 250 customers are free to spend their $1,000 anywhere they want, not just on my business.
The real math works like this: If, as a small business owner, I am charged an extra $5,000 in taxes, which gets redistributed to other people, then those other people will have an extra $5,000 to spend - not any more than that, as you imply. They may or may not choose to spend the $5,000 at my business.
How this ultimately will work out is unknown to you or anybody else. Some businesses may benefit from the redistribution, but others will suffer. There isn't any evidence that business in general will benefit from the redistribution.
If you want to argue that the redistribution is more "fair", by some definition of "fair", then go right ahead. Europe has managed to prosper for the past 50 years with a greater degree of socialism than the United States, so it is doubtful that it would be the end of the world if we had more of it. But your argument that all businesses will be better off with higher taxes and wealth redistribution doesn't fly.
See Stephen Herrington's Profile
Thanks geoff1234, my "math" here does exagerate the immediate potential benefit to a single business by a great deal depending on scale, purposely. You are right, your $5,000 may end up in some other business' hands. But it did not disappear then. It will then eventually come back to you in some measure as no business stands alone. It is not the math that is hard, it is the dynamics of accounting for where money is allocated that is hard. How for instance would you feel if every other business but yours had to raise wages. Would that not be a benefit to you with more customers? It is not about math, never was, its about logic.
And there is evidence that business in general benefits from more money in the hands of the public, it is called the U.S. economy, built as it were by Americans having more money and higher wages than any other country, until recently.
Taxes in the general sense is a redistribution of wealth. There is no Lauffer curve in reality. The constraints on taxes are purely a practical matter. The practical matter is the maintanence and/or improvement of the general walfare. Without any concern for the general walfare there will be no climate under which business can prosper. That is about where we have arrived.
Didnt Europe have to loan money to their banks before we did and the banks withheld the money from the people?
A part of this financial crisis that doesn't get enough press is the OTC derivative part. These are artificial, computer generated, non regulated, financial instruments with little transparency. Banks have packaged these into their mortgage holdings imagining that they provided a hedge against anything going wrong. Their notional value is now over $50 trillion and climbing. Do you see these instruments as problematic? It certainly doesn't appear that they provided the hedges they were supposed to give.
On the issue of inflation, even though interest rates have been held low for quite a while, hasn't the capital supply continued to expand, and isn't inflation of prices at least partially related to expansion of the money supply?
You are absolutely correct. To become socialist or not is the heart of this issue. My parents and I fled an Eastern European socialistic (communist) government for the opportunity that the United States represented. I fear that the people of this country may go down that road blindly and not like what is at their destination. I am sure that everyone gets a bad feeling in their gut when they think about taking income from one person and giving it to another. The federal government was never intended to provide for the people but to merely see to it that they could provide for themselves. For the government to say to someone that we will take more from you because you have chosen to work harder to succeed and give it to those who have not is simply morally wrong. I fear for the economic future of this country. Remember that if you rob Peter to pay Paul, Paul will always vote for you.
It's not taking and giving, darn it! It's reducing what the government takes from one over-burdened group, and increasing what it takes from the under-burdened group. And in so doing, the government will actually be strengthening the economy and business. It's that simple and it's NOT socialism.
See Stephen Herrington's Profile
Fear not Freeman6. The top tax bracket in the U.S. was 70-90% at the peak of the Cold War. If we weren't socialists then we are not in danger of becoming socialist with a top bracket of 39%.
Yes, and the majority of those taxes were spent on A. the Arms Race, and B. repaying (mostly) the debt from the new deal and WWII. Very little of this money was ever given to the people. Oh, and if the US tried a confiscatory tax rate such as that now, then we would face mass emigration of skilled and wealthy individuals.
If you are a doctor you have an obligation to your patients. It is not a purely monitary decision to become a doctor. Likewise, if you are a business owner you have an obligation to those you employ and more importantly to the general economic walfare of the country in which you operate. Ignoring that obligation is something you do at your own paral.
By the way, if you think you are a purely self-made person, think again. If you are successful why wouldn't you choose to improve the conditions that made your success possible?
Stephen once again your are correct. The basic human flaw in a trickle down philosophy is that people will voluntarily give up their resources for the benefit of their fellow man. Like the game of monopoly Globalization recognizes the winners and pushes all others out of the game. Private enterprise and Public Government can work together to promote the motivation of Capitalistic ideas while the maximization of profits for our nation depends on sensible taxation that promotes our innovation and Nation.
PS: So much of what people are required to spend through auto insurance, medical services, college expenses and interest on loans is in fact a regressive or negative tax to middle income Americans as that they are regulated or mandatory for citizenship in our great nation.
Very true kells ... and there's even one MORE layer to expenses: when those who are poor and cannot afford property tax on their car and thus cannot register it with the DMV, or cannot get the repairs they need to pass inspection, "the law" invariably finds them and tickets them, and then there's ANOTHER expense they cannot afford.
Bradley
The poor do not pay taxes like the middle class and so called rich. Also it was Bill Clinton that allowed the lenders for Fannie and Freddie to accept people that could not afford what they were buying. What do you say to the young generation that are saving their money to buy a house by putting 20% down and buying with in their means? I have went with out to get where I am going and was not born with a silver spoon in my mouth, and dont expect anything from anybody but myself! Inflation on consumer goods is going to go up whether we like it or not especially if buisnesses pay more taxes to make up for the difference. This is proven when ever the goverment hikes minimum wage. Everybody where I have ever worked knows they are about to pay more at the store because of it. The point is if you stop the free enterprise system then you stop Americas wheels from turning. What makes everybody think that the companies wont just move on or even just stop what they are doing and dont provide the things we want and need in America?
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If you heard Greenspan's testimony before congress then you must have heard him say that Freddie Mac and Fannie Mae were not the cause of the problem. They were both victims of upstream fraud originating with unregulated direct lenders. The claim that they or Clinton are responsible is an out and out misrepresentation.
Fannie and Freddie were tasked to use a small percentage of funds to fight what is called "red lining", a prejudice by lenders against loaning to perfectly qualified minority borrowers or loaning in minority neighborhoods. If the loans they bought in the secondary market went bad it was because of the housing bubble and Bush recession.
The Fed has been fighting deflation with historic low interest for the last 7 years starting after the dot com bubble. Low interest policy is used to make money available to the people to buy stuff. It has the same economic effect as raising the minimum wage only the effect does not last. Sooner of later the credit runs out and the economy stalls. That is happening now. Whatever inflationary pressure raising wages has will be offset by deflationary pressures of the recession.
It is well understood that raising wages or shifting tax burdens will be disruptive. But it will be necessary to endure them because the overall health of the economy is at stake. And in truth, what put the economy at risk is the long drought in wage increases coming from the business circular firing squad.
Dude ... companies will have to stop "making the things we want" if there aren't enough people who can afford to PURCHASE them.
Consumer spending is the lifeblood of our economy, and consumers cannot afford to spend. No matter HOW much MORE money fat cats make, they aren't buying more toothpaste, bread, milk, school supplies, etc.
Honestly, how many people have to suffer because of some "ideal"??
Bradley
you remind me of my Dad; he was one of those guys who had a tuba in his arms the day it rained money and he thinks it is a special talent of his to get money. When my Dad applied for several great-paying jobs on the same day in 1966, he was offered all of them and made his choice based on which one told him he could start on Monday after a weekend of celebrating versus starting tomorrow. Endlessly congratulating your nugget-finding skills that you honed when the gold was lying around on the surface is tiresome to those who understand the reality of today's economy. My Dad retired from a job that hired him with two years of High School; after 30+ years his replacement had to have an Engineering degree just to start in the department. If the price of milk had gone up at the same pace as the price of education, milk would cost over $15 a gallon.
First of all Im not your dad because im only 29 y/o and I paid for my college on my own by serving my country in the Army. Dont take me for a guy that tripped into a job I paid my dues by getting out of the Army and working 7/12hr days and still going to community college and not getting home until 11:00 pm every night for two years. If you want it you'll go get it. A single person can be their own savior or destroyer!! This is the greatest country in the world and thats weird to some people because they just cant understand how a few people that were British (Human Beings like anyone else in the World) could create such a great country in so little time based off of freedom where so many have failed. Freedom is your friend and goverments do not create freedom the people do!
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