This post take a very circumlocuitous route to get to my point. Sorry.
Interaction with many of my Facebook friends is often similar to the greater scope of debate. If economy is in the news, some of us talk about what is better to do. If illegal immigration comes up, we talk about that. Turns out I have a relatively diverse group of friends.
Economics needs a skeptical eye pointed at it
Anyway, I have one friend that posts article after article of doom and gloom about the economy. One of them even predicted that come October we wont even be able to recognize our country. I searched for 5 minutes and found another economic article that explained how things will be getting better, and perhaps the housing market will take longer.
Another recent one, a friend posted that the stimulus is killing us, and I found another article about how we actually didnt do enough spending and need to do more despite the debt and budget deficit (I'm sure his article was from a respected economist, and mine was from another, Paul Krugman who won a nobel prize).
When it comes to economics, I hereby proclaim I am as in the dark as most people when it comes to biology, medicine or quantum mechanics. Pointing a skeptical eye towards all these economic claims, on both sides will take a lot of time, and I hope to do a blog post on it one of these days. I can fully sympathize with people who are confused when Joe Mercola says Vaccines are bad, and then the CDC and other people say how good they are.
The key is to verify the claims and see which side does more lying and stretching to make their point. This is what I hope to do in my future post.
Do increased taxes mean economic or personal doom?
But until then, here is the way I see the economy and taxes. They are not as related as most people think. There are a number of times when taxes were higher than now and debt and deficit dropped (post WWII and Clinton years among others. In those very times the economy expanded very well. There are other times where the reverse happened.
So it is demonstrably wrong to say "the economy will shrink and people will leave if we raise taxes", that causation is not concluded. There are obviously more variables in that equation than that. For example, in 1999, 4-7 million people have left this country for countries with higher taxes (these are non-governmental Americans). Further, the US is the only country that still taxes you if you are living abroad. Some certainly left because work sent them there, but for the most part its because they prefer benefits of living abroad.
The point is the taxes-economy relationship is not as simple as free market people will have you believe. It's there to some degree, but it simply is not the whole story. It reminds me of a control system where we try to make changes on something we can adjust to create a response from a system we desire. I am suggesting that our controlled inputs (tax rate and spending) should be raised and lowered, respectively, until the economy is in a more comfortable position.
As I mentioned before, there are some who claim that spending should not be lowered right now. I'm am sure I don't have to link to the vociferous opposition to this view. I contend that there is spending reduction that could and should happen. The military is bloated, Health and Human Services and Education are both extremely expensive and a new effort to reign in costs on these should be tried. The spending Krugman is thinking of would go towards projects, research, business development. But for this, I want to focus on taxes.
Rich people whining about nothing
While I hear a lot of whining about how raising taxes on the richest 5% is going to doom the country, I simply don't see it. I have yet to see a compelling argument for that view, other than "its common sense" as if that closes the case. Some rich people agree with me. We aren't talking about raising them to oblivion, we are talking about raising them 4-5%. There is no argument against the that this would bring in extra revenues needed right now. Quite the reverse. Let's remember, after WWII when the economy was in sad shape,the rich were taxed at rates of 80-94% (and when I say rich, i mean incomes starting at 200-400K depending on the year). Wow! Somehow they survived, somehow the economy grow, somehow the country prospered. Lets not forget, this was in the 50's that the conservative relish with nostalgia.
Not impressed by the rich guys.
But then, I had pause (finally the topic of this post). Several months ago, Bill Gates and Warren Buffet, the two richest people in America with a combined net worth of 100 billion dollars (Wow!) went on a campaign to get the other rich guys to donate 1/2 of their wealth to charity.
By "other rich guys" I mean the 400 other US billionaires. Maybe they could show us economic skeptics, that they can be trusted to use that vast wealth to stimulate the economy and reduce suffering on their own.
What was the result? A measly 10% of them signed up for this. Let's keep in mind, these are billionnairres. Most of them multibilionairres. The lowest end of these folks, if they pledged, would still have 500 million left after this program. At a small earning rate of 5%, they would still be making 25 million dollars/year by sitting on their thumbs.
They wouldn't even have to give the money to a charity, if they balk at efficiencies of them. They could do what they claim to do with that money anyway, they could invest in promising businesses, and not expect a return on that investment, they could take no shares. Any number of these things could be done, improving the economy, improving the jobless rate, reducing suffering. But they didn't do this when things are bad after they benefited more when times were good.
And at the end of that investment...they would still be stinking rich with a huge income.
This is not a very impressive group of people.
So when I hear that rich people (now I switched to those making 250K and above) are complaining about a 4% increase in their taxes, to a rate that they were at just 10 years ago, I just have to laugh.
I hope you laugh at them too.
