This is a good description of why our system of government and economics is eroding. Ultimately we're going to lose it. We can pretend that Europe's system is super, but the truth is that there's works because of us. It's the great missing link. We protected them from having to police their own system throughout the 20th century, and it's going to come apart.
We are making it less desirable to take a shot at the brass ring. It will inevitably lead to a leveling of the wage gap, but at the same time it will be a less permeable barrier. Social Security is going from being a bad investment plan to a mediocre welfare plan and suddenly we're giving back over half of what we make to the government. Not to each other, to the government. That's what this article pretty succinctly points out.
I don't get depressed easily. Most of you who read this know how impervious my mood is. Unfortunately, as I get older and our government takes more and more of our freedoms (and money is freedom), I get more and more upset that my children and their children will have fewer and fewer opportunities. When people can't strive for wealth, no one will try. When no one is trying to be wealthy, everyone is just incented to get their piece of the pie. The greatest economic engine in history will slowly grind to a halt and die.
My progeny aren't going to reach the full glory of human potential until humanity reaches the stars or flames out trying. They're going to be crushed by generation of humans scraping out an increasingly meager existence until they're choked to death by the bottlenecks of too many people and not enough food.
I get depressed.
We are making it less desirable to take a shot at the brass ring. It will inevitably lead to a leveling of the wage gap, but at the same time it will be a less permeable barrier. Social Security is going from being a bad investment plan to a mediocre welfare plan and suddenly we're giving back over half of what we make to the government. Not to each other, to the government. That's what this article pretty succinctly points out.
I don't get depressed easily. Most of you who read this know how impervious my mood is. Unfortunately, as I get older and our government takes more and more of our freedoms (and money is freedom), I get more and more upset that my children and their children will have fewer and fewer opportunities. When people can't strive for wealth, no one will try. When no one is trying to be wealthy, everyone is just incented to get their piece of the pie. The greatest economic engine in history will slowly grind to a halt and die.
My progeny aren't going to reach the full glory of human potential until humanity reaches the stars or flames out trying. They're going to be crushed by generation of humans scraping out an increasingly meager existence until they're choked to death by the bottlenecks of too many people and not enough food.
I get depressed.
6 comments:
The author makes an assertion here that I have heard before but makes no sense to me, and I think is the logical flaw that invalidates the argument.
"If you take away 10% of a high earner's after-tax income at the margin, he will cut his taxable income by at least 4%."
See, I just don't agree with this. As someone who is motivated by money, and not ashamed of it, when our earnings get taken away (in our case by HMOs and Malpractice insurers, but I think the principle is the same), I am HUNGRY for more profit, and redouble my efforts to increase our margins. If my taxes go up, I'm going to want to increase my income to offset the losses.
OTOH, the author posits that his entrepreneur who makes $500K, faces a $40K increase in taxes, so he alters his behavior such that his new net is negative $70K ($56K less income and $14K increase in taxes). Just to reiterate: if taxes go up and his behavior is unchanged, his post-tax income goes from $330K to $290K. If taxes go up, the author argues, he will change his behavior so that his after-tax income will go from $330K to $260K. Huh?
Someone with that little business sense is unlikely to have made $500K in the first place, I think. My logical assessment of human nature, which is informed by my personal experience, is that if taxes go up, the entrepreneur is going to be motivated to INCREASE his earnings to $550K or so to keep his after-tax income steady (gotta pay the mortgage and other fixed expenses, you know?).
I dunno. The author calls this a "widely accepted economics rule of thumb." I'd be interested to hear where that is accepted outside of the WSJ op-ed page and other right-wing economics circles.
One other point: I agree that Obama's Soc Sec plan is an artful dodge, but not a great idea. If you accept the proposition that Soc Sec is in need of additional funding (which is itself a far-off and dubious need, compared to medicare's more imminent and certain need), then a small increase in the cap would more than suffice to cover the gap, say from $102,000 to $115-120,000, adjusted for inflation as it currently is. It would be fairer, in terms of "getting back" more of what you pay in. But this would hit more voters, and would be unpopular in an election year. So Obama goes the donut hole route, which will probably bring in more money, and it socks the rich, so there's little electoral down side. I'd rather his proposal were more honest.
If my taxes go up, I'm going to want to increase my income to offset the losses.
But you're wrong. Not for you, but for the aggregate. It just doesn't work that way. It's a well-studied effect and it's just a fact of life. You may behave differently than the market, but the market behaves the way it behaves.
I'd be interested in a source, if you have one, to support that claim -- I'm really curious to see if there is good empiric data to support the contention.
I'd also be interested to hear a contrary opinion from a "Genuine Certified Economist," because this is such a conservative article of faith, I wonder whether there really is consensus in the economics community...
George F. Will said this is the "classical" election. The Republicans are willing to sacrifice equality for freedom and the Democrats are willing to sacrifice freedom for equality. They are both important for a just and successful society. One does not hold without the other.
Population growth is slowing, and I've seen predictions of it beginning to decline around mid century.
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