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Author Topic: The Tax Increase
G2
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Remember the election and how there would not be a tax increase on anyone making less than $250,000 a year? Man, some people around here truly believed it (you know who you are). I ridiculed it. Now Lawrence Haas lays it out as to why it deserved that ridicule:
quote:
Eventually, he [Obama] will raise taxes on middle-class Americans simply because, facing the challenges at hand, he won’t be able to fulfill his no-tax pledge and govern effectively. Here’s why:

First, we’re bleeding red ink.

Even after the economy recovers, we face deficits that could average about $1 trillion a year in the coming years and never dip below an economically harmful 4 percent of Gross Domestic Product.

Our major lenders, like China, may not keep buying Treasury securities in the same quantities as they are today. They’re already nervous that we’ll print more money to pay our bills, which will cause inflation to rise and their investments to shrink in value.

That’s why top administration officials have assured the Chinese that we will protect their investments and reduce our deficits. Nevertheless, our major lenders may look elsewhere simply to diversify their dollar-heavy portfolios.

At that point, we would have to raise interest rates to entice others to lend to us. That would threaten our economic recovery – and that’s something that the president, with hopes of re-election in 2012, would want to avoid.

Second, we can’t cut our deficit enough without raising taxes.

What’s mainly driving our long-term deficit is the growth of Medicare, Medicaid and Social Security, due to soaring health care costs and the emerging retirement of “baby boomers” who will become eligible for those programs. Americans won’t support big enough cuts in those programs alone to reduce the deficit.

Third, we can’t raise taxes just on those earning over $250,000.

Yes, those who are doing relatively well can afford to pay more, perhaps lots more. But there simply aren’t enough well-to-do Americans to raise taxes just on them and make a necessary dent in our deficit.

Fourth and finally, we can’t even address unmet needs without raising taxes broadly.

Congress is stalled on a host of issues regarding health care, not the least of which is how to pay for the $1 trillion or so in upfront costs. Lawmakers don’t want to raise taxes broadly to finance the effort.

But if they raise taxes only on the wealthy to finance health reform, they’ll be hard-pressed to soak the rich more for deficit reduction. At that point, the middle class will be an even more unavoidable target.

It's inevitable. Hope and change!
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sfallmann
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I think Obama will resist doing this. It will spell his doom.

People are unhappy with the results of the stimulus. Unemployment has gone beyond 8%.

They don't like cash for clunkers.

They don't like the bailouts.

He's not trusted on Healthcare.

He's promised to pass immigration reform by 2010.

And then on top of that all he's going to raise taxes?

If he does allow a tax increase on the middle class he's toast.

He's coming to a point where he needs to decide if he's going to be a Clinton or a Carter.

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Colin JM0397
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The Executive does not make laws, ergo any tax increase will be from Congress.

Why do people insist on treating the office of President like it means the person is King?

It'll be up to Congress to pass any future tax increase, and then it’ll be up to the President to pass or veto said plan. To lay it all at his feet does a disservice to all those Congressfolks and Senators who would like us to pay no attention to the role they play in all this.

As for States, NC - in spite of all going on, figured they would raise taxes on the wealthy. In NC that means you earn more than 60k a year single, or 100k a year family... Not to mention the extra 1% sales tax for a total of 7.75% sales tax. They also like to do sneaky crap like tax things like food, which is not taxed in many other states.

Think maybe it's time to shuffle across the border to SC one of these days.

But not to worry - HAHAHAHAHAHAH - they said it will - HAHAHAHAHHAAH, oh sorry, just can't get this one out without - HAHAHAHAHAHHAAHHA - laughing... They set an expiration date for the new taxes to expire in 2 years.

Sure. And G2 will be voting for Obama in 2012! [Cool]

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sfallmann
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quote:
Originally posted by Colin JM0397:
The Executive does not make laws, ergo any tax increase will be from Congress.


That's why I said "allow a tax increase".

It would have been clearer if I said "doesn't veto a tax increase".

I live in NC too.

I'm not too happy with the new governor. She's not a very popular figure at the moment.

http://www.politico.com/news/stories/0809/25716.html

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LoverOfJoy
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Wait, didn't G2 say he won't be voting American-born as long as the government has part ownership of car companies? Unless Schwarzenegger runs for President, what choice will G2 have but Obama? Or am I getting my threads mixed up? [Wink]
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G2
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quote:
Originally posted by sfallmann:
I think Obama will resist doing this. It will spell his doom.

Maybe, don't underestimate the power of having a willing media that will spin 24x7 for you. Also, The One's true believers will accept literally anything.

The problem is the math. There is no way to do everything he says he can do with the current level of taxation. It is a mathematical impossibility. Taxes for the middle class will have to be raised for all the reasons Haas lays out.

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JoshCrow
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If this goes the way I think it will, he will resist such an increase until his anticipated second term (although like any politician he will be forced into a "read my lips" moment). Once he has "election immunity" in term 2 he'll probably do it.
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hobsen
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The President may have taken the lead too much in proposing how money should be raised and how it should be spent. The Constitution assigns most of the responsibility for this to the House of Representatives. Since resources are limited, those members have to hammer out a compromise on how money will be raised and which programs most need funding. And while Obama thinks reforming health care has the highest priotiry, as he certainly has a right to suggest, members of the House may be hearing differently from their constituents. Otherwise, while Obama may have spoken rashly, I see no reason voters should blame him too much for failing to do things which prove to be impossible. Remember Bush announcing a rather premature end to the war in Iraq?
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JoshCrow
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I remember Bush announcing that we were going to Mars.
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Pyrtolin
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It's speculation, we'll have to see what actually happens. Increasing taxes on households that make less that 250K/year would have very little appreciable effect on revenue, so right from there we have something dodgy about the claims being made.

On the other hand, we can look at things that have already happened, like tax cuts for more than 98% of working families:

http://www.fivethirtyeight.com/2009/08/obama-has-cut-taxes-for-986-percent-of.html

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Colin JM0397
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I love that phrase "working families" - insinuating that anyone earning more than that certain amount per year is a parasite on society.

Because, after all, it is a zero-sum game and "the rich" get richer always and without fail on the backs of the "working families" by drinking their lifeblood and grinding up their bones for bread.

Since when did "blue collar" or "lower middle-class" become "working families"?

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JoshCrow
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"In this time of change, government must take the side of working families."
-President G. W. Bush, 2004.

or perhaps...

"The Campaign for Working Families (CWF) is a political action committee founded by Religious Right activist Gary Bauer to support like-minded candidates. Like the Club for Growth, CWF is known for supporting "pro-family" candidates over more mainstream Republican candidates in GOP primaries. In 1998, it was the fifth largest national PAC."

[ August 12, 2009, 09:55 PM: Message edited by: JoshCrow ]

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Pyrtolin
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quote:
Originally posted by Colin JM0397:
I love that phrase "working families" - insinuating that anyone earning more than that certain amount per year is a parasite on society.

Because, after all, it is a zero-sum game and "the rich" get richer always and without fail on the backs of the "working families" by drinking their lifeblood and grinding up their bones for bread.

Since when did "blue collar" or "lower middle-class" become "working families"?

Actually "working families" means "people earning an income" here. As opposed to people receiving an entitlement or living on profit from investments. You'd do well to actually pay attention to context here.

And while it's clever the way you manages to couch the additional jab in your rhetoric, making it so that denying the error in your statement would implicitly deny the truth that you peppered in, the rich are, in fact, continuing to get disproportionately richer in terms of their share of all wealth. Wealth is being generated, but a disproportionate share of it is going to the most wealthy, while barely any is being retained by the lower classes.

And of course on the scale that matters, economics, for all practical intents and purposes, is zero sum- there are only so many dollars and resources in existence at any given time.The more resources you have, the easier it is get acquire them from other people. People can't create money or raw materials from nothing, and while information technology does but a little spin on that, having access to it and knowledge of how to use it still requires one to pass a minimum bar of resources that aren't universally available.

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TomDavidson
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*nod* That's part of what I can't figure out, G2. You insist that it will be necessary to raise taxes on "Middle America" to fund this program -- but Middle America pays just a small fraction of our federal taxes. Raising taxes on Middle America would have far less effect than raising taxes on "upper" America, which is almost certainly what would happen.
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Daruma28
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Pyrt, your entire argument rests on Marxist class warfare rhetoric.

An upper-middle class family making 150k a year is also a "working" family. But in your twisted, collectivist rhetoric, they are taking a disproportionate share of wealth away from the poorer working families. This is simply wrong.

Economics is NOT a zero sum game.

Wealth is being generated....and the guys that generate should be the ones who retain it.

Why else would they bother to generate it in the first place?

If I bake 100 cakes, and sell it to 100 people at $10 a piece, but the materials to bake that cake only cost me $100, I've just generated $900 of wealth. Since I contributed all of the labor to make the cake, and the labor to go around and sell it to all those people...why shouldn't I retain that "disproportionate" share in comparison to the homeless druggie living in the street that did nothing to generate wealth at all?

I should hope to GOD there is income inequality between the person that uses his or her own personal initiative, creativity and entrepreneurialship to generate wealth disproportionately from the guy that sits on his ass and collects welfare entitlements and blows it on drugs.

Either we are an economy based on free market capitalism or we are a socialist/collectivist one. It's fine for you to advocate for a socialist/collectivist one -- afterall, everyone has the right to believe in whatever mythical fairy tales they want - the flying spaghetti monster or marxist/socialist/collectivist economics can bring about "equality" -- but I digress.

Some of your assumptions rest on deliberate lies and distortion and emotional based rhetoric with no foundation in the real world. The reason why Marxist arguments like yours use class warfare (disproportionate...income inequality...blah, blah, blah), is to appeal to the lowest common denominator. The have-nots. Rather than trying to motivate the have-nots to work to become haves, it's all based on inspiring the have-nots to be envious and to get them to support taking away the wealth generated by others through Government coercion (which, btw, almost always results in greater growth in the scope and power of the government supposedly doing this to benefit the "have-nots") and giving it to people that did nothing to generate wealth themselves...and than call that "social justice."

[Roll Eyes]

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TomDavidson
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quote:
Wealth is being generated....and the guys that generate should be the ones who retain it.
I think you are making the erroneous assumption that the higher-level managers of many corporations are actually generating the wealth. They are overseeing the generation of wealth, but I would argue that this is not the same thing.
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Pyrtolin
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You can't see the field for the strawmen there.


If every person had equal access to an unlimited pool of resources that were traded on a free market, your point would stand. But they don't. Resources are inherently limited, and thus their availability favors those with the wealth to command them, and in turn those who command them can garner the most wealth. There is only so much wheat with which to bake your cakes. Limit its supply and you can manipulate the entire baking industry.

If you can make that selling the cakes in a market where everyone has equal access to the materials, that's just fine, and completely tangential.

But when you use that $900 to buy up all the flour in town, so that all the other bakers have to come work for you, then you only pay them $2/cake (and they take it because the only other choice is starving, since that's the only job they can do) and pocket the difference, then you are absolutely benefiting at their expense. You only have to pay them just enough that they can scrape by and you're assured of a steady income because they'll never be able to afford to break your lock on the market or to educate themselves in a field that you don't have a lock on. And you can arbitrarily raise the prices on cakes too, without raising their wages, so you're generating even more wealth per cake, and they remain hovering just on the edge of bankruptcy.

My entire point was that people are not being fairly compensated for the product of their labor. if they were, then the divide between rich and poor would be much smaller because those doing the labor would see a much greater share of the profits and the investors and executives would profit on the margins from it. Instead the investors tend to vote to increase their personal profits at the expense of compensation for labor and quality and price of product for consumers. (And they return the favor to their investors by investing in their companies and voting similarly) Then, when they've soaked as much value as they can from the company and shortsighted policies will shortly cause it to collapse, they sell of their interests, bail out with golden parachutes, if necessary, and repeat the process elsewhere.

Meanwhile retaining such a large portion of wealth helps to ensure that there is a non-zero level of unemployment, which means that constant competition for any possible job ensures that people never have the full leverage to demand fair compensation for their work, because to hold out for it means getting passed over in favor of someone who will work for less.

But even in the case of executives, they're still working members of society and included in that 98%. It's the people who hold the most wealth, but don't work (or worse, have never worked) at all to get it that have the fastest growing pools. They produce nothing, but get a share of all profits, and use their influence to direct more of those profits to themselves rather than to the people that are actually producing the wealth.

quote:
The trade of a joint stock company is always managed by a court of
directors...The directors of such companies, however, being the managers
rather of other people's money than of their own, it cannot well be
expected that they should watch over it with the same anxious vigilance
with which the partners in a private copartnery frequently watch over
their own. Like the stewards of a rich man, they are apt to consider
attention to small matters as not for their master's honour, and very easily
give themselves a dispensation from having it. Negligence and profusion,
therefore, must always prevail, more or less, in the management of the
affairs of such a company.

Go ahead and guess where that sentiment comes from.
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Colin JM0397
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quote:
Actually "working families" means "people earning an income" here. As opposed to people receiving an entitlement or living on profit from investments. You'd do well to actually pay attention to context here.
Pyrtolin, I can throw your own words right back at you and say you'd do well to actually pay attention to the rhetoric of class warfare that term invokes. It's a classic passive-aggressive ploy - claim innocence when the between the lines insinuation is something else.

Speaking of passive-aggressive, while you are trying to couch your snide assumptions about what you think I might say or mean in non-threatening and non-accusatory language, you're still assuming intentions, assuming you know what I'm going to say - things that are supposed to be a no-no in this forum.—and then you’re getting all worked up over this internal dialogue you are having with yourself.

Furthermore, if I want to call anyone out, tell someone off, or directly address something someone said, I’ll address said person by name. Otherwise, I’m making a general comment that wasn’t directed at you. If you go back and reread you’ll see I have an obvious pet peeve with that term specifically, and not you personally.

In other words, lighten up, Francis! [Razz]

As for the other things you said about income inequality blah-blah-blah – I’m just going to agree to disagree and not even bother with that discussion – it never goes anywhere.

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G2
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quote:
Originally posted by TomDavidson:
*nod* That's part of what I can't figure out, G2. You insist that it will be necessary to raise taxes on "Middle America" to fund this program -- but Middle America pays just a small fraction of our federal taxes. Raising taxes on Middle America would have far less effect than raising taxes on "upper" America, which is almost certainly what would happen.

It's not me insisting, it's the math. Haas lays it out well.

Are you saying raising taxes on Middle America is now the way to go?

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Colin JM0397
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IMO, you can sum up the wealth generation thing with this statement:

Wealth is generated at the lowest level by an individual's labor (be it physical or intellectual). In other words, I exchange/convert my work for revenue/income.

Some will argue the larger picture, such as the banks "create wealth" with the fractional reserve system, but what they are doing is creating the placeholder for future wealth, but it still takes our collective labor to generate the actual wealth.

Banks and such get "overextended" when the supply of the wealth generation (work) isn't keeping up with the expansion of those future wealth placeholders - aka fiat dollars.

I realize others see if differently... Before anyone goes on the rant against this, please take note of that IMO at the top and understand this is an editorial.

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G2
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quote:
Originally posted by Pyrtolin:
And of course on the scale that matters, economics, for all practical intents and purposes, , is zero sum- there are only so many dollars and resources in existence at any given time.

I just caught that... this is a demonstrably inaccurate premise. Wealth is created and lost all the time. The economy is *not* zero sum.
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Pyrtolin
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quote:
Originally posted by Colin JM0397:
quote:
Actually "working families" means "people earning an income" here. As opposed to people receiving an entitlement or living on profit from investments. You'd do well to actually pay attention to context here.
Pyrtolin, I can throw your own words right back at you and say you'd do well to actually pay attention to the rhetoric of class warfare that term invokes. It's a classic passive-aggressive ploy - claim innocence when the between the lines insinuation is something else.
Okay. How's this- read the link posted before commenting on it and note that it explicitly definies "working families" in a way that differs from how you tried to cast it.
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TomDavidson
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Haas "lays it out well?" Here's the entirety of what he says on the subject, which you'll notice includes no math:

quote:
Third, we can’t raise taxes just on those earning over $250,000.

Yes, those who are doing relatively well can afford to pay more, perhaps lots more. But there simply aren’t enough well-to-do Americans to raise taxes just on them and make a necessary dent in our deficit.

I disagree. Marginal tax rates on the rich are still remarkably low, especially relative to accumulated wealth. For another thing, the rich already pay the majority of taxes in the country; raising taxes as a percentage of the smaller piece of the pie is less effective than increasing the size of the larger piece of the pie.

There are indeed "billions" out there to be taxed, if it turns out we need to raise taxes to scoop them in. Those billions are in the hands of the rich, and taxes aimed at the middle class won't find them.

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Pyrtolin
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quote:
Originally posted by G2:
quote:
Originally posted by Pyrtolin:
And of course on the scale that matters, economics, for all practical intents and purposes, , is zero sum- there are only so many dollars and resources in existence at any given time.

I just caught that... this is a demonstrably inaccurate premise. Wealth is created and lost all the time. The economy is *not* zero sum.
Fundamental resources are not created all the time. There is only so much land, only so many crops in a given harvest, only so many trees or coal mines.

It's all well and good to tell a person who can't afford current food prices to grow their own, but on a relevant scale, they'd starve before they were actually able to finish that project, so the effective supply of food for direct market effect is fixed, and those who own it have full control of its distribution.

Beyond that, the creation of wealth requires wealth to begin with. Those who control the supply of the basic resources needed set the bar to entry for those who would work to create wealth. Unless you can surrender to them enough to satisfy them, you can't get off the ground.

What's more, with a glut of labor, if you're below the bar, market forces will keep you there because the best you can hope to earn is barely enough to support yourself, or else someone willing to make less will come along and take your place. There's no way to accumulate the necessary capital unless you already have the required capital, and anyone who takes enough of a loss to fall below the line gets stuck there.

This isn't any real surprise or radical idea- Adam Smith directly addressed the need to compensate for that barrier in the fundamental design of capitalism; he proposed right out of the gate that public provision should be made to support the basic necessities for people so that they could actually accumulate the product of thier labor and be effective actors in the market.

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Pyrtolin
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quote:
Originally posted by Colin JM0397:
IMO, you can sum up the wealth generation thing with this statement:

Wealth is generated at the lowest level by an individual's labor (be it physical or intellectual). In other words, I exchange/convert my work for revenue/income.

Some will argue the larger picture, such as the banks "create wealth" with the fractional reserve system, but what they are doing is creating the placeholder for future wealth, but it still takes our collective labor to generate the actual wealth.

Banks and such get "overextended" when the supply of the wealth generation (work) isn't keeping up with the expansion of those future wealth placeholders - aka fiat dollars.

I realize others see if differently... Before anyone goes on the rant against this, please take note of that IMO at the top and understand this is an editorial.

This is perfectly true- but I'll also add that part of the overextention happens when existing wealth is locked out of the wealth generation process- when it gets trapped in a loop or pool that prevents it from being paid back down to the bottom where it can fund labor to generate new wealth. This particularly happens when you allow top level pay to grow out of proportion to base level pay or alow pay for labor to be a secondary concern to profits for investors. In both cases you end up starving the roots from which the bulk of wealth creation comes, leading to the overextention that you mention.
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G2
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quote:
Originally posted by Pyrtolin:
quote:
Originally posted by G2:
quote:
Originally posted by Pyrtolin:
And of course on the scale that matters, economics, for all practical intents and purposes, , is zero sum- there are only so many dollars and resources in existence at any given time.

I just caught that... this is a demonstrably inaccurate premise. Wealth is created and lost all the time. The economy is *not* zero sum.
Fundamental resources are not created all the time. There is only so much land, only so many crops in a given harvest, only so many trees or coal mines.
That's not the way to frame it. Try this:
quote:
In one form or another, a zero-sum equation is probably the most common systematic argument against a really free market of voluntary exchange. The essential basis of this argument, whatever its particular focus, is a 'zero-sum game' of wealth, in which everyone cuts pieces of a 'wealth pie,' if you will, which can only be sliced so many ways and is only so large. According to this, any addition to the amount of wealth must have been balanced by its removal from somewhere else. The additions and subtractions add up to consistent amount. Wealth may not be created, only redistributed, the gain and loss adding up to zero.

If one believes this, it is perfectly understandable to object to anyone being richer than someone else (since they have necessarily appropriated more than their 'fair share'), or to think the wealthier western world has to be exploiting the rest of the world since it has a greater piece of the pie, or that profit is unfair because it must come at the expense of someone else even in a voluntary exchange, or to believe in the use of force to 'redress the balance.' These things follow from the zero-sum game of wealth if it is accurate. However, the worst of this phenomenon of belief may be that in some cases, these conclusions themselves are desired, and the zero-sum economics have been discovered as a justification. I believe that to have been the case with many communist economists such as Marx, who really wanted to be justified to hate capitalists, since they already did. Before discussing any specifics, it is worth noting initially that this claim is characteristic of pessimism, and while dealing with it, it is wise to keep in mind that the proclamation of this kind of limit may have less to do with a realistic perception of the world than a pessimistic desire for such a limit to exist.

Capitalism in a free market is not a zero-sum game, and exchange is not limited to zero-sum equations, for multiple reasons. First, wealth is subjective in amount and kind according to individual understandings of value. There cannot be a fixed amount of wealth in the world if the wealth that matters to each person is subjectively different. Certainly, physical commodities and resources like gold and wood and food and stone are not overly subjective in the way we experience them, and they are not interchangeable depending on who you are. But their value to each of us does vary, and it is subjective, depending on who we are. The same is true of the products produced from them, and their various applications. There is also great variation in the worth of what is physical depending on what we have the knowledge to accomplish. To experienced workers today, iron ore means tools and girders to build into the sky. But to our distant ancestors, iron ore was just another rock. In the hands of a skilled doctor today a knife can save a life, but once people only knew that knives were good for cutting up food and each other. Before papyrus and sheepskin became the first kinds of paper and made literature and accounting possible, they were just reeds and a way to keep warm. Obviously the vast difference in value has come from the subjective realm of mental capital. Much of what is often called culture is mental capital, such as art and science, and even every idea or concept, with perhaps a value which is even more subjective. Individual human capacities and abilities count as well, and those are certainly not measurable statistically.

All that matters is that someone values a thing, and then it is real wealth to them. Of course, some people believe that capital which is not physical is not 'real.' But for proof that ideas and concepts can have as much, or much more, real impact than quantities of physical resources, consider the difference that knowledge and technique makes in efficiency, and in what can be accomplished with resources. Once all people spent virtually every waking moment trying to feed and protect themselves with the tools ready at hand. They had all the same basic physical resources. The only important difference is mental; certainly there were fewer people alive to build wealth in the past than there are people building wealth of all kinds now, but exceedingly more value per person is being created today, thanks to the accumulated exchange of mental capital and mental resources. If we were instead billions of cave-dwellers, we would probably still measure wealth in having enough to eat and a fire for warmth. The main reason that some still do is that the profits of unhindered mental and material production and trade have been denied them through the true oppression and exploitation of modern-day societies, which are not free at all.

Another reason the zero-sum equation does not apply is that even according to a given standard of wealth, wealth can be created. Look about you at everything that exists now, all the technology, art, literature, and the material farms and cities, from homes and skyscrapers to gardens and fields. Once people lived in only natural shelter, hunting and gathering, and had none of this. So where did it all come from, if wealth cannot be created? Gains can be made. Effort can accomplish and what is accomplished can accumulate.

Labor is often considered to be the basis of wealth according to zero-sum economics. If all labor is equal in value objectively, if the products produced by less labor are exchanged for what required more hours of labor to make, then that profit is exploitation. In the eyes of many people this has condemned all capitalists as exploiters of their employees, and millions have been killed in the world out of revenge and jealousy, in the name of the 'fairness' of this theory. But it is utterly wrong. It could only be right if value were completely objective, and if the contribution of every person in work is always exactly identical. Labor was closer to commonality when more people did very similar work, such as agricultural farm labor. But labor is in fact highly dissimilar, especially today. It includes inherent and learned talents, experience, individual flair, and many other subjective qualities. It is also worth more or less in subjective value according to the circumstances of the world around the worker. Labor in the strictest physical sense is also a far less significant kind of capital than mental capital, which means the difference between making piles out of sand and making glass out of it, as well as the difference between making glass out of sand and making silicon chips.

The specific justification for a zero-sum game of wealth is often the connection of wealth to a limited amount of resources in the world, a zero-sum game of resources. This claim may be extended to anything from arable land to food production to energy production, to any or all natural resources used by mankind. If this is true, the very use of these limited resources for profit is exploitation of other people. But in practice and in history, every time a limit is found, someone will invent a way to surpass it as long as people are allowed to achieve freely. For example, if the ability to grow food based on available land really stayed constant, this planet could never support billions of people as it does now, with irrigation, hydroponics, and other modern farming techniques effectively creating more cultivated land. It would seem there are always better methods for accomplishment. There are always ways of converting one substance into another more useful one, and even ways of exchanging energy for matter and matter for energy. The only real scientific limits that apparently exist involve the amounts of matter and energy in the universe, and these are hardly limits that we can relate to as human beings.
quote:

"[T]he idea of distributing everything evenly is based on a theory that there’s only X amount of stuff in the world, that somehow we took it away from the poorer countries in the first place, and therefore we should give it back to them. But this theory doesn’t take into account the real reason for the differences between countries — that is, the development of new techniques for growing food, the development of machinery to grow food and do other things, and the fact that all this machinery requires the concentration of capital. It isn’t the stuff, but the power to make the stuff, that is important. But I realize now that these people were not in science; they didn’t understand it. They didn’t understand technology; they didn’t understand their time."

— Richard Feynman

One popular conviction is that the third world has been exploited by the rest of the world through the pillaging of its resources. There is some truth to this — but not due to a zero-sum of resources. Particularly under the application of the fascism of the past — mercantilism, colonialism, trade monopolies, tariffs, and so on — people in the third world were exploited through force, and their economic progress was set back. The chief means of their exploitation had little to do with shipping more substance out of these lands than was sent back; actually these people were not allowed to innovate and improve using mental capital, and profit accordingly. For example, in India under British colonial occupation, the most weighty leverage for exploitation was in only allowing the Indians to sell raw materials such as indigo dye to the British, prohibiting them from the more profitable work such as producing and dying clothing to sell. This was reserved for British monopolies, which sold finished goods back to the Indians. Even today international trade 'management' interferes using force, preventing some people from prospering even if their own government will let them alone. But this has nothing to do with voluntary exchange. It is economic fascism and tyranny, not simply the use of resources in a free market. Within a free market of individuals, people from any land will always be able to accomplish and prosper far more than those bound by artificial limits.

In a free market, evenly distributing what resources already exist or what is created is both impossible and undesirable. It does not matter that different definitions of capital belong to people in uneven amounts. In fact, this is quite natural because people are different in their abilities and interests. What matters is that in a free market, each person is more likely to achieve his own goals than in any other kind of economy — which includes greater average prosperity as well as relative riches in the hands of those who have made this their goal and achieved it.


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G2
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quote:
Originally posted by TomDavidson:
I disagree. Marginal tax rates on the rich are still remarkably low, especially relative to accumulated wealth. For another thing, the rich already pay the majority of taxes in the country; raising taxes as a percentage of the smaller piece of the pie is less effective than increasing the size of the larger piece of the pie.

There are indeed "billions" out there to be taxed, if it turns out we need to raise taxes to scoop them in. Those billions are in the hands of the rich, and taxes aimed at the middle class won't find them.

There really aren't billions out there. The WSJ analyzed the incomes of the richest Americans:
quote:
A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.
That's 2006 data - when there was a lot more to tax. This year and next will see a significantly reduced tax base. Again, the math does no support the plan.
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TomDavidson
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quote:
A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue.
That is, of course, compensating for capital gains losses. And it's worth noting that "income" is a pretty poor yardstick in the first place for taxation.

Which is why I favor wealth taxes, mind you. But that's a subject for another day. [Smile]

[ August 13, 2009, 11:53 AM: Message edited by: TomDavidson ]

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Pyrtolin
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G2- all of that still depends on having access to enough wealth, whatever you can find value in, to not only survive but to begin to transform other wealth.

All the ideas in the world don't matter if you starve to death before you can put them to work. And even if you don't starve, you need to be able to afford the materials and tools required to do something with them.

I fully agree with what you posted so long as the basic assumption that all basic physical and mental needs are gauranteed to be met, regardless of what kind of work one does or does not do. At that point, and only at that point, can people freely barter for the actual value of their labor, ideas, and resources. And only at that point can they retain the product of their labor to invest in new ventures rather than being forced to use it to sustain themselves.

Introducing mortal needs to the market destroys any freedom that it might have. You can bargain infinitely against someone's life if you control a resource critical to it without any regard to the actual overall supply of it.

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quote:
Originally posted by TomDavidson:
And it's worth noting that "income" is a pretty poor yardstick in the first place for taxation.


It's the one we use, so we gotta work within it.
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quote:
It's the one we use, so we gotta work within it.
There's no reason that it has to be the only one we use, you realize.
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