I will charge thee nothing but the promise that thee will help the next man thee finds in trouble.
Mennonite proverb
Number NonSense
This is a play on words; when I was in high school in Texas, I represented my high school in UIL number sense--a math contest that required you to solve problems in your head, no scratch pad. I've become increasingly impatient with the misuse of percentages. In particular, there have been two topics of recent note: Warren Buffett's famous comparison of his effective (federal) tax rate versus that of his secretary, alleging his secretary pays a higher effective tax rate. (Mark J. Perry's Carpe Diem blog has referenced several articles questioning or debunking this claim.) Progressives argue fairness on a relative basis; even a flat income tax ensures a progressive share of aggregate income tax burden.
The other ratio drawing attention is the so-called 1% by the Occupy Wall Street motley crew. In the 1960's, the top 1% had 8% of total income; more recently the top 1% has accounted for 20% of total income. There are a couple of false inferences that are often made: (1) percentages reflect a zero-sum game (i.e., that the 1% have gained at the expense of the other 99%), and (2) the higher-income people gained while lower-income people didn't over the past decade. Now, to be sure, not all stocks go in the same direction even during a down or flat market. Even though many stocks were flat or down over the past decade, some (e.g., Google and Apple) did quite well, and a number of investors did well.
When looking at percentages as described above, one should always keep in mind the marginal tax rates in effect. For example, until the JFK/LBJ tax cuts (e.g., down from an FDR 90% or so tax rate to around 70%), there was little incentive to maximize wages or taxable interest/dividends. In essence, it may well be the case that the high-income worker chose not to invest his property in equities: the reward wasn't worth the risk. When the government decided to cut tax rates, there was more reason to invest. Increased investment contributed to greater growth and labor force participation. A bigger economy means bigger payoffs and lifts all boats, not just the investors': if you have a decent job as a result of some people doing very well, why does it matter what they make? My decade-old car gets to my destination just as well a luxury sedan costing several times more. Beyond your own labor market, what other people make is none of your business; all you should care about is that economic growth is a win-win proposition.
Keep in mind one of my favorite examples, WalMart reduces margins and prices and makes up for lower prices in volume, i.e., sales growth. Yes, they would make even more profit if it was possible to sell the current volume at the original margin, but that's unlikely.
What about the Politics of Envy? Irrelevant. Among other things, if the stock markets didn't do well during the 2000's, neither did the well-to-do people holding positions in them. The above cited reference quotes US Census data showing similar patterns under alternative income classifications.
Some Notes From StudentsFirst.org
 |
| http://www.studentsfirst.org/ |
Isn't it time to end to end the teacher union tyranny of public sector teacher LIFO employment policies?
"Research shows that each year, a highly effective teacher can increase the expected lifetime earnings of his or her students by $20,000. In a classroom of twenty students, the total economic impact of a highly effective teacher amounts to $400,000."
Political Humor
"One of the guys accused of organizing the Iranian plot to kill the Saudi ambassador is a used car salesman from Texas. Just when you thought terrorists couldn’t get any lower." - Jay Leno
[Well, he could have run for public office in Texas...]
"During the Republican debate last night, Michele Bachmann said she has 28 children, five of her own and 23 foster kids. It’s all part of her new strategy: Adopting a majority of voters." - Jimmy Fallon
[Rick Perry shook his head at the news; he didn't realize that Michele Bachmann was Mormon, too.]
Musical Interlude: My Favorite Groups
Moody Blues, "I'm Just a Singer (n a Rock 'N Roll Band)"
